Mombasa, KenyaMombasa, Kenya09/10 February 201009/10 February 2010

Eckart Naumann

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

Rules of Origin for Fish and Fish ProductsRules of Origin for Fish and Fish ProductsEast AfricaACP Dialogue on Non Tariff Barriers within Economic Partnership Agreements (EPAs)

2

Why Rules of Origin? A few basics

Rules of Origin (RoO) are the “fine print” of trade agreements

Primary purpose is to prevent trade deflection, or prevent “superficial” operations from obtaining trade preferences

RoO can “make or break” exports, depending on the requirements specified RoO often used to further protectionist policies RoO can undermine and devalue duty free / quota free access Fisheries a case in point?

3

To start with... a few trade stats

Country EU Exports Chapter 3(EURO million)

EU Exports Chapter 16(EURO million)

2007 2008 2007 2008

Kenya 28,9 mil 35,6 mil 25,8 mil 29,7 mil

Mauritius 5,7 mil 3,8 mil 137 mil 178 mil

Madagascar 99 mil 95 mil 32 mil 23 mil

Uganda 96 mil 80 mil - -

Seychelles 19 mil 15 mil 140 mil 152 mil

Tanzania 127 mil 112 mil - -

4

What EU RoO currently apply to East African States?

Zimbabwe, Zambia, Seychelles, Mauritius, Comoros, Madagascar initialled IEPA in Nov/Dec 2007, and subsequently signed in 2009

For signatories, interim RoO provisions of EC Market Access Regulation 1528/2007 applied prior to signature, now IEPA provisions (details on later slide)

Other countries have reverted to GSP/EBA RoO (much stricter conditions)

Are EU RoO all bad? No ! But watch out for future change to VA

5

EU RoO are based on the following principle: Products must be “wholly obtained” in the export country, or substantially transformed

Wholly obtained (WO) or

Substantially transformed

Specific processing (SP)Change in tariff heading (CTH)

Value-added (VA)

6

For fish and fisheries products, most of the relevant details are contained in the “wholly obtained” provisions

The “wholly obtained” provide detail such as requirements for vessels, flag, ownership, leasing arrangements etc. (+crew in GSP and elsewhere)

Even the list rules (requirements defining ‘substantial transformation’) specify that fish material (“material of Chapter 3”) be “wholly obtained” in the exporting country, with some flexibility (value tolerance)

7

RoO for fish and fisheries products: how the “wholly obtained” provisions relate to “territorial waters”

Differentiation territorial waters (incl. inland waters) and beyond

automatically considered originating conditional

and “wholly obtained” - must follow rules closely

(vessel, ownership, flag, leasing)

8

…Illustrative example

Kenya

9

For 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

10

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

11

Leasing 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 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)

12

What’s new?

What is new in EC-ACP RoO for fish? Slight changes to basic WO provisions – products of aquaculture

(where fish born and raised there)

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!)

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.

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

13

What’s new?

Leasing and chartering: Also removes crew requirement [In EPA RoO, the ACP country must have first offered the EC opportunity to

negotiate charter or lease agreement )

15% value tolerance (fish material) for some product categories:

HS 0304 – HS 0307 (fish fillets, dried/smoked fish, crustaceans, molluscs etc.) HS 1604 – HS 1605 (preparations of fish)

14

A few concerns

Cumulation GSP: no cumulation, Market Access Regulations: confined to signatories, IEPA – with all ACP States restored

Treatment of fish caught in EEZ / beyond (global sourcing) Why no recognition of UNCLOS status of this zone? [NAMIBIA] Why no reward for processing in Chapter 1604/1605 [PACIFIC

EPA]

15

A few concerns

Ambiguities in leasing provisions, limit to EEZ e.g. Legal uncertainties, lack of timelines, etc.

Tuna derogation (as per Cotonou?) – general concern ESA ok, derogation effectively shared between Seychelles,

Madagascar & Mauritius as they have tuna processing facilities EAC – effectively for Kenya – what if other processors join later?

Possibility of renegotiation of RoO – concern or opportunity? Reviewed as part of full EPA, or within defined time after signature of IEPA Renegotiation provided for in legal texts, but...contradictory statements from

EC (argument of legal certainty) Preference for a VA-based methodology – feasible?

16

Thank you

Thank You