Revision of the PEM Convention on Rules of Origin

Revision of the PEM Convention on Rules of Origin

Textiles

TAXUD/1645234/1420th PEM Working Group

Brussels, 22 May 2014Guillaume DOREYDG Taxation and Customs Union

TAXUD B3 – Trade facilitation, Rules of Origin and International coordination Europe and neighbouring countries

Textile – origin provisions

1. Textile in rules of origin – State of play

2. Position of Contracting Parties

3. Other ways of relaxations

1. Textile in rules of origin – State of play

• List rules in the current PEM

• Tolerances

• Cumulation (special provisions for certain areas)

List rules – current PEM rules

• Based on 'double-transformation' two significant processes of production undergone in PEM Members (provide higher value added)

• Complementary nature and integrated production chain across pan-Euro-Med area

• Double transformation generated a number of benefits for PEM area due to cumulation among PEM partners

• Estimates: about 5 mio textiles and clothing workers employed throughout the area

1. State of play

- extrusion of man-made fibers accompanies by spinning for synthetic yarns, or

- spinning of natural or man-made fibers accompanies by weaving, or

- a substantial printing operation accompanies with two preparatory or finishing operations (such as scouring, bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permament finishing, decatising, impregnating, mending and burling),

conditioned to a value-added criteria for the incorporated non PEM input – 47.5%

Textiles (examples) Clothing (examples)- weaving accompanied by

making–up (including cutting), or

- making–up preceded by printing accompanied by at least of two preparatory or finishing operations (such as scouring, bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permament finishing, decatising, impregnating, mending and burling),

conditioned to a value-added criteria for the incorporated non PEM input – 47.5% (e.g. grey fabrics)


1. State of play

Tolerances – current PEM rules

• Specific tolerances expressed in Introductory notes:

• Note 4 (definitions)

• Note 5 (tolerance of 10% in weight for basic textile materials + definition of basic textile materials)

• Note 6 (tolerance for textile materials of 8 % EXW price providing a CTH with the exception of linings and

interlinings + tolerance for non-textile materials)

1. State of play

Cumulation – current PEM rules

• Cumulation for textile: full cumulation

Areas of full cumulation:• EEA (European Economic Area – EU, IS, LI, NO)• MA – TN – EU • MA – TN – TR• TN – EFTA (CH, IS, LI, NO)

• DZ – EU

1. State of play

List rule for shirts:“Manufacture from yarn”

Full cumulationEEA

List rule for fabrics:“Manufacture from fibres”

Full cumulation

Takes into account the different working stages

1- weaving from yarns

2- making

Pakistan

yarn

Iceland

weaving

Supplier's declarationfor non-originating fabrics

Norway

EUR.1 or Invoice declaration

PO = EEA (EU)

HS 62 05

1. State of play Example

New challenges in textile and clothing sector

• New business and industrial reality in the sector

• Increasingly complex supply chains/diversity of production

processes

• Changing production techniques and production patterns (e.g.

finishing sector with innovative technologies )

• Limited supply of originating fibres/yarns in terms of needed types,

quantities, qualities

• Fierce competition from many Asian countries

2. Positions of PEM partners

• To keep the current rules (with relaxations or not)

• Double transformation as a principle but with options

• Single transformation (with or without conditions)

- extrusion of man-made fibers accompanies by spinning for synthetic yarns, or

- spinning of natural or man-made fibers accompanies by weaving, or

- a substantial printing operation accompanies with two preparatory or finishing operations (such as scouring, bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permament finishing, decatising, impregnating, mending and burling),

conditioned to a value-added criteria for the incorporated non PEM input – 47.5% [or without now]

textiles clothing- weaving accompanied by

making–up (including cutting), or

- making–up preceded by printing accompanied by at least of two preparatory or finishing operations (such as scouring, bleaching, mercerising, heat setting, raising, calendaring, shrink resistance processing, permament finishing, decatising, impregnating, mending and burling),

conditioned to a value-added criteria for the incorporated non PEM input – 47.5% (e.g. grey fabrics)


2. Positions

Textile (examples merging different positions)

