‘Rules of origin are too complicated’: Complex regulations undermine free-trade agreements, trade body warns

By Katy Askew contact

- Last updated on GMT

Complex regulations inhibit cross boarder trade ©iStock/JohnDWilliams
Complex regulations inhibit cross boarder trade ©iStock/JohnDWilliams

Complex rules of origin labelling requirements inhibit trade and SMEs pay a particularly heavy price, trade bodies amfori and EuroCommerce warn.

Speaking at a conference on rules of origin in Brussels, the heads of both associations argued that unless rules of origin requirements are reformed, they will continue to discourage European companies from taking advantage of “hard won concessions” in free trade agreements. 

Rules of origin have been established to determine the ‘nationality’ of products. The global nature of supply chains means that companies need clear rules but the complexity of the current system – which includes preferential and non-preferential rules – discourage trade, particularly among SMEs, the organisations observed.

“Even the most beneficial trade agreements have little effect if the rules of origin are too complicated. There is definitely something wrong when small companies, but also some big enterprises prefer to pay import duties rather than dealing with a set of different rules of origin,”​ EuroCommerce director general Christian Verschueren said.

“There is an urgent need for a modernised system which recognises that we are operating in a world of global supply chains, where complex products are made up of parts from all over the world.”

Bilateral agreements between the EU and third party countries frequently contain different requirements, complicating the picture further still.

Origin rules need to be simplified, harmonised – ideally at the global level – and regularly updated, so that they properly reflect modern global value chains. This should include wider rules for cumulation and less stringent rules for granting preferential origin. Without these improvements there is a definite risk that the benefits of trade agreements will continue to be only partially adopted and even a risk to the future of new trade agreements entirely,”​ Christian Ewert, president of amfori - a business association supporting open and sustainable trade - added.

On top of these difficulties, under the recently-adopted Registered Exporters System (REX), that replaces the certificate of origin Form A, importers now run the risk of being held liable for any incorrect information provided by the exporter on the origin of a product. “This approach should be revisited to find a more balanced set of rules on an importer’s burden of proof when dealing with customs authorities in the EU,​” the trade associations argued.

COOL rules may also hit cross-boarder trade

Neil McMillan, EuroCommerce Director for Political Affairs and Trade, told FoodNavigator that the complexity for rules of origin work to the detriment of importers or exporters who seek to benefit from reduced tariff rates under free trade agreements with suppliers from outside the EU. 

National Country of Origin Labelling (COOL) requirements can add to this burden.

For example, McMillan observed, when Italy introduced COOL requirements the food industry was resistant. “There was protest from Canadian wheat producers and some Italian pasta manufacturers, who saw the Italian rules on declaring the origin of wheat used in pasta could cause problems, both in reducing Canadian exports and manufacturers finding sufficient supplies of the right grades of wheat.”

A number of European countries have introduced some form of COOL regulations, including France, Spain and Italy. France is due to report back to the EU on its pilot COOL project this December.

EuroCommerce said this will be a significant moment for COOL and stressed it is important for European regulators to ensure that COOL rules do not undermine the single market. 
“We believe it is necessary to closely monitor the outcomes of the national COOL pilot projects in place to ensure that they comply with EU rules. We are looking forward to the French report on implementation of the French national rules… and we expect the European Commission to carefully consider the conclusions of this report in order to make sure those origin rules do not constitute a barrier to the single market,”​ McMillan said.

“There is some anecdotal evidence that cross-border sales of the basic commodities that go into some of the products covered by national COOL rules have indeed seen a significant reduction, but it is too early to tell the longer-term impact at this stage.”

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