Info Service on WTO and Trade Issues (Oct16/05)
6 October 2016
Third World Network
other DCs voice concerns on core Rules of Origin issues
Published in SUNS #8320 dated 27 September 2016
Geneva, 26 Sep (D. Ravi Kanth) -- Several least-developed countries
- Benin, Tanzania, and Cambodia among others - voiced their concern
at the World Trade Organization on 22 September over the lack of progress
in addressing their core issues such as the simplification of preferential
rules of origin as promised in the Nairobi ministerial declaration
(NMD), several participants told the SUNS.
During a meeting of the WTO’s Committee on Rules of Origin (CRO),
the LDCs reminded the preference- granting developed countries as
well as the developing countries declaring themselves in a position
to do so to notify the measures they are required to undertake for
simplifying the preferential rules of origin under the Nairobi ministerial
declaration of December 2015.
Concerns were also voiced at the meeting by other developing countries
over lack of progress on long overdue harmonization of non-preferential
Rules of Origin, mandated by the WTO agreement at Marrakech to be
completed by 1998, a failure that would make a mockery of claims of
the Trade Facilitation Agreement (TFA).
Expressing sharp concern, the LDCs said the preference-granting developed
and some developing countries have not submitted any notification
as to what they intend to undertake as per the paragraph 4.2 of the
Nairobi ministerial declaration.
That paragraph calls on the major preference-granting developed countries
along with those developing countries to “inform the Committee on
Rules of Origin (CRO) of measures being taken to implement” the simplification
of preferential rules of origin.
The Nairobi ministerial declaration provided non-binding and incremental
changes for addressing the preferential rules of origin, which is
a major non-tariff barrier that the poorest countries encounter when
they export their goods, particularly leather and textile products,
to major industrialized countries, especially the United States.
It called for ensuring “that preferential rules of origin applicable
to imports from LDCs are transparent and simple, and contribute to
facilitating market access.”
The paragraph 4.2 of the Nairobi ministerial declaration states: “No
later than 31 December 2016 each developed Preference-granting Member,
and each developing Preference-granting Member undertaking the commitments
in accordance with paragraph 4.1 up to that date or thereafter, shall
inform the Committee on Rules of Origin (CRO) of the measures being
taken to implement the above provisions.”
Until now, none of the developed or developing countries in a position
to do so have notified about the proposed measures they are willing
to adopt for simplification of preferential rules of origin.
In a report on preferential rules of origin which will be submitted
to the General Council on 3 October, the CRO acknowledged that “no
preference-granting member had yet notified the Committee about the
measures being made to implement the provisions of the 2015 (Nairobi)
Decision. Developed countries must submit such notification by 31
Both developed and developing countries in a position to undertake
commitments are required to notify measures for the assessment of
sufficient or substantial transformation for preferential rules of
The Nairobi ministerial declaration had proposed the following criteria
to determine substantial transformation:
When applying an ad valorem percentage criterion to determine substantial
(i) Preference-granting Members shall:
(a) Adopt a method of calculation based on the value of non-originating
materials. However, Preference-granting Members applying another method
may continue to use it. It is recognized that the LDCs seek consideration
of use of value of non-originating materials by such Preference-granting
Members when reviewing their preference programmes;
(b) Consider, as the Preference-granting Members develop or build
on their individual rules of origin arrangements applicable to imports
from LDCs, allowing the use of non-originating materials up to 75%
of the final value of the product, or an equivalent threshold in case
another calculation method is used, to the extent it is appropriate
and the benefits of preferential treatment are limited to LDCs;
(c) Consider the deduction of any costs associated with the transportation
and insurance of inputs from other countries to LDCs.
According to the Nairobi ministerial declaration, for applying a change
of tariff classification criterion to determine substantial transformation,
Preference-granting Members shall:
(a) As a general principle, allow for a simple change of tariff heading
or change of tariff sub-heading;
(b) Eliminate all exclusions or restrictions to change of tariff classification
rules, except where the Preference- granting Member deems that such
exclusions or restrictions are needed, including to ensure that a
substantial transformation occurs;
(c) Introduce, where appropriate, a tolerance allowance so that inputs
from the same heading or sub-heading may be used.