-New wording with key working processes (options) for both yarn or fabric:

- Extrusion + spinning/weaving

- Extrusion + twisting/weaving

- Twisting or/combined with gimping/weaving

- Yarn dyeing + weaving

- Weaving + one specific operation (printing, dyeing, coating…)

- Printing (as standalone operation + value added criteria)

- Dyeing + 2 finishing operations) + value added criteria

- Dyeing (as standalone operation)

Clothing (examples merging different positions)

-New wording with key working processes for clothing

- weaving accompanied by making–up (including cutting)

- making–up preceded by printing (as standalone operation + value added criteria)

- Dyeing + making-up- Specific rules for some

products (ex: denim)

List rules – Relaxations by certain partners

2. Positions

- Single transformation based on:

- CTH

- Change from any heading

textiles clothing- Single transformation based on:

- CTH- Change from any heading- 30 % minimum of originating

added-value

List rules – Relaxations by certain partners

2. Positions

Analysis chapter by chapter

2. Positions

• Chapters 50 to 53• Chapters 54 and 55• Chapters 56, 57, 58, 59• Chapters 60 and 61• Chapter 62

Example:Chapters 50, 51, 52, 53 (Silk, Wool, Cotton, Other vegetable textile)

Fabrics PEM Change in wording + options

CTH / Change from any heading

+ dyeing

Chapters 50 to 53

Chapters 50, 51, 52, 53 (Silk, Wool, Cotton, Other vegetable textile)

Chapter rule+ Fibres

PEM (CTH) Change from any heading

Yarns PEM Wording change+ options


Fabrics PEM Wording change+ options


+ dyeing

2. Positions

+ ex 5003 (silk waste) with special rule needed?

Chapters 54 and 55

Chapters 54 and 55 (man-made, synthetics textile)

Fibres(chapter 55 only)

PEM CTH Change from any heading

Yarns PEM Wording change+ options


Fabrics PEM Wording change + options


+ dyeing

2. Positions

Chapter 56 Wadding, felt and non-wovens (ouates, feutres et non-tissés) + cordage and cables

Chapter rule

PEM

CTH Change from any heading

5601 Wording change+ options


5602 PEM Wording change+ options


5603 Specific rules for non-woven products

+ by needle bunch





2. Positions Chapter 56

2. Positions

Chapter 57

Chapter 57 (carpets and textile floor coverings)

Of needleloom felt PEM

Wording change+ options

CTH / Change from any headingOf other felt

PEM

otherPEM

Chapter 58

2. Positions

Chapter 58 (special fabrics – woven, tufted textile, tapestries…)

Chapter rule PEM Wording change+ options


+ dyeing

5805 (tapestries)

PEM (CTH)Change from any heading

5810 (embroidery)

PEM Wording change CTH / Change from any heading

Chapter 592. Positions

Chapter 59 (textile fabrics – impregnated, coated, or laminated + textile articles for industrial use)



5902 PEM Wording change CTH / Change from any heading



+ dyeing

5904 PEM Wording change CTH / Change from any heading



+ dyeing

2. Positions

Chapter 59 (textile fabrics – impregnated, coated, or laminated + textile articles for industrial use)





+ dyeing

5908 PEM (CTH) Change from any heading

5909-5911 PEM Wording change+ options


Chapter 59

Chapters 60 and 61

2. Positions

Chapters 60 and 61 (knitted or crocheted fabrics and clothing)

Chapter rule 60 PEM Wording change+ options


Chapter rule 61 PEM Wording change

+ dyeing with added-value

CTH (or single transformation) or 30% of originating added-value

Proposition of chaging the wording of « other » by « other (fully-finished knitting or knitted to shape) »

Chapter 62

2. Positions

Chapter 62 (Articles of apparel and clothing accessories not knitted or crocheted)

Chapter rule PEM Wording change+ options

CTH (single transformation) or 30% of originating added-value+ dyeing

Ex 6202Ex 6204Ex 6206Ex 6209Ex 6211

PEM Wording change+ options(based on unembroidered fabric)

