Origin experts discuss measures to ease global trade

15 April 2021

 

Chamber International senior associate, Mette Werdelin Azzam, a former head of the origin sub-directorate at the World Customs Organization (WCO), writes about the Second Global Origin Conference, held virtually by the WCO, from 10-12 March 2021, where she was a moderator and speaker. The conference had more than 1,300 registered participants and 500 delegates. WCO secretary general, Kunio Mikuriya, made the opening address.

Recent years have seen a global increase in Free Trade Agreements (FTAs) with rules of origin defining the level of manufacturing needed in a specific country for an item to enjoy originating status and benefit from preferential tariffs.

Only goods originating in the FTA signatory countries can be imported with a preferential tariff so it is crucial to have rules preventing transhipment of goods from other countries where this does not apply.

Also, non-preferential rules of origin, used for applying different trade policy measures, such as collecting statistics, applying quotas and anti-dumping duties, and “Made-In” labelling are putting additional burdens and costs on traders and need consideration.

I moderated a technical session on rules of origin updates in FTAs to record the latest edition of the Harmonised System (HS), which is closely linked to rules of origin.

HS terminology is updated regularly - next on January 1 2022 - although this does not apply to most trade arrangements. When different editions of the HS are used for HS classification and determining origin, the issue becomes more complex and time-consuming.

The session presented the current global situation and challenges linked with not updating the rules of origin to record the latest edition of the HS.

I also spoke about rules of origin from a customs perspective in an “Open Forum on Future Prospects of Rules of Origin” where debate also considered the views of the private sector, academia and inter-government organisations (IGOs).

I focused on the importance of rules of origin in international trade and, especially, in the implementation of FTAs, giving examples based on the new UK-EU trade deal and the African Continental Free Trade Area (AfCFTA) which is in force but is waiting for the rules of origin to be finalised.

I also discussed cumulation possibilities in FTAs, which are meant to make compliance with the origin criteria easier, and certification of origin, where procedures need to be streamlined to help businesses, as more FTAs use self-certification instead of authority issued certification.

Another issue we discussed is the need to ensure quality in origin information and determination. Traditionally customs have focused on authenticity but self-certification will move focus to the goods’ originating status, which is much more important.

Online tools are being developed to provide this quality and give traders more certainty as well as ensuring traceability and facilitate customs control. The use of ‘blockchain’ technology for origin purposes, through the entire supply chain, including certification and verification, should also be considered.

Whatever technological solution is selected, we need a system that guarantees the quality in origin information fed into these systems and ensures that it cannot be altered.

On Importer Liability, I said that there was a need for practices and procedures that support importers and allow them to take the origin risk seriously and conduct due diligence.

As customs we cannot help exporters with certification because it’s economically beneficial without also helping importers mitigate risks linked to origin.

Transparency and awareness raising is crucial for customs and trade. We need greater clarity and information to make ensure FTAs are used correctly.

FTAs are not used as much globally as they could be and operators and countries are not benefitting from them as much as they could. The agreements are used far more in countries where customs promote them and support traders, so we should learn from this and ensure that all stakeholders work in partnership for mutual benefit.

Debate about the “impact of non-preferential rules of origin in today’s trading environment” was interesting and very timely.

Most origin discussions are on the preferential rules as they give access to duty savings and are related to revenue collection but many companies struggle with non-preferential rules as well. They are just as complicated, not harmonized, add costs for trade, and do not give access to any benefits.

I found discussion on the “administration of rules of origin” very interesting and important. This is linked to administrative procedures such as certification, verification and transport requirements. The rules of origin are not harmonized but nor are the procedures.

For many FTAs we see a low use of the agreement because of complex rules and procedural aspects.

Many economic operators indicate that the administrative procedures are time consuming and costly and, if operators do not use the FTAs, they, and the signatory countries, miss out on the expected economic benefits which formed part of the economic analysis leading to the FTA negotiation in the first place.

As this was a virtual event bringing together participants from many time zones, each session was quite short. On one hand, a virtual event allows a lot of people worldwide to attend but a ‘physical event’ is more convenient for exchange of views, interacting with the participants. A combination of these could be considered next time.

The most important aspect of these events for me is that they bring together participants and experts from customs, public sector, private sector, academia, and international organisations.

While there are few origin experts and the same people meet for these discussions, we do not often have the opportunity to bring all these different stakeholders together.

But we should all be fighting in this together and pulling in the same direction to ensure the best possible situation for international trade as this leads to sustainable economic development globally.

 

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