1. Mombasa, Kenya 09/10 February 2010 Mombasa, Kenya 09/10 February 2010 Eckart Naumann Associate: Trade Law Centre for Southern Africa (tralac.org) Rules of Origin for Fish and Fish Products Rules of Origin for Fish and Fish Products East Africa ACP Dialogue on Non Tariff Barriers within Economic Partnership Agreements (EPAs)

2. 2  Why Rules of Origin? A few basics  Rules of Origin (RoO) are the “fine print” of trade agreements  Primary purpose is to prevent trade deflection, or prevent “superficial” operations from obtaining trade preferences  RoO can “make or break” exports, depending on the requirements specified  RoO often used to further protectionist policies  RoO can undermine and devalue duty free / quota free access  Fisheries a case in point?

3. 3 To start with... a few trade stats Country EU Exports Chapter 3 (EURO million) EU Exports Chapter 16 (EURO million) 2007200820072008 Kenya 28,9 mil35,6 mil 25,8 mil29,7 mil Mauritius 5,7 mil3,8 mil 137 mil178 mil Madagascar 99 mil95 mil 32 mil23 mil Uganda 96 mil80 mil -- Seychelles 19 mil15 mil140 mil152 mil Tanzania 127 mil112 mil--

4. 4  What EU RoO currently apply to East African States?  Zimbabwe, Zambia, Seychelles, Mauritius, Comoros, Madagascar initialled IEPA in Nov/Dec 2007, and subsequently signed in 2009  For signatories, interim RoO provisions of EC Market Access Regulation 1528/2007 applied prior to signature, now IEPA provisions (details on later slide)  Other countries have reverted to GSP/EBA RoO (much stricter conditions)  Are EU RoO all bad? No ! But watch out for future change to VA

5. 5  EU RoO are based on the following principle: Products must be “wholly obtained” in the export country, or substantially transformed Wholly obtained (WO) or Substantially transformed Specific processing (SP) Change in tariff heading (CTH) Value-added (VA)

6. 6  For fish and fisheries products, most of the relevant details are contained in the “wholly obtained” provisions  The “wholly obtained” provide detail such as requirements for vessels, flag, ownership, leasing arrangements etc. (+crew in GSP and elsewhere)  Even the list rules (requirements defining ‘substantial transformation’) specify that fish material (“material of Chapter 3”) be “wholly obtained” in the exporting country, with some flexibility (value tolerance)

7. 7 RoO for fish and fisheries products: how the “wholly obtained” provisions relate to “territorial waters”  Differentiation territorial waters (incl. inland waters) and beyond automatically considered originating conditional and “wholly obtained” - must follow rules closely (vessel, ownership, flag, leasing)

8. 8 …Illustrative example  Kenya

9. 9  For fish caught outside territorial waters:  Must be caught by “their vessels”  Qualification of vessel based on three components :  COUNTRY of registration  FLAG of vessel  OWNERSHIP

10. 10  The details: qualifying “vessels” must be… - registered in ACP State or an EC Member State - sail under the flag of an ACP EPA State or EC Member State - ownership : ≥ 50% ACP or EC nationals or owned by companies with head office and main place of business in the ACP State or the EC, which in turn must be owned≥ 50% ACP or EC State / nationals / public entities

11. 11 Leasing of vessels  Under certain circumstances, chartered or leased vessels may be considered to be a “qualifying” vessel: CotonouMarket Access Regulations IEPA EC must be offered opportunity to negotiate fisheries partnership agreement and EC did not accept this offer sameright of first refusal for charter or lease agreement Lease must be accepted as... -Providing adequate opportunities to develop local capacity to fish on own account -The ACP EPA State must have nautical and commercial responsibility over the vessel - Fishing effort (leasing) limited to the 200-mile EEZ i.e. can’t “follow the fish” (commercially viable migratory and straddling stocks)

12. 12 What’s new?  What is new in EC-ACP RoO for fish?  Slight changes to basic WO provisions – products of aquaculture (where fish born and raised there)  Removal of crew requirement : (previously ≥ 50% of crew (master and captain included) had to be nationals of the ACP/EC/OCT countries (≥ 75% in GSP!)  Simplification of ownership requirements: remains at ≥ 50% local/EC but no longer reference to chairman and members of board of directors or supervisory board, ownership capital etc.  Tuna derogation: same qty. for ESA Group as (previously) all ACP (8,000t canned tuna and 2,000 loins), EAC got 2,000t tuna loin derogation

13. 13 What’s new?  Leasing and chartering:  Also removes crew requirement  [In EPA RoO, the ACP country must have first offered the EC opportunity to negotiate charter or lease agreement )  15% value tolerance (fish material) for some product categories:  HS 0304 – HS 0307 (fish fillets, dried/smoked fish, crustaceans, molluscs etc.)  HS 1604 – HS 1605 (preparations of fish)

14. 14 A few concerns  Cumulation  GSP: no cumulation,  Market Access Regulations: confined to signatories,  IEPA – with all ACP States restored  Treatment of fish caught in EEZ / beyond (global sourcing)  Why no recognition of UNCLOS status of this zone? [NAMIBIA]  Why no reward for processing in Chapter 1604/1605 [PACIFIC EPA]

15. 15 A few concerns  Ambiguities in leasing provisions, limit to EEZ  e.g. Legal uncertainties, lack of timelines, etc.  Tuna derogation (as per Cotonou?) – general concern  ESA ok, derogation effectively shared between Seychelles, Madagascar & Mauritius as they have tuna processing facilities  EAC – effectively for Kenya – what if other processors join later?  Possibility of renegotiation of RoO – concern or opportunity?  Reviewed as part of full EPA, or within defined time after signature of IEPA  Renegotiation provided for in legal texts, but...contradictory statements from EC (argument of legal certainty)  Preference for a VA-based methodology – feasible?

16. 16  Thank you Thank You