Presentation OCT 03 2024 Rules of Origin PDF

RULES OF ORIGIN GENERAL OVERVIEW LAWRENCE SSENYANGE OFFICER – INT’L AFFAIRS UNIT – URA CUSTOMS DEPT. OCTOBER, 2024 The objective of the Presentation At the end of the course, Participants will be in...

RULES OF ORIGIN GENERAL OVERVIEW LAWRENCE SSENYANGE OFFICER – INT’L AFFAIRS UNIT – URA CUSTOMS DEPT. OCTOBER, 2024 The objective of the Presentation At the end of the course, Participants will be in position to explain the Relevance of Rules of Origin in International Trade. Polices Measures Requireme Rules nts Origin complian ce  SCOPE OF THE COURSE U N D E R S TA N D I N G O F R U L E S O F O R I G I N ADMINISTRATION OF ROO Origin infrastructure for Uganda Certification of origin GLOBAL ECONOMICS Globalization Economic Integration Roles of WTO and WCO in UGANDA & PREFERENTIAL RO International Trade EAC, COMESA, SADC Roo GSP & the REX Preferential Roo for LDCs RULES OF ORIGIN WTO Agreement on RoO Preferential RoO Origin determination Q&A Activities- Group discussions GLOBALIZATION Globalization refers to the interconnectedness and interdependence of the world economies, culture, and population, brought about by cross-border trade in Goods & Services, People, Capital (FDI), and Information & Technology. Economic Globalization oInternational Trade oForeign investment oGlobal Supply Chains oEconomic Integration (e.g., WTO, EU, NAFTA, AfCFTA) Social Globalization: o Cultural exchange o Migration o Global communication (e.g., internet, social media) o International collaborations (e.g., science and education) GLOBALIZATION Political Globalization o International relations o Global governance (e.g. UN, IMF, World Bank) o Human Rights o Global Security Benefits: oIncreased International Trade which sparks economic growth oInnovation resulting from technological transfers oCultural diversity oGlobal cooperation Risks: oFlow of illicit goods, people & money thorough the integrated markets & free movement of people oPrice fluctuation oDepreciation of Currency oUnemployment ECONOMIC INTERGRATION Economic integration refers to the unification of economic policies between different states, through the partial or full abolition of tariff and non-tariff restrictions on trade. Pillars of The World’s Major Goals: regional Free Trade integration Association Increase Economic North American economic integration FTA efficiency Foreign policy EU(Also has a Enhance coordination CETA-Agreement competitiveness Human & social with Canada) Foster economic development African Continental growth Security FTA Promotes trade Common Market of and investment Eastern & Southern Improve living Africa standards Association of Southeast Asian Nations FTA STAGES OF ECONOMIC INTEGRATION CUSTOMS UNION ECONOMIC UNION FTA with a Common Coordinates economic policies, external tariffs (CET) including monetary & fiscal policies 1 2 3 4 5 FREE TRADE COMMON MARKET POLITICAL UNION Reduction/Removal of Allows Free movement of Common government tariffs between/among goods, services, capital & member countries services PROS AND CONS – ECONOMIC INTERGRATION  Advantages of Economic Integration The advantages of economic integration fall into three categories:  Trade creation,  Employment opportunities, and  Consensus and cooperation  Disadvsantages of Economic Integration  Diversion of trade. That is, trade can be diverted from non-members to members, even if it is economically detrimental for the member state.  Erosion of national sovereignty. Members of economic unions typically are required to adhere to rules on trade, monetary policy, and fiscal policies established by an unelected external policymaking body.  Employment shifts and reductions. Economic integration can cause companies to move their production operations to areas within the economic union that have cheaper labor prices. Conversely, employees may move to areas with better wages and employment opportunities  TRADE AGREEMENTS  A Free trade Agreement (FTA) is an agreement between two or more countries where the countries agree on certain obligations that affect trade in goods and services, and protections for investors and intellectual property rights, among other topics  Types of Trade Agreements  Unilateral Trade Agreements: Country unilaterally reduces trade barriers  Bilateral Trade Agreements: Two countries agree to reduce trade barriers  Regional Integration: Group of countries integrate their economies  Multilateral Trade Agreements: Global Agreements, such as WTO Uganda’s Trade Partner  Unilateral  Regional  India  East African Community – Customs Union  China  Common Market for Eastern and Southern Africa –COMESA – Free Trade Area  South Korea  Africa Continental Free Trade Area - AfCFTA  Generalized System of Preferences - GSP  EU & UK (Registered Exporter System - REX TRADE AGREEMENTS - WTO  WTO – an intergovernmental organization with Headquarters in Geneva Switzerland that regulates and facilitates International trade.  Membership – 164 (Representing 98% of Global Trade & GDP)  Observer members/Gov’ts - 24  Non-Members – 16 Countries  Roles: To facilitate trade in goods, services, and intellectual property among participating countries by providing a framework for negotiating trade tariffs.  