4Stabilisation- and Association Pact 1999 Cologne40 participants: All participants of CEFTA 2006,EU, Canada, Switzerland, Russia, Japan, USA,IMF, World Bank, OECD; NATO, UN, Turkey et alt.
5Targets of the Stability Pact: 3 „working tables“ -. Democracy - Targets of the Stability Pact: 3 „working tables“ - Democracy - Economy - Security
6„Working table economy“: To assist economic development by trade liberalisationin the region andin the trade with partners of the European Economic Area (EEA)
7on Trade Liberalisation and Facilitation Key targets: 2001 Memorandum of Understandingon Trade Liberalisation and FacilitationKey targets:- Bilateral Free Trade Agreements- Enhance the WTO accession- Stimulation of the EU accession process
9Elements of the Free Trade Agreements: Liberalisation of at least 90% of the trade within 6 years- Application of preferential rules of origin- Harmonisation of legal regulations with the EU legislation (Customs nomenclature, phyto- and sanitarian protection, tax system etc.)- Protection of intellectual property rights- Approximation of laws with WTO-rules
10Joint Declaration of June 2006: Creation of a single modernised and improved CEFTA (1996) Agreement in- full conformity with the WTO rules- and establishing a zone of diagonal accumulation
11Agreement on Amendment of the CEFTA (1996) Agreement :Agreement on Amendment of the CEFTA (1996) Agreement
12Conditions for the accession: WTO-membership (in case of non-membership a committment to application of WTO-rules mutatis mutandis is imposed, actually relevant for Serbia, BiH and UNMIK/Kosovo)Free Trade Agreement with the EUFree Trade Agreements with all member states of CEFTA
13Structural elements of the Agreement: Preamble -with reference to EU-accession and WTO compliance-ObjectivesIndustrial productsAgricultural productsTechnical barriersGeneral provisionsNew trade issues - with reference to „TRIPS“Joint declaration – containing WTO-Annexes 1 A, B, and C
14Main targets of CEFTA 2006 (trade related): Free trade in the areaTrade facilitation by- Customs preferences- - In general duty free trade- - Support for technical co production- Modern and harmonised Customs Law- Lesser technical barriers- Harmonisation of standards
15Customs preferences in detail: - Abolition of quantitative restrictions- No export duties- No new import duties- Industrial goods:- - Duties abolished at entry into force(exceptions in Annex 2/dismantling)- Agricultural goods:- - Duties abolished, reduced or retention of MFN-tariff (Annex 3)
16Conditions for Customs preferences: - Goods are eligible or preferences - Goods are originating in the country of exportation - Technical conditions are met
17The cornerstone: Rules of Origin Different trade within aFree Trade Zoneand aCustoms Union
20Intensity of EU-Preferences per 1.8..2010 Complete integration: European UnionCustoms Union: With Turkey (except steel products)EU-EFTA Agreements:Norway, Iceland, Liechtenstein, Switzerland“Europe Agreements”: No more countriesStabilisation and Association Agreements with Croatia, BiH, Macedonia, Albania, Montenegro, Serbia (Interim)Economic Partnership Agreements ( EPAs, see “Abroad”)Mediterranean Agreements :North Cyprus (Turkish part),Maghreb states: Morocco, Tunisia, Algeria.Mashrek group: Egypt, Jordan, Syria, Lebanon. Plus Israel and PNAAbroad: South Africa, Mexico, Chile, EPAs: Cariforum, Pacific Terr.Unilaterally: 178 (176) developing countries in the GSP,Balkan beneficiaries: UNMIK/ Kosovo and Moldova
21CEFTA System of Origin Preferential definition Commercial definition Non-preferentialdefinition“Made-in” originEU-systemSystem ofothercountriesEU-definitionWorldwidedefinitionUK in 1887WTO mandateto WCOMadrid-Agreement 1891General systemof Preferences(UNCTAD)Rules forspecifiedproducts(i.e.textiles)andMadrid-Agreement 1958Actually inprocessNational legislationPAFTAASEANCEFTAAGADIRMost important: TRIPS,(WTO-accession!)Rules forall the restof productsContainselements ofthe preferentialoriginWIPO-Geneva
22Criteria for the origin of goods. Wholly obtainment. or Criteria for the origin of goods Wholly obtainment or sufficient processing
27Wholly obtainment frequently used for agricultural goods: Chapter 07 Edible vegetables: Fresh, chilled, provisionally preserved Chapter 08 Edible fruits: Fresh, dried Chapter 20 Preparations of vegetables: In general all vegetables and fruits used must be wholly obtained (with little exemptions). Chapter 21 Miscellaneous edible preparations: With one exception no wholly obtainment „Chapter“ means Chapter of the „Harmonised System“ – see below).
