RULES OF ORIGIN

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Rules of origin are the criteria used to define where a product is made, and are thus critical in determining what the import conditions of an imported good, such as the tariff on an imported good, should be. They are also important for implementing other trade policy measures, including trade preferences, quotas, anti-dumping measures and countervailing duties. 

The event provided an opportunity to review the conditions that led to the adoption of the Agreement on Rules of Origin and the initiation of work in the CRO, which first met in April 1995. Participants also identified other international and multilateral instruments that deal with rules of origin and discussed the effectiveness and gaps of these instruments.

The fact that the harmonization of non-preferential rules of origin has not been completed and the fact that there are no other international instruments regulating the design and use of rules of origin means that an increasing number of governments use their own sets of rules, leading to multiple and divergent rules being applied.

As a result of this situation, business representatives present at the event discussed  the costs of complying with diverse and multiple origin requirements and suggested priorities for work in the Committee in the years ahead.

Uma Shankari Muniandy, the Singaporean chair of the CRO, told the anniversary event that rules of origin have become increasingly important — and complicated — with the rise of global production chains and the proliferation of bilateral and regional trade agreements.

“Regional and global value chains fragmented the production of goods and made the determination of origin a more complex exercise,” she noted. “Preferential trade agreements have thrived, creating a spaghetti bowl of multiple regimes of rules of origin.”

“Consumers have increased expectations about their ability to trace the origin of the goods they purchase,” she continued.  “In fact, the list of developments putting more pressure on rules of origin and origin requirements could go on and on.”

The Agreement on Rules of Origin requires WTO members to ensure that their rules of origin are transparent; that they do not have restricting, distorting or disruptive effects on international trade; and that they are administered in a consistent, uniform, impartial and reasonable manner.

Ms Muniandy noted that the agenda of the Agreement has expanded greatly since it was concluded, covering the negotiation of harmonized non-preferential rules of origin and issues such as transparency, compliance costs and advance rulings.

The efforts to negotiate global harmonized non-preferential rules of origin — those which apply in the absence of any trade preferences — has not delivered final results, although several speakers noted that the intensive work which went into the effort did result in provisional agreement on rules for thousands of tariff lines and has proven beneficial for efforts outside of the WTO.

Stefan Moser, a former Swiss diplomat who previously chaired the CRO, said the work on harmonized non-preferential rules “was not in vain. Many of these rules found their way into free trade agreements and drew from the lessons learned at the WTO.”

In the meantime, committee efforts have focused on implementing two key rules of origin decisions intended to benefit the WTO's poorest members — the 2013 Bali Ministerial Decision on Rules of Origin for LDCs and the 2015 Nairobi Ministerial Decision on Rules of Origin for LDCs. These decisions set out multilateral guidelines for rules of origin that WTO preference-granting members apply to their non-reciprocal preference schemes for least-developed countries (LDCs), making it easier for LDCs to qualify for preferences and better utilize market access opportunities available to them.

Assan Touray, First Secretary with the Mission of The Gambia to the WTO, praised the CRO as “one of the most productive committees I've been in,” with LDCs playing an active role in its deliberations.

Darlan Martí, Secretary of the CRO with the WTO Secretariat, said these decisions have “generated momentum in the identification of best practices” and serves as an example of how the work of WTO committees in general can be reinvigorated to help serve the needs of its members.

Nevertheless, the business community cautioned that much work remains on making rules much easier for traders to understand and comply with in general.

“For years we have been talking about the need to make rules of origin simple,” said  Martin Van Der Weide with the International Chamber of Commerce. “If I compare the situation 20 years ago and today, it's not simpler; in fact the situation is becoming more complex, with more trade agreements and more procedures to follow.”

The event was streamed live on the WTO website. The event programme, presentations, and video are available here.

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