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. 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 processing step determines where the product is from? ROOs provide governments with the criteria to identify whether imports qualify for preferential treatment under trade agreements in force or to assess whether imports are subject to other trade measures such as: most-favoured-nation treatment; 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 the imported goods were manufactured in multiple countries as part of a global or regional value chain, the country where the latest production process took place typically determines the origin of the good, depending on 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 trade agreements. Qualifying under preferential origin may require imports to be completely or partially produced in a country that is a party to the trade agreement under consideration, according to the specific conditions identified under that agreement. Preferential rules of origin in the context of reciprocal trade agreements notified to the WTO Secretariat can be retrieved in the WTO’s Regional Trade Agreement (RTA) database. 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 Membersthat have notified their non-preferential rules of origin.
What role do rules of origin play in trade policy?
Rules of origin are often referred to as non-tariff measures that serve to achieve specific purposes. 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.
Rules of origin and MSMEs
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 I access resources on policy guidelines, frameworks, and trainings?
- 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 I access best practices and national examples?
- A Basic Guide to Rules of Origin with Focus on the EU system (TRALAC): The Trade Law Centre for Southern Africa (TRALAC) provides a guide to navigate through rules of origin provisions in European Union trading arrangements. Visit the TRALAC website.
- 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.