Dec 13, 1985

GSP ORIGIN RULES NOW "ABSURDLY STRICT".

GENEVA, DECEMBER 11 (IFDA/CHAKRAVARTHI RAGHAVAN)— Rules of origin for Generalised System of Preference (GSP) schemes, which were "over-restrictive" when introduced in 1975, are now "absurdly strict", and point to the need for fresh initiatives and actions by the preference-giving countries, the Group of 77 has suggested.-

The G77 view was presented Tuesday in the working group on rules of origin by Mahmoud Assran of Egypt, the spokesman for the group.-

The working group has been mandated to identify fresh initiatives aimed at achieving progress in improvement, harmonisation, and simplification of the rules of origin and their ancillary procedures, and improve the rules for cumulative origin.-

Referring to the impending changeover from the four-digit CCCN (Customs Cooperation Council Nomenclature) system to the six-digit harmonised system, Assran stressed the agreed conclusion of the UNCTAD’s Special Committee on Preferences that the transposition should maintain overall level of benefits, and should not hinder preference-giving countries from improving their schemes.-

The ultimate goal was "a fully harmonised system based upon the simplest of rules of origin", and the working group's session was of vital importance if any breakthrough was to be achieved, Assran added.-

Despite the welcome, though largely minor, improvements of the past decade, the rules of origin in various schemes continued to possess many important defects.-

"These", Assran complained, "seriously impede and in some cases prevent the proper fulfilment of the objectives of the GSP".-

Coupled with other restrictive measures adopted by the preference-giving countries (such as quotas, ceilings, and competitive need limits), which were contrary to the philosophy of the GSP, the stringency in the origin rules "further undermine the opportunities for increasing export earnings and maintaining development programmes".-

The UNCTAD studies showed that overall the current situation in 1985, from the point of view of the preference-receiving countries, was little different than it was a decade ago, "and in some respects worse".-

"Many of the rules now not only prevent deflection of trade, their primary function, but also provide substantial protection for the preference-giving countries".-

Replies to the UNCTAD questionnaire from the preference-receiving countries showed the "stringency" of the percentage and process criteria in regard to many products, including those of a more advanced nature, whose manufacture had to rely on the use of imported inputs at the outset of production.-

Assran also underscored the recommendations in a number of replies for improvement of the rules, the need for extension of cumulative origin on a full global basis, and the adoption of a "donor-country content" rule whereby the imported material from the preference-giving country used in a product would qualify for GSP benefit under the percentage criteria.-

"The experience of member-states (of the Group of 77) in operating the current rules, together with the review of the origin systems by the UNCTAD secretariat, provide irrefutable evidence of the need for action to be taken by the preference-giving countries", Assran added.-

The spokesman for the European Communities, Denmark’s Per Bryks Knutsen, presented to the working group a document explaining the actions proposed by the EEC for transposition of its origin rules from the present CCCN to the new harmonised system.-

The Community spokesman-noted that it was applying cumulation in favour of a number of regional groupings - ASEAN, the Cartagena agreement and the Central American common market.-

The Community had now made some "important improvements" that would come into force on January 1, 1986.-

As a result, any particular restriction in the system, going beyond the normal rules of origin, had been deleted.-

Hereafter, materials, parts and components originating from one partner in a regional grouping could be used by any other partner and would be considered as 100 percent originating from the country of further processing.-

Also, the provisions on allocation of origin had been clarified, and the administrative provisions simplified.-

As regards least developed countries (LDCs), the Community had considered various approaches, and had opted for a "derogation system", allowing specific problems of each individual country to be taken into account when working out the conditions.-

The derogations were adopted on request and given for an initial three-year period, but could be prolonged if need for derogation still existed.-

The derogation system, the EEC stressed, could be applied where the ability of existing industries to continue to export was affected by the origin rules, or when significant investments in an industry could be deterred by the rules.-

As regards the transposition to the harmonised system, the economic effect would be neutral.-

A "considerable simplification" was also been effected, by combining its present lists "A" and "B" (negative and positive lists of processing requirements) into one list, that would explain clearly, and in one place, the rule that would apply for certain products in addition to the main rule of change of tariff heading.-

Anton Egger of Switzerland, speaking for the countries in the European Free Trade Area (EFTA), said that it would create more complications for the beneficiaries, if any EFTA country applied a different criterion than those applied by its neighbours or its important trading partners.-

From this viewpoint, the EFTA countries would follow to a great extent the main principles and methods to be applied by the EEC in introducing the change over from CCCN to the harmonised system.-

The EFTA countries had achieved a high degree of harmonisation on their cumulation rules, so that products could be exported under the same cumulation rules to all of Western Europe.-

Established regional groupings of the preference-receiving countries, wishing to take advantage of this cumulation, should apply to the respective EFTA country or to the EFTA secretariat in Geneva, the Swiss delegate added.-

The U.S. delegate, Jon Huenemann, explaining some of the improvements effected, said that the cumulation rules had now been extended to the ASEAN, the Andean pact and the Caricom regional associations.-

The U.S. district directors of customs had now been given the authority to waive the "form A" documents, for shipments seeking GSP duty-free treatment, if the district director was satisfied that the shipment met the rules of origin requirements.-

As regards transformation to the harmonised system, the U.S. followed the value added criteria and hence did not foresee any modifications to the U.S. GSP rules of origin as a result of the adoption of the harmonised system.-

The U.S. would make every effort to ensure that the current GSP treatment was carried over into the new system in "as trade neutral a manner as possible".-

And where the GSP coverage in the harmonised system was not coterminous with that in the present tariff schedules of the U.S., appropriate adjustments would be made to avoid contraction of the coverage of the U.S. GSP programme.-

The U.S. government, Huenemann added, was hopeful that the current high utilisation rate of the U.S. GSP would continue and improve, and that a better understanding of the U.S. origin rules would lead to yet higher utilisation rates among beneficiary Third World countries.-