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Revision of the PEM Convention on Rules of Origin

Revision of the PEM Convention on Rules of Origin. Textiles TAXUD/ 1645234/14 20 th PEM Working Group Brussels, 22 May 2014. Guillaume DOREY DG Taxation and Customs Union TAXUD B3 – Trade facilitation, Rules of Origin and International coordination Europe and neighbouring countries.

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Revision of the PEM Convention on Rules of Origin

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  1. Revision of the PEM Convention on Rules of Origin Textiles TAXUD/1645234/14 20th PEM Working Group Brussels, 22 May 2014 Guillaume DOREY DG Taxation and Customs Union TAXUD B3 –Trade facilitation, Rules of Origin and International coordination Europe and neighbouring countries

  2. Textile – origin provisions Textile in rules of origin – State of play Position of Contracting Parties Other ways of relaxations

  3. 1. Textile in rules of origin – State of play • List rules in the current PEM • Tolerances • Cumulation (special provisions for certain areas)

  4. 1. State of play List rules – current PEM rules • Based on 'double-transformation'  two significant processes of production undergone in PEM Members (provide higher value added) • Complementary nature and integrated production chain across pan-Euro-Med area • Double transformation generated a number of benefits for PEM area due to cumulation among PEM partners • Estimates: about 5 mio textiles and clothing workers employed throughout the area

  5. 1. State of play List rules – current PEM rules Clothing (examples) Textiles (examples) - extrusion of man-made fibers accompanies by spinning for synthetic yarns, or - spinning of natural or man-made fibers accompanies by weaving, or • a substantial printing operation accompanies with two preparatory or finishing operations • (such as scouring, bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permament finishing, decatising, impregnating, mending and burling), • conditioned to a value-added criteria for the incorporated non PEM input – 47.5% • weaving accompanied by making–up (including cutting), or • making–up preceded by printing accompanied by at least of two preparatory or finishing operations(such as scouring, bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permament finishing, decatising, impregnating, mending and burling), • conditioned to a value-added criteria for the incorporated non PEM input – 47.5% (e.g. grey fabrics)

  6. 1. State of play Tolerances – current PEM rules • Specific tolerances expressed in Introductory notes: • Note 4 (definitions) • Note 5 (tolerance of 10% in weight for basic textile materials + definition of basic textile materials) • Note 6 (tolerance for textile materials of 8 % EXW price providing a CTH with the exception of linings and interlinings + tolerance for non-textile materials)

  7. 1. State of play Cumulation – current PEM rules • Cumulation for textile: full cumulation • Areas of full cumulation: • EEA (EuropeanEconomic Area – EU, IS, LI, NO) • MA – TN – EU • MA – TN – TR • TN – EFTA (CH, IS, LI, NO) • DZ – EU

  8. 1. State of play Example Full cumulation EEA Pakistan Iceland HS 62 05 Supplier's declarationfor non-originating fabrics yarn weaving List rule for shirts:“Manufacture from yarn” List rule for fabrics:“Manufacture from fibres” EUR.1 or Invoice declaration PO = EEA (EU) Full cumulation Takes into account the different working stages 1- weaving from yarns 2- making Norway

  9. New challenges in textile and clothing sector • New business and industrial reality in the sector • Increasingly complex supply chains/diversity of production processes • Changing production techniques and production patterns (e.g. finishing sector with innovative technologies ) • Limited supply of originating fibres/yarns in terms of needed types, quantities, qualities • Fierce competition from many Asian countries

  10. 2. Positions of PEM partners • To keep the current rules (with relaxations or not) • Double transformation as a principle but with options • Single transformation (with or without conditions)

  11. 2. Positions List rules – current PEM rules clothing textiles - extrusion of man-made fibers accompanies by spinning for synthetic yarns, or - spinning of natural or man-made fibers accompanies by weaving, or • a substantial printing operation accompanies with two preparatory or finishing operations • (such as scouring, bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permament finishing, decatising, impregnating, mending and burling), • conditioned to a value-added criteria for the incorporated non PEM input – 47.5% [or without now] • weaving accompanied by making–up (including cutting), or • making–up preceded by printing accompanied by at least of two preparatory or finishing operations(such as scouring, bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permament finishing, decatising, impregnating, mending and burling), • conditioned to a value-added criteria for the incorporated non PEM input – 47.5% (e.g. grey fabrics)

