The document summarizes proposed reforms to the EU's Generalized System of Preferences (GSP) rules of origin. Key changes include making rules product-specific rather than relying solely on value-added, simplifying rules through the use of tariff classification changes or specific processing requirements, expanding regional cumulation to include Mercosur countries, and allowing statements of origin from registered exporters instead of certification by authorities. An analysis found that proposed rules of origin for key Brazilian exports like fisheries, hides and leather, textiles, machinery and motor vehicles generally increased flexibility through higher non-originating content thresholds or alternative rules.

1. Reform of EC GSP rules
of origin:
a Product- specific
analysis
Emanuela Balestrieri
Sao Paulo, 7 Junho 2010
09/06/2010 1

2. Overview: EU Preferential
Trading Arrangements
January 1 2009 – December 31,
2011: Generalised System of
Preferences (GSP) -- Brazil
GSP+ -- Paraguay
Everything But Arms (EBA) --
Duty-Free, Quota-Free access for
products of the 49 Least
Developed Countries (LDCs).

3. EU-Brazil Trade
The EU is Brazil's biggest trading partner,
accounting for 22.5% of its total trade (2008).
Brazil is the single biggest exporter of
agricultural products to the EU, accounting for
13% of total EU imports.
Manufactured products such as machinery and
transport equipment represent almost one third
of Brazilian exports to the EU.
EU runs a deficit in trade in goods with Brazil:
EU goods exports to Brazil 2007: €21.2
billion
EU goods imports from Brazil 2007: €32.3
billion

4. EU-Brazil Trade
Brazil is the 2nd largest user of GSP – €4.4 billion
in 2007
4th largest Beneficiary in terms of MFN duties
otherwise due
Estimated savings to Brazilian exporters of €142
million in 2007
[http://trade.ec.europa.eu/doclib/docs/2009/march/tradoc_142658
.pdf]

5. However:
99% preferential tariff utilization rate for
products such as selected automobiles,
compressors and engines
70% motor vehicle parts and
65% footwear with rubber
a matter of origin compliance?
5

6. GRADUATION - Performance on the EU market
exceeds set threshold over 3 years: preferential tariff
suspended
Council Regulation (EC) No 732/2008 of
22 July 2008 applying a scheme of generalized
tariff preferences for 1 Jan 2009-31 Dec 2011
period, graduation is applied to Brazil for
- HS chapters 16 to 24: prepared foodstuff,
beverages, spirits and vinegar, tobacco and
manufactured tobacco substitutes
- HS chapters 44 to 46: wood and wood
articles, wood charcoal, cork and cork articles,
manufactures of straw, of esparto or of other
plating materials, baskets ware and wickerwork
6

7. EU-MERCOSUR Trade
The EU is Mercosur's largest trading partner,
representing 20.7% of total Mercosur trade
(2008)
Mercosur ranks 8th among EU trading partners,
accounting for 2.7% of total EU trade(2009)
The EU is Mercosur's largest market for its
agricultural exports, accounting for 19.8% of total
EU agricultural imports (2009)
EU runs a deficit in trade in goods with Mercosur:
EU goods exports to Mercosur €27.2 billion (2009)
EU goods imports from Mercosur €35.1 billion
(2009)

8. Why does it matter and
what is at stake?
Scope and conditions for regional cumulation
as envisaged by the reform of the GSP rules
of Origin: extended cumulation with creation
of a new regional cumulation group = group
IV comprising the 4 Mercosur MSs
and cumulation with Turkey
Current Mercosur rules of origin regime
indicates a move from across-the-board RoO
approach to product-specific approach
8

9. Official link
http://ec.europa.eu/trade/wider-
agenda/development/generalised-system-of-
preferences/index_en.htm
9

10. GSP: first concrete application of the
reform of rules of origin (RoO)
Simplification and development-friendliness:
leading principles of the reform
Single method for determining origin based on
value added in the beneficiary country abandoned
in favor of a sector-based approach = list rules
(value added, CTHs and specific processing
requirements)
Less dramatically streamlined RoO system than
the “net cost” across-the-board criterion, yet
simplified and including targeted relaxation for the
LDCs 10

11. Key issues of proposed RoO Regulation
General tolerance rule: relaxed. Amount of non-
originating materials permitted increased from
10% to 15% of ex-works price of final product.
Exception: agricultural and processed
agricultural products: 15% tolerance in weight
Cumulation: relaxed. Value added criterion
eliminated, only requirement “more than a
minimal operation must be performed in the
country where cumulation takes place on
materials originating in the other MCs of a
cumulation group”
11

12. The main changes at
horizontal level
The RoO are product specific instead of the single
method based on value added previously envisaged
(opposed by many stakeholders).
The proposed RoO are based on the 3 methods:
percentage criteria, change of tariff heading or a specific
processing requirement.
There are many simplifications, plus targeted relaxation, in
particular for the least developed countries.
Cumulation of origin: Regional cumulation of origin is
expanded to Mercosur and some conditions are relaxed.
Efficient procedures in establishing and controlling origin:
The current certification of origin by the authorities of the
beneficiary country is replaced by statements on origin to
12
be given directly by registered exporters. (*2013)

13. Changes in the
calculation of the
percentage requirement
Before: Maximum amount of non-originating material
value of non -originating material X 100 < 40%
Ex -works price
Proposed (July 2009) : the “build down method”
Value added /local value content =
Ex- works price - value of non-originating material X 100 > 50%
Ex -works price
Current proposal (June 2010) not official:
Back to the old system ! percentage of 40% at times increased tp 50%,
even 70% (see chapter 84, Nuclear reactors, boilers, machinery and
mechanical appliances ) 13

