Trade Negotiations Insights • Volume 7 • Number 5 • June 2008
Rules of origin for fish in interim EPAs
The continuation of uninterrupted market access for fish and fish products (hereon ‘fish’) was a major motivation behind several countries’ initialling interim Economic Partnership Agreements (IEPAs) at the end of 2007. For those coastal and island ACP countries that act as sites of production for the processing of marine capture fisheries, a major point of historical tension in their trade relations under Lomé/ Cotonou was the onerous nature of EU rules of origin (RoO) for fish.2 But how have IEPAs addressed this issue?
There are two core aspects to the European Commission’s preferential RoO for fish: the definitions of ‘wholly obtained’ and ‘sufficiently worked or processed’ products. The following assesses each of these in turn, comparing their treatment under the Cotonou Partnership Agreement (CPA) and under IEPAs. While there are some important changes, the IEPA RoO for fish are very similar to those under the CPA, which explains their categorisation as ‘Cotonou+’.
Wholly obtained fish under IEPAs
The definition of wholly obtained marine-capture fish is identical in the RoO protocols in the signed Caribbean (CARIFORUM) EPA and in several interim EPAs, including those initialled by the East African Community (EAC), Eastern and Southern Africa (ESA), the Pacific states (PACP) and the South African Development Community (SADC). Like the CPA, in these agreements, classification is still dependent upon 50% ownership by nationals or companies of the parties to the agreement—i.e., owners must hold EU or ACP country passports—and vessels must still be flagged and registered by one of the parties.
There are four areas of difference, however, between CPA and IEPA definitions of ‘wholly obtained’ fish. First, the IEPAs have deleted the CPA requirement that 50% of the crew of vessels be nationals of the ACP, EU or Overseas Countries and Territories of the European Communities (OCTs). This change was requested by the EU distant water fleet in order to enhance commercial flexibility in the employment of crew, and by some ACP negotiators, (although not by all given that an estimated 2,000 ACP nationals serve as crew in EU vessels). Nonetheless, for those ACP countries with Fisheries Partnership Agreements (FPAs) with the European Commission, requirements on the use of nationals as EU distant water fleet crew can be (and are) written in here.
The second change is a very slight simplification of the criteria on vessel ownership by companies. A company now only has to have “its head office and … main place of business” in a party to the agreement, rather than the additional component under the CPA that the Chairperson and board members must all be nationals. Regardless, 50% of ownership must still be held by an entity based in one of the parties to the agreement.
Third, the conditions under which an ACP party is able to lease or charter vessels have changed: now EU fishing interests must have been offered—and refused—the opportunity to lease or charter vessels before an ACP party is able to do so itself. However, there is a contradiction between IEPA texts and that of the European Council Regulation applying IEPA RoO3. Here, the condition for ACP leasing or chartering is identical to the original clause under the CPA: the given state must first offer the European Commission the opportunity “to negotiate a fisheries agreement and the Community did not accept this offer.” This difference is important as the European Commission already has FPAs with several ACP states that might wish to lease or charter vessels, making the clause irrelevant in cases of existing European Commission access agreements. Clearly this difference between texts needs to be clarified, but it is assumed that the IEPA texts would hold legal sway given that they were initialled. In the case of industrial fisheries, the potential for the leasing or chartering of vessels is an important element of IEPA RoO because there is a general lack of domestic capital in ACP states to buy industrial vessels outright. However, the extent to which the new conditions are workable (and which rules apply!) remains to be seen.
The final change to the definition of wholly obtained fish appears to be an anomaly. Unlike in the CPA, Overseas Countries and Territories are not included in the text on qualifying vessels; this effectively excludes OCT vessels from being able to supply wholly obtained fish to IEPA countries. In operational terms, this unexpected flaw in IEPA texts is problematic as some EU-owned vessels are registered in OCTs thereby limiting the overall potential supply of originating fish to processors based in EPA states. For both the ACP and the European Commission, this issue is unlikely to be in their interests and, as such, should be easily ironed-out in the negotiations for comprehensive EPAs.
It is also worth noting that both Namibia (in the SADC IEPA) and CARIFORUM made unilateral declarations attached to their respective EPAs on the need for the extension of ‘wholly obtained’ to automatically confer origin onto fish that is caught within their Exclusive Economic Zones and landed locally, regardless of vessel registration or ownership. This is a long-running demand, but one that the European Commission continues to oppose.
