Long Term Declaration

Supplies at the origin "proof"

Eingestellt 29/07/2015

Here we are. The chickens come home to roost!
The “globalization” has become a prominent feature of the contemporary world, as factories had been in the last century. The steadily increase of trade worldwide has lead in turn to congestion of ports, airports, highways and, last but not least, exports – that has become more and more an outstanding factor of development for the major global economies, European Union included.

Magna pars of the strengthened pace of the EU international trade is due to a series of agreements concluded by the EU and its partner countries. The core of the so-called Free Trade Agreements (FTA) is the treatment of products traded between signatory Countries – provided that certain requirements are met. It is therefore fundamental to verify the preferential origin of products, in order to qualify them for favorable treatments, i.e. reduction of import duties. The preferential origin, however, implies compliance with requirements set out in the FTAs. Who knows these agreements? How do I know if the products exported are entitled to preferences? The questions arisen require multiple answers, as the EU has agreements in force with many third countries, and the conditions granting "preferential origin" to products varies in accordance with many factors. The country of destination of the product, the product itself (properly described through an appropriate customs tariff code), the "ex works" price (EXW) of the product, the value (even, sometimes, the weight) of its components not originating in the EU.
An example may clarify the reasoning: our company, valve producer, wants to export to Albania enjoying the tariff benefits provided for in the FTA which the EU has in force.

First of all, it is necessary to verify the condition required for valves to be considered as sufficiently worked or processed in order to obtain preferential treatment. These conditions are set out for all products sorted by its headings (first four digit of the tariff code), in specific annex in each FTA.
Specific rules, however, are not laid down for all headings: since no rule exists for heading 8481, in our case it has therefore to be applied the so-called rule of ex Chapter, which is the general rule for chapter 84 (two digit).
The rule provides for two alternatives (the last two columns) among whose it can be chosen the most convenient – or most easily satisfiable:

Ex Chapter 84

Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof; except for:


- from materials of any heading, except that of the product, and

- in which the value of all the materials used does not exceed 40% of the ex-works price of the product

Manufacture in which the value of all the materials used does not exceed 30% of the ex-works price of the product

As per rules set out, valves can acquire originating status if non-originating materials used are classified in any heading except that of the finished product, and its value doesn’t exceed 40% of the EXW price.
The second alternative provides that valves may acquire preferential origin through a production process in which not originating materials (included, if presents, parts in the same heading of finished products), do not account for more than 30% of the EXW price of the valve itself.
The example, in the end, shows an almost insurmountable limit for our company: it has to do not just with the complexity of the calculations to be carried on production processes, but rather with an effective knowledge of the contents of FTAs, where the rules governing preferential origin vary remarkably based on the agreement chosen.

Only such a knowledge can ensure the proper utilization of “preferential origin”, avoiding the risk of sanctions related to false statements. If possible, the issue is puzzled even more when a supplier of the exporter is asked to provide a statement indicating the origin. What happens when a person not used to deal with international trade has to release a supplier's declaration, i.e. the “long term supplier's declaration” (LTSD)?
To make such a statement to the exporter, the supplier must have knowledge of any parts not originating in the EU as per conditions set out in the agreements, contained in the product he supplies to the effective exporter. Where in its manufacturing process the supplier uses components purchased from other parties, it is necessary that it is established, in turn, the origin of those components. Therefore he has to require in turn a supplier’s declaration to his vendors. All parties involved in this process have then to raise awareness in respect to their respective production process, in order to release accurate LTSDs. A real chain reaction, where inexperience is not allowed and even less errors do.

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