Aim: To reduce or eliminate tariffs, quotas, and other restrictions Types of Trade Agreements – Preferential & Non-Preferential Trade Agreements Rules of origin are Annexes to the preferential Trade Agreements Regional Trade Agreement - WTO Source: https://rtais.wto.org/UI/PublicMaintainRTAHome.asp x World Map –Free Trade Areas https://images.app.goo.gl/KGg9D9dv8A7E  RULES OF ORIGIN  Rules of Origin are defined by WTO as:- “The specific provisions, developed from principles established by national legislation or international agreements applied by a country to determine the origin of goods.” (AnnexD, currently Annex K to the Revised Kyoto Convention). (Source: https://www.wcoomd.org/-/media/wco/public/global/pdf/topics/origin/overview/origin-handbook/rules-of-origin-handbook.pdf ) Background - WTO In 1995 the WTO was established via the so-called Marrakesh Agreement. One of the annexes to the Marrakech Agreement is the WTO Agreement on Rules of Origin (Part of the annex 1A: Multilateral Agreement on Trade in Goods) There are 2 types of Rules of Origin:  Preferential Rules of Origin  Non – Preferential Rules of Origin  RULES OF ORIGIN  What are Rules of Origin? “The specific provisions, developed from principles established by national legislation or international agreements applied by a country to determine the origin of goods.” (Chapter 1, E2/F3 of Specific Annex K to the Revised Kyoto Convention). (Source: https://www.wcoomd.org/-/media/wco/public/global/pdf/topics/origin/overview/origin-handbook/rules-of-origin-handbook.pdf )  There are 2 types of Rules of Origin: 1) Non-preferential rules of origin: These are laws, regulations, and administrative determinations of general application applied by any Member to determine the country of origin of goods” (Article 1.1). 2) Preferential Rules of Origin: These are laws, regulations, and administrative determinations of general application applied by any Member to determine whether goods qualify for preferential treatment under contractual or autonomous trade regimes leading to the granting of tariff preferences going beyond the application of paragraph a of Article 1 of GATT 1994” (Annex II, Paragraph 1). (Source: WTO/The Agreement on Rules of Origin /Annex 1A to the Marrakech Agreement establishing the World Trade Organization in 1995)  RULES OF ORIGIN…..CONT  Difference between Preferential Rules of Origin and Non- Preferential Aspect Rules of Origin of Origin Preferential Rules of Origin Non-Preferential Rules of Origin Purpose Are used to determine whether goods qualify for Are used in the implementation of an array of Trade policy measures which are listed under preferential tariff treatment i.e. import duties are reduced paragraph 2 of article 1 of the WTO Agreement on Rules of Origin: and or made Nil. -Application of Most Favoured Nations Treatment (MFN); -Anti-dumping and countervailing Duties; To create access to a wider market for manufacturers; -Safeguard Measures; Consumers to have access to a variety of goods at -Quantitative restrictions or tariff quotas reduced prices. -Government Procurement; and -Trade Statistics To foster economic growth; and cooperation among member states. Application These are Harmonized as per the instrument of each Non - Preferential Rules of Origin are NOT Harmonised as per the WTO Agreement on Roo. Trading Bloc. Examples EAC & other RECs, AFCFTA, NAFTA/CUSMA, EU, EU- Most Favoured Nations Treatment (MFN); CETA, ASEAN, Certification Preferential Certificates of Origin (Paper & E- Non-Preferential Certificates of Origin certificates), Statement on Origin  EFFECT OF PREFERENCES  Preferential tariff treatment result into the reduction or removal of import duties.  Under the EAC Customs Union, goods are entitled to NIL Import duty. o Example: A declaration of Salt (25.01) transferred from Kenya to Uganda with EAC Preferential Tariff Claim Product: Salt Hs Heading: 25.01 CET Rate 35% Origin Criteria: Wholly Produced  Preferential Rules of Origin The Role of Preferential Rules of Origin is to determine the economic nationality as opposed to the geographical nationality of a given good for the purpose of granting preferential tariff treatment. “country of origin of goods” means the country in which the goods have been produced or manufactured, according to the criteria laid down for the purposes of application of the Customs tariff, of quantitative restrictions or of any other measure related to trade; Good are entitled to preferential tariff treatment if they meet specific requirements, such as:  Origin criteria – conditions or requirements for a good to be considered as 'originating'.  Proof of origin / Certification requirements – documentary evidence to prove that the specified product met the origin criteria set in the relevant preferential trade agreement  Shipping/ consignment requirements – goods must be transported directly from one member state to another  Other terms/conditions contained in, or made following, an agreement Preferential Rules of Origin are Product Specific Rules (PSR) – Rules provide specific qualifying criteria for each product.  Origin Determination – Origin criteria Origin Criteria Substantial Wholly Transformation Obtained Criteria Production Natural waste; products and Specific Worn articles Change in Tariff Regional Value goods made Workings or purposely for Classification Content from Natural Process products. recovery of materials WHOLLY OBTAINED CRITERION -EXAMPLES Diary Spices Sugar & Salt Cereals & Products Grains Chapter 1 Chapter 3 Chapter 2/3/7 Heading 72.04 Wholly Obtained criterion- examples Goods produced wholly in a given country shall be taken as originating in that country. (Standard 2 of RKC) The following only shall be taken to be produced wholly in a given country : a. mineral products extracted from its soil, from its territorial waters or from its sea-bed; b. vegetable products harvested or gathered in that country; c. live animals born and raised in that country; d. products obtained from live animals in that country; e. products obtained from hunting or fishing conducted in that country; f. products obtained by maritime fishing and other products taken from the sea by a vessel of that country; g. products obtained aboard a factory ship of that country solely from products of the kind covered by paragraph (f) above; h. products extracted from marine soil or subsoil outside that country's territorial waters, provided that the country has sole rights to work that soil or subsoil; i. scrap and waste from manufacturing and processing operations, and used articles, collected in that country and fit only for the recovery of raw materials; j. goods produced in that country solely from the products referred to in paragraphs (a) to (ij) above.  