Rules of Origin and the Pacific fisheries trade with the EU

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Rules of Origin and the Pacific fisheries trade
with the EU

• Liam Campling
• School of Oriental and African Studies
• TRINNEX workshop PacificEU Economic
• Partnership Agreements Opportunities and
  Challenges for the
• Private Sector of New Trading Arrangements,
• 2728 November 2006, Port Villa, Vanuatu

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What Are Rules of Origin For?

• Two purposes of fisheries rules of origin
• To ensure that preferences provide developmental
  benefits to recipient country
• A tool of EU domestic commercial policy
• EU rules of origin are a ticket of entry for
  PACP fish products and serve as a major barrier
  to market access and associated industry
  development

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What Are Cotonou Rules of Origin for Fish? (i)

• Wholly obtained fish based on qualifying
  vessels
• Qualifying vessels
• Registered flagged in EU, ACP and/or OCT (EU
  territories)
• Crew 50 nationals EU, ACP and/or OCT
• 50 ownership by nationals or a company based in
  EU, ACP and/or OCT
• Chartering (renting) permitted if EU fleet
  decline access

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What Are Cotonou Rules of Origin for Fish? (ii)

• Automatic derogations (exemptions for set
  quantities) for canned tuna and tuna loins
• Bilateral cumulation available among EU, ACP
  and/or OCT (i.e. their imports qualify as part
  of production)
• Regional cumulation with neighbouring (non-ACP)
  developing countries available to ACP
• but of no value to PACP
• Value tolerance 15 (per consignment)
• but very rarely used in practice

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Rules of Origin as Commercial Policy

• EU distant water fleet (DWF) can charge premium
  on fish meeting rules of origin (RoO) ? acts as a
  subsidy to DWF
• Preferential access to EEZ for EU DWF under
  Cotonou
• EU processors able to source based on best market
  price ? insulates them from ACP competition (i.e.
  flexibility of supply)
• Rules of origin are not a neutral instrument
  (EC official)
• In sum, EU RoO provide commercial benefit to the
  EU. Understanding this point is central to the
  success of proposed PACP reforms.

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PACP and Cotonou RoO for Fish

• Benefits
• Better than GSP on crew, ownership, chartering,
  derogation, value tolerance
• Intra-regional trade
• Signatorys ownership of plants not required

• Costs
• EU DWF marginally active in WCPO
• Limits strategic sourcing
• Barrier to development of PACP economies of scale
• Automatic derogation small and lacks stability
• Admin and compliance costs (for firms and
  governments)

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PACP EPA Negotiations and RoO Reform

• On the Community side trade liberalisation
  shall build on the acquis and shall aim at
  improving current market access for the ACP
  countries through inter alia, a review of the
  rules of origin.
• Cotonou Agreement, Article 37, para 7

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EU RoO Reform Three Scenarios

• A. Relaxing Cotonou RoO for originating fish
• Taxud 1) Delete crew condition
• 2) Simplify ownership criteria
• 3) Wholly originating or substantial
  transformation (i.e. 40 value addition)
• PACP 1) Any fish caught in PACP EEZs or high
  seas by EU or PACP flagged vessels
• 2) Fish caught in PACP EEZs by any vessel if
  landed in a signatory state

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EU RoO Reform Three Scenarios

• B. Value Added Method (DG Taxud proposal)
• 40 value to be added in recipient country (based
  on net production costs)
• Price of originating fish value addition
• Problematic for tuna processing because of the
  high cost of fish (especially loins)
• Opposition from ACP and EUROTHON
• Possible reduction for fish products
• Possible combination with other methods such as
  change in tariff sub-heading

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EU RoO Reform Three Scenarios

• C Change in Tariff Sub-Heading Method (PACP
  proposal)
• Product qualifies if there is a change in
  Harmonised System (HS) code at the 6-digit
  sub-heading
• However, change at 4-digit heading would suffice
  for fish
• Canned/ loined tuna would easily qualify
• DG Taxud opposed to fillets as substantial
  transformation

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Change in Tariff Sub-heading for Tuna
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Summary of Key Points

• Rules of origin a tool of EU commercial policy,
  but
• reform of fisheries rules of origin the
  primary mechanism to improve PACP tuna market
  access
• PIFS recommendation on change in tariff
  sub-heading method beneficial to PACP exporters
  of tuna products but
• likely to encounter resistance from EU vested
  interests (but such is the nature of trade
  negotiations)

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ANNEX 1 Cotonou and GSP RoO differences

• Cotonou
• Wholly obtained based on qualifying vessels
• Crew 50 nationals EU, ACP and/ or OCT
• Charting permitted if EU DWF offered access
• Automatic and specific derogations
• Bilateral cumulation with EU, ACP and/ or OCT
• Regional cumulation with neighbouring DCs
• Value tolerance 15 (ex-works)

• GSP
• Wholly obtained based on qualifying vessels
• Crew 75 nationals EU and/ or recipient
• No chartering
• No derogations bar specific for LDCs
• Bilateral cumulation with EU
• Regional cumulation for SAARC, Andean, ASEAN
• Value tolerance 10 (ex-works)