WTO RULES OF ORIGIN JASMINE BAAC MEANNE MANINGAS I. Background The WTO Agreement on the Rules of Origin was adopted at Marrakesh as part of the final results of the Uruguay Round of Multilateral Trade Negotiations (MTN) II. Rules of Origin (ROO) Definition Laws, regulations and administrative procedures which determine a products country of origin. Criteria needed to determine the national source of a product Country of Origin refers to the country where a product is obtained, produced or manufactured. III. Types of ROO 1. Non-Preferential ROO used to determine the country of origin for certain purposes. These purposes maybe for quotas, anti-dumping, anti-circumvention, statistics or origin labeling. 2. Preferential ROO part of a free trade area or preferential trade agreement which includes tariff concessions. IV. Purpose of ROO To implement measures and instruments of commercial policy such as anti-dumping duties and safeguard measures To determine whether imported products shall receive most-favored-nation (MFN) treatment or preferential treatment For Trade Statistics For the application of labeling and marking requirements; For government procurement V. No Specific Provisionin GATT 1994 No specific rules governing the determination of the country of origin of goods in International commerce Each country is free to determine its own rules ...within the province of each importing country to determine, in accordance with the provisions of its law, for the purpose of applying the MFN provisions (and for other GATT purposes), whether goods do in fact originate in a particular country ( Art. XXIV) VI.WTO Agreement on Rules of Origin (ARO), what does it do? ARO requires that WTO members apply their ROO in an impartial, transparent and consistent manner It also requires that ROO do not restrict, distort or disrupt international trade The agreement entered into force on January 1, 1995 and has no expiration date. All WTO members are parties to this Agreement VII. Institutions governing the ARO 1. WTO Committee on Rules of Origin Duty: review the implementation and operation of the Agreement 2. World Customs Organization Technical Committee Duty: to carry out the HWP and to deal with any matter concerning technical problems related to rules of origin. VIII. Aim of the ARO Harmonization To ensure that rules on origin do not create unnecessary obstacles to trade. Setting up of a harmonization work program (HWP) to be the framework for ROO Until the HWP is completed, Members are expected to ensure that their rules of origin are transparent IX. Objectives and Principles of Harmonization of ROO applied equally for all purposes provide for determination of country of origin objective, understandable, predictable not to be used as instruments to pursue trade objectives directly or indirectly consistent, uniform, impartial and reasonable coherent based on a positive standard X. Harmonization Work Program HWP is a framework based upon a set of principles, including making rules of origin objective, understandable and predictable in order to better facilitate international trade Shall be initiated as soon as after the entry into force of the WTO Agreement (1995) Shall be completed after three years (1998) XI. Criteria in determining ROO 1. Wholly obtained goods produced in a given country shall be taken as originating in that country 2. Substantial Transformation production that results in a new and different goods, which then has a name, character, use and tariff code different from those constituent materials. XII. Updates on the HWP 1999 provisional draft text of the Harmonized Non-Preferential ROO 2002- Core policy issues were submitted to the General Council for Resolution 2008 - draft consolidated text of non-preferential ROO was circulated 2011 - General Council have slow progress in dealing with the difficult trade policy issues 2014 - Two distinct views among the Members XIII. HWP General Rules* 1. Harmonized System 2. Determination of Origin 3. Neutral Elements 4. Packing and Packaging Materials and Containers 5. Accessories and Spare Parts and Tools 6. Minimal Operations and Processes *Taken from the Draft of the Consolidated Text of Non-preferential Rules of Origin Harmonization Work Program, WTO-CRO, G/RO/W/111/Rev.3, 2 December 2008 GR 1 - Harmonized System The HS provides for the classification and description of goods by Chapter, with each chapter having specific subchapters and subheadings identified through HS Code Number HS also provides for the rules on how to determine the country of origin of a specific good.HS CODE NUMBER DESCRIPTION OF GOODS PRIMARY RULES CHAPTER 1Live animals 01.01Live horses, asses, mules and hinnies. As specified in subheading 0101.11HORSES - Pure-bred breeding animals - Other The origin shall be the country where the animal was born The origin shall be the country where the animal was fattened for at least 6 months; otherwise the country where the animal was born. Illustration of HS GR 2 - Determination of Origin The country of origin of a good shall be determined in accordance with the General Rules and with the provisions under Rules on Wholly Obtained Goods and Products Specific Rules of Origin, applied in sequence. Wholly Obtained Goods The WTO ROO provides an Appendix 1 which sets forth the definition of the goods that are to be considered as being wholly obtained in a particular country a. Live animals born and raised in that country b. Animals obtained by hunting, trapping, fishing, gathering or capturing in that country c. Products obtained from live animals in that country d. Plants and plant products harvested, picked, or gathered in that country e. Minerals and other naturally occurring substances extracted or taken in that country f. Scrap and waste derived from manufacturing or processing operations or from consumption in that country and fit only for disposal or for the recovery of raw materials g. Articles collected in that country which can no longer perform their original purpose, not capable of being restored or repaired and which are fit only for disposal or for the recovery of parts or raw materials h. Parts or raw materials recovered in that country from articles which can no longer perform their original purpose nor are capable of being restored or repaired i. Goods obtained or produced in that country solely from products referred to in letters a through h. Product Specific Rules of Origin The WTO ROO provides an Appendix 2 which sets forth rules for determining the country of origin of a good when the origin of good is not determined under the Wholly Obtained Goods category Primary Rules last country in which a primary rule prescribed for the good in the HS has been satisfied by production Residual Rules When a good is produced by further processing of material/s that all have their origin in a single country, the country of origin is the origin of such material When a good is produced from materials of more than one country, the country of origin shall be the country in which the major portion of the materials originated GR 3 - Neutral Elements The origin of the power and fuel, plant and equipment, or machines and tools used to obtain a good or the material used in its manufacture which do not remain in the good shall not be taken into account when determining where the good originates.GR 4 Packing and Packaging Materials and Containers The origin of packing and packaging materials and containers presented with the goods shall be disregarded in determining the origin of the goods.GR 5 - Accessories andSpare Parts and Tools The origin of accessories, spare parts, tools and instructional or other informational material classified and presented with a good shall be disregarded in determining its origin GR 6 - Minimal Operationsand Processes Minimal operations or processes undertaken, such as ensuring preservation of goods in good condition for transport or storage, facilitating shipment or transportation, or packaging or presenting goods for sale, shall not be taken into account in determining the origin of a good. 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