Origin Determination – Origin criteria Criteria for determining where goods originate; The 2 broad criteria for determining the country of origin for goods are: 1) Wholly obtained Criterion (WO): for goods to originate from a country, they must be produced entirely within the country, without incorporating materials from any other country. 2) Substantial Transformation Criteria: goods may also originate from a country if they are processed in line with relevant product-specific rules. There are 3 broad categories of product-specific rules: a) Value-added rule – final goods must have limited value of non-originating materials to qualify as originating from a member country. This value is typically a defined percentage of the ‘ex-works’ price of the finished good. The ex-works price of finished goods is the production cost of the finished goods, minus internal taxes, insurance, and freight costs.  Origin Determination – Origin criteria b) Change of tariff classification – final goods cannot have the same classification as any of the non-originating materials used to make them. Customs tariffs are based on the Harmonised System (HS). There are mainly 3 HS levels used in the FTA: i. HS2 (HS chapter level represented by 2-digit codes) ii. HS4 (tariff heading level represented by 4-digit codes) iii. HS6 (tariff sub-heading level represented by 6-digit codes) There are 3 types of changes in tariff classification that could qualify goods as originating:  Change of Chapter (CC) – this means the final good cannot be classified under the same HS chapter as the non-originating materials for it to qualify as originating.  Change of Tariff Heading (CTH) – this means that, to qualify as originating, the final goods cannot have the same tariff heading as any of the non-originating materials.  CHANGE IN TARIFF CLASSIFICATION CRITERION CHANGE IN TARIFF CLASSIFICATION (CTC)/ HEADING (CTH) CRITERION For goods to qualify under CTC criterion, the non-originating materials of a particular tariff heading (s) that is at 4 digit level or 6 digit level - Sub Heading, must have undergone through a process to produce goods that are classified under a different tariff heading or subheading from that of the materials. Change in Tariff Heading requirements Origin of Manufacturing Materials process Finished Product Substantial E x Value NOM - Or w Volume OR o OR Transformatio r k n s HS. Code X HS. Code Y Change Trailers and Semi- trailer (87.16) Change in Tariff Heading Criterion HS Descripti Origin determi Heading on of the Criteria nation No Product 87.16 Trailer and Manufactu The rule semi- re from allows trailer; materials use of other of any non vehicles; heading originatin not except g mechanica that of the materials lly product for as propelled; long the parts thereof origin criteria is Products: Trailer met HS Heading: 87.16 Other trailers: Tanker, Wheelbarrows  Origin Determination – Origin criteria  Change of Tariff Subheading (CTSH) – this means that to qualify as originating, the final goods cannot have the same tariff sub-heading as any of the non-originating materials. 3) Specific operations (Processing rule) – the production of the goods from non-originating elements must follow a set processing procedure. This type of rule specifies processes which need to have taken place to get the originating status. Illustration 1: Manufacturing processing rules for some products Silk: spinning of natural fibres or extrusion of man-made fibres accompanied by spinning or twisting. Flax yarn: spinning of natural fibres or extrusion of man-made fibres accompanied by spinning. Glass or glassware: cutting of glassware or hand decorations (except silk-screen printing). Illustration: Specific workings or Process criterion for Sacks (63.05) under EAC Rules of Origin. A product has to undergo through a Example: Sacks and bags, of a kind used for the specific manufacturing or processing operation which is described under Rule 6. packing of goods (63.05) Origin Criteria - Weaving or knitting and making-up (including Cutting)  PROCESSES NOT CONFERING ORIGIN Non-qualifying Operations: Operations which do not contribute, or which contribute to only a small extent to the essential characteristics or properties of the goods, and in particular operations confined to one or more of those listed below, should not be regarded as constituting substantial manufacturing or processing: a) Operations necessary for the preservation of goods during transportation or storage; b) Operations to improve the packaging or the marketable quality of the goods or to prepare them For shipment, such as breaking bulk, grouping of packages, sorting and grading, and repacking; c) simple assembly operations; d) mixing of goods of different origin, provided that the characteristics of the resulting product are not essentially different from the characteristics of the goods which have been mixed. MATERIAL CONTENT CRITERION A product is considered as originating when the value of the product is increased up to a specified level expressed by an ad valorem percentage. Example- Biscuits (19) Material Test for composition Origin Ingredients Weight(g) Percentage % Origin Criteria: Chapter 19 flour 500 60.24 Manufacture from materials of any heading, except that of the product, in which the weight of the non-originating materials used does sugar 150 18.07 not exceed 30% of the weight of the final product. shortrning 125 15.06 If the flour is non originating: skimmed milk powder 25 3.01 Flour weight is 60.24% is greater than the 30% the threshold glucose 15 1.81 Therefore, the product become ineligible for preferential treatment. salt 3 0.36 If sugar and shortening are