Rules of origin in EU trade agreements

The European Commission is currently in the process of simplifying and harmonising the rules of origin for EU trade agreements, with the aim of enhancing the effectiveness of the latter. Indeed, there is a general perception that the complexity of the rules and their lack of harmonisation across EU trade agreements, together with burdensome certification procedures, may be deterring some business managers from making use of the preferential trade tariffs allowed by the agreements. Rules of origin govern the conditions under which an imported good is recognised as 'originating' in a preference-given country and eligible for preferential trade tariffs. Provisions on rules of origin cover two major areas. First, the conditions for conferring origin are designed on a product-by-product basis, following principles typically based on processing operations and/or share of input. An essential part of this process also consists of determining to what extent origin rules may 'cumulate' materials and operations, not only in the parties to trade agreements, but also in third countries (under specific conditions). A second aspect is the certification procedure for origin, including product consignment conditions. The EU's reform process touches on all of these areas. It started with the reform of the generalised scheme of preferences in 2011, a unilateral trade arrangement designed by the EU for developing countries that inspired the EU's subsequent trade agreement negotiations. In some cases, the EU also promotes a more advanced cumulation system, particularly within the pan-Euro-Mediterranean system, to promote economic integration with neighbouring trading partners. Finally, the EU supports the use of flexible consignment rules that take into account increasingly globalised inventory management. It also encourages the use of self-certification by exporters as opposed to exporting authorities. Rules of origin are complex and rely on negotiations with partner countries, and their harmonisation poses a genuine challenge for the EU. In its latest trade policy review published in February 2021, the Commission announced that policy actions on rules of origin are still needed. The modernisation of the rules of origin is supported by the European Parliament, which has argued that they determine the 'true extent of trade liberalisation'.