EC Revises GSP Rules for Textiles, Non-Originating Goods and Cumulation, Etc.
The European Commission has adopted a regulation revising the rules of origin for products imported under its Generalized System of Preferences regime. The changes relax and simply rules and procedures for developing countries wishing to access this European Union preferential trade arrangement. The new rules will apply effective January 1, 2011.
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The regulation will also establish a new procedure for demonstrating proof of origin directly by exporters starting in 2017.
(GSP regime rules of origin are used to determine whether imported goods really originate in countries covered by this preferential trade agreement, thereby making them eligible for a preferential customs tariff.)
Rules Simplified for Developing Countries, Single-Stage Fabric Processing Allowed
The regulation will simplify the rules of origin so that they are easier for developing countries to understand and to comply with. Among other things, the new rules take into account the specificities of different sectors of production and particular processing requirements.
For example, in the textiles and clothing sector, which is of particular importance to many developing countries, single-stage processing (manufacture from fabric) is allowed in many cases, instead of the two stages of processing (manufacture from yarn) required by the present rules.
Special Provisions Allow LDCs to Claim Origin for Good Processed but Not Originating
In addition, special provisions are included for Least Developed Countries (LDCs) which will allow them to claim origin for many more goods which are processed in their territories, even if the primary materials do not originate there.
For example, an operator in Zambia that produces and exports plastics to the EU will benefit from the new rules of origin, because even with up to 70% of foreign input the exported plastics can still be considered as originating from Zambia. The EC states that these new rules should greatly benefit the industries and economies of the world's poorest countries.
Cumulation of Origin Rules Relaxed, New Region/Types Introduced
Regional cumulation of origin, which allows countries with identical rules of origin to work together for the purpose of manufacturing products eligible for preferential tariff treatment, is maintained. However, the conditions are relaxed for more efficiency.
A new cumulation region, comprising member countries of Mercosur, is added, and new types of cumulation are introduced in the reformed rules, notably between countries of different regions and between GSP beneficiary countries and EU Free Trade Agreement partner countries under certain conditions.
Proof of Origin to be Made Directly by Exporters Starting in 2017
The regulation also puts forward a new procedure for demonstrating proof of origin, which places more responsibility on the operators. From 2017, the current system of certification of origin carried out by the third country authorities will be replaced by statements of origin made out directly by exporters registered via an electronic system.
EC states that this will allow the authorities of the exporting country to re-focus their resources on better controls against fraud and abuse, while reducing red-tape for businesses.
The EC's draft regulation is available here.
The question and answer document is available here.
(Press release dated 11/18/10)