non originating: sodium bicarbonate 2 0.24 Weight (Sugar Plus Shortening ) 33.1% > 30% ammonium bicarbonate 5 0.60 Therefore, the product becomes ineligible for preferential treatment. lecithin 2 0.24 If sugar and flour are originating, the products glycerol-mom-sterate 3 0.36 automatically becomes originating because the total weight of other ingredients is less than 30% 830 100.00 East African Community BACKGROUND: EAC trade bloc was first formed in 1967, with 3 countries namely Kenya, Uganda & Tanzania. The EAC was dissolved in 1977, the break up was due to Ideological differences, unequal development & trade imbalances. The new leaders revived the EAC when they signed the TREATY to the establishment of EAC in 1999 and entered into force in 2000 following its ratification by the original three Partner States-that’s: Kenya, Uganda & Tanzania. Rwanda and Burundi acceded to EAC Treaty and became full members in 2007. South Sudan acceded to the treaty on 15 April 2016 and became full member on 15 august 2016. New members DRC – Democratic Republic of Congo On 8th April, 2022, DRC formally joined the East African Community (EAC) after the signing of the Treaty of the Accession of the DRC into the EAC in Nairobi, Kenya. Somalia On 15th December, 2023, The Federal Republic of Somalia is inching closer to joining the East African Community with the Horn of Africa nation scheduled to sign a Treaty of Accession with the bloc at State House, Entebbe, Uganda today. Instruments EACCMA,2004, EAC Customs Management Regulations, EAC Rules of Origin,2015, Customs Protocol,  DETERMINATION OF ORIGIN Origin Criteria Wholly obtained/produced Good produced exclusively from originating materials Consignment Rules of Goods satisfied the substantial criteria transformation criteria Change in tariff Classification Origin Value Added criteria Procedural Certificate of Origin Transportation Specific working/processing provisions Documentation Three Major Elements of RoO Product specific Rules  ORIGIN CRITERIA – EAC RULES  Rule 6 : Substantial Transformation ORIGIN CRITERIA CRITERIA IS REQUIREMENT DENOTED BY LETTER CHANGE IN TARIFF C Manufacture from materials of any heading except that of the product HEADING MATERIAL CONTENT M Manufacture in which the value of all the non-originating materials used does not exceed a specified percentage (e.g 70% ) of the ex-works price of the product SPECIFIC S Manufacturing has to include the specified workings/process Key points note: WORKINGS/PROCESS  EAC Rules of Origin,2015 are Product Specific Rules (PSR)  First schedule of the EAC Rules of Origin,2015 - Rule 6 (1) has the list of products and working or processing operations which confer originating status.  Origin criteria under EAC Rules of Origin are ONLY FOUR (P/C/M/S).  ORIGIN CRITERIA – EAC RULES Rule 8: Cummulation of Origin – Treatment of products manufactured from materials sources from other Partner state. Rule 9: Unit Of Qualification – Each item is considered separately. Rule 10: Sets – 15% Rule that qualifies non originating elements in a set. Rule 11: Separation Of Materials – Separation of goods produced using both originating and non originating materials Rule 12: Treatment Of Mixtures Rule 13: Treatment Of Packing Rule 14: Neutral Elements eg. Plant and machinery, energy- electricity are not considered as part of Ex-works Price Rule 15: Territoriality -10% rules on admission of reimports from out side the Partner states Rule 16: Direct Transport- Consignments have to move directly from one partner state to another. Cumulating of origin-Rule 8 EAC PARTNER STATES TANZANIA UGANDA WORKING/ EXPORTS ORIGINATING BY PREFERENCE PROCESSING MAKE HYDRATED S PRODUCT ORIGINATIN G BY LIME ACCUMULATI ON STATE ORIGINATING MATERIAL BY CET OUTSIDE EAC NON-ORIGINATING MATERIAL FOR MAKING CEMENT IMPORTED AT 0% UNDER CET 33 CONSIGNMENT CRITERIA (a)Direct Transportation from the exporting State Party to importing State Party Where (a) is not possible due to physical limitations e.g Landlocked countries, transit through third party countries is allowed provided the goods are not tampered with. In case of inevitable events e.g accidents, transshipments are allowed under the supervision of Customs/Designated body. Territoriality & Direct Transport Rules-EAC Rules 15 & 17 ORIGINATING-UPPERS & SOLES INDIA EXPORT – KENYA PARTS OF SHOES EXPORT FINISHED SHOES- NON-ORIGINATING DIRECT TRANSPORT UGANDA- 35  ORIGIN CRITERIA – EAC RULES Rule 17: Issuance of Certificate of Origin – Only to goods that have met the requisite origin criteria Rule 18: Issuance of Duplicate of Origin – Replacements Certificates for lost, destroyed,….. Rule 19: Issuance of Certificate of Origin on the basis of proof of origin issued or made out previously Rule 20: Approved exporter Rule 21: Validity of Proof origin – Six months Rule 22: Exemption from Certificate of Origin – Simplified trade regime ($2000 or less), passenger baggage ($500) Rule 23: Notification of information related to competent authorities Rule 24: Verification of proof of Origin Rule 25: Preservation of documents --- At least five years  EAC RULES 26 -30 Rule 26: Infringement and penalties Rule 27: Manuals Rule 28: Directives by the council Rule 29: Cessation of the Rules of Origin Rule 30: Revocation of the EAC (Rules of origin) Rules Schedules 1st schedule – List of products and working or processing operations which confer originating status 2nd schedule – EAC Certificates of origin 3rd Schedule – Supplier / producers declaration 4th schedule - Origin declaration 5th Schedule - EAC form for verification of origin 6th Schedule – EAC information certificate  ORIGIN IRREGULARITIES FORMS OF ORIGIN IRREGULARITIES  Granting preferences to goods presented with invalid certificates;  Certificates which are not completed as required (Box 1 to 11)  Granting preferences to goods that undergone processes mentioned under Rule 