GenevaGeneva16 June 201016 June 2010

Eckart Naumann

Associate: Trade Law Centre for Southern Africa (tralac.org)

Meeting on Fisheries, Trade and DevelopmentRules of Origin for Fish and Fish ProductsRules of Origin for Fish and Fish Products

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Why are we even discussing Rules of Origin (RoO) ?

Direct link to “preferential market access” – the fine print

RoO are here to stay – as long as there remain tariff differentials between countries anywhere in the world

Link between in RoO and development, esp. in poorer countries

RoO can create concerns around environmental sustainability – e.g. incentivise use of (foreign) subsidised fishing vessels and facilities

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A few basics about RoO

Primary purpose is to prevent trade deflection, and prevent “superficial” operations being rewarded with trade preferences, with no local developmental benefits

RoO can “make or break” exports, depending on the specific requirements

RoO often used to further protectionist trade policies RoO can undermine and devalue duty free / quota free access Fisheries a case in point?

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Market Access and Rules of Origin: Why relevant?

Preferential RoO not bound by WTO disciplines, remain prerogative of negotiating partners – very little chance for “harmonisation”

The greater the preference margin, the more relevant the RoO

Duties on fish often high: EU regime in important categories 9-24% MFN (GSP 5.5% - 20.5%)

Lower tariffs in some fresh vs marine categories (9% MFN fresh fillets vs 24% marine fish fillets – HS 03042xxx) – incentive to comply

Trade overview: ACP EU

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To start with... a few trade stats

Fish and crustaceans, molluscs and other aquatic invertebrates

ACP Exports to EU - Chapter 3(€ million)

2002 2009 %

ACP Countries € 1,565 mil € 1,105 mil -29%

% of total EU imports in category 15.4% 9.1%

Namibia 231 222 - 4%

South Africa 230 176 - 23%

Senegal 202 149 - 26%

Mauritania 121 109 - 10%

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To start with... a few trade stats

Chapter 1604(€ million)

Chapter 1605(€ million)

Prepared or preserved fish Prepared or preserved crustaceans, molluscs, aquatic invertebrates

2002 2009 2002 2009

ACP Countries € 574 mil € 621 mil € 2 mil € 1 mil

% of total EU in category

35.1 % 30.2 % 0.3% 0.1%

Seychelles 187 158 - -

Mauritius 71 145 - -

Côte d'Ivoire 157 108 0.4 -Ghana 69 94 - -

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EU preferences for ACP countries: Fish and fish products

Different market access regimes apply: EPA, IEPA, Interim Market Access Regulations, GSP+(EBA), GSP

EPA: Caribbean countries [reciprocal]

IEPA: Countries that have implemented interim agreement [reciprocal]

EC Market Access Regulations (1528/2007): countries that initialled agreement at end 2007 [non-reciprocal]

GSP+ (EBA): ACP LDCs that did not initial [non-reciprocal]

GSP: ACP that did not initial, and are not LDCs [non-reciprocal]

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Most RoO regimes are based on principle that goods must be wholly produced in exporting country, or materials substantially transformed.

EU RoO define the nationality of fish mainly in the ‘wholly obtained’ clauses – with marine fisheries link the nationality of fish to the vessel that undertakes fishing effort

EU RoO relevant only to marine fish caught outside territorial waters – inland and territorial fish automatically originating

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Applicability of EU RoO: Example

Kenya

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EU RoO for fish

If fish caught outside territorial waters:

Must be caught by “their vessels”

Qualification of vessel based on three

components:

COUNTRY of registration

FLAG of vessel

OWNERSHIP

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EU RoO for fish

The details: qualifying “vessels” must be…

- registered in ACP State or an EC Member State

- sail under the flag of an ACP EPA State or EC Member State

- ownership: ≥ 50% ACP or EC nationals or

owned by companies with head office and main place of business in the ACP State or the EC, which in turn must be owned ≥ 50% ACP or EC State / nationals / public entities

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ACP-EU EPA Developments

What is new in EU-ACP RoO for fish?

1) Slight changes to basic WO provisions – includes “products of aquaculture” (where fish born and raised there)

2) Removal of crew requirement: (previously ≥ 50% of crew (master and captain included) had to be nationals of the ACP/EC/OCT countries (≥ 75% in GSP!)

