IMPORTANT FTA-RELATED NEGOTIATING ISSUES

During FTA negotiations the following are taken into account:

•  TRADE IN GOODS

Firstly, the whole range of goods – subject of FTA – is classified according to the harmonised system of goods classification HS. The system used is the 8-digit european system. All signing countries have accepted to ratify this system. Agricultural and processed agricultural products are classified between chapters 1 to 24 of such a system, meanwhile industrial products are classified between chapters 25 to 97.

For agricultural products classified between chapters 1-24, trade is based on:

•  The principle of concesion, which means that products are exchanged cross-border through import tariffs on which there are no customs duties;

•  The principle of bilateral elimination of custom tariffs, which means that products are exchanged cross-border without import quotas, eliminating so customs tariffs (which get down to zero immediately after FTA come into effect);

•  The principle of the unilateral elimination of customs tariffs, which means that products are imported cross-border without import tariffs, eliminating so customs tariffs (which get down to zero in each direction, and where each country presents its own products' list);

•  The principle of most favoured nation status (normal tariffs), which means that all other goods which are not included in the above provisions will continue to be freely traded by paying current custom tariffs.

With regards to the usage from market operators of import quotas, there will be employed the principle “first one goes”. According to such a principle, all interested operators applying at customs offices up to the fulfillment of quotas, are exempt from applied custom tariffs – i.e the first ones until auotas are filled. After quotas are filled, there will be levied normal import tariffs on any operator.

The above principles are included in the free trade agreements with Macedonia, Croatia, Bulgaria, Romania and Serbia & Montenegro.

While with Bosnia & Herzegovina and Moldova trade flows are based on the following:

•  The principle of bilateral elimination of custom tariffs, which means that goods may be exchanged without import quotas, scraping so custom tariffs (custom tariffs which bilaterally come down to 0 immediately);

•  The principle of progressive elimination of custom tariffs duriong a transitional period;

•  The principle of most favoured nation treatment (normal tariffs), which means that all other goods that are not included in the above principles will continue to be exchanged freely without paying any custom tariffs ;

For industrial products, trade flows are based on the following:

•  The principle of immediate elimination of custom tariffs soon after the agrement comes into effect;

•  The principle of designing range of goods whose custom tariffs are gradually reduced to zero during the transitional period.

Gradually reduced tariffs imply that for a good (or a range of goods) there are applied tariffs which are gradually reduced until they reach for zero at the end of the predefined period .

•  TRADE IN SERVICES

The sides in this Agreement do recognise the increasing importance of such areas as services and investment.

They will cooperate with the aim of achieving a progressive liberalising and a bilateral opening of their markets to investment and trade in services. This will be in full compliance with the appropriate provisions of the 1994 GATT's General Agreement of Trade in Services.

•  INTELLECTUAL PROPERTY

The sides in this Agreement will provide for the protection of intellectual property rights on a non discriminatory basis, and making such rights obligatory. Such protection will be improved as to comply with the International Multilateral Agreements which are ratified or will be ratified from sides concerned .

For the purpose of such agreements, the term “Protection of Intellectual Property” includes especially the following:

•  Protection of copyright, including copyrights on softwares and databases;

•  Trademarks' rights of goods and services;

•  Geographical Indicatiors;

•  Patents;

•  Industrial designs,

•  New plants' variations;

•  Topography of integrated circuits, and

•  Non-confidential information on know-how.

The sides under the agreement, are committed to jointly work on the issue. On the demand of whichever side, they may underatke experts' consulting on such issues, especially on the activities which are related to existing conventions (or future internationl conventions) and that are subject to harmonisation, administration and protection of intellectual property. This will be also applied for activities of such international organisations as the WTO, the World Organisation of Intellectual Property and also for the relations of sides with regard to a third one on intellectual property issues.

•  TECHNICAL RULES OF TRADE

The rights and obligations of sides, related to the technical barriers on trade will be implemented in full compliance with the WTO Agreement on Technical Barriers of Trade. In the meantime, sides should cooperate and exchange information in the area of standardisation, assessment of conformity and accreditation with the aim of eliminating technical barriers of trade and harmonising them with the WTO Agreement on Technical Barriers of Trade.

Sanitary and Phytosanitary measures

Sides will apply their own rules in the areas of veterinary, sanitary and phitosanitary control, so that such rules comply with the Agreement on Sanitary and Phytosanitary Measures of WTO. Sides are encouraged to sign cooperation agreements in such areas in order to provide for the precise implementation of such measures.

