Rules of Origin

What are rules of origin?

 

Rules of origin (ROOs) are a set of laws, regulations, and administrative procedures that countries impose to determine where an imported product comes from. At first glance, where a product comes from should be a simple question to answer – wherever it was made. But digging deeper it becomes more challenging: is a product from the place where the materials originated? Is it from where the product was first put together? What if it has many parts all from different locations? And which processing step determines where the product was made?  ROOs provide governments with the criteria to identify whether imports are subject to trade measures such as: most-favoured-nation treatment or preferential treatment from a regional trade agreement; trade remedies; origin marking requirements; quantitative restrictions or tariff quotas; government procurement; and trade statistics. For more information, see the World Trade Organization’s (WTO) Technical Information on Rules of Origin.

 

What are the different types of origin criteria?

 

When making their declarations to customs, businesses have to present a proof of origin which determines whether their imported products are subject to preferential or non-preferential market access terms. If imported goods are manufactured in multiple countries, the country of origin would be ascertained in accordance with the criteria defined in the rules of origin. The WTO Agreement on Rules of Origin distinguishes two types of rules of origin:

  • Preferential origin: This determines whether products are eligible for preferential (lower or zero) tariffs and other benefits provided under preferential regimes, either in the context of trade agreements or unilateral preferential schemes. Qualifying under preferential origin may require imports to be completely or partially produced in a country that is a beneficiary from the preferential regime under consideration, according to its specific conditions identified. In some cases, however, materials from certain third parties may also qualify as originating. Information on rules of origin and origin provisions in trade agreements can be retrieved in the Rules of Origin Facilitator, an initiative developed jointly by the WTO and the International Trade Centre (ITC). For identifying rules of origin provisions in non-reciprocal preferential schemes, see the WTO’s Preferential Trade Agreements (PTA) database.
  • Non-preferential origin: This is not linked to trade agreements and may determine whether businesses have to comply with non-tariff requirements such as trade remedies and quotas (see guide on non-tariff measures). Not all countries apply specific legislation related to non-preferential rules of origin, and negotiations on adopting harmonized non-preferential rules of origin are still ongoing. The WTO’s Rules of Origin Section provides a list of WTO Members that have notified their non-preferential rules of origin.

 

What role do rules of origin play in trade policy?

 

Rules of origin are used to determine the country of origin of goods and shall not, as specified in the WTO Agreement on ROOs, create restrictive, distorting or disruptive effects on international trade. For example, determining rules of origin may be required to verify whether certain products are subject to measures aimed to correct unfair trade practices, protect local industries, or grant preferential access to imports from developing countries or beneficiary countries in regional cooperation agreements. Other reasons that may justify the use of rules of origin range from administering discriminatory government procurement procedures to controlling foreign market access to implementing environmental or sanitary measures. The World Customs Organization (WCO) offers two resources that review technical aspects of rules of origin in a comprehensive manner. These resources are the Rules of Origin – Handbook and the WCO Origin Compendium.

 

What can policymakers do?

 

Complying with rules of origin can require a significant amount of resources, especially when these rules vary depending on the countries involved. With the growing number of preferential trade agreements between different groups, it is important to consider streamlining rules of origin and origin procedures whenever practicable to help businesses of any size comply. For more information, see the International Chamber of Commerce’s (ICC) Business Recommendations on Rules of Origin in Preferential Trade Agreements.

 

Where can policymakers access more resources?

  • The WCO’s Rules of Origin Handbook and Compendium: This handbook and compendium provides a comprehensive review of frameworks that underpin  the correct application of rules of origin. Access this WCO resource.
  • The WCO’s Training Packages: The WCO offers e-learning courses on rules of origin for international trade professionals, companies, and universities, as well as training opportunities for customs administrations and private sector entities. Visit the WCO website.
  • The WTO Agreement on Rules of Origin: This provides links to official documents and related resources concerning the WTO rules that apply to this area. Visit the WTO website.

 

Where can policymakers access good practices or national examples?

  • European Commission’s Guidance on Rules of Origin: The European Union provides a number of resources with guidance materials on how economic operators and customs authorities can understand, apply and communicate rules on the determination of preferential and non-preferential origin of goods. Visit the European Commission Quick Guide to Working with Rules of Origin and the European Commission Rules of Origin Webpage.
  • The United Nations Conference on Trade and Development’s (UNCTAD) Rules of Origin and Origin Procedures Applicable to Exports from Least Developed Countries: This resource examines the rules of origin landscape  and what it means for least developed countries. Visit the UNCTAD website.
  • Informal Working Group on MSMEs: Drawing from recommendations submitted by business associations, the Informal Working Group on MSMEs  prepared a consolidated document that includes the topic of rules of origin.

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