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Members review implementation of preferential rules of origin for LDCs

Members review implementation of preferential rules of origin for LDCs
Photo credit: Jan Hoffmann

12 Oct 2017

WTO members reviewed efforts to implement the Nairobi Decision on preferential rules of origin for least developed countries (LDCs) at a meeting of the Committee on Rules of Origin on 4 October.

The Decision aims to facilitate export of LDC goods to both developed and developing countries under unilateral preferential trade arrangements in favour of LDCs.

The discussion on preferential rules of origin for LDCs took up most of the committee's attention during its meeting. The WTO’s LDC Group of members delivered presentations surveying preference-granting members’ practices with regards to the provisions of the Nairobi Decision.

The Nairobi Decision on Preferential Rules of Origin for LDCs builds upon an earlier 2013 decision setting out, for the first time, a set of multilaterally agreed guidelines to help make it easier for LDC exports to qualify for preferential market access. The Nairobi Decision, adopted at the WTO’s 2015 Ministerial Conference in Kenya, provides more detailed directions on specific issues, such as methods for determining when a product qualifies as “made in an LDC”, and when inputs from other sources can be “cumulated” – or combined together – into the consideration of origin.

Rules of origin are the criteria needed to determine the national source of a product. Those members granting preferences to LDC imports often condition the benefits on the imports meeting minimum “LDC content” as set out under their rules of origin schemes.

The LDC Group presentations were based on a series of notifications submitted by preference-granting members about their existing rules and requirements. The notifications follow an agreed template adopted  by WTO members last March aimed at enabling a better understanding and comparability of the requirements.

Preference-granting members that submitted notifications about their rules of origin requirements for LDC imports are Australia; Canada; China; the European Union; India; Japan; Korea; New Zealand; Norway; Russia; Switzerland; Chinese Taipei; Thailand; and the United States.

The intensification of the technical work means the committee is in a better position to act as a “clearing house” for the identification and promotion of best practices for preference-granting members and as a forum for defusing trade tensions or trade concerns on how rules of origin are being applied to LDC imports.

The WTO secretariat presented members an updated note reporting the rates of utilization of LDC preferences. The objective of the note is to help identify schemes, countries or sectors where utilization rates are low in order to assess whether origin requirements could be acting as a trade barrier. The committee agreed to continue working in this area and asked the secretariat to both update its report and to prepare other disaggregated reports.

Several members informed the committee of recent developments regarding their preferential rules of origin requirements. China told the committee it adopted new legislation introducing a series of simplifications to its rules of origin, while Canada announced changes to facilitate the requirements for some apparel items. Norway announced that it was examining the Nairobi Decision to identify possible areas for improvement of its rules, while Australia announced it was conducting a comprehensive review of its Generalized System of Preferences and rules of origin. 

Non-preferential rules of origin

Several WTO members, most notably the United States and Canada, once again expressed reservations with the idea of resuming negotiations for the harmonization of non-preferential rules of origin. A mandate for the negotiations was included in the WTO’s Agreement on Rules of Origin, but the talks have been stalled since 2007 due to divergences on a number of “core policy” issues.

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 (MFN) basis. Around 50 members currently apply specific legislation related to non-preferential rules of origin. However, 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.

The chair of the committee, Gerardo Pajuelo (Peru), acknowledged the difficulties related to the harmonization work programme but asked members to identify other areas where technical work would be useful. In particular, he invited members to draw conclusions from presentations made in the context of recent “information sessions” on the impact of non-preferential rules of origin so that concrete proposals could be considered at the next committee meeting in March 2018.