•  ORIGIN RULES (CUSTOMS PROCEDURES)

It is very clear that a single country cannot produce everethyng itself and it cannot provide itself the whole range of raw meterials. Such limitations are a hindrance to economic development. The global economy has provided the opportunity to expand the scale of usage of raw materials; to increase thher rate of transformation and to export them. In those conditions, there is of special importance the concept of a product's origin. A product which enjoys such a status implies the following:

•  The link between the product and the producing country,

•  Production conditions,

so that there is guaranteed the granting of preferential status.

The status of origin is enjoyed where:

•  The product is fully produced in the country, (1)

•  The product is subject to additional processing for raw materials and materials imported into the country. (2)

Further down this document, there are a few examples in order to illustrate where the preferential origin status is obtained or not:

Preferential origin (1)

Example 1. The fish caught in territorial or internal waters; domestically produced agricultural products; minerals and their derivative products; metals' remnants; livestock and their derivative products; all those products are granted the preferential origin.

Preferential origin (2)

The criteria for obtaining such status (2) are as follows:

•  The change of custom classification, according to the HS chapter (a)

•  The processing value in %, towards producer's price (ex-works), (b)

•  Carrying out of specific processing processes, (c)

•  The combination of above criteria, (d)

Preferential Origin (2) (a)

Example 2. Chips (HS 2005), which are obtained from imported patatoes (HS 0701) are granted the preferential origin.

Preferential Origin (2) (b)

Example 3. Powdered Sugar (HS 1701 91)

which is partially obtained from imported sugar - HS 1701 12

- (and where the sugar accounts for 75% of the products' e x-works price) is not granted the preferential origin.

Preferential Origin (2) (c)

Example 4. Dried vegetable flour HS 1106

Manufactured from imported HS 0708 20 beans

is granted preferential origin.

Preferential Origin (2) (d)

Example 5. Refined sun flower oil HS 1512 1991

and manufactured with imported oil HS 1512 11 19

(preferential origin is forecast for only soy, peanuts, etc and not for sun flower oil) is not granted the preferential origin.

Preferential Origin (2) (c)

Example 6. The imported HS 1101 00 wheat flour manufactured with HS 1001 wheat is not granted preferential origin.

The applied rule to ex Chapter 11 is as follows:

•  Products where all cereals, vegetables or fruits are totally originating .

The network of FTA also provides for the further expansion of obtaining origin's preferential status, because part of FTA are the following as well:

•  Bilateral cumulation

•  Diagonal cumulation

•  Total cumulation

Bilateral cumulation is the process of reciprocally accepting the preferential origin of products manufactured in one country with raw materials imported from the other country where the final product would be exported.

For example, the wine produced in Albania with grapes imported from Macedonia is considered with preferential origin if exported into Macedonia, because of the bilateral cumulation principle.

Diagonal cumulation is the process of reciprocally accepting the preferential origin of products manufactured in one country with raw materials imported from either one or two importing countries, which have reciprocally FTAs in place, and the final product may be exported in each of these countries because it is granted the preferential origin.

For example, the wine produced in Albania with imported grapes from Macedonia is considered with preferential origin if exported into Croatia. This because between these 3 countries is in place the wine import-export regime under the preferential regime.

Total cumulation is the process of reciprocally accepting the preferential origin of products manufactured in one country with raw materials imported from either one or all-importing countries, which have reciprocally FTAs in place, and the final product may be exported in each of these countries because it is granted the preferential origin.

In other words, because of origin rules included into the principles of bilateral, diagonal or tota cumulation, it is extended the use of raw materials export, which grant products the preferential status.

Preferential Origin (2)

Minimal operations which do not grant preferential status can be mentioned as follows:

•  Packing and repacking of goods;

•  Portioning of products;

•  Packing, portioning, washing, etc;

•  Labelling of products;

•  Warehousing;

•  Packing goods into smaller boxes;

•  Killing imported livestock before the export date.

In order to obtain the preferential origin, the following are required:

•  Request for obtaining the preferential origin certificate, where are detailed all necessary data concerning the product, producer and raw materials;

•  The document which certifies the preferential origin is the one called “EUR.1” ( see annex for a copy ), which is provided from the Customs General Department;

•  Invoice Declaration ( see annex for a copy )

f) JOINT COMMITTE

With the FTA in place, there is established a Joint Committee, made up of representatives of each side and that deals with the following:

•  Supervising, administering and enforcing such an agreement;

•  Exchanging information;

•  Joint consultation with the aim of totally removing trade barriers in the future;

•  Decision making in compliance with dispositions that are subject of the agreement, and

It can also provide recommendations for other issues.

F.eg. Country A will export wheat to country B (based on the FTA signed) at the quantity of 1000 tons a year. According to the agreement, within 3 years, the custom tariff is reduced to zero. This means that in the first year of the functioning of the FTA, the importing country B custom tariff will decrease (f.eg.) by 40%, in the second year by another 40% and in the third year by 20% so getting down to zero.