CTH (single transformation[+dyeing]) or 30% of originating added-value

Ex 6201Ex 6202Ex 6203Ex 6204Ex 6205 Ex 6206Ex 6209Ex 6211

Specific rulefor denim

Manufacture from yarn orMaking-up followed by a stonewashed operation provided that the value of all the materials used does not exceed 40% of the EXW price of the product

Manufacture from unbleached fabrics orMaking-up followed by a stonewashed operation provided that the value of all the materials used does not exceed 40% of the EXW price of the product

Chapter 62

2. Positions

Chapter 62 (Articles of apparel and clothing accessories not knitted or crocheted)

Ex 6210Ex 6216

PEM Wording change+ options


62136214

PEM Wording change+ options(printing + based on unembroidered fabric)


+dyeing

6217 PEM Change in wording CTH (single transformation[+dyeing]) or 30% of originating added-value

2. Positions

Current PEM

Position 1

Status quo

Position 2

Double transformation with options

Position 3

Single transformation (with options or not)

ex Chapter 62 Articles of apparel and clothing accessories, not knitted or crocheted; except for:

Manufacture from yarn

PEM Rule to be kept

Weaving combined with making-uporMaking-up preceded by Printing (as standalone operation)orMaking-up preceded by Printing (as standalone operation) or byDyeing (as standalone operation)

Manufacture from fabric (+ dyeing)OrManufacture from materials of any heading, except that of the productOrManufacture in which the value of all the materials used does not exceed 70% of the ex-works price of the product

Chapter 62

2. Positions Chapter 63

Chapter 63 (other made-up textile articles)

Chapter rule PEM 30% of originating added-value

6301 to6304

PEM Wording change CTH or 30% of originating added-value

Manufacture from unembroidered fabric

6305 PEM Wording change CTH or 30% of originating added-value

6306 PEM Wording change+ option for non woven process

CTH or 30% of originating added-value

6307 PEM CTH or 30% of originating added-value

6308 PEM CTH or 30% of originating added-value

3. Other Ways of Relaxation

• Modernization of rules for textile may go through different approaches:

• List rules

• Tolerance

• Cumulation

3. Relaxations

Tolerance (general provisions and Introductory notes)(see presentation on open questions)

• Article 5(1) – General tolerance

• Introductory notes (Notes [4], [5] and [6])

• Article 13 – provision on Duty Drawback

• Article 14 – Principle of territoriality

Tolerance

Article 5(1) – General tolerance• State of play

[15%] of the ex-works price → all other products except Ch. 50-63 → specific tolerances (Introductory notes 5 and 6)

• Discussion

tolerances to be increased to the same extent and/or remove exclusion of textiles in general ex-works price tolerance

3. Relaxations

Tolerance

Introductory notes (see document TAXUD/1645189/14)

Note [5] (definitions + printing and printing as standalone operation)

Note [6.1] (tolerance of 10% in weight for basic textile materials + definition of basic textile materials)

Note [7.1] (tolerance for textile materials of 8 % EXW price providing a CTH with the exception of linings and interlinings + tolerance for non-textile materials)

3. Relaxations

Article 13 – provision on Duty Drawback• See working document TAXUD/1261847/14

• Discussion

CPs are invited to express their views on the principle and the potential impact

Tolerance

3. Relaxations

Article 14 – Principle of territoriality

• Provision

Working or processing outside the exporting CP can be disregarded' if added value ≤ [10%] of the ex-works price of the end-product

Not allowed for products of Ch. 50-63• Discussion

CPs are invited to express their views on the principle and the potential impact

Tolerance

3. Relaxations

Cumulation

Full cumulation could be considered by partners:

• Step-by-step approach?

• Bilateral approach?• Other?

• General provision (to be included in Article 3)?

• Combined with other relaxations?

3. Relaxations

Conclusion

Revision exercise should strike the right balance between:

List rules

ToleranceCumulation

Rulesof

origin

• Unit B3 – PANEUROMED – Origin of goods• European Commission

DG Taxation and Customs Union

• [email protected]

• http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/index_en.htm

Revision of the PEM Convention on Rules of Origin

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