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Pan-Euro-Mediterranean cumulation of origin: 

Pan-Euro-Mediterranean cumulation of origin EU-Egypt preferential trade relations

Agenda: 

Agenda Basic concepts of preferential rules of origin Rules of origin of EU-Egypt Association agreement Pan-Euro-Mediterranean cumulation

Preferential rules of origin : 

Preferential rules of origin Economic nationality of products Based upon - the location of the production - the conditions of the production condition for preferential tariff treatment

Definition of originating products : 

Definition of originating products Wholly obtained no imported materials or Sufficiently worked or processed from non originating imported materials (list rules)

Sufficient processing - criteria: 

Sufficient processing - criteria Change of HS Tariff Heading (CTH) Value percentage (% of ex-works price) Specific process Combination of criteria

Definition of cumulation of origin: 

Definition of cumulation of origin Criteria of sufficient processing do not need to be respected if materials are imported from a country with which cumulation is applicable. Materials imported from partner country considered as originating

Bilateral – diagonal cumulation : 

Bilateral – diagonal cumulation Bilateral : materials are imported from country to which finished product will be exported. EU materials processed in EG for export to EU. Diagonal : materials are imported from country other than country to which finished product will be exported. TURK materials processed in EG for export to EU.

Conditions for diagonal cumulation: 

Conditions for diagonal cumulation existence of free trade agreements between the participating countries identical rules of origin in all agreements notice published in the Official Journal

Why free trade agreements ?: 

Why free trade agreements ? Garments Romania Egypt EU Egypt EUR.1 X X If no agreement Romania – Egypt, it has to be avoided that Romanian products are exported to Egypt through the EU. circumvention of absence of Egypt-Romania agreement WTO incompatible to grant preferences in Egypt to Romanian products without FTA

Why identical rules ?: 

Why identical rules ? Assume RO for fabrics : (1) weaving in EU-Switz. agreement (2) spinning and weaving in EU-Egypt agreement India yarn Fabric Switz Fabric Egypt EUR.1 Garment EC MO EUR.1 Garment EC MO

EU-Egypt protocol 4: 

EU-Egypt protocol 4 Applicable since 1 January 2004. Provisions on diagonal cumulation Provisions on no-drawback

Protocol 4 : diagonal cumulation: 

Protocol 4 : diagonal cumulation Art 4 Diagonal cumulation with Algeria, Cyprus, Israel, Jordan, Lebanon, Malta, Morocco, Syria, Tunisia, Turkey, WBGS not yet applicable as condition of identical rules of origin not fulfilled with any of the countries (nor by EU nor by Egypt)

Protocol 4 : no drawback : 

Protocol 4 : no drawback If product exported under preference : duties must be paid on imported, third country materials used duties paid on imported materials, may not be refunded upon export No duties to be paid on materials originating in the zone (e.g. EU)

Purpose of no drawback rule: 

Purpose of no drawback rule To create a level playing field between economic operators throughout the zone equal treatment of products imported from preferential country and products produced locally

Example level playing field: 

Example level playing field TV made for Egyptian market from Japanese parts Japanese parts Egyptian assembly EU assembly Egyptian market Egyptian market EUR.1 Duties on JP parts Duty free in 2007 Duties on JP parts

Exporter’s Choice: 

Exporter’s Choice 2 options apply for preferential proof of origin and pay duties on imported parts OR not apply for preferential proof of origin and not pay duties on imported parts decision depends upon preferential margin on exported product and rate of duty on imported materials

Example 1. exporter ’s choice : 

Example 1. exporter ’s choice Refrigerator assembled in Egypt /Value 100 € Japan 39€ Egypt EC EUR.1 Duties paid on Jap. parts Duty free access to EC 5 % duty on JP parts (1,95 €)

Example 2. exporter ’s choice : 

Example 2. exporter ’s choice Refrigerator assembled in Egypt / value 100€. Japan 39€ Egypt EC No EUR.1 Duties NOT paid on Jap. parts MFN rate in EC (1.9 % - 1.9€) no duty on JP parts (1,95€)

Article 15 of protocol 4: 

Article 15 of protocol 4 prohibition of drawback § 6 : suspended for 6 years (until 31 December 2009) §7 : as from 2010 prohibition of drawback for agri products flat rate of 5% for industrial products flat rate of 10% for textiles

