Free Trade Agreement EU - Mercosur
The European Union and Mercosur states - Argentina, Brazil, Paraguay and Uruguay, reached on June 28, 2019 a political agreement for an ambitious, balanced and comprehensive trade agreement.
The EU is Mercosur's number one trade and investment partner and exports to Mercosur were € 45 billion in goods in 2018 and € 23 billion in services in 2017.
The EU is the biggest foreign investor in Mercosur with a stock of € 381 billion, while Mercosur’s investment stock in the EU amounts to €52 billion in 2017. While the relationship is very substantial both exporters and potential investors face barriers in Mercosur markets.
Goals of the new EU - Mercosur Trade deal
To remove these barriers and help EU firms – especially smaller ones – to export more
- To strengthen worker’s rights and ensure environmental protection, encourage companies to act responsibly, and uphold high food safety standards
- To protect quality EU food and drink products labelled as Geographical Indications from imitations
The agreement represents a win-win for both the EU and Mercosur, creating opportunities for growth and jobs for both sides.
Agreement from a Rules of Origin perspective
The agreement from a Rules of Origin perspective can be found in the Agreement in principle published on July 1, 2019. In Chapter 2 the information regarding the Rules of Origin is published.
The agreement provides a set of modern rules of origin that will facilitate trade flows between the EU and Mercosur. They will allow exporters and importers on both sides to benefit from the tariff reductions under the agreement and are in line with EU practice in other recent FTAs.
The Chapter about Rules of Origin and Origin Procedures consists of General Provisions in three Sections (Section A: Rules of Origin, Section B: Origin Procedures, and Section C:
Miscellaneous) as well as Annexes: including Introductory Notes, Product Specific Rules, Text of the Statement on Origin, and Provisions on Andorra and San Marino.
Section A: Rules of Origin
This section defines requirements for originating products including wholly obtained products, the absorption rule, and the principle of territoriality. The definition of ‘wholly obtained’ for fish products is coherent with EU vessel criteria: flag, 'registration' and ownership or crew requirements, which apply equally to the Exclusive Economic Zone and Continental Shelf as well to the high seas. Bilateral cumulation between the Parties is allowed. The agreement preserves the traditional EU list of insufficient operations, which do not confer origin. Accounting segregation may apply to fungible materials. The so-called 'non-alteration' rule stipulates activities that may be undertaken for originating products in third countries, such as operations to preserve products, storage, splitting of consignments, exhibitions, etc.
Section B: Origin Procedures
This section specifies that claims for preferential tariff treatment must be based on a statement on origin by the exporter (with a transitional period of maximum 5 years for Mercosur). In the EU, exporters must register in the REX system. Regarding verification, customs authorities of the importing party may request administrative cooperation to obtain information from the exporting party.
Direct verification visits by the customs authorities of the importing party to an exporter in the exporting party are not allowed. In the event of suspected irregularities or fraud, the customs authorities of the parties must provide each other with mutual administrative assistance.
Section C: Miscellaneous
This section contains standard provisions on Andorra and San Marino and specific provisions on Ceuta and Melilla. It also contains transitory provisions.
Product Specific Rules of Origin (PSR) are an important part of any agreement. These rules reflect the rules of origin applicable in recent EU FTAs, in particular for key EU export sectors. These include rules of origin for cars and car parts as well as most machinery; a modern set of rules for chemicals based on the main chemical processes; double transformation for textiles and clothing (with a few exceptions), which also takes into account relevant input to the final good from EU and Mercosur industry. There are only limited exceptions or deviations to the normal rules, which take into account the nature of Mercosur’s agricultural exports to the EU (e.g. coffee, soya) and some specific requests (e.g. iron and steel sector and some plastics), which also draw on examples in earlier EU FTAs.
The full publication can be read on the website of the European Commission