Novas regras do SGP Europeu: Robert light

European Commission
Taxation and Customs Union

GSP rules of origin and their reform

FIESP seminar about the EC-GSP in the
framework of the Strategic Partnership on
Cooperation between the EU and Brazil
São Paulo, Brazil, 7 June 2010

7 June 2010 FIESP seminar about EC-GSP 1

European Commission /

Presentation

• Robert Light, working for the European Commission in
DG Taxation and Customs Union for over 20 years and
specifically responsible for GSP rules of origin from 2001
until 2008.
• Presentation focuses on GSP rules of origin and their
reform.



GSP regulation

• GSP regulation lays down the tariff preferences applicable – the rules of origin
are a separate legal text
• GSP regulation must be renewed periodically (usually every 3 years).
• Current regulation: Regulation (EC) No 732/2008 (EU OJ L 211, 6.8.2008, p. 1).
• Public consultation - ended on 31 May - sought comments from interested
parties to help the Commission to prepare a proposal for the successor
Regulation.
• Commission should present its proposal to the Council and the European
Parliament in early 2011.
• Because of duration of legislative procedures, current regulation, due to expire
on 31/12/2011, will be prolonged temporarily (until 31/12/2013 at the latest, or
a date to be specified in the successor regulation).



GSP rules of origin: what and where are
they?
• The key to the preferences on offer
• Aim to ensure a genuine economic link between the exporting
country and the goods
• Contained in Regulation (EEC) No 2454/93 (implementing
provisions of the Community Customs Code), as amended,
Articles 66 to 97 and Annexes 15 to 18, 21 and 22
• Unlike GSP regulation, rules of origin are not subject to
periodic renewal – only when considered necessary



GSP rules of origin: why reform? (1)

• Preferences are not fully used
– rules sometimes too complex (problems of
interpretation), sometimes too stringent.
– high compliance costs with the rules.
– exporters in many countries, especially the poorest,
lack complete production chains and investment
opportunities.
• The rules are old
– Developed in the 1970s.
– Rise of globalisation.



GSP rules of origin: why reform? (2)

• Difficulties in applying cumulation
– stringent rules for GSP regional cumulation, resulting in
limited use and reduced incentive to economic
cooperation.
• Non-appropriate control system
– burdensome for both operators and administrations.
– weak in terms of breakdown of responsibilities.
– Impossible for the authorities in the exporting country to
check every single consignment.
– false sense of security for importers.



GSP rules of origin: why reform (3)?

• Difficulties in managing administrative cooperation
– Outdated, inefficient paper-based procedures.
– Poor co-operation from certain countries:
information not updated in time;
Resulting difficulties on import
Need for reminders for notifications and verifications
• Problems in securing compliance with obligations
– Lack of systematic means for monitoring.
– Lack of appropriate remedial actions.



Steps to reform

• Green Paper COM(2003) 787 final
18 December 2003: launched a debate.
• Communication COM(2005)100 final
16 March 2005: indicated the orientations favoured by
the Commission for reform.
• Communication was a horizontal document but
indicated that GSP should be the first concrete
application.
• Commission’s impact assessment and draft regulation.



The communication: aims of the reform

• Three pillars of Communication COM(2005) 100:
– Simpler and more development-friendly rules for the
determination of preferential origin.
– More efficient procedures based on a better balance of
responsibilities between trade and customs.
– Secured environment for legitimate trade through enforced
rules.



The draft regulation

• Published at the end of 2008, after
Commission’s initial proposal for a single
method for determining origin, based on value
added, failed to find favour with MS or other
stakeholders
• Now in the final stages of the decision-making
process



The structure of the draft regulation

A new, more logical and clearer structure
Begins with general conditions to benefit from the
arrangements (not new, but less evident at present).
Specific sub-sections on procedures at export; procedures
at release for free circulation; control of origin.
Roles and responsibilities of all concerned, plus
consequences of actions, made more apparent.



The general conditions

Beneficiary countries must be listed as a beneficiary country in the GSP
Regulation.
They must undertake to comply with the administrative cooperation
provisions of rules of origin:
- set up and manage a data-base of registered exporters (“REX”);
- communicate required information to the Commission;
- assist the Commission and the Member States with verification requests
and monitoring actions
No new undertakings until 2016 (prior to REX applicability).



