© Francis Osiemo, Stellenbosch University 2012
Francis Osiemo Omesa
Rules of Origin in COMESA-SADC-EAC:
The Impact of International Harmonization of
Rules of Origin on the Tripartite Free Trade
Agreement
© Francis Osiemo, Stellenbosch University 2012
Overview
The Tripartite Free Trade Agreement (TFTA). What are Rules of Origin (RoO)? Rules of determining origin. COMESA-EAC-SADC RoO. International Harmonization of RoO. TFTA RoO. Conclusion.
© Francis Osiemo, Stellenbosch University 2012
The TFTA
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Definition of RoO
Rules to determine the country of origin of a
product.
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Definition of RoO
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Definition of RoO
Classified into : - preferential; and
: - non-preferential.
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Definition of RoO: Preferential RoO
Used in Free Trade Agreements (FTA) to
determine which goods qualify for preferential
treatment.
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Definition of RoO: Preferential RoO
An FTA is an agreement by a set of countries to
eliminate trade restrictions in intra-member
trade: (Article XXIV, GATT).
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Definition of RoO: Preferential RoO
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Definition of RoO: Preferential RoO
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Definition of RoO: Preferential RoO
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Definition of RoO: Non-Preferential RoO
Allocate origin for purposes of trade
statistics, trade restrictions or market access
restrictions.
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Definition of RoO
Preferential and non-preferential RoO are
further sub-categorised into product specific
RoO and regime wide RoO.
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Rules of determining origin
Goods are either: - wholly produced ; or
: - sufficiently processed.
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Rules of Determining Origin: Wholly produced goods
Goods cultivated, extracted or grown in
countries eligible for preferential treatment.
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Rules of determining origin: Wholly produced goods
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Rules of determining origin: Wholly produced
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Rules of determining origin: Wholly Produced goods
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Rules of determining origin: Substantially transformed goods
Goods produced with inputs from more than
one country.
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Rules of determining origin: Substantially transformed goods
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Rules of determining origin: Product Specific RoO
The four rules:-
: - Regional (Local) Value Contents (RVC);
: - Specific Production Process (SP);
: - Change in Tariff Classification (CTH); and
: - Value Added Percentage (VA)
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Rules of determining origin: Product Specific RoO.
Regional (Local) Value Contents (RVC): A
good originates from the country where it
underwent the last substantial transformation
into a new product.
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Rules of determining origin: Product Specific RoO.
Specific Production Process (SP):
determines origin using specified process or
technical tests.
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Rules of determining origin: Product Specific RoO
Change in Tariff Classification (CTH): confers
origin depending on the change in tariff
classification of the Harmonized System (HS)
of Tariff Nomenclature.
© Francis Osiemo, Stellenbosch University 2012
Rules of determining origin: Product Specific RoO
Value Added Percentage (VA): the origin of a
good is the country it underwent the highest
value addition.
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Rules of determining origin: Regime Wide RoO The 3 principles: -
: - Cumulation;
: - Tolerance or de minis rule; and
: - Absorption principle
Rules of determining origin: Regime Wide RoO
© Francis Osiemo, Stellenbosch University
2012
Cumulation: Allows importation of goods from specific country or region(s) without affecting its origin. Types of cumulation:-
Bilateral: imports from a partner country. Diagonal: imports from a particular region. Full: Any processing activity from within a
country of a regional grouping.
© Francis Osiemo, Stellenbosch University 2012
Rules of determining origin: Regime wide RoO
Tolerance or de minis rule: allows for the use
of a percentage of non-originating material
without affecting the final product.
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Rules of determining origin: Regime wide RoO
Absorption principle: Additional processing or
transformation of a product qualifying for
preferential treatment does not affect its
origin.
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Rules of origin: Regime wide RoO NB:
The regime wide RoO allow for leniency in
the application of product specific RoO.
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COMESA-EAC-SADC RoO: COMESA The origin of goods in COMESA are
determined by:- The concept of wholly produced goods; CTH Rule; VA Rule; and Full cumulation.
COMESA-EAC-SADC RoO: EAC The origin of goods in EAC are determined
by:- The concept of wholly produced goods; VA Rule; CTH Rule; and Full cumulation.
© Francis Osiemo, Stellenbosch University
2012
© Francis Osiemo, Stellenbosch University 2012
COMESA-EAC-SADC RoO: SADC The origin of goods in SADC are determined
by:- The concept of wholly produced goods; VA Rule; CTH Rule; SP Rule; Full cumulation; and Tolerance/ de minis rule.
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International Harmonization of RoO The harmonization of non- preferential RoO
is ongoing. The main instrument is the WTO Agreement on RoO
Previous attempts to harmonize preferential RoO have been unsuccessful.
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TFTA RoO
Annex 4 of TFTA provides that origin of goods is determined by:-
The concept of wholly produced goods; CTH Rule; Principle of territoriality(new); and Full cumulation.
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Conclusion
The RoO regime in COMESA and EAC differ
from RoO in SADC but TFTA RoO regime is
similar to COMESA and EAC.
© Francis Osiemo, Stellenbosch University 2012
Conclusion
International harmonization has minimal
impact on TFTA RoO as it focuses on non-
preferential RoO
© Francis Osiemo, Stellenbosch University 2012
Conclusion
There is need for further studies on
international harmonization of preferential
RoO.
© Francis Osiemo, Stellenbosch University 2012
Conclusion
Solutions for possible conflict with SADC’s
RoO?
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Conclusion
Make the RoO in TFTA more protective of local industries.
Conclusion
© Francis Osiemo, Stellenbosch University
2012
© Francis Osiemo, Stellenbosch University 2012