rules of origin in the tripartite free trade agreement

© Francis Osiemo, Stellenbosch University 2012

Francis Osiemo Omesa

Rules of Origin in COMESA-SADC-EAC:

The Impact of International Harmonization of

Rules of Origin on the Tripartite Free Trade

Agreement


Overview

The Tripartite Free Trade Agreement (TFTA). What are Rules of Origin (RoO)? Rules of determining origin. COMESA-EAC-SADC RoO. International Harmonization of RoO. TFTA RoO. Conclusion.


The TFTA


Definition of RoO

Rules to determine the country of origin of a

product.


Definition of RoO

© Francis Osiemo, Stellenbosch University Press 2012

Definition of RoO

Classified into : - preferential; and

: - non-preferential.


Definition of RoO: Preferential RoO

Used in Free Trade Agreements (FTA) to

determine which goods qualify for preferential

treatment.



An FTA is an agreement by a set of countries to

eliminate trade restrictions in intra-member

trade: (Article XXIV, GATT).


Definition of RoO: Non-Preferential RoO

Allocate origin for purposes of trade

statistics, trade restrictions or market access

restrictions.


Definition of RoO

Preferential and non-preferential RoO are

further sub-categorised into product specific

RoO and regime wide RoO.


Rules of determining origin

Goods are either: - wholly produced ; or

: - sufficiently processed.


Rules of Determining Origin: Wholly produced goods

Goods cultivated, extracted or grown in

countries eligible for preferential treatment.


Rules of determining origin: Wholly produced goods


Rules of determining origin: Wholly produced


Rules of determining origin: Wholly Produced goods


Rules of determining origin: Substantially transformed goods

Goods produced with inputs from more than

one country.


Rules of determining origin: Substantially transformed goods


Rules of determining origin: Product Specific RoO

The four rules:-

: - Regional (Local) Value Contents (RVC);

: - Specific Production Process (SP);

: - Change in Tariff Classification (CTH); and

: - Value Added Percentage (VA)


Rules of determining origin: Product Specific RoO.

Regional (Local) Value Contents (RVC): A

good originates from the country where it

underwent the last substantial transformation

into a new product.


Rules of determining origin: Product Specific RoO.

Specific Production Process (SP):

determines origin using specified process or

technical tests.



Change in Tariff Classification (CTH): confers

origin depending on the change in tariff

classification of the Harmonized System (HS)

of Tariff Nomenclature.



Value Added Percentage (VA): the origin of a

good is the country it underwent the highest

value addition.


Rules of determining origin: Regime Wide RoO The 3 principles: -

: - Cumulation;

: - Tolerance or de minis rule; and

: - Absorption principle

Rules of determining origin: Regime Wide RoO

© Francis Osiemo, Stellenbosch University

2012

Cumulation: Allows importation of goods from specific country or region(s) without affecting its origin. Types of cumulation:-

Bilateral: imports from a partner country. Diagonal: imports from a particular region. Full: Any processing activity from within a

country of a regional grouping.


Rules of determining origin: Regime wide RoO

Tolerance or de minis rule: allows for the use

of a percentage of non-originating material

without affecting the final product.


Rules of determining origin: Regime wide RoO

Absorption principle: Additional processing or

transformation of a product qualifying for

preferential treatment does not affect its

origin.


Rules of origin: Regime wide RoO NB:

The regime wide RoO allow for leniency in

the application of product specific RoO.


COMESA-EAC-SADC RoO: COMESA The origin of goods in COMESA are

determined by:- The concept of wholly produced goods; CTH Rule; VA Rule; and Full cumulation.

COMESA-EAC-SADC RoO: EAC The origin of goods in EAC are determined

by:- The concept of wholly produced goods; VA Rule; CTH Rule; and Full cumulation.


2012


COMESA-EAC-SADC RoO: SADC The origin of goods in SADC are determined

by:- The concept of wholly produced goods; VA Rule; CTH Rule; SP Rule; Full cumulation; and Tolerance/ de minis rule.


International Harmonization of RoO The harmonization of non- preferential RoO

is ongoing. The main instrument is the WTO Agreement on RoO

Previous attempts to harmonize preferential RoO have been unsuccessful.


TFTA RoO

Annex 4 of TFTA provides that origin of goods is determined by:-

The concept of wholly produced goods; CTH Rule; Principle of territoriality(new); and Full cumulation.


Conclusion

The RoO regime in COMESA and EAC differ

from RoO in SADC but TFTA RoO regime is

similar to COMESA and EAC.


Conclusion

International harmonization has minimal

impact on TFTA RoO as it focuses on non-

preferential RoO


Conclusion

There is need for further studies on

international harmonization of preferential

RoO.


Conclusion

Solutions for possible conflict with SADC’s

RoO?


Conclusion

Make the RoO in TFTA more protective of local industries.

Conclusion


2012

rules of origin in the tripartite free trade agreement

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