7, that do not confer origin  Granting preferences to goods presented with non-preferential certificate of origin  Granting preferences to goods which have not met direct transport rule  Granting preferences to goods manufactured in Export Processing Zone  Granting preferences to goods whose raw materials benefited Duty remission schemes Other Risks  Mixing of qualifying and non-qualifying items in the same consignment  TREATMENT OF QUERIES TREATMENT OF QUERIES (Chapter 3.3.3 Manual on Application of EAC Rules of Origin, 2015)  MINOR QUERIES Examples: Clerical or similar nature detected on a proof of origin eg. Omission of weight or other quantity, or insertion of an incorrect HS code  Treatment; Allow the importer to obtain a Replacement Certificate without rejection of the claim to EAC preferential tariff treatment. o Refer the Certificate for verification o Perform physical examination  QUERIES OF SERIOUS NATURE Example: I. A claim of wholly produced is made for certain kin fog machine II. The description of goods on the invoice is different from that appearing in the certificate of origin III. There is an indication of dubious transport route used; TREATMENT OF QUERIES- CONT IV. The proof of origin has not been signed or dated by the competent issuing authority; V. The stamp used to endorse the proof or origin is different from the one that was notified to the secretariat ; or VI. The proof or origin has not been signed by the exporter. VII. Origin verification procedure (3.4 Manual on Application of EAC Rules of Origin,2015)  Action by the importing country a) Request for additional information from exporter through the importer or the exporter or Issue the query directly to issuing authority b) The query about admissibility should draw attention to the particular aspect of the transaction and the in response the information which is needed in such cases should also be clearly specified. COMESA FREE TRADE AREA Brief facts about COMESA Uganda & COMESA COMESA – Uganda excludes some items from duty exemptions Common Market for Eastern & Southern Africa Categories: Founded : December 8, 1994 – 4% Band - Paper & paper products – 6% Band - Electronics COMESA secretariat: Lusaka, Zambia The derogation doesn't apply to sensitive items which Member States: 21  Burundi, Comoros, Congo, Dem Rep., Djibouti, Egypt, Eritrea, Ethiopia, Kenya, attract 35% to 100% in the EAC CET Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Traded goods: Uganda, Zambia, and Zimbabwe – Imports: Cement, Paper products, steel products, concentrates for Population: 640 million making beverages, fruits, cables. GDP: USD$ 1.0 trillion, trade in goods worth Us$383 – Exports: Gold, scrap & waste for glass, cement, steel products, Billion agricultural produce Aim: promoting regional integration through trade and the Countries: – Egypt, Zambia, Swaziland, Zimbabwe, Sudan, DRC development. RULE 2 – Origin Criteria 1. Goods shall be accepted as originating from a Member State if they are consigned directly to a consignee in another Member State and : (a) They have been wholly produced as provide for in Rule 3 of this protocol (“P”); or (b) They have been produced in the Member State Wholly or partially from materials imported outside the member States or of undetermined origin by a process , which effects a substantial transformation of those materials such that: I) Material content- Value of non originating materials (@CIF) does not exceed 60% of the total cost of material used in the production(“M”) II)Value Added Content – Production process should account for at least 35% of the ex-factory costs of the goods (“V”) III)Change in Tariff Classification (“X”) –Goods are classified or become classifiable under a tariff Heading other than the heading under which they were imported. c) Goods for a particular economic importance (“Y”) – produced in the Member state and designated in a list by the council upon recommendation of the committee RULE 2 – Origin Criteria C E RT I F I C AT I O N WHOLLY PRODUCED “P” for goods satisfying the wholly produced criterion [Rule 2.1 (a).] “M” for goods satisfying the material content MATERIAL CONTENTT of the substantial transformation criterion [Rule 2.1 (b) (i)]. VALUE ADDED “V” for goods satisfying the value-added CONTENT content of the substantial transformation criterion [Rule 2.1 (b) (ii)]. CHANGE IN TARIFF “X” for goods satisfying the change of tariff HEADING heading of the substantial transformation criterion [Rule 2.1 (b) (iii)]. ECONOMIC "Y" for goods satisfying the criterion of IMPORTANCE particular economic importance to the member States [Rule 2.1(c)].  RULE 3 – Wholly Produced (P) 1. For the purposes of sub-paragraph (a) paragraph (1) of Rule 2 of this Protocol, the following are among the products which shall be regarded as wholly produced in the Member States. (a) Mineral products extracted from the ground or sea-bed of the Member States; (b) Vegetable products harvested within the Member States; (c) Live animals born and raised within the Member States; (d) Products obtained from live animals within the Member States; (e) Products obtained by hunting or fishing conducted within the Member States; (f) Products obtained from the sea and from rivers and lakes within the Member States by a vessel of a Member State; Products: Oranges (g) Products manufactured in a factory of a Member State exclusively from the Hs code : 08.05 Origin Criteria: Wholly Produced products referred to in sub-paragraph (f) of paragraph 1 of this Rule; RULE 3 – Wholly Produced (h)Used articles fit only for the recovery of materials, provided that such articles have been collected from users within the Member States; (i) Scrap and waste resulting from manufacturing operations within the Member State; (j) Goods produced within the Member States exclusively or mainly from one or both of the following: i. Products referred to