RESTRICTEDWORLD TRADE
ORGANIZATIONG/RO/M/23
27 August 1999
(99-3549)
Committee on Rules of Origin
MINUTES OF THE MEETING OF 1 JULY 1999
Chairman:  Mr. A.R. Moroz (Canada)
The agenda for the meeting was adopted by the Committee on Rules of Origin (CRO) as
follows:
Page
1. Report of the Technical Committee on Rules of Origin on progress made at
its Seventeenth Session to the Committe e on Rules of Origin (G/RO/37)............... 1
2. Overall architecture of the harmoniz ed rules of origin;  application of
primary/residual rule s (G/RO/37/ Add.1)................................................................... 2
3. Continuation of the Harmonization Work Programme........................................... 3
4. Implications of the implementation of the harmonized rules of origin on other
WTO Agreements (G/RO/W/28/Rev .1, G/RO/W/30-34, 38 & 42)........................... 5
5. Second progress report to the Council for Trade in Goods on the status
of the Harmonization Work Programme .................................................................. 6
6. Election of Vice-Chairperson...................................................................................... 67. Implementation of the Agreement on Rules of Origin in areas beyond the
scope of the Harmonizat ion Work Programme ........................................................ 6
8. Agreement between the United States and the European Communities on
rules of origin ............................................................................................................... 7
9. Date of the next meeting.............................................................................................. 7
_______________
1. Report of the Technical Committee on Rules of Origin on progress made at its
Seventeenth Session to the Committee on Rules of Origin (G/RO/37)
1.1 Mr. Claypole, the Chairman of the Technical Committee on Rules of Origin (TCRO) made a
progress report on the work done at the Seventeenth Session of the TCRO.  The report was circulated
to Members as document G/RO/37.G/RO/M/23
Page 2
1.2 The representative of India expressed its appreciation to the TCRO for completing the work
programme and sending the final results to the Committee on Rules of Origin (CRO), and stated that
the CRO should set out a schedule for comple ting the Harmonization Work Programme (HWP).
1.3 The representative of Canada stated that her delegation did not associate itself with
"2/option 1" of Chapter 61 (G/RO/37/Add.1, page 69) and with "2/option 1" of Chapter 62
(G/RO/37/Add.1, page 72) as transmitted from the TCRO, and that these amendments should be
reflected in the updated integrated negotiating text.
1.4 The CRO took note of the statements made and agreed  to mandate the Chairman to send a
letter to the Chairman of the TCRO to express the CRO's appreciation for the TCRO's timely
submission of the final results of the HWP.
2. Overall architecture of the harmonized rules of origin;  application of primary/residual
rules
2.1 The Chairman stated that the issue of the application of primary/residual rules concerned
Rule 2, Determination of Origin (G/RO/37/Add.1 , pp. 145-149), where the words "provided" and
"where" were in square brackets.
2.2 The representative of the European Communitie s stated that the word "provided" would not
create problems of application, which, on the contrary, might be generated by the word "where" as
this involved the application of the primary rules to upstream countries.  Article 9.1(b) of the
Agreement provided that when more than one country was concerned in the production of a particular
good, the origin of the good was the country where the last substantial transformation had been
carried out.  If, as allowed by the word "where", the primary rule was applied also in countries other
than the last country of production, it meant that the last transformation carried out in the latter wasnot substantial.  However, in such cases, origin determination should not take place by application of
the primary rules in a previous country, but via resi dual rules, which enabled the determination of the
country where the last substantial transformation was carried out when such transformation did not
take place in the last country of production.  These residual rules could be applied on the basis of the
information available in the normal course of business (tariff classification, volume, weight or value
and origin of the input materials).  If the word  "where" was chosen for Rule 2(b), information
concerning production processes in other countries would be required, obliging producers to collectinformation which was not available in the normal course of business.  Producers of input materials
might not always wish to disclose all information to buyers. .  As concerned General Rule (2)(c)(i), he
expressed concern that there was no limit to the scope of this subparagraph.  The intention of that
subparagraph was to deal with minimal operations and processes, as well as situations involving, for
example, disassembly.  However, the present text had no limit to the scope of non-origin-conferringoperations.
2.3 The representative of India stated that the word "provided" meant that if a primary rule was
not satisfied in the last country of production of a certain good, the primary rule would immediately
be abandoned.  The residual rule would then be applied.  However, Article 3 of the Agreementrequired searching for the last country of substantial transformation.  Likewise, the word "where"
required searching for the last country where the primary rule could be applied, so that the primary
rule should not be foregone at the very first instance.  The very fact that it was called a primary rule
meant that that rule was the preferred rule to dete rmine substantial transformation.  The residual rules
would only address a situation where the primary rule was not satisfied in any country.  As concernsthe information required for the application of