Pan-Euro-med Cumulation: 

Pan-Euro-med Cumulation Creation of diagonal cumulation zone between 42 countries European Union (25 members) Morocco, Algeria, Tunisia, Egypt, Israel, Palestinian Territories, Jordan, Lebanon, Syria Iceland, Lichtenstein, Norway and Switzerland (EFTA) Bulgaria and Romania Turkey Faroe Islands

Pan-Euro-Med cumulation: 

Pan-Euro-Med cumulation creation of pan-euro-mediterranean free trade area liberalisation of rules of origin will : increase possibilities for sourcing of raw materials create new markets for raw materials boost investments in the region harmonisation of rules of origin

Example 1 : textiles : 

Example 1 : textiles Garments are originating if obtained from yarn (weaving and making up in Egypt) Cumulation allows to import fabrics. Fabric Turkey Garment Egypt Jordan Switzer- land EU Preference Preference Preference

Example 2 : textiles : 

Example 2 : textiles Fabrics are originating if obtained from fibres (spinnig and weaving) Cumulation allows to import yarn. Fabric Turkey Yarn Egypt Tunisia Preference No Pref. Yarn China

Example 3 : Refrigerators : 

Example 3 : Refrigerators Refrigerators (HS 8418) are originating if value non-originating materials does not exceed 25 % ex works price. Cumulation allows to count parts from pan-Euro-Med countries as local value Japan 20 Refrigerator Egypt Jordan EU Turkey 15 Preference

Example 4 : preserved citrus fruit: 

Example 4 : preserved citrus fruit Preserved citrus fruit (HS 2008) is originating if fruit used is originating Cumulation allows to import citrus fruit. Preserved fruit Jordan Citrus Egypt EU Preference No Pref. Citrus Brazil

Example 5 : Cars: 

Example 5 : Cars Cars (HS 8703) are originating if value non-originating materials does not exceed 40 % ex works price. Cumulation encourages to source materials in the zone Cars Morocco Egypt 15 EU Preference USA 35

Prohibition of drawback : 

Prohibition of drawback Bilateral trade suspension until 31/12/2009 5% or 10% duties as from 1/1/2010 Diagonal trade not possible because no identical rules Bilateral trade no duties to be paid not even after 1/1/2010 Diagonal Trade 5% or 10% duties on non-originating materials from outside the zone Current Protocol 4 Pan-Euro-Med

No-drawback – bilateral trade : 

No-drawback – bilateral trade Japan Egypt EC EUR.1 CURRENT protocolDuties on Jap. parts ? - none until 31/12/2009- 5% as from 1/1/2010 PEM protocolDuties on Jap. parts ? none - permanently not even 5% after 1/1/2010

No-drawback – diagonal trade : 

No-drawback – diagonal trade Turkey fabric Egypt Garment EC CURRENT protocol: No preferential access to EU !! PEM protocol: - preferential access to EU - no duties on Turkish fabric

No-drawback – diagonal trade : 

No-drawback – diagonal trade Turkey fabric Egypt Garment EC CURRENT protocol: No preferential access to EU !! PEM protocol: - preferential access to EU - no duties on Turkish fabric - 10 % duty on USA accessories Acces- sories USA

No-drawback on 3rd country materials : 

No-drawback on 3rd country materials Refrigerator assembled in Egypt CH Japan Egypt EC EUR.1 Duties to be paid on Jap. parts No duties to be paid on materials originating from PEM countries

State of play: 

State of play EU-MED agreements proposals for adoption of new protocol sent to all MED on 10 November 2005 adoption : on date of receipt of reply applicable : first day of the following month ( 1 december 05 / 1 January 06?)

State of play other agreements : 

State of play other agreements Pan-Euro-Med in force : Tunisia-Turkey (1/7/2005) EU- Faeroe Islands ( 10/11/2005) Morocco – EFTA (1/3/2005) Lebanon - EFTA(1/1/2006?) Tunisia – EFTA (1/6/2005) Israel – EFTA (1/7/2005) European Economic Area (21/10/2005) Iceland-Faeroe Islands (31/10/2005) Pan-Euro-Med agreed or being negotiated : Morocco – Turkey (signed 7 April 2005) Agadir (signed 02/2004) Turkey – EFTA (adopted 15/5/2005)

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