Sufficiently worked or processed fish under IEPAs
There are two major changes to RoO on the definition of ‘sufficiently worked or processed products’ for fish. The first is a new value tolerance (or de minimis) provision of 15%. In cases where insufficient wholly obtained fish is available, all IEPA texts to date provide a concession of up to 15% value tolerance for non-originating inputs of fresh or frozen fish in the manufacture of fish products.4 This is broader and less administratively complex than the ‘value tolerance’ provision under the CPA, which allowed the use of up to 15% of non-originating fish in the product price, but required the exporter to do so on a single species, single consignment and single consignee basis (a very tricky organisational demand). Only one customs authority in the EU accepted imports under this CPA rule and only two canneries managed to actually utilise it. Yet, despite the minor improvements under IEPAs here, the practical value of the ‘concession’ is actually very limited. It still requires 85% of the value of fish to emanate from originating sources and it remains unclear whether the change offers any operational significance to exporters.
The second—and far more important change—is the European Commission’s offer of global sourcing RoO to the PACP. The new rule here is that, regardless of where the fish is caught or the status of a vessel’s flag, registration or ownership, the fish is deemed originating as long as it is transformed from being fresh or frozen (and thus categorised under HS chapter 3) into being a pre-cooked, packaged or canned product (categorised under HS 1604 and 1605). This is known as the change in tariff heading method and was a core demand of the PACP in their negotiations with the European Commission. In principle these new RoO are a huge step forward for PACPbased processors (mainly of canned tuna and tuna loins), but in practice the ability of processors to maximise the benefit remains to be seen. The most important limitation is the fact that fish still needs to meet mandatory EU Sanitary and Phytosanitary measures (vessels must be registered and approved by the local Competent Authority, which is in turn regulated by the Health and Consumer Protection Directorate, better known as DG SANCO). The supply of fish meeting such criteria is very tight.
Finally, under the CPA the only automatic derogation for fish was a total annual quota for canned tuna and tuna loins. This was distributed among the 77 countries of the ACP group and was fixed at 8000 and 2000 metric tonnes, respectively. A major gain in IEPA negotiations was made by the ESA grouping as it received the same volume of automatic derogation for canned tuna (8000 mt) and tuna loins (2000 mt) as that awarded under the CPA, but to be distributed among the ESA signatories only. Similarly, the EAC IEPA contains an automatic derogation for 2000 mt of tuna loins.5
Implications for comprehensive EPA negotiations
The following table briefly summarises the status of RoO reform in each of the IEPAs initialled to date. There are two scenarios here based upon whether or not a RoO protocol has already been agreed to and the status of the RoO review clause: 1) for those EPA regions that have yet to negotiate a protocol on RoO (CEMAC-Cameroon, Côte d’Ivoire, Ghana) or those that have agreed to renegotiate RoO as part of comprehensive EPA negotiations (EAC and ESA), the opportunity to develop relevant improvements in RoO is open to discussion with the European Commission; and 2) for those EPA regions that have initialled a RoO protocol and which is not up for renegotiation until triggered by the relevant review clause (i.e. CARIFORUM within five years, PACP after five years, SADC after three years), the options may prove to be more limited. This last point is made because the European Commission has ruled out renegotiations in several formal communications in recent months, but the extent to which this is true is very much open to question on both legal and political grounds.
The obvious question for those EPA groupings that are endeavouring to renegotiate RoO is what rules might be best? This article does not attempt to answer that question, but instead offers a few comments based upon RoO for fish negotiated to date.
• At a minimum, automatic derogations to the value of the ESA IEPA should be demanded, for example by Côte d’Ivoire and Ghana.
• Governments need to consult with exporters to carefully assess the practical workability and commercial relevance of the new 15% value tolerance provision. If it is found to be wanting (which is likely), evidence-based negotiation positions should be developed for more generous alternatives.
• On the prospects for the extension of PACP global sourcing RoO to other EPAs, the European Commission has painstakingly made it clear that this rule was specific to the Pacific islands because of their unique geographical and economic disadvantages. It is also worth reiterating the structural constraint of the supply of fish compliant with sanitary and phytosanitary measures. Nonetheless, if an EPA grouping felt that such RoO were practicable and necessary, there is little reason not to push for them.
• Finally, even if the European Commission accepted demands that fish caught in an EPA country’s Exclusive Economic Zone were automatically wholly originating, vessels would only be able to target stocks within this sovereign area, thus limiting the ability to follow commercially valuable, highly migratory and straddling species.
Liam Campling - Department of Development Studies, School of Oriental and African Studies, University of London. The author can be contacted at: liamcampling@yahoo.co.uk
2 These sites of production predominantly deal with canned tuna and tuna loins.
3 See: EC No 1528/2007. Published in the Official Journal (L 348/1) on December 31 2007.
4 The fresh and frozen fish are grouped under HS Chapter 3.
5 For the quantities concerned, the rule is equivalent to global sourcing which aims to fill the gap in supplies of originating fish due to low seasonal catches. This ensures a continuous production and export activity for the beneficiary countries. A global sourcing for unlimited quantities - as is the case in the PACP - could undermine existing local fishing capacities supplying originating fish during high season (PACP have no or very few fishing vessels).
6 See also Mangeni, 2008: 42.