28The alternative for the processing industry: Sufficient processing
29Most frequent basic principles : Change of the HS-heading (4-digits!)Limited percentage of the used materials- Manufacturing procedure-- AND COMBINATIONS THEREOF—Recommendation: To start with theproduction on the lowest level possible
3010% of materials which should not be used, are allowed. General tolerance:10% of materials which should not be used, are allowed.The tolerance rule cannot be applied for textiles (Chapter 50 – 63) and in case of insufficient working or processing.
31Column 3 an 4 only refer to imported materials Where to find these criteria?See „List of working andprocessing“= Annex to the Origin ProtocolColumn 3 an 4 only refer toimported materials
32Importance of the HS for the. rules of origin: - Importance of the HS for the rules of origin: - For preferential origin: 4 digits (for used materials: See Customs declaration) - for export goods: See export declaration - For help: Binding tariff information by Customs! - For non-preferential origin: 4 digits, 1 KN- code-line with 8 digits - Tariff reduction schemes: 6 – 8 digits
33The Structure of the HS 01 04 20 90 00 10 Heading HS Subheading HS Chapter HSHeading HSSubheading HSSubheading National Statistic(Combined Nomenclature, TARIC)NationalInternal
34The HS / version 2007 is divided into 21 SECTIONS97 CHAPTERS1221 HEADINGS5052 SUBHEADINGSGeneral Rules I – V, also binding
35Determination of the origin in case of „sufficient processing“: - HS-heading of the finished product - HS-heading of the used materials - Exact calculation of the ex works- price per unit (= exact bookkeeping!)
36The value of the used materials is their Customs value. So: Important is to check the Customs value carefully!Be aware of the exchange rate!
38Combined criteria - Medicine HS headings 3003, 3004:1. Tariff change of all used materialsBut: materials of headings 3003 and3004 only up to 20% ex-worksand2. Used materials must not exceed 50% of the ex works-price.Combined criteria - Medicine
39Example for Exclusion of a heading, exclusion specific imported materialsandrestriction of imported materials:Heading 1904, I.E. Corn Flakes Question: Is it allowed to use imported mineral salts?
40Example for minimum- input of originating materials: HS-heading 2402,… Cigarettes…:At least 70% by weight of the usedtobacco must be originating in the country
41Notice: Chapter 1 = Live animals! Preparations of meat of Chapter 16:" Manufacture from animals of chapter 1”Notice: Chapter 1 = Live animals!(sanitarian conditions ofslaughter houses!)
42„Manufacture from yarn“ Clothes and garments of Chapter 61 and 62:„Manufacture from yarn“
43Rules for cotton products: 1.Natural cotton fibers, not prepared for spinning HS 5201
442. Cotton yarn, HS 5203Manufacture from natural fibers, not prepared for spinning
453. Cotton Fabric HS 5208Manufactured from natural fibers, can be prepared for spinning
47Alternative 1/ for fabrics: Alternative for the fabric:Printing of the raw fabric(Plus at least two finishing steps)But: Value of the unprinted fabric allowed only up to 47,5 % of the ex-works price of the goodsAlternative 1/ for fabrics:
48Alternative for clothing: Embroidered clothing:Manufacture from unembroidered fabric with a value of not more than 40 % of the ex-works price of the finished good
49Insufficient treatment (“simple operation”) in general not accepted as to confer origin. For details see Art. 7 of the Origin Protocol, but see cumulation rules (below).
50Alternative criteria: Column 3 of the “List”:Alternative criteria:Why do you need and when should you use thealternative criterion??
