COMESA Rules of Origin Course, 4-5 September 2006
tralac facilitated a 2-day training course on Rules of Origin (RoO) on 4-5 September, and which took place in Harare, Zimbabwe. It was organised by tralac together with the COMESA Secretariat and was aimed at countries forming part of the East Southern Africa (ESA) regional configuration for the proposed Economic Partnership Agreements (EPAs).
Despite challenging logistics, delegates from each of the 16 ESA countries attended the course, and which included senior officials from customs and revenue authorities, ministries of trade, chambers of commerce, export and investment councils, fishing authorities as well as competition and tariff commissions in the region.
The course was aimed at building a better understanding in the ESA region not only on RoO issues in general, but also specifically with regard to the current Cotonou trade regime and negotiation options for future EPAs. While tariff barriers are likely to remain a fact of life for some time still, especially in certain key sectors that may be of interest to both ACP countries and Europe, RoO will continue to function as an important trade policy tool.
The course began by focusing on methodological concepts employed by RoO regimes in trade agreements the world over, including key tests and alternatives used for determining origin (such as the ‘wholly-obtained’ and ‘substantial transformation’ principles, together with the various tests that can give effect to the ‘economic origin’ of a product). Other concepts included cumulation and its inherent limitations, value tolerance rules, drawback, exceptions, certification and so forth, especially as these relate to the Cotonou Agreement.
Considering that RoO in current EU preferential trade arrangements under which ACP countries benefit from are often criticised for being unwieldy, complicated, and even protectionist in nature, a more detailed analysis was undertaken of the rules applicable to key sectors (e.g. fisheries and textiles) in which ACP (and ESA countries in particular) may have an economic interest.
Moving on from the methodological aspects under current rules, an important focus of the course was also on recent policy changes that have been proposed by the European Commission specifically with regard to future RoO. The EC has recently embarked on a process of harmonising its RoO under preferential trade arrangements, and has proposed a shift away from the current rules to a methodology that it deems simpler and more transparent.
Many of these changes and challenges are technical in nature, and cover for example the basis with which the EU proposes to classify specific content as being “local value added”. Delegates were sensitized to these methodologies through theory and practical examples, which highlighted how even subtle exogenous variable could potentially determine whether a product will be deemed to be of local or foreign origin.
The ESA region has taken steps to draw up preliminary proposals for future RoO under EPAs, although it considers these as a work in progress as it refines its position through consultations among its stakeholders. Considering that EPAs are intended to be WTO-compliant, unlike the current trade regime which is operating under a waiver, for the first time will ACP countries have a real opportunity to actively engage with Europe and negotiate (improved) market access, including improved RoO.
While WTO compliance requires EPAs to be reciprocal, the EU has acknowledged that a future trading regime may be asymmetrical in its application, especially over a transitionary period. The course detailed these principles, and explored various options of how asymmetry may be achieved (these include for example differentiated product coverage, tariff liberalisation schedules and methodological basis for determining origin).
Course participants were encouraged to consult with business stakeholders in their respective countries on these issues, and were reminded that as a general rule it is “individuals and businesses that trade with each other, not governments”, even though governments play a key role in defining the rules and framework for international trade.
RoO should complement and promote local development and regional integration – two important principles for the ACP – yet still recognise commercial realities (for example sector-specific value chain dynamics) that are an inevitable part of globalisation.
The RoO training course was intended to provide delegates with the tools and technical insight necessary to assist ESA-group States to develop and further define their negotiation position on RoO – in the context of EPA negotiations – rather than to simply advocate specific positions and improvement options which may not always be consistent with the needs of the region.