Preferential rules of origin for LDCs and implementation of Bali and Nairobi ministerial decisions

The LDC Group made a series of presentations that sought to share opportunities for simplifying preferential rules of origin, reducing burdens on the trade community, and facilitating the utilization by LDCs of these preferential regimes.

The presentations described what the group saw as best practices in different areas.  These include the method and percentages used for ad valorem calculations; cumulation ; direct consignment; proof of origin and flexibilities for low value shipments; and substantial transformation using change of tariff heading.

In addition, the LDC Group also made a presentation on its aspirations regarding future rules of origin in the US trade preferences: the US Generalized System of Preferences (GSP, which expired at the end of December 2020) and the African Growth and Opportunity Act (AGOA, which expires in 2025). Preference-granting members took note of the recommendations and requests for reform by the LDC Group. Noting that their preferential rules of origin already comply with the requirements of the 2013 Bali and 2015 Nairobi ministerial decisions, they stated that it was important to design rules which would ensure an appropriate level of processing and transformation in the LDCs.

The Chair,  Mr. Guna Seelan Balakrishnan from Malaysia, noted that the CRO will continue discussing the LDC requests in each of these areas.

Earlier, China, Japan and the United Kingdom shared with the CRO an update on recent developments in relation to preferential rules of origin used in their non-reciprocal preferences for LDCs.

Japan presented an overview of its Generalized System of Preferences (GSP) and preferential rules of origin as well as an analysis of the utilization of the scheme. Japan said utilization is consistently above 90% in practically all tariff lines where exports from LDCs are recorded. In response, the LDC group also shared its analysis of utilization rates and reflected that RTAs should not be included in the calculation, as such preferences are not available to all LDCs.

In the UK's presentation, it was noted that its Developing Countries Trading Scheme (DCTS), which replaced the GSP, had 65 countries that could benefit from tariff reductions under the UK preferences and that the UK was committed to improved market access for the LDCs.

China shared that it has been updating its certificate of origin issuing system so that, from November 2025, certificates of origin (COs) can be automatically and digitally transmitted to China's customs service. China requested LDCs to provide the necessary information to China's customs to be able to benefit from this CO electronic transmission system.

Modalities for calculation of utilization rates by LDCs of preferential rules of origin

The WTO Secretariat presented an updated note describing different methodological options for the calculation of preference utilization rates (G/RO/W/161/Rev.2). The note acknowledged that members had already agreed to calculation modalities in 2017. The purpose of the note was simply to reflect the current practice and discussions in the committee on this matter.

Some members expressed the view that it was important to maintain a focus on individual preferential programmes and avoid lumping together the utilization of different programmes, each with specific origin requirements. Others noted the importance of keeping a holistic view and taking into account all the schemes and circumstances that can inform the trade patterns of a LDC and a preference-granting member.

Presentations by Asian Development Bank and UNCTAD

UNCTAD and the ADB presented ongoing research that compared product-specific rules of origin used in several major free trade agreements. The presenters noted that despite differences in language used to draft such rules, the content (substantive requirement) of the rules is either identical or very similar, even in some sensitive sectors. That observation opened opportunities for diminishing the variety of rules of origin and hence reducing the costs of compliance with such requirements for businesses. They argued that the CRO could consider the simplification of rules of origin and the use of increasingly common, trade-facilitating rules of origin.

Information session on work of WCO related to rules of origin

Members participated in an information session on 20 November about the “Work of the World Customs Organization related to rules of origin and the work of the Technical Committee on Rules of Origin (TCRO)”. According to the Chair, the session contributed to closer collaboration between the TCRO and the CRO for the simplification of origin requirements. Both committees had, in fact, been created by Article 4 of the WTO Agreement on Rules of Origin. During the session, representatives of the WCO Secretariat presented comparative studies, databases and guidelines available in relation to origin certification, origin verification, origin irregularities and preferential rules of origin.

Transparency for non-preferential rules or origin

The Chair reported that, following his consultations with members, there was no consensus for the CRO to formally adopt his proposed "Transparency Decision on non-preferential rules of origin" and its standardized notification form. As a result, he said that the proposed form should be used on an entirely voluntary basis. He encouraged members to consider updating their notifications describing their practices related to non-preferential rules of origin.  

Next meetings of Committee on Rules of Origin

The next formal committee meetings are scheduled for 3–4 April 2025 and 5–6 November 2025. In 2025, the CRO will also mark the 30th anniversary of its creation and first-ever meeting. A small event for members in April will mark that milestone.

Background

Rules of origin are the criteria needed to determine the national source of a product. Rules of origin are important in the application of import duties as well as trade policy instruments such as anti-dumping and countervailing duties, origin marking, and safeguard measures.

There is wide variation in the practice of governments with regard to the rules of origin. The WTO’s Agreement on Rules of Origin aims at long-term harmonization of rules of origin, other than rules of origin relating to the granting of tariff preferences, and to ensure that such rules do not themselves create unnecessary obstacles to trade.

Further information on the WTO’s work regarding rules of origin can be found at www.wto.org/origin.