51Fertilizers Ex - 3105 Standard rule col. 3: Manufacture, in which all materials used are classified within a Heading other than that of the product.However, materials classified within the same heading may be used, provided their value does not exceed 20% of the ex-works price of the product
52And the value of all materials used does not exceed 50% of the ex-works price of the product - COMPLICATE -
53Alternative Rule Col. 4:Manufacture in which the value of all the materials used does not exceed 40% of the ex-works price of the productSimple and allows products of heading 3205 up to 40%
54If the conditions of the „List“ cannot be met, a co-production with a partner state can help in order to get the origin for the finished product.How?By processing materials originating in this or in more partner states.Which possibilities are actually offered by the Free Trade Agreements?
551. Bilateral accumulation 2. Diagonal accumulation Actual models of co-production:1. Bilateral accumulation2. Diagonal accumulation3. Full accumulation, actually only by EU appliedin the trade with the Maghreb states, some formerACP states and in the EEA (EU + NO, IS, FO, CH isconnected).Principle:Non originating material as first processing stepallowed, but all accumulations must lead finally to“List compliance” -.
57Conditions for bilateral accumulation 1. Agreement between the partners2. Processing of originatingmaterials more than insufficient- but less than sufficientprocessing is allowed -3. If only insufficient processing:Origin will be retained4. Non-originating materials have to beprocessed sufficiently (“List”)
58The bilateral accumulation today is integrated as standard rule in all modern European Free Trade Agreements.The „pan-european accumulation“,which covers the bilateral and the diagonal accumulation with more than two involved trade partners, nowadays constitutes the most favourable and most modern system of trade facilitation by Customs technique.
59B A D MULTILATERAL/DIAGONAL ACCUMULATION PREFERENCE PARTY AREA PARTY C CONTRACTINGBPARTYPREFERENCEAAREADCCONTRACTINGPARTYMULTILATACCUM
60Advantages of the Pan-European accumulation No more differentiation between bilateral and multilateral accumulationInsufficient operation can lead to the originFacilitation and enhancement of regional cooperation
61The diagonal accumulation is used - in the trade within EEA (European Economic Area) = EU plus EFTA- states Norway and Iceland, while Switzerland incl. Liechtenstein are associated to the EEA,- in the trade of the EEA with Turkey,- in the trade of the EU and Turkey with the SAP-partners,- within the CEFTA-region
62Accumulation in the CEFTA-Origin Protocol: Origin in CEFTA-states, 2 options:Art. 3 of the Origin Protocol:- - Using originating materials only from CEFTA-member states (Art. 3, Item 1),- - Using originating materials from CEFTA-member states, the EU, Iceland, Norway, Switzerland and Turkey (Art. 3, Item 2).
63Origin in CEFTA-states a n d in the EU: Art. 4 of the Origin-Protocol: - Using originating materials from any other CEFTA-party or from the EU (Art. 4 (1) of the Origin Protocol)Question: How to be applied?
64Conditions for CEFTA-accumulation: Agreements with all other involved partnerstates with identical rules of origin2. Origin of the materials and processing of more than “insufficient operation”3.) Publication in the Official Journal/Gazettesame conditions as in pan-european model ----
65Principles of CEFTA-accumulation 1. Processing more than insufficient operation:= Origin in this country, Compliance to list-criteria is not necessary!2. Processing only as insuficient operation:= Origin in the last country only if the added value there is higher than the highest value share of originating materialsof the other involved countries3. Processing of non-originating materials:= Origin only by sufficient working orprocessing (according to “list criteria”)4. Unchanged sale of the materials:Goods retain their origin
66Example for CEFTA-accumulation Export product: Woven fabric of wool, HS 5112, woven in Albania, export to MontenegroInput: yarn of wool of HS 5107, originating in BiH and SerbiaThe weaving in Albania is more than insufficient processing. The criterion of fabric is: Manufacture from natural fibre.
