Industry blasts new rules on preferential trade area imports
tape nightmare for processors, says the EU food industry.
An obligation to detail where each ingredient originated and how much value the overseas supplier added to the product would raise costs for processors benefiting from preferential import tariffs.
Some imported products might even end up being excluded from the system if the Commission determines they were ultimately sourced from countries not benefiting from preferential tariffs.
The European Commission says its planned new system would cut down on fraud and abuse. The Commission wants to prevent overseas suppliers from using ingredients or food products sourced from countries that are not under the EU's preferential trade agreements and then re-exporting them to the bloc, claiming they are eligible for the lower tariffs.
In particular, the current system of certification of origin would be replaced by a statement on origin to be given directly by the exporter. Exporters would be registered with regulators, who would remain responsible for carrying out the controls on imported goods.
Overseas exporters eligible for the lower tariffs would also have to prove that they added value to any ingredients or foods source from non-eligible countries before products arrive in the EU. They would have to provide detailed accounts and sourcing data to customs officials.
The Commission has been attempting to sell the amendments to business as a way of simplifying the preferential trade agreements. Specific proposals on new rules of origin under the Generalised System of Preferences (GSP) are due to be developed and implemented this year.
But in its formal response made public this week, the Confederation of the Food and Drink Industries of the EU (CIAA) complains that the proposed rules would hurt rather than help businesses.
No gain is expected in terms of simplification and of development of the preferential trading system, stated CIAA president Jean Martin in his letter to László Kovács, the Commissioner responsible for taxation and customs in the EU.
Martin called for the food and drink industry to be exempted from the proposed changes, which would affect all manufacturing sectors in the EU. He also called for an impact assessment to be completed for the industry to determine the expected costs and benefits of the proposals.
"On both the import and export sides of preferential trade arrangements, CIAA members consider that the new value added method would worsen the current situation," he wrote. "The new approach is likely to increase red tape, rather than to reduce it. Indeed, traders will need to maintain suitable accounts, develop data on net production costs and understand the value added concept. Many traders would find it difficult to produce the required figures, in particular for processed foodstuffs made from several ingredients, originating or not. Needless to say that the capacity to manage such complex issues in developing countries is doubtful."
The CIAA also finds that the Commission's proposed definitions relating to cost and value, which involve net production cost and estimates of local value content, lack clarity and would lead to increased fraud.
"It will be difficult to establish these values in such a way that the outcome of the calculation would be acceptable to all parties," Martin stated. "The CIAA members identify an increased potential for fraud. Indeed, the new approach would be based on the reliability of declared prices, production costs and added values within a self-certification system."
The added complexities of the new value added method would lead to a less effective system and thus to an additional risk importers would circumvent border controls, he argues.
"The potential consequences of the value added method and of the proposed procedures on trade in developing and also EU countries should have been fully analysed," Jean Martin stated. "Moreover, the impact assessment should have run in parallel with the development of the Commission's draft and not, as it is currently the case, begin several months after the elaboration of the first draft."
In addition the proposed procedures would lead to an increased commercial and legal risk for operators, he said.
After the changes, the exporter in the beneficiary countries would have to demonstrate the origin of the goods based on the value added. The EU importer, due to confidentiality reasons, is not aware of the breakdown of value of imported goods but is only informed of the invoice value, he wrote.
"Most of the EU importers will thus not be in a position to make checks with their supplier," wrote Martin. "The increased responsibility of the importer is thus a major concern for EU operators. The idea according to which a unique value added criteria would bring simplification both for operators and administrations is erroneous. The companies need rules adapted to the products they trade and to the structure of production in the world market."
The Commission presented the proposals in April 2005 and plans to present final proposals for implementation later this year.