in sub-paragraphs (a) to (i) of paragraph 1 of this Rule: ii. Materials containing no element imported from outside the member states 2. Electrical power, fuel, plant, machinery and tools used in the production of goods shall always be regarded as wholly produced within the Common Market when determining the origin of the goods. Cost of electricity, fuel, plant & machinery are regarded as wholly produced Material content Criterion (M)  Material content-Under this criteria, the products becomes Example: Treatment of Furniture (94): eligible for preferences if the Value of non originating materials o Suppose a Company Manufactures sofas using local & imported ( at CIF) does not exceed 60% of the total cost of material used in materials: the production(“M”) – Imported Material Value = CIF$10,000; – Local content value = $20,000  Formula for calculating of Material content (%): Import Material (IM) content = C.i.f value of IM Determine whether the sofas qualify for origin under Material content (Cost of local material + c.i.f of value of IM) criteria. – IM Content = $10,000/ ($10,000 +$20,000); = 0.3333 – IM Content (%) = 0.3333*100 = 33.33% less than 60%  Decision: Sofas meet the Material content criteria since the value of non originating materials (CIF$10,000) doesn’t not exceed 60% of the total cost of material used in the production.  Certificate will be issued with Criteria “M’ Value Added Criterion(V) Methodology: Value Added Criterion Treatment of Microwaves: 85.16  This criteria requires a manufacturing process that adds value to non originating materials. The Value Added should account for Suppose; atleast 35%; A company imports parts of a microwave and adds value to get a  Value of non originating materials equals the CIF value at importation (less the value of the cost of transport) complete Microwaves. Total cost of a product = value of non originating material + value added Value of non originating material $90(shell, nobles) Therefore; value added = Total cost – Cost of Non originating materials Cost of value added $60(element/power supply+labour) Value added %tage = (value added ÷ Total cost)*100% Total cost($90+$60) = 150 Origin Criteria: Heading 85.16 Value added % = ($60 ÷ $150)*100% = 40% greater than 35%  Microwaves meet the Value added criterion (V) since value added %tage is higher than 35% DEVELOPING UGANDA TOGETHER 47 Change in Tariff Heading (X) Methodology: CTH Treatment of Shoes (64)  Under this criteria, Goods are classified or become classifiable Manufacturing process Inventory under a tariff Heading other than the heading under which they Threa 64.06/83.08/56. 07/35.05/54.01 were imported. uppers Eyel lace ds (of material s sole Glue classified  Examples: Shoes (64) are made from different materials, these ets under different include; Uppers(64.06), eyelets(83.08), laces(56.07), glue(35.05), heading) threads(54.01),…  Origin criteria: Chapter 64 Process (manufacturin g/operation) Is it originatin g? Finished Products 64.05 DEVELOPING UGANDA TOGETHER 48 RULE 5 – Insufficient Operations a) Packaging, bottling, placing in flasks, bags, cases and boxes, fixing on cards or boards and all other simple packaging operations; (b) Simple mixing of ingredients imported from outside the Member States i. Simple assembly of components and parts imported from outside the Member States to constitute a complete product; RULES 6 ii. Simple mixing and assembly where the costs of the ingredients, parts and components imported from outside Member States and used in any of such processes exceed 60 percent of the total costs of the ingredients, parts and components used. (c) Operations to ensure the preservation of merchandise in good condition during transportation and storage such as ventilation, spreading out, drying, freezing, placing in brine, sulphur dioxide or other aqueous solutions, removal of damaged parts and similar operations; (d) Changes of packing and breaking up of or assembly of consignments; (e) Marking, labelling or affixing other like distinguishing signs on products or their packages; (f) Simple operations consisting of removal of dust, sifting or screening, sorting, classifying and matching, including the making up of sets of goods, washing, painting and cutting up; (g) A combination of two or more operations specified in sub-paragraphs (a) to (f) of this Rule; and (h) Slaughter of animals.(01 / 02 COMESA RULES 6 - 14 Rule 6 Unit of qualification – Each item is treated separately from each other Rule 7 Separation of materials – Use of accounting methods to determine which goods are originating from a member state Rule 8 Treatment of mixtures – Characteristic of the mixtures should be different from that of originating & non originating materials Rule 9 Treatment of packaging – National law takes precedent. If containers are not returned, they are treated separately from the goods Rule 10 Documentary evidence – Certificate of Origin; proof of origin; Preservation of documents is 5 years. Rule 11 Infringement and penalties Rules 12 Entry into force Rule 13 Regulations Rule 14 Cessation of force of the protocol  CERTIFICATES OF ORIGIN P R O C E D U RA L A S P E C T TRADE REGIMES TYPES Simplified Trade Regime (STR); Goods worth threshold $2000 & Normal Clearance COMPETENT AUTHORITY ISSUANCE All certificates (including Replacements & Duplicates) are issued by competent authority in the exporting country. RISK MANAGMENT VERIFICATION Competent authorities share lists of authorized signatories. LAWS & RULES DISPUTE SETTLEMENT Enforcement & settlement of disputes are based on the National & International Laws & Regulations GENERALISED SYSTEM OF PREFERENCES Instituted in 1971 Purpose The GSP makes it easier for developing/ least developing countries to export their products to the EU at reduced tariffs. Goods traded Under GSP Under the EBA (Everything but Arms) least developed countries have duty free, quota free access for all products expect arms & ammunition. Uganda & REX Uganda started implementing the EU-REX system on 01/Jan/2019. Benefits Access to EU Market List of countries that grant GSP preferences Economic corporation Armenia, Austria, Canada, The European Union, Iceland, Japan, Challenges arising for the Beneficially Kazakhstan, New Zealand, Norway, the Russian Federation, Switzerland, Meeting the Rules of Origin requirements Turkey, United Kingdom and the United States of America  CERTIFICATION OF ORIGIN Why is it Important?  