  12. 2. Positions List rules – Relaxations by certain partners Textile (examples merging different positions) • New wording with key working processes (options) for bothyarn or fabric: • Extrusion + spinning/weaving • Extrusion + twisting/weaving • Twisting or/combined with gimping/weaving • Yarn dyeing + weaving • Weaving + one specific operation (printing, dyeing, coating…) • Printing (as standalone operation + value added criteria) • Dyeing + 2 finishing operations) + value added criteria • Dyeing (as standalone operation) Clothing(examples merging different positions) • New wording with key working processes for clothing • weaving accompanied by making–up (including cutting) • making–up preceded by printing (as standalone operation + value added criteria) • Dyeing + making-up • Specific rules for some products (ex: denim)

  13. 2. Positions List rules – Relaxations by certain partners clothing textiles • Single transformation based on: • CTH • Change from any heading • Single transformation based on: • CTH • Change from any heading • 30 % minimum of originating added-value

  14. 2. Positions Analysis chapter by chapter • Chapters 50 to 53 • Chapters 54 and 55 • Chapters 56, 57, 58, 59 • Chapters 60 and 61 • Chapter 62 Example:

  15. 2. Positions Chapters 50 to 53 + ex 5003 (silk waste) with special rule needed?

  16. 2. Positions Chapters 54 and 55

  17. 2. Positions Chapter 56

  18. 2. Positions Chapter 57

  19. 2. Positions Chapter 58

  20. 2. Positions Chapter 59

  21. 2. Positions Chapter 59

  22. 2. Positions Chapters 60 and 61 Proposition of chaging the wording of « other » by « other (fully-finished knitting or knitted to shape) »

  23. 2. Positions Chapter 62

  24. 2. Positions Chapter 62

  25. 2. Positions Chapter 62

  26. Chapter 63 2. Positions

  27. 3. Other Ways of Relaxation • Modernization of rules for textile may go through different approaches: • List rules • Tolerance • Cumulation

  28. 3. Relaxations Tolerance (general provisions and Introductory notes)(see presentation on open questions) • Article 5(1) – General tolerance • Introductory notes (Notes [4], [5] and [6]) • Article 13 – provision on Duty Drawback • Article 14 – Principle of territoriality

  29. 3. Relaxations Tolerance • Article 5(1) – General tolerance • State of play[15%] of the ex-works price → all other products except Ch. 50-63 → specific tolerances (Introductory notes 5 and 6) • Discussion • tolerances to be increased to the same extent and/or remove exclusion of textiles in general ex-works price tolerance

  30. 3. Relaxations Tolerance • Introductory notes (see document TAXUD/1645189/14) • Note [5] (definitions + printing and printing as standalone operation) • Note [6.1] (tolerance of 10% in weight for basic textile materials + definition of basic textile materials) • Note [7.1] (tolerance for textile materials of 8 % EXW price providing a CTH with the exception of linings and interlinings + tolerance for non-textile materials)

  31. 3. Relaxations Tolerance • Article 13 – provision on Duty Drawback • See working document TAXUD/1261847/14 • Discussion • CPs are invited to express their views on the principle and the potential impact

  32. 3. Relaxations Tolerance • Article 14 – Principle of territoriality • Provision • Working or processing outside the exporting CP can be disregarded' if added value ≤ [10%] of the ex-works price of the end-product • Not allowed for products of Ch. 50-63 • Discussion • CPs are invited to express their views on the principle and the potential impact

  33. 3. Relaxations Cumulation • Full cumulation couldbeconsidered by partners: • Step-by-stepapproach? • Bilateralapproach? • Other? • General provision (to beincluded in Article 3)? • Combinedwithother relaxations?

  34. Conclusion • Revision exercise should strike the right balance between: List rules Rulesoforigin Cumulation Tolerance

  35. Unit B3 – PANEUROMED – Origin of goods • European CommissionDG Taxation and Customs Union • TAXUD-UNIT-B3@ec.europa.eu • http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/index_en.htm

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