This interview first appeared in CCRM Journal for Practitioners in Europe, Issue 8, May / June 2021 (https://www.customsclearance.net/en/articles/a-coffee-break-withmette-werdelin-azzam)
This is the first “coffee break” article in our new series featuring thought leaders in the field of customs.
Our guest is Mette Werdelin Azzam, a rules of origin geek who spent a decade at the World Customs Organization (WCO) as the Senior Technical Officer focusing on origin. She is now working as an independent Customs and Trade Agreement Specialist with rules of origin as her main expertise and passion.
Jessica: Mette, thank you for being our first guest. You are well known in the circle of origin geeks, but for the people who have not had the pleasure of meeting you yet, can you describe what you do?
Mette: Thanks a lot for inviting me – it is always a pleasure to have opportunities to talk about origin. Rules of origin are really a niche in Customs and Trade and, indeed, not many people know what it is all about. Countries negotiate free trade agreements with other countries in order to boost trade between them and thereby create more jobs and work towards a sustainable development. For the importing country, customs duties are relieved – and rules of origin in these trade deals make sure only goods originating in the partner countries can cross the border without paying duties.
My job is to assist Customs administrations, businesses and other stakeholders build capacity so that they can implement and apply rules of origin correctly and thereby benefit from the free trade agreements.
Jessica: An important job, you must be very busy! Since you are based in the EU, I want to talk about one of the biggest changes in the customs world over the last year, namely the UK’s departure from the customs union. How are businesses adapting to the new world since January 2021?
Mette: Indeed, UK leaving the EU has brought a lot of changes for trade – going from free circulation to a trade deal has a huge impact as goods must be originating in the UK or the EU to be imported without payment of customs duties. Many companies have never imported/exported, so they must learn the whole process with customs declarations etc from scratch. They didn’t change anything, but everything changed around them.
Businesses were told to “be ready” for the new situation – but ready for what? The trade deal was finalised very late, making the new situation even more difficult.
Especially distribution companies are heavily impacted, and even more so as they made sure to fill their stocks before 1 January to avoid queues etc at the border. Now they find themselves with goods that are not fulfilling the origin provisions and therefore will be subject to customs duties when distributed (back) to the EU.
But they are getting there – in general the questions I receive now are much more specific and complex than in January.
Jessica: It is great to hear that the business community is learning fast. Now let’s zoom out and look at some other trade agreements around the world. In your view, are there any that are revolutionary in terms of their approach to rules of origin?
Mette: A WCO study shows that despite the so-called spaghetti bowl of rules of origin there are definitions, provisions, procedures etc that are found in all FTAs around the world, and none of the agreements are actually breaking away from the traditional approach to rules of origin.
One new trend that we see in many agreements, is that they are moving towards self-certification. This means that exporters, manufacturers, importers can certify the origin of the goods themselves – via a declaration on the invoice, other commercial documents or the import declaration – without the direct involvement of authorities. This is of course facilitating trade and reducing costs for traders – but it also leads to more uncertainty especially for importers due to the duty liability.
One revolutionary trade deal would be the African Continental Free Trade Agreement (AfCFTA) – not necessarily because of its rules of origin as such, but because of its scope, coverage and potential impact on sustainable development for an entire continent. When finalised - and if utilised - it will definitely lead to economic growth, job creation and regional integration in Africa.
Jessica: The good old spaghetti bowl analogy! Do I remember correctly there was also a lasagne analogy? At the recent WCO Global Origin Conference, you mentioned trade agreements are used more where the customs authorities promote and support traders. What else can be done to reduce the cost of using trade agreements so that more businesses can benefit?
Mette: A WTO study some years back showed that preferential trade across the globe was only 16 % of total global trade. In countries where the agreements are heavily promoted and where Customs administrations support traders, the utilisation of the agreements is over 90%.
As a part of negotiating trade deals, governments calculate the economic benefit of these deals. If they are not used, businesses do not benefit from all the advantages both on the import and export side – and thereby the country itself doesn’t benefit fully.
There are features in an FTA that can save costs for traders, including self-certification, flexible rules of origin which give more flexibility in the choice of suppliers and make compliance with the rules easier. Less strict transport/shipment provisions can also save costs and make life easier for traders.
Jessica: Of the topical discussions that have emerged over the last few years, which ones do you think are here to stay? For example: 3D printing and origin, using rules of origin to improve labour standards (e.g. minimum wage requirement), free trade agreements and sustainability, etc.
Mette: E-commerce as part of digital trade has been discussed over the last years in relation to customs. E-commerce itself is of course topical now as VAT rules have changed in the UK from 1 January 2021 and will change for the EU on 1 July this year too, but e-commerce as such is not treated differently by customs as any other kind of border crossing trade – it has no impact on rules of origin, HS codes or customs valuation how you ordered your goods.
Another part of digital trade – and which in my opinion is closer to actual digital trade than just ordering your goods online – is 3D printing. This new kind of trade is also closely linked to origin on services. It is being discussed at the international level, in the WCO, in the WTO etc, but for now customs duties only apply to physical goods crossing a border and not to services. 3D printing is on the edge of this as you start by ordering a service online but end up with a physical good.
In general, FTAs are used for a lot of other stuff than free trade, including child labour, environmental issues, human rights etc.
Another important topic that is here to stay is how to ensure quality in the origin information and origin determination and how to make sure that this quality information is then kept in a secure system where it is immutable and impossible to alter.
Jessica: Plenty of food for thought then. Finally, what advice would you give to someone looking to grow their career in customs and trade?
Mette: I would advise them to build a network, there is a lot of information “out there” for those who are interested. And of course, to reach out to the geeks – we are more than happy to engage and to discuss our favourite topics.