Proof of Origin. It is the proof that the specified products originate from Uganda.  Preferential tariff Claim. Goods can only be accorded preferential tariff treatment if they are accompanied by a proof of Origin. The Origin Criteria under the EU REX system Wholly produced (denoted by letter “P”). Under this criteria, the Products considered are the natural products & goods made from natural products( NO non- originating materials) Sufficiently worked or processed (denoted by letter “W”- followed by the 4-digit Heading level of the Harmonized System. ). Under this criteria, the products are considered originating if they are manufactured through processes or workings that are specified under the GSP Rules of Origin. DEVELOPING UGANDA TOGETHER 53  EXPORT DOCUMENTS 54 REQUIRED UNDER THE EU REX SYSTEM CUSTOMS DECLARATION 01 Export entry to prove that goods were exported from Uganda. STATEMENT ON ORIGIN 02 Statement about the originating status of the exports appended on the commercial document. REGULATORY CERTIFICATION 03 Proof that the exports were checked & found fit for the EU market. TRANSPORT DOCUMENTS 04 Provides information about means of conveyance & the INCOTERMS.  STATEMENT ON ORIGIN Application for EU REX number. Step1. Register for a Tax Identification Number(TIN). Step2. Apply on the EU-REX link (using the TIN): https://customs.ec.europa.eu/rex-pa-ui/ Step3. Submit the filled, signed & stamped forms to International Affairs Unit-URA Tower Mezzanine floor for approval. Step4. Officer validates the details & issues the REX number to the applicant. DEVELOPING UGANDA TOGETHER 55  Cont.. STATEMENT ON ORIGIN How the statement of origin is made out ? Its mandatory to include the statement on origin on every commercial document (commercial invoice) for all exports destined to the EU market. Self Certification Under the REX system, registered exporters do self certification. Under this facility, registered exporters or producers self- declare the origin of their goods onDEVELOPING statement onTOGETHER UGANDA origin. 56  ORIGIN VERIFICATION URA may from time to time call upon any registered exporter for an origin verification/inspection. Purpose: To ascertain that the good(s) meet the origin criteria. Activities conducted during the Verification: 1. Interviewing the registered exporter 2. Inspection of the premises 3. Inspection of the manufacturing operations & processes 4. Examination of documents DEVELOPING UGANDA TOGETHER 57  EXPORT LEVY The government imposed export levy on the following goods: Good description Export levy Fish $0.5 per kg Gold- processed gold 5% of the value Tobacco $0.8 per kg Unprocessed minerals 10% of the Value of unprocessed minerals Fish maws 8% the value of fish Hides & Skins- unprocessed $0.8 per kg DEVELOPING UGANDA TOGETHER 58  African Continental Free Trade Area (AfCFTA) Brief Brief Facts Facts Entered into force on May 30, 2019 Entered into force on May 30, 2019 Trading commenced in January 01,2021 Trading commenced in January 01,2021 Population: 1.3 billion Population: 1.3 billion GDP: US$3.4 Trillion GDP: US$3.4 Trillion Ratification StatusStatuts Ratification Member states:states: Member 54; 4654; have46 deposited theirtheir have deposited instruments instruments  Ghana,  Kenya,Kenya, Ghana, Rwanda, Niger, Niger, Rwanda, Chad,Chad, Eswatini, Guinea, Eswatini, CôteCôte Guinea, d’Ivoire, Mali,Mali, d’Ivoire, Namibia, South Namibia, SouthAfrica, Congo, Africa, Rep., Congo, Rep.,Djibouti, Djibouti,Mauritania, Mauritania, Uganda,Uganda, Senegal, Togo, Egypt, Ethiopia, Gambia, Sahrawi Arab Democratic Rep., Sierra Leone, Zimbabwe, Senegal, Togo, Egypt, Ethiopia, Gambia, Sahrawi Arab Democratic Rep., Sierra Leone, Zimbabwe, Burkina Faso, Burkina Faso, São ToméSão& Príncipe, Equatorial Guinea, Gabon, Mauritius, Central African Rep., Angola, Lesotho, Tunisia, Cameroon, Nigeria, Tomé & Príncipe, Equatorial Guinea, Gabon, Mauritius, Central African Rep., Angola, Lesotho, Tunisia, Cameroon, Nigeria, Malawi, Malawi, Zambia, Algeria Zambia, and Burundi, AlgeriaTanzania. and Burundi, Tanzania.  Parliamentary/Cabinet  approvalapproval Parliamentary/Cabinet for has for been hasreceived for Seychelles; been received SomaliaSomalia for Seychelles; is pending. is pending. Adoption  of documents Adoption of documents In December In December 2020, 2020, the the following following trading trading documentsdocuments were adopted; were adopted; a) the AfCFTA a) the AfCFTA Certificate Certificate of Origin, of Origin, b) Originb) Declaration Origin Declaration document. document. c) Supplier c) Supplier or Producer’s or Producer’s Declaration Declaration document,document, d) Supplier or Producer’s Declaration d) Supplier or Producer’s Declaration for Products for Products not having not having Preferential Preferential FreeOrigin Free Trade Trade Status Origin document Status document Commencement of Trading Commencement Trading underof Trading AfCFTA commenced on 1 January 2021 under a liberalized trade regime that would gradually lead to an integrated Tradingcontinental under AfCFTAmarketcommenced on 1 January with tariffs phased 2021 out on 97% underlines of tariff a liberalized within 10 totrade regime that would gradually lead to an integrated 13 years continental market with tariffs phased out on 97% of tariff lines within 10 to 13 years DEVELOPING UGANDA TOGETHER 59  African Continental Free Trade Area (AfCFTA) AIM  Encouraging Industrialization, innovation, diversification, Technology Transfer and job creation.  