Non-preferential Rules of Origin Debated at WTO

· The initiative, which was originally proposed in January 2019, would require members to notify the WTO Secretariat the rules of origin they use in the application of most-favoured-nation treatment to imports, using an agreed notification template.

· Proposal would close information gaps and make it easier to access up to date information about non-preferential original requirements

· Rules of origin are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.

· Non-preferential rules of origin are those which apply in the absence of any trade preference — that is, when trade is conducted on a most-favoured nation basis.

· An informal session was held virtually on the issue of harmonization of non-preferential rules of origin, to which members of the public were invited to attend.

· Self-certification (where the origin of the goods and compliance with specific origin criteria is attested by the producer or exporter of the goods) is generally associated with better preference utilization

· Underutilization rates for members allowing self-certification (22%) was less than half the underutilization for members applying third-party certification (49%).

· Self-certification remains a recommended benchmark of the Bali and the Nairobi Ministerial Decisions on preferential rules of origin for LDCs.

· Next meeting of the Committee on Rules of Origin is tentatively scheduled for 11 May 2023.

WTO members have agreed to ask the chair of the Committee on Rules of Origin to consult with delegations and propose a way forward on an initiative aimed at enhancing transparency regarding non-preferential rules of origin. The decision was made at a committee meeting on 13 October.

The committee chair, Ms. Laura Gauer of Switzerland, told members she would reach out to delegations to hold consultations in the coming weeks on specific aspects of the current proposal with a view to preparing a chair's text. Once the draft is ready, the chair said she would circulated the text and organize further consultations.

The initiative, which was originally proposed in January 2019, would require members to notify the WTO Secretariat the rules of origin they use in the application of most-favoured-nation treatment to imports, using an agreed notification template. Members would outline their practices with respect to certification of origin and other mandatory documentary proofs of origin for non-preferential purposes, using an agreed template, and notify the WTO Secretariat of substantive changes to their rules of origin and related documentary requirements.

Proponents argue the proposal would close information gaps and make it easier to access up to date information about non-preferential original requirements, something that would be useful not only for members governments but also for customs administration's businesses and trade operators. This, they say, would ultimately lead to clear and predictable rules of origin which would in turn facilitate the flow of international trade.

Transparency regarding non-preferential rules of origin is an objective shared by all members but three delegations have expressed some concerns about the initiative as proposed.

Rules of origin are the criteria needed to determine the national source of a product. Their importance is derived from the fact that duties and restrictions in several cases depend upon the source of imports.

Non-preferential rules of origin are those which apply in the absence of any trade preference — that is, when trade is conducted on a most-favoured nation basis. Some trade policy measures such as quotas, anti-dumping or “made in” labels may require a determination of origin and, therefore, the application of non-preferential rules.

Fifty-three members have notified the WTO Secretariat that they apply non preferential rules of origin, counting the European Union and its member states as one, while 63 members have informed the Secretariat that they do not apply any non-preferential rules of origin. The remaining 21 members have not yet submitted a notification.

Following the committee meeting an informal session was held virtually on the issue of harmonization of non-preferential rules of origin, to which members of the public were invited to attend. Members of the Secretariat provided a history of efforts by WTO members to negotiate and adopt harmonized non-preferential rules of origin and the stumbling blocks they encountered.

Vera Thorstensen, a former Brazilian official who chaired the Committee on Rules of Origin for seven years, was a guest speaker.

Impact of certification practices on the utilization of trade preferences

At the 13 October committee meeting the WTO Secretariat presented the results of a paper it prepared on members' requirements related to certificates of origin (proof of origin) and the possible effects that such requirements may have on the utilization of non-reciprocal trade preferences by least developed country (LDC) members.

The paper found that self-certification (where the origin of the goods and compliance with specific origin criteria is attested by the producer or exporter of the goods) is generally associated with better preference utilization when compared to third party utilization (where the origin of the goods and their compliance with specific origin criteria is attested by a designated or mutually recognized authority). Underutilization rates for members allowing self-certification (22%) was less than half the underutilization for members applying third-party certification (49%).

The Secretariat cautioned that this was not a universal observation and not confirmed by more detailed calculations with reference to several preference-granting members. However, calculations focusing exclusively on agricultural goods did associate self-certification with better preference utilization.

Self-certification remains a recommended benchmark of the Bali and the Nairobi Ministerial Decisions on preferential rules of origin for LDCs.

A number of members welcomed the paper, with some saying they would submit comments to the Secretariat to improve its content.

Preferential rules of origin for LDCs

Members reviewed recent developments in relation to preferential rules of origin for LDCs, including notification of preferential rules for LDCs and preferential import data. The United Kingdom, Thailand and Japan updated members on recent changes to their respective programmes.

Next meeting

The next meeting of the Committee on Rules of Origin is tentatively scheduled for 11 May 2023.