Rules for determining origin

• Goods must be either:
– Wholly obtained in the beneficiary country (mined,
grown, etc); or
– Sufficiently worked or processed there.
• Cumulation of origin possible in certain cases



Minimal operations (1)

• List of operations which, either on their own or
in combination with others of the same type,
can never confer origin (“minimal
operations”).
• Dual purpose of list:
– In context of “sufficient working or processing”
– In context of cumulation



Minimal operations (2)

• (a) preserving operations to ensure that the products remain in good condition during transport and
storage;
• (b) breaking-up and assembly of packages;
• (c) washing, cleaning; removal of dust, oxide, oil, paint or other coverings;
• (d) ironing or pressing of textiles and textile articles;
• (e) simple painting and polishing operations;
• (f) husking and partial or total milling of rice; polishing and glazing of cereals and rice;
• (g) operations to colour or flavour sugar or form sugar lumps; partial or total milling of crystal sugar;
• (h) peeling, stoning and shelling, of fruits, nuts and vegetables;
• (i) sharpening, simple grinding or simple cutting;
• (j) sifting, screening, sorting, classifying, grading, matching (including the making-up of sets of articles);
• (k) simple placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards and all other
simple packaging operations;
• (l) affixing or printing marks, labels, logos and other like distinguishing signs on products or their
packaging;
• (m) simple mixing of products, whether or not of different kinds; mixing of sugar with any material;
• (n) simple addition of water or dilution or dehydratation or denaturation of products;
• (o) simple assembly of parts of articles to constitute a complete article or disassembly of products into
parts;
• (p) a combination of two or more of the operations specified in points (a) to (o);
• (q) slaughter of animals.



Sufficient working or processing (“list
rules”) (1)
Various simple criteria, according to what is most appropriate for the sector concerned:
• Maximum content of non-originating materials (value or weight);
• Change of tariff heading or sub-heading;
• Specific processing requirement;
• Use of wholly obtained materials.

Where a value rule applies, normally 70% of non-originating materials for goods originating
in LDCs; may be more demanding (50%) for goods originating in other beneficiary
countries
In some cases, alternative value-based rules (operator free to choose).



rules”) (2)
List of insufficient working or processing operations which can never
confer origin (minimal operations) maintained
Tolerance rule: percentage of non-originating materials which do not
satisfy the rule may be used:
(a) 15% of the weight of the product for products falling within
Chapters 2 and 4 to 24, other than processed fishery products of chapter
16;
(b) 15% of the ex-works price of the product for other products,
except for products falling within Chapters 50 to 63 of the Harmonized
System, for which the tolerances mentioned in Notes 5 and 6 of Part I of
Annex 13a shall apply.



rules”) (3)

Reasons for choice of rules:
- To support development by encouraging local sourcing.
- To avoid circumvention.
- For industrial products originating in non-LDCs,
differentiated rules are a reflection of their higher industrial
capacity.
- .



Sufficient working or processing (3)

• How to calculate compliance with a rule based on maximum content of
non-originating materials:

Value of non-originating materials x 100
Ex-works price 1
• New provision: Reference periods may be used to smooth out
fluctuations in prices and exchange rates at choice of exporter – usually
over the previous fiscal year, but not less than three months.
.
- .



Wholly obtained fisheries products: conditions
for fisheries vessels outside the territorial
waters
• Definition of territorial waters (12 miles).
• Rules simplified and clarified.
• Crew condition remains.
• New possibility to cumulate the conditions between
members of the same regional cumulation group.



Cumulation of origin: list of types

• Bilateral cumulation (with EU).
• Cumulation with Norway, Switzerland and
Turkey
• Regional cumulation
• Extended cumulation with countries with which
the Community has concluded an FTA



Bilateral cumulation

• Materials originating in the EU in accordance
with GSP rules and which undergo a more
than minimal operation in a beneficiary
country, are considered to originate in that
beneficiary country



Cumulation with Norway, Switzerland
and Turkey
• The present arrangements with Norway and Switzerland will
continue but a new exchange of letters is being negotiated.
• Turkey should join this cumulation, once an agreement is
reached (exchange of letters).
• Materials originating in the Norway, Switzerland or Turkey in
accordance with GSP rules and which undergo a more than
minimal operation in a beneficiary country, are considered to
originate in that beneficiary country
• Certificates may be replaced on import, so that the goods can
be forwarded to one of the other parties and preference
claimed there.



Regional cumulation (1)

• Four groups:
– Three current ones: Groups I, II and III – ASEAN, CACM
and Andean Community, SAARC; also possibilty of
cumulation between countries in groups I and III;
– New Mercosur group (Argentina, Brazil, Paraguay and
Uruguay – Group IV).
• Before group IV cumulation can begin, undertakings on
administrative cooperation must be submitted




• Present double condition removed – origin of last
country is acquired provided only that a more than
minimal operation takes place
• If a less than minimal operation, origin of the country
accounting for the highest customs value of the
originating materials used.