Market access; 55states, 1.3 billion people, by 2050 Africa's population is projected to reach 2 billion, and GDP $2.4 trillion.  Africa has a big chunk of arable land which guarantees food security and market. Agriculture also employs a great number of people and is therefore a source of income.  Elimination of NTBs.  Free movement of people.  To enhance competitiveness at all levels and more specifically at the industry and enterprise level through exploiting opportunities for small scale economies, reducing business costs, continental/global market access and better re-allocation of resources and the development of trade-related infrastructure.  To overcome dependence on exportation of primary products and promote social and economic transformation for inclusive growth, industrialization and sustainable development in line with Agenda 2063;  Resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes; DEVELOPING UGANDA TOGETHER 60  African Continental Free Trade Area (AfCFTA) CONCLUSION AfCFTA covers both goods and services, and provides a platform for individual countries or Regional Economic Communities (RECs), as applicable, to engage in intra-African trade, through offers of tariff concessions and service commitments with reciprocal most-favored-nation treatment (MFN). There is already a degree of liberalized trade and integration under the eight RECs recognized by the African Union, and other customs and monetary unions that exist elsewhere on the continent. To date, it has been reported that 41 countries and the RECs, including SACU, EAC, CEMAC and ECOWAS, have submitted their tariff offers and service commitments. Admittedly, the implementation process has been slower than anticipated, with tariff books still being updated and administrative procedures getting rolled out. There is political support and willingness.  Political engagement.  Major and unprecedented support by the 55 Member States:  Negotiations  Concluding the Instruments  Signatures  Ratifications  Civil Society, Business Sector  Customs Administrations are now a key cog in the implementation and success of this major initiative the reason for establishing partnership with stakeholders. DEVELOPING UGANDA TOGETHER 61 Economic Rational Advantages Disadvantages Rules of origin can be used to attain specific national or international Restrictive rules of origin can affect investment flow since they might trade policies. There several discriminatory trade measures where an lead to excessive investment in the territories of major importers to origin determination is required to; satisfy local content requirement either deriving from an undertaking to  Measures designed to correct unfair trade (e.g imposing of anti dumping or the host government or to meet the origin criteria. countervailing duties against imported products causing material injury to domestic industry)  Measure designed to protect local industry (e.g safeguard measure to protect Inward investment incentives leads to over investment which can result against unforeseen increase of imported products causing serious injury to a specific into lack of competition from more efficiently manufactured imported domestic industry)  Administer national policies (e.g discriminatory government procurement procedure goods and disappearance of the previous local competitors which in and practises for adjusting balance of payment with specific countries) the end tends to market out the products out of their market.  To control access to the domestic market by foreign exporters (e.g quantitative restrictions or import quotas)  To implement environmental or sanitary measures (e.g preventing the import of contaminated food stuff or plants from a specific country, preventing of nuclear and hazardous material and their wastes)  To ensure national security or political policy (e.g control of trade in strategic weapon or specific products to which sanctions are applied) DEVELOPING UGANDA TOGETHER 62 ORIGIN INFRASTRACTURE Training Centre HEADQUARTERS WCO/WTO Policy matters Legislation & regulations Origin committee Coordination Cooperation(External) Other government (Optional) Dispute settlement departments & agencies ===========ORIGIN CENTRE=============== Issuing Advance ruling Consultation Ensuring correct & uniform application of the Coordination/ rules Overall coordination of the verification system Cooperation Provide guidance to regional offices Publication of Origin information Risk Management Unit Training Trade community Origin Unit Declaration Processing Unit Regional Offices Importers/Brokers Post Clearing Audit Unit Local offices  FUNCTIONS Headquarters Levels: Ensure implementation and application of the rules of Origin; Establishing and managing Origin policy to ensure uniform origin work in the administration; Issuing origin rules or directives for uniform application throughout the country Examining origin questions referred by the regional or local offices & pre entry origin requests from the trade community Updating national legislation & regulation of origin Coordinating the verification system within the national customs administration Origin Centre (Optional) Ensures that the correct and uniform origin determination of goods throughout the importing country or the customs or economic union Provide useful guidance to officers in the field Provide technical advise to higher level management on origin matters, particularly on the settlement of origin disputes Verification of Preferential Origin Origin Unit Give advice to declaration processing unit as well as importers Issue advance ruling on origin Serves as a liaison with Headquarters or the Origin Centre Regional/Local office Handle routine origin work