14. Current EU-GSP Rules of Origin:
Non-Originating Materials
GENERAL RULE: To qualify for GSP entry any non-originating
materials in the product must have been sufficiently processed
in the beneficiary exporting country so that the final product
meets at least ONE of the following tests:
Product has undergone operations beyond mere preservation,
washing, assembly, and other processes considered insufficient to
give the product Brazilian origin
Original product undergoes a change in tariff heading or sub-
heading prior to exportation
Specified percentage in value has been added to the product so
that the value of any non-originating material used does not
exceed a given percentage of the ex-works price of a product

15. Please note
Comparative analysis of “old” and “new”
systems carried out at chapter level
Further analysis required at the level of
headings as alternative approach to the
chapter rule may be pointed out – e.g.:
Chapter 84 and 8401
15

16. Changed rules of origin for
Fisheries - Chapter 3
Relaxation of the crew and officers requirement for the vessels
definitions in the wholly obtained category
Requirements are now limited to:
Registration of the Vessel in Brazil,
Sail under the Brazilian flag,
0wned by Brazilian nationals or Companies, Cumulation
applicable
Introduction of the 15% value tolerance rule for specific
headings of Chapter 3
The 15% value tolerance is also applicable to HS Chapter 16,
Preserved and prepared fish
16

17. Confront current EU-GSP Rules
of Origin for Fishery Products
Product caught within territorial waters, i.e. within
12-mile zone of shores, are wholly obtained;
Product caught on the “high seas” or produced in
factory ships are wholly obtained if:
Vessel registered and flagged to Brazil/EC
member
Captain and officers are all nationals of
country/EC
At least 75% of crew are Brazilian nationals;
AND
Can establish ownership of vessel according to
specified criteria.

18. The changes in raw hides and
leather (HS41 and 42)
Chapter rule 41 introduced flexibility as CTH or 30 % of
local content (leather)
Introduced flexibilities for headings 4101 to 4103, Raw
hides and skins of bovine(including buffalo) or equine
animals : Manufacture from any heading
Liberal: it means that all manufacturing operations carried
out within the heading are origin conferring excluding
insufficient working or processing operations – for ex.
salting.
Tanned or crust hides and skins: CTH or re-tanning =
unchanged rule
Chapter 42 Leather products - Introduction of alternative
rule to CTH : the local value content is at least 30% of the
18
ex-works price of the product= 70% of non-originating.

19. Changes in selected textiles and
clothing - Chapter 61 and 62 (1)
Old rules: stringent
Chapter 61 knitted/crocheted garments product
grouping:
Assembled: manufacture from yarn
Other: manufacture from natural fibres
New rules
Assembled: knitting and making-up(including
cutting)
Other : spinning of fibers and knitting or dyeing of
yarn of natural fibers and knitting = flexibility 19

20. Changes in selected
textiles and clothing (2)
Old rules
Chapter 62 - Not knitted/crocheted garments:
Manufacture from yarn
New rules
Weaving accompanied by making-up and cutting
Or making- up preceeded by printing and
accompained by at least 2 preparatory or finishing
operations provided that the unprinted fabric does
not exceed 47,5 % of the ex-works price of the
product 20

21. No Changes in Footwear
Chapter 64
Manufacture from materials of any
heading, except from assemblies of
uppers affixed to inner soles or to other
sole components of heading 6406
Parts of footwear of heading 6406:
CTH
Still very liberal/flexible
21

22. Changes in selected
machineries HS 84
Old chapter rule HS 84
CTH and not more than 40 % of non- originating
materials of the ex-works price or not more than
30 % of non- originating materials
New chapter rule HS 84 (July 2009)
CTH or manufacture in which the local value is at
least 30 % of the ex-works price
More flexibility as CTH alone is origin conferring and
up to 70% of non-originating materials can be used
with respect to the old rules
Engines HS 8407, 8408: local value content of 50%
22

23. Changes in selected
Electric machineries
HS85
Old chapter rule HS 85
CTH and not more than 40 % of non –originating
materials of the ex-works price or not more than 30%
of non-originating materials.
New rule (July 2009 )
CTH or Manufacture in which the local value content
is at least 30 % of the ex-works price(70% of non
originating materials)
Conclusion: more flexibility since requirements are
not cumulative. Increased threshold for use of non-
originating materials.
23

24. Changes in selected
machineries (motor
vehicles HS87)
Old chapter rules HS 87
Not more than 40 % of non-originating
materials of the ex-works price
New chapter rule HS 87(July 2009 )
Manufacture in which the local value content is
at least 50 % of the ex-works price
Conclusion: more flexibility since 10 % more
allowance of non-originating materials
24

25. Preliminary conclusions
In terms of the product specific
rules of origin of the main exports
of Brazil to the EC it appears that,
at first glance:
1)The proposed RoO are more
liberal
2)More in depth analysis may be
needed to identify changes for
selected tariff headings of export
interest to Brazil 25

26. Official Link
http://ec.europa.eu/taxation_customs/customs/cu
stoms_duties/rules_origin/preferential/article_777
_en.htmI
In the meantime, the existing rules of origin
remain applicable
As regards procedure, 1st January 2013 is the
target
26

27. Grazie
Muito obrigada
27