• Example 1:
– Uruguay material exported to Brazil: Uruguay provides proof of
Uruguay origin;
– More than minimal operation in Brazil: Brazil origin acquired,
Brazil issues proof of origin indicating Brazil origin
• Example 2:
– Uruguay material exported to Brazil: Uruguay provides proof of
Uruguay origin;
– Less than minimal operation in Brazil: origin belongs to the
country accounting for the highest customs value of the
originating materials. Brazil issues proof of origin indicating
Uruguay origin




Limitations:
- Cumulation possible where different rules apply in the countries
concerned: but when sending materials to another member of the group,
a country must apply the rule it applies for exports to the EU
- Specific agricultural or processed agricultural products where the market
access conditions applicable (e.g. a general arrangement country and an
EBA country) are different may be excluded – list in annex
- Additional list of excluded specific operations in the case of textiles
(Annex 16).



Extended cumulation

• New possibility
• Any beneficiary country may ask Commission to be allowed to cumulate with a
country with which the EU has concluded an FTA (e.g. Mexico, Chile)
• Commission will decide on applications and on the goods which may be covered.
• Chapters 1 to 24 always excluded.
• Materials originating in a country with which the EU has concluded an FTA will
be considered to originate in the beneficiary country if a more than minimal
operation is performed there.
• The countries concerned must agree to comply with provisions on administrative
cooperation



“Non-manipulation” clause

• Current direct transport rule abolished.
• Instead, a general requirement that goods shall not
have been altered or transformed in any way en route
(“non-manipulation” clause).
• Authorities in the EU will ask the importer for supporting
evidence only in cases of doubt
• Storage or splitting of consignments in country of
transit permitted, provided goods under customs
supervision.



Evidence of origin: new system from
2017 (1)
• Further development needed (legal, technical).
• Authorities set up and maintain a data-base of traders registered to
export under GSP.
• Registration not the same as prior approval or authorisation. It
consists of gathering basic information about the trader to facilitate
subsequent controls.
• Once registered, exporters make out statements on origin themselves
and send them to their customer in the Community. Statements may
be in electronic format.
• Authorities in beneficiary countries concentrate on keeping the record
of registered exporters up to date and carrying out controls. Traders
who commit fraud should be withdrawn from the register – no
readmission until they put their hose in order.
• Controls to be carried out on these authorities’ own initiative, or at
the request of authorities in the Community. Risk analysis should be
used.



Evidence of origin : new system from
2017 (2)
• Importers submit the statement on origin to the
customs authorities in the Community.
• It is a fundamental principle of customs law that
importers should be responsible for the declarations
they make – this should also be the case as regards
evidence of origin.
• Importers should take reasonable steps to protect
themselves in case something goes wrong (e.g. a clause
in the commercial contract).



Evidence of origin : new system from
2017 (3)
• An amending regulation will lay down further
specifications
• Commission will decide by mid-2016 who is ready
• Will apply from 2017 only (and 2020 for countries not
ready by then)
• Until 2017 (or 2020), present system (Form A)
continues to apply.



Monitoring

• Monitoring actions (checks by the Commission that the
authorities of beneficiary countries are able to comply
with their obligations in terms of management and
control, as a basis for improved cooperation between
customs authorities) have already begun but should
become more systematic.
• Monitoring actions are not just in the interest of the
Community – they are in the interest of beneficiary
countries also: if we are aware of a problem early, we
can offer help to correct it.



Derogations

• The possibility of granting derogations is no longer
limited to LDCs and the circumstances in which they
may be granted are re-defined.



Implications for other arrangements

• The regulation has no direct effect on other
arrangements.
• However, the Communication of 2005 was a horizontal
document, concerning all preferential trade
arrangements.
• The Community will approach negotiations for new
agreements in a constructive and open manner.



The timetable for the new GSP rules of
origin
• Member States must give a favourable opinion: vote now
expected to take place in September 2010
• After this, Commission will formally adopt the text and publish
it in the EU Official Journal
• Rules on determination of origin, cumulation, non-
manipulation: should apply from 1 January 2011
• New procedures on proof of origin: from 1 January 2017 (or 1
January 2020 for beneficiary countries not ready by then)
• Nothing is definitive until the regulation is published. Watch
the web-site!



Further information

• GSP rules of origin:
http://ec.europa.eu/taxation_customs/customs/customs_duti
es/rules_origin/preferential/article_781_en.htm
• Guide for users on GSP rules of origin:
• Latest news on the reform of GSP rules of origin:
• GSP regulation: http://ec.europa.eu/trade/wider-
agenda/development/generalised-system-of-
preferences/index_en.htm



Whom to contact

• European Commission, DG Taxation and
Customs Union, Unit B3 (Rules of Origin),
1049 Brussels, Belgium
• Mr Pierre-Jacques Larrieu (head of unit)
• Mrs Oksana Zikuna,
Oksana.Zikuna@ec.europa.eu or functional
mailbox Taxud-Unit-B3@ec.europa.eu.


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