3) Simplification of ownership requirements: remains at ≥ 50% local/EC but no longer reference to chairman and members of board of directors or supervisory board, ownership capital etc.

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What’s new?

What is new in EC-ACP RoO for fish?

4) OCT’s not included in new interim agreements – oversight?

5) Changes to Leasing and chartering (now “right of first refusal of charter agreement”). Still limited to EEZ – what about commercially viable straddling stocks?

6) Tuna derogation: same qty. for ESA Group as (previously) all-ACP (8,000t canned tuna and 2,000t loins), EAC got 2,000t tuna loin derogation

7) Changes to definition of “substantial transformation” – 15% product-specific tolerance

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Leasing and Chartering of Vessels

Under certain circumstances, chartered or leased vessels may be considered to be a “qualifying” vessel:

Cotonou Market Access Regulations

IEPA

EC must be offered opportunity to negotiate fisheries partnership agreement and EC did not accept this offer

Same as Cotonou right of first refusal for charter or lease agreement

Lease must be accepted as...-Providing adequate opportunities to develop local capacity to fish on own account

-The ACP EPA State must have nautical and commercial responsibility over the vessel

- Fishing effort (leasing) limited to the 200-mile EEZ i.e. can’t “follow the fish” (commercially viable migratory and straddling stocks)

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Scenario

An Indian-owned fishing company sets up operations in South Africa,

Invests in a South African-made fishing fleet sells a 49% share to a South African JV partner employs an entirely South African captain and crew, sails under the flag of South Africa, and fishes for Yellowfin tuna in South African waters 30km

south of Cape Point processes the tuna into canned tuna locally exports the final product inter alia to Europe

Originating?

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NO ! The rule for chapter 03 products requires that fish be

‘wholly obtained’

In order to be ‘wholly obtained’, any fish caught beyond the 12 mile territorial waters must inter alia be caught with vessels that are at least 50% locally owned in addition to various other requirements (crew, flag, board of directors, captain and master etc.)

Exporter pays normal duties

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What’s new?

Additional changes for Pacific ACP Group

“Global sourcing” of fish materials – de facto becomes a “change in tariff heading” (CTH) rule

But limited to processed fishery products of HS1604 – prepared or preserved fish (eg canned tuna)

HS1605 – prepared or preserved crustaceans, molluscs etc.

Subject to further conditions: local landing and processing, compliance with EU SPS measures, subject to review (must submit report after 3 years on developmental impacts, species etc.)

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Recognition of fish caught in EEZ ? CARIFORUM

The CARIFORUM States reaffirm the point of view they expressed throughout the negotiations on rules of origin in respect of fishery products and consequently maintain that following the exercise of their sovereign rights over fishery resources in the waters within their national jurisdiction, including the Exclusive Economic Zone, as defined in the United Nations Convention on the Law of the Sea, all catches effected in those waters obligatorily landed in the ports of the CARIFORUM states for processing should enjoy originating status.

The Parties agree that the existing rules of origin have to be examined........... with a view to arriving at a solution satisfactory to both sides

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Recognition of fish caught in EEZ ? Namibia

Namibia reaffirm the point of view it expressed throughout the negotiations on the rules of origin in respect of fishery products and consequently maintain that... [same as Cariforum]

...In so far as the European Free Trade Area (EFTA) States acknowledge Namibia’s EEZ for the purposes of Rules of Origin, as embodied in Annex IV to the Free Trade Agreement between SACU and EFTA relating to Fish and Marine Products, Namibia maintains that all catches effected in her waters as defined above and obligatorily landed in all ports of Namibia for processing, should enjoy originating status.

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Summary of RoO issues and concerns

Interim arrangements – Cotonou-minus (eg cumulation, GSP)

Harmonisation of preferential RoO virtually impossible – RoO an important frontier for trade policy given declining tariffs

Treatment of fish caught in EEZ / incentive to use (subsidised) EU vessels

Clarify new 15% rule / automatic tuna derogation for other regions (Ghana,CI...?)

Local development: Why no reward for local processing?

Renegotiation of fish RoO – concern or opportunity? Legal certainty?

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Thank you

Thank YouThank You