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Final <strong>Report</strong>
RoO Derogation under the PACP-IEPA
EXECUTIVE SUMMARY
Background
After several years of negotiations to establish a WTO-compliant reciprocal Economic Partnership
Agreement (EPA) between the European Union (EU) and the Pacific-ACP states (PACPs), the EU and
PACPs agreed to the terms of an Interim EPA, which was initialled in November 2007 by Papua New
Guinea and Fiji, and later signed in July and September 2009, respectively.
As part of this agreement, a special derogation to the standard Rules of Origin (RoO) for processed
fish was negotiated. This derogation, often referred to as ‘global sourcing’, permits PACPs to source
raw material from any vessel regardless of flag or where it was caught, provided it has been
‘substantially transformed’ by a PACP-based processing facility into canned tuna or frozen cooked
loins. This was a one-off and specific exception offered exclusively to PACPs because of their
historical lack of RoO compliant fish under the prior RoO due to limited fishing capacity of PACP
fishing fleets, reduced processing capability due to physical and economic factors, geographical
isolation and distance from the EU market, as well as a low identified risk of destabilising the EU
market.
On 13 March 2008, PNG submitted a notification to the EU for use of the derogation for processed
fishery products. In meeting the review requirements specified in the PACP IEPA text (Protocol II,
Art. 6), this report on the implementation of the RoO derogation was commissioned for completion
no later than three years after PNG’s notification had been lodged to consider the following:
• Development effects on PNG economy – long-term income and employment generation;
• Effective conservation and sustainable management of fishing resources (including
compliance with sanitary and phytosanitary (SPS) regulations and support for combating
illegal, unregulated and unreported (IUU) fishing in the Western and Central Pacific Ocean
(WCPO)).
In addition, the review also considers the impacts of the RoO derogation on the EU canned tuna
market and EU fishing and canned tuna processing industries.
Impact of RoO derogation on PNG development
The impact of PNG’s global sourcing RoO derogation on development effects on the PNG economy
has been negligible since 2008, given that existing canners have made very little use of the
derogation to date.
In the medium term future (2011-2016), with the potential development of an additional five
processing plants, the derogation is expected to have a partial impact on development effects on the
PNG economy, given global sourcing is only one contributing factor of several in attracting new
onshore investment to PNG.
Onshore tuna processing facilities
Currently, PNG has three tuna processing facilities handling canned tuna and cooked loin production,
with a combined maximum processing capacity of 520 mt/day (130,000 mt annual raw material
throughput). In September 2011, actual production was around 280 mt/day (70,000 mt/year). From
2008-2011, global sourcing has had little influence on growth of PNG’s existing tuna processing
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