Origin Management: Rules of Origin in Free Trade Agreements

247 Pages·2011·1.44 MB·English

by  Anne van de Heetkamp

Origin Management
.
Anne van de Heetkamp Ruud Tusveld
l
Origin Management
Rules of Origin
in Free Trade Agreements
AnnevandeHeetkamp RuudTusveld
FisherAvenue3745 PwC
WestSacramento Customs&InternationalTrade
CA95691 FascionatoBoulverd350
California 3065WBRotterdam
USA Netherlands
[email protected] [email protected]
ISBN978-3-642-19807-6 e-ISBN978-3-642-19808-3
DOI10.1007/978-3-642-19808-3
SpringerHeidelbergDordrechtLondonNewYork
LibraryofCongressControlNumber:2011933220
# Springer-VerlagBerlinHeidelberg,2011
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Preface
For centuries, the levy of import duties has been a common part of economics; it
protectshomemarketsandisaneasywayfortheauthoritiestogenerateincome.As
longastariffshaveexisted,internationaltradehasbeenhamperedbythem.Inefforts
topromoteinternationaltradeandtogaincompetitiveadvantages,differenttrading
partners have agreed to ease up and reduce or even abolish duty rates. The key
conditiontobenefitfrom these duty rate reductions isthat thegoods for whichthe
lowerratesareapplieduponimportation,are“oforigin,”i.e.thegoodsneedtomeet
certain originating requirements in order to claim preferential treatment. The main
reason for thecondition isthat thetradingpartners donotwantpartiesthatarenot
part of the agreement to benefit from the agreement. Therefore, in order to benefit
from the lower duty rate opportunities, companies have to manage their origin
issues,hence:OriginManagement.
Origin Management is the holistic approach toward the creation of a single,
auditable,andglobalplatformthatenablescompaniesandgovernmentstosuccess-
fullyclaimpreferentialorigin,sustain,review,andauditpreferentialclaims.Origin
Managementadvocatesanapproachthatinvolvessharinganddistributinginforma-
tion and resources throughout the company and the supply chain, resulting in
competitive advantages, synergies, and a central point of wisdom for all origin-
associatedissues.
In order to understand the importance, environment, and impact of Free Trade
Agreements(FTAs),itisrequiredtoappreciatetheimpacttheyhaveonglobaltariff/
customsdutystructuresandhowthespecificelementsoftheFreeTradeAgreement
textaffectthepartiesdealingwithFTAs.WithoutabackgroundinGlobalTradeand
a historical perspective regarding FTAs, it is difficult to grasp its concepts and its
practicalapplication.Itisthereforethatthebookissetupinthreeparts.
Part I lays the groundwork. It outlines global trade trends and history, and the
concept and content of Free Trade Agreements. Special emphasis is put on the
principles of Tariff reduction schedules and Rules of Origin that are laid out in
eachFTAandthatarecurrentlyconsideredtheFTAelementswiththemostimpact
onbusiness.Inthispartfocuswillbeonthebackground,principles,andstructureof
tradeandFTAsratherthanonthedetailedpracticalimplications.
In Part II, the practical implications of FTAs are further reviewed – obtaining
preferentialtreatmentinvolvesmorethanasimple“checktheboxforlowerrates,”
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andparticipantsarerequiredtofulfilltherequirementssetforthintheFTAsinorder
to obtain and sustainpreferentialclaims. The requirements inthe FTAdo not only
affecttheimporterthatmakesthepreferentialclaim.Theexporterormanufacturer,
its suppliers, and the authorities are other parties that are closely involved. Part II
relatestohowpreferentialclaimsaresustained,howOriginManagementrelatesto
othertradeprograms,thecomponentsofOriginManagement,andwhichpartiesare
involvedinthevariousprocessesandprocedures.
Part III details how companies can set up a successful origin management
program that will ensure that the company benefits from FTAs at a reasonable
cost. Many recent studies and analysis identified Origin Management as a missing
linkinstrategicsourcinginitiatives.Thesetupofacomprehensiveoriginmanage-
mentprogramwillallowcompaniestocreateasourcingstrategythatalsoincludes
duty rate impact. This will exist on top of the other benefits a well-run origin
programoffers:lowercompliancecosts,ongoinglowerdutyrates,highcompliance
rates,andatransparentinternalandexternalprogramstructurethatenhancesvisibil-
itythroughoutthesupplychain.PartIIIincludesideas,guidelines,andstructurefor
setting up and maintaining origin programs. It also provides the reader industry
referencesandaflurryofQ&Aonoriginissues.
WestSacramento,CA,USA AnnevandeHeetkamp
Rotterdam,Netherlands RuudTusveld
.
Acknowledgments
Thank you to all who knowingly and unknowingly contributed and supported:
Mohit Anand, Grace Chang, James Taman Davies, Fernanda Dias Colon, ICPA
membership, Joon Hyuck Lee, Ngoc Lewis, Carolyn Muhlstein, Walter Stocker,
Pierre-PauldeVaucher,JoeWalsh,RanWang,BettyWilliams,AllenWu.
Personalthankyouto:PwCCustoms&InternationalTradeTeam,CDCSoftware
andCDCTradeBeamleadershipteams,andthewonderfulpeopleatSpringerVerlag.
Really special thank you to: our sweet wonderful supportive wives Linda and
Michelleandcute,sweet,wonderfulchildrenCharlotte,Mariette,Tristan,Mia,and
Tallula.
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Contents
PartI Theory,Background,andLegislation
1 SettingtheStageforWorldTrade ....................................... 3
1.1 TradeVolume .......................................................... 4
1.2 TariffandNontariffBarriers ........................................... 7
1.2.1 CustomsDutiesandDutyRates ................................ 7
1.2.2 OtherTariffBarriers:Anti-dumping,Countervailing
Duties .......................................................... 13
1.2.3 NontariffBarriers .............................................. 14
1.3 ImpactonBusiness ................................................... 14
1.4 TradeCompliance ..................................................... 17
1.5 AuthoritiesandAgencies ............................................. 19
1.5.1 UnitedNationsConferenceonTradeandDevelopment
(UNCTAD) ..................................................... 19
1.5.2 WorldTradeOrganization ..................................... 20
1.5.3 WorldCustomsOrganization .................................. 20
1.5.4 InternationalChamberofCommerce .......................... 21
1.5.5 Overview ....................................................... 22
1.6 SupplyChainLogistics ............................................... 22
1.7 GlobalandOffshoreManufacturing .................................. 24
1.8 GlobalTradeManagementSoftware ................................. 25
1.9 SettingtheStageforGlobalTrade:Recap ............................ 27
2 TypeofTradeAgreements .............................................. 29
2.1 AgreementsWithoutDutyReductionSchemas ...................... 29
2.2 AgreementswithDutyReductionSchemas .......................... 32
2.3 Unilateral,Bilateral,andMultilateralAgreements ................... 35
2.4 TheOrderofTradeAgreements:Recap .............................. 36
3 FreeTradeAgreements:NumbersandBackground .................. 37
3.1 TheObjective ......................................................... 37
3.2 TheoreticalBackgroundandCurrentDebate ......................... 38
3.3 History ................................................................ 40
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