67Result: The fabric gets Albanian origin Reason: BiH, Serbia, Montenegro and Albania are contracting parties to the CEFTA-2006 Free Trade Agreement.Preference in Montenegro.In case of only insufficient operation in Albania, i,e, only packing of the yarn, the origin goes to the country with the highest input of originating materials.Applied: Art. 3, Item 1 of the Origin Protocol
68Same example,but export to the EU: Same result:The woven fabric has Albanian origin and is eligible for preference in the EU, because all involved parties have Free Trade Agreements (actually as Interim Agreements) with the EU and between themselves. Preference in the EU.Applied: SAP-AgreementQuestion: Yarn from Croatia ??
69Example with export to Turkey: Yarn ( HS 5204) origin: EUgoes to Albania for weaving intoraw fabric ( HS 5208) origin: Albaniafabric goes to Serbia for dyeing origin: Serbiafabric sold from Serbia to TurkeyBoth processings are more than unsufficient operation within the CEFTA accumulation.But: There is no Agreement between Turkey and Albania (but betweenTurkey and EU and Turkey with Serbia) . No preference in Turkey, non-preferential origin only!
70Example with 10%-tolerance and “insufficient operation” Assembling of a ball point pen of HS 9608 for export to the EU- All used parts are of HS 9608:- Cartridge, origin EU, value 2.—€- Plastic parts, origin BiH value 1,-- €- Clip, origin Montenegro value 1.-- €Ex-works price in Albania €Export → Serbia: Origin is EU ( highest share)Applied: Art. 3, Item 2 of the Origin ProtocolThe “ List” does not apply because of “insufficient operation”!If: Cartridge is of origin BiH: Origin of the pen will be BiHIf: Cartridge is of origin Albania: Origin of the pen will be AlbaniaIf: Clip is of origin China: No preferential origin for the pen at all- 10%-tolerance rule does not apply:“Insufficient operation” is given and%- tolerance is exceeded
71Example with “insufficient operation” only Jeans / Origin BiH ( HS 6203) with EUR.1 go toAlbania for packing and export to the EU:Values: Jeans EuroPacking costs EuroPlastic bag (Albania) EuroOther costs/profit EuroPrice ex works EuroAdded value in Albania: EuroHighest value input = BiH, Origin = BiHApplied: SAP-AgreementQuestion: If the plastic bag is of origin Ukraine?
72No Draw Back rule Art. 15 of the Origin Protocol General background Concerned goods
73Example: TV tubeOrigin : South KoreaProcessing in Albania for TV-setValue not exceeding 25% of the ex - works price of the TV (HS 8528)
74Export of the finished TV to other CEFTA-partner state with EUR.1 1. Duty free access of the Korean TV tube to the CEFTA - market,2. disadvantage for CEFTA producers against Albanian producers becauseof customs duties to be paid by the CEFTA producer for his importations of tubes.Question: Exportation to EU-market ?
75Additional special rules: Accessories, spare partsNeutral elementsPrinciple of territorialityDirect transportFree zone processingSanctions
76Impact of the rules of. origin on the internal. structure of your Impact of the rules of origin on the internal structure of your company:
77Purchase Calculation Production Preferences Sales Marketing Case WorkerPreferencesSalesMarketingCalculation 2
78Formal simplification: - Invoice declaration forall shipments up to € oras „Approved Exporter“--- in future: „Approved EconomicOperator“/AEO:Approved for Security aspects,Customs procedures or both---
79Details for the „approved exporter“: - Legal base in the Agreement- Irrespective of the value- Origin declaration by typing, stamping or printing on the invoice or any commercial doc.- Wording must be according to the legal textThe declaration must be signed ( principle)- Non-originating goods indicated only on the invoice- Written application and basic audit- Frequent shipments, knowledge of rules of origin- Proper records and stock accounts- Full responsibility by the exporter- Regular audits by the Customs- Withdrawal of the authorization in case of non-compliance
80Internal proof of origin of materials: „Supplier‘s declaration“ as part of the contract:Certification for the- - status of non-originating materials- - status of already originating materials- Issued for single shipments andas long term declaration.Responsibility by the manufacturer, auditing by the Customs.Actually formally applied and based in the Agreements within the EEA and between EU, Turkey and the Maghreb states, but informal use is highly recommended.