Further, for applying a manufacturing or processing operation criterion
to determine substantial transformation, Preference-granting Members
shall, to the extent provided for in their respective non-reciprocal
preferential trade arrangements, allow as follows:
(a) if applied to clothing of chapters 61 and 62 of the Harmonised
System nomenclature, the rule shall allow assembling of fabrics into
(b) if applied to chemical products, the rule shall allow chemical
reactions that form a new chemical identity;
(c) if applied to processed agricultural products, the rule shall
allow transforming of raw agricultural products into processed agricultural
(d) if applied to machinery and electronics, the rule shall allow
assembling of parts into finished products, provided the assembly
of parts goes beyond simple assembly.
The NMD also said that Preference-granting Members shall, to the extent
possible, avoid requirements which impose a combination of two or
more criteria for the same product.
If a Preference-granting Member still requires maintaining a combination
of two or more criteria for the same product, that Preference-granting
Member remains open to consider relaxing such requirements for that
specific product upon due request by an LDC.
As regards the development of cumulation possibilities in relation
to the rules applied to determine sufficient or substantial transformation,
the NMD said “preference-granting Members are encouraged to expand
cumulation to facilitate compliance with origin requirements by LDC
producers using the following possibilities:
(a) cumulation with the respective Preference-granting Member;
(b) cumulation with other LDCs;
(c) cumulation with GSP beneficiaries of the respective Preference-granting
(d) cumulation with developing countries forming part of a regional
group to which the LDC is a party, as defined by the Preference-granting
Against this backdrop, Benin, on behalf of LDCs, expressed sharp concern
over lack of engagement and progress in addressing the preferential
rules of origin by preference-granting countries. Benin also called
for more dedicated sessions.
Tanzania said that the preference-granting countries must sincerely
implement the Nairobi commitments failing which the exports of LDCs
will continue to suffer.
In a strong statement, Cambodia’s trade minister Pan Sorasak drew
attention to the continued failure on the part of major developed
countries to implement preferential rules of origin since the Nairobi
The Cambodian minister called for convening of a dedicated meeting
for addressing various concerns on rules of origin that remain a major
hurdle for their exports.
The LDCs called for convening a dedicated session in February 2017,
but several countries - Canada, Chile, and India - expressed their
scepticism on grounds that they would need an approval from their
In short, the prospects for addressing preferential rules of origin
despite the Nairobi ministerial declaration seem grim and it is highly
unlikely that the major preference-granting countries will adhere
to their commitments, a LDC participant told the SUNS.
The meeting also witnessed a strong demand for reverting to the unfinished
work on the harmonization of non- preferential rules of origin that
was required to be “completed” by 1998 but remains deadlocked because
of continued opposition from the United States.
The main objective of the RoO under which “WTO members have to extend
any advantage granted to a product originating in one country, to
all like goods originating in all other WTO members” aims at harmonizing
non- preferential rules of origin of thousands of tariff lines.
To cover up the continued obstacles for addressing harmonization of
rules of origin, several industrialized and some developing countries
are now increasingly resorting to so-called “education” exercised
by private companies during the regular RoO committee meeting for
driving home the message that RoO remain important for global value
The work on harmonization of non-preferential rules of origin remains
deadlocked for almost 20 years because of opposition from one major
industrialized country, said a trade official after the meeting last
At a time when the WTO’s director-general Roberto Azevedo made grand
pronouncements at the United Nations General Assembly meeting that
“the WTO’s Trade Facilitation Agreement will make a big difference”
by cutting trade costs, the failure to harmonize non-preferential
rules of origin since 1998 exposed the false claims that are propagated
by him and major industrialized countries such as the US, according
to an African trade official.
After all, the rules of origin impose burdensome requirements and
escalating costs that deny market access for the poorest and developing
countries in major industrialized countries.
If anything, the TFA is not worth the paper on which it is signed
as long as the harmonization of non-preferential rules of origin remain
un-addressed, the official added.
During the committee’s meeting, Switzerland said that lack of harmonization
of non-preferential rules of origin impose burdensome requirements
on small and medium enterprises for integrating into the global value
chains. Further, the delay in arriving at non-preferential rules of
origin could also severely under-cut the Trade Facilitation Agreement.
South Africa and India said educational workshops on issues involving
rules of origin by private sector must be held separately on an informal
basis but not as part of the regular committee meetings, said a participant
from a developing country.
In a nutshell, as attempts are made to hijack the development agenda
from addressing the core issues in the global trading system such
as the trade-distorting domestic agriculture subsidies in major industrialized
countries or harmonization of non-preferential rules of origin, the
poorest and developing countries must join hands to ensure that their
bread-and-butter problems in international trade are not given short-shrift,
the participant added. +