Before analysing the provisions of the DCFTA, it should be noted that the EU unilaterally liberalised a part of its trade with Moldova as early as 2008 through autonomous trade preferences (ATP). Initially these ATP only covered industrial goods, but after Russia’s import ban on several Moldovan agricultural products, the EU amended its ATP in 2013 and 2014 to extend duty-free treatment to Moldovan wine and to grant duty-free quotas for apples, plums and table grapes. The ATP applied until 31 December 2015, in order to make it easier for business to adapt during the transition period between the autonomous preferences and the DCFTA.30
The DCFTA has established a free trade area for trade in goods since the start of the provisional application of the EU–Moldova Association Agreement from 1 September 2014.
30 See Regulation (EU) 1383/2014 amending Council Regulation (EC) 55/2008
32 PART II.DEEP AND COMPREHENSIVE FREE TRADE AREA
For industrial goods, the DCFTA provides for asymmetric trade liberalisation: the EU will immediately and fully abolish import duties on all Moldovan industrial products, whereas Moldova will open its market for several products only after a transition period of three to five years. Moldova will gradually phase out its tariffs for certain types of plastics and related products, furniture and several textile products, such as carpets and clothing. This should give Moldovan exporters the time to prepare for competition from the EU.
For agricultural products, the parties will not fully liberalise trade. Although the EU will immediately liberalise access to its market for most Moldovan agricultural imports, it will still impose tariff rate quotas (TRQs) on a limited number of sensitive products (Table 4.1). The MFN customs duty will apply to imports exceeding the TRQs. Moreover, for the types of fruits and vegetables subject to entry prices in the EU (e.g. tomatoes, courgettes and peaches), Moldova will still have to pay an import duty, with the exemption of the ad valorem component of that import duty.
Table 4.1 Moldovan products subject to annual duty-free TRQs for import into the EU
Product description Volume (tonnes)
Tomatoes, fresh or chilled 2,000
Garlic, fresh or chilled 220
Table grapes, fresh 10,000
Apples, fresh 40,000
Plums, fresh 10,000
Grape juice 500
For a large group of agricultural products, listed in Annex XV-C (including pig and poultry meat, and dairy products), the EU may apply an “anti-circumvention mechanism”. This defines for each category of products an average annual volume of imports (i.e. a “trigger level”). If imports from Moldova into the EU reach 70% of this trigger level in a given year, the EU must notify Moldova about the volume of imports of the products concerned. If 80% of the trigger volume is reached, Moldova is obliged to provide the EU with a sound justification of the increase of imports. Only when 100% of the trigger volume is reached may the EU temporarily suspend the preferential treatment of the products concerned for a period of six months.
Moldova will – unlike the EU – only liberalise most of its agricultural products after a transitional period over a maximum period of ten years (e.g. dairy products, meat products and wines). Moreover, Moldova will only partially liberalise trade for sensitive products such as pigment, poultry meat, processed meat products, sugar and sweeteners through TRQs.
The DCFTA also prohibits export duties and includes a standstill clause stating that neither party may increase any existing customs duty or adopt any new customs duty on goods originating in the territory of the other party. Quantitative restrictions on imports and exports are also prohibited by the DCFTA, except if allowed by the relevant WTO rules (i.e. Art. XI GATT).
Detailed rules of origin are laid down in Protocol I of the Association Agreement. These rules specify when a product is wholly obtained in the territory of one of the parties or when products have undergone “sufficient working or processing” in order to obtain the movement certificate ‘EUR 1’. An annex to the protocol defines four different criteria for sufficient processing for each product (i.e. tariff heading): i) a change of tariff heading (e.g. a screw will be originating in Moldova if it is made from imported materials of any other heading); ii) a minimum value added (e.g. for passenger cars, the value of all the non-originating materials used to manufacture the car may not exceed 40% of the total value of the product); iii) specific processing or working requirements or iv) a combination of the first three requirements. The DCFTA also allows bilateral cumulation, meaning that producers in the EU and Moldova can use materials and components originating in the other’s country as if they originated in their own country when seeking to qualify for preferential treatment. For example, when a Moldovan car producer imports intermediate parts from the EU to manufacture a car, those intermediate parts will be regarded as Moldovan and will not have to be taken into account in the calculation of the maximum threshold of the non-originating materials (i.e. 40%, as explained above).
In addition, Moldova has been able to accede to the Pan-Euro- Med Convention for diagonal cumulation (see further below).