On October 7, the International Chamber of Commerce (ICC) released for discussion at its Customs and Trade Facilitation meeting, from October 16 to 17, its proposed policy statement on nonpreferential rules of origin.
According to the ICC, the nonpreferential rules of origin of goods are considered an important instrument in international trade. The generally accepted World Trade Organisation (WTO) criterion for this type of rule states that a product’s country of origin shall be determined as the country where the product undergoes its last substantial transformation.
The ICC believes that, notwithstanding significant efforts under the auspices of the WTO agreement on rules of origin (ARO), the objective of precisely defining substantial transformation for all products for all nonpreferential purposes has eluded the WTO for nearly two decades. In some ways, this is not surprising. It took about 13 years to transform the existing Harmonised System from a four-digit system into a six-digit system, while the WTO’s nonpreferential origin had to essentially start from scratch.
Since negotiations relating to the ARO began, the international trade community has witnessed the proliferation of preferential trade agreements across all regions of the globe. Each of these preferential agreements features its own origin regime and a unique set of preferential rules of origin. This preferential origin multiplicity has been creating costly complexity for traders. This phenomenon has been closely monitored and documented by trade observers for many years. Unfortunately, it seems that, more recently, we are entering a new era of nonpreferential origin proliferation.
According to the ICC, national regulatory bodies and customs administrations have been implementing methods to determine nonpreferential origin for a variety of purposes. The ICC is concerned about this development for these reasons:
- With many jurisdictions developing their own country-of-origin regulations, albeit for legitimate policy reasons, the ICC is concerned that this might lead to a global footrace between competing nonpreferential origin regimes.
- Different nonpreferential rules of origin in different countries create clear barriers to cross-border trade. This is already evidenced by the problems caused by different rules of origin in the so-called ‘spaghetti bowl’ of preferential agreements.
- Unlike other technical standards, nonpreferential rules of origin are not a question of consumer protection. The ICC notes that the safety and quality of goods are not put at risk owing to the fact that their nonpreferential or most-favoured nation (MFN) origin is determined in the country of manufacture or last substantial transformation – even if different countries use different approaches to determine the nonpreferential origin.
According to the ICC, nonpreferential rules of origin are based on the widely accepted principle of last substantial transformation. The ICC believes that specific and differing nonpreferential rules of origin should not be implemented in the country of import, as this leads to unnecessary trade barriers. As a consequence, the ICC has called for mutual recognition of nonpreferential rules of origin for MFN purposes until the ARO is ratified. The ICC holds the view that a certificate of origin can be issued if this seems to be appropriate. Accordingly, it feels that the nonpreferential rules of origin for MFN purposes implemented in the country of manufacture should be accepted by the country of import.
Customs Control Act Rules
On October 3, the South African Revenue Service (Sars) released the ‘third batch’ of the draft rules of the Customs Control Act No 31 of 2014, assented to on July 21, for comment by November 14.
The draft rules pertain to chapters 21 (confidentiality), 23 (disclosures in terms of international agreements), 24 (requests for information), 25 (rules to facilitate implementation of this chapter), 26 (offences in terms of this chapter), 27 (purpose of this chapter), 28 (customs control of goods), 29 (customs control of persons), 30 (foreign-going vessels and aircraft passing through the republic without calling or landing) and 31 (designation of places of entry and exit).
Draft rules were previously released for comment on June 17 and August 4. Draft rules for chapters 2 (time of importation or exportation and of arrival or departure) and 22 (disclosure to authorised recipients) have not yet been released.
Itac Minute
Last week, mention was made of the International Trade Administration Commission of South Africa (Itac) Minutes. Then there were four; now there is a fifth for the year, with M3/2014 still to be published. It is understood that the minute is used in instances where the Itac report provides the reasoning for the initial tariff amendment and that a correction or adjustment to the tariff is required.
Paper Tariff
On October 10, Sars informed of an increase in the ‘general’ rate of customs duty through the insertion of tariff subheadings on certain paper products of paperboard coated, impregnated or covered with plastic or metal foil, classifiable under tariff 4811.59.05 and 4811.90.05 from 0% ad valorem (free) to 5% ad valorem and of the substitution of tariff subheadings 4811.59.10 and 4811.90.10. The reasoning for the tariff amendments are contained in Itac Report No 484. The application was lodged by Nampak Flexible on May 23 and took 140 days to complete.
- Tariff subheading 4811.59.05 – combined with plastic film with a film thickness not exceeding 50 µm, printed.
- Tariff subheading 4811.90.05 – combined with metal foil with a foil thickness not exceeding 15 µm, printed.
- Tariff subheading 4811.59.10 – other, in strips or rolls of a width not exceeding 150 mm; in rectangular (including square) sheets, with one side not exceeding 360 mm and the other side not exceeding 150 mm in the unfolded state (excluding floor coverings on a base of paper or of paperboard, whether or not cut to size).
- Tariff subheading 4811.90.10 – other, in strips or rolls of a width not exceeding 150 mm; in rectangular (including square) sheets, with one side not exceeding 360 mm and the other side not exceeding 150 mm in the unfolded state.