Rules on origin of products under generalised system of preferences revised

On November 18 2010 the European Commission adopted Regulation 1063/2010 which amends the rules on the generalised system of preferences (GSP).(1) The GSP provides for zero or reduced tariffs for products exported to the European Union from developing countries that benefit from preferential trade arrangements. The new rules will be of interest to those businesses that export goods from GSP beneficiary countries.

Aims of reform

The revised rules on the GSP seek to reform an old system by simplifying procedures and improving controls for products exported from beneficiary countries. In this respect, the proposal lays down new provisions on determination of origin, taking account of the specificities which apply to different sectors, and shifts the responsibility for demonstrating origin to operators.

The new regulation also aims to improve systematic checks in order to prevent fraudulent exports. This update elaborates on the key issues in more detail.

Rules of origin

In order to simplify the determination of the origin of products, the new regulation provides principally for a single assessment criterion for goods which are not wholly sourced from a beneficiary country. For these types of product, new rules of origin are laid down in Annex 13a of the new regulation, and vary on a sector-by-sector basis. In general, these principles specify the maximum content of non-originating materials in relation to the ex-works price of the final product (the added-value criterion) for categories of goods corresponding to the classification established by the Harmonised Commodity Description and Coding System.

In the case of products for which assessment on the basis of the value-added criterion is not suitable (eg, chemicals, metals or textiles), different, more simple criteria will apply. These will include assessment of:

▪ a maximum permitted content for non-originating materials;
▪ a change of tariff heading or subheading;
▪ specific processing operations; and
▪ the use of wholly obtained materials.

Moreover, the revised rules require a sufficient level of working or processing of nonoriginating input materials, allowing the conferring of the status of originating products under the GSP rules. In this respect, the new regulation also adopts a sectoral approach by requiring certain products to undergo specified working or processing operations in order to enjoy the status of originating goods, such as the breaking up of packaging, the mixing of products or the assembly of parts. In addition, the new regulation broadly upholds the existing list of operations considered to be insufficient for the granting of originating status.

In order to verify whether particular products can benefit from preferential tariffs under the GSP, the rules of origin listed in Annex 13a under the respective headings of the harmonised system will need to be consulted by businesses.

The new regulation has also updated an exception to these rules of origin. Accordingly, products containing non-originating materials which do not fulfil the conditions laid down in the corresponding section of the list in Annex 13a may nevertheless benefit from the GSP preferential tariffs if their content does not exceed a specified threshold. This limit has been increased in the new regulation from 10% to 15% of their ex-works price.

New registration system

From 2017 the current system of certification of origin carried out by third country authorities will be replaced by statements of origin which are to be made out directly by exporters, which will be registered through an electronic system. Consequently, exporters will no longer have to apply for the issuance of certificates by the competent authorities of GSP beneficiary countries. Instead, they will be required to produce a statement of origin themselves for a product which claims to originate in a beneficiary country, in accordance with the rules of origin. The statement of origin should be made out in either French or English, in accordance with the wording which is annexed to the regulation.

In practical terms, the revised rules state that this statement of origin may be made out on any commercial document identifying the exporter concerned and the goods involved. The statement should identify the exporter (including its address), the date of issue and a description of the goods concerned. Such documents should be provided upon export to the customer in the European Union.

Although statements of origin will be valid for 12 months, the revised rules will require exporters to keep their records and accounts of the originating and non-originating materials, as well as production and stock accounts, for at least three years, for the purposes of subsequent checks. EU member states may set out a longer period for the retention of such documents.

While more responsibility will be placed on exporters as regards proof of origin, the competent authorities in beneficiary countries will be entrusted with the task of registering exporters covered by the GSP. The list of exporters will be compiled in an electronic database established by the European Commission, and the nonconfidential content of the database will be disclosed to the public online.

Improved controls

Alongside verifications conducted at the request of EU member states, the new regulation introduces regular control procedures which should be carried out on the initiative of the beneficiary countries. In order to ensure continued compliance with the GSP rules, these procedures will be carried out at intervals which reflect the assessed risk of fraudulent exports. Businesses exporting goods covered by the GSP scheme to the European Union should therefore ensure that they keep accurate records, since in the future control procedures may be carried out far more frequently.

Comment

Although the new regulation seeks to simplify the GSP rules, the revision will not necessarily provide an immediate boost to the export of goods from GSP beneficiary countries. The new provisions, which will apply from January 1 2011, are likely to require exporters to make an additional effort to ensure that they meet the stringent conditions established in the GSP. Moreover, it must be borne in mind that certain sectors for certain GSP beneficiary countries are considered by the European Union to be sufficiently developed and thus, in the first place, do not benefit from preferential tariffs under the GSP.

Endnotes

(1) A copy of Regulation 1063/2010 can be found at
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:307:0001:0081:en:PDF.