Bridges Weekly Trade News Digest • Volume 9 • Number 10 • 23rd March 2005
EU To Modify Rules Of Origin For Trade Preference Schemes
The European Commission (EC), the executive body of the EU, has adopted a plan to develop a new, simplified set of rules of origin for its trade preference schemes, particularly the Generalised System of Preferences (GSP).
‘Rules of origin’ are a set of requirements that govern whether goods are eligible for the lower rates of customs duty offered under a particular preferential trade arrangement. Developing country governments and civil society groups have long criticised origin rules for being major trade barriers, since they can be so onerous that they render preferential market access essentially meaningless. An oft-cited example is the EU’s offer of duty free access to clothing exports from the Maldives only if the fabric and cloth are made there — an impossible requirement for a tiny atoll consisting largely of sandy beaches. Maldivian clothes made from Chinese cloth would face high tariffs in the EU.
The EC itself recognised these problems in its statement announcing the new policy, describing its existing requirements as "too complicated" and "susceptible to abuse." The new plan, which was adopted on 16 March, asks EU members to revise and simplify the conditions for a product to be considered as originating in a particular country, to modify customs procedures to facilitate exporters’ use of preferential market access, and to develop instruments to ensure that preference beneficiaries comply with their obligations. Improving developing countries’ access to rich-country markets is to "inspire" the process, according to the document outlining the new plan.
Notably, the new policy calls for a "single, across-the board" criterion for determining the country-of-origin for goods that have not wholly originated in a single country. This would replace the current multiplicity of varying rules for different products present in the EU’s preference schemes. It also proposes relaxing the conditions for allowing ‘cumulation of origin’ within ‘coherent regional groups or zones’ — i.e., treating a group of states as a single country for the purposes of eligibility for enhanced market access.
The EU will first address the rules of origin associated with its GSP, aiming to implement the new ones in 2006. The GSP itself was modified earlier this year (see BRIDGES Weekly, 16 February 2005). In a 17 March speech to the Development Committee of the European Parliament, EU Trade Commissioner Peter Mandelson said that he would make a greater priority of attempts to simplify the WTO’s rules of origin as well.
The EC ‘Communication’ on the future rules of origin in preferential trade arrangements is available here.
ICTSD reporting; "EU to simplify rules of origin over preferential trade arrangements," XINHUANET, 18 March 2005; "Customs: Commission proposes strategy for simplified rules of origin," EUROPEAN COMMISSION (Press Release), 17 March 2005.