Global Harmonisation of Rules of Origin

In 1953 the International Chamber of Commerce made the first attempt to harmonise rules of origin: it submitted a resolution to the contracting parties recommending the adoption of a uniform definition for determining the nationality of manufactured goods. In the 1970’s another effort was made with the Kyoto Convention.

It came into force the 25 September 1974, with the aim of attaining a harmonised scheme of custom procedures. The text is divided in two parts: the body of the Convention and the Annexes. As each Annex considers a specific customs procedure, the most important for the purposes of this paper are the “D.1. Concerning rules of origin”, “D.2. Concerning documentary evidence of origin” and “D.3. Concerning the control of documentary evidence of origin”.

The Convention has particular relevance since it explains the most used criteria to determine the origin with their main advantages and drawbacks, and provides suggestions about their use.

The use of the rules of origin to implement trade restrictive and trade distortive policies finally lead to the inclusion of “rules of origin” as a topic of the Uruguay Round multilateral trade negotiations. The WTO Agreement on Rules of Origin was part of the outcomes of the Uruguay Round: it sought to harmonise the non-preferential rules of origin used by signatory countries into a single set of international rules. By drafting the rules in a multilateral context where all countries are represented and the adopted rules are used for all non-preferential purposes, the possibility for a single country to draw up rules in politically motivated ways has thus been limited.

A specific program was set up, and two new institutions were created to reach this purpose. The first one was the Geneva-based Committee on Rules of Origin (CRO) at the WTO, the second body was the Brussels-based Technical Committee on Rules of Origin (TCRO) of the World Custom Organisation. The Harmonisation Work Programme (HWP), which was launched on 20 July 1995, was scheduled for completion within three years of its initiation, i.e. by July 1998. However, due to the complexity of the issues, the work has still not been completed.

Negotiation difficulties can be attributed to problems such as:

1) the definition of goods which are wholly obtained in one country, in particular when they are related to products extracted from international territories, as in high seas or outer space;

2) the need for further refinement of the definitions of minimal operations and processes which do not by themselves confer origin: processes like assembly, disassembly, bleaching, drying, cutting and sewing, blending, packing and packaging, colouring must be classified and ordered in the definition of “substantial transformation”;

3) the need of product-specific rules for particular product sectors.

In order to achieve harmonisation, committees are working on a detailed uniform definition for determining when goods are wholly obtained in one country, on a list of minimal operations or processes that do not by themselves confer origin to a good and finally on the definition of last substantial transformation. The determination of the last transformation will depend on the change in the tariff classification method through the use of the harmonised system combined, when necessary, with tests of value-added and others specific methods.

As of May 2000, measurable progress had been made with respect to the general rules but the TCRO is still unable to complete the work owing to the divergence of views over the method of application for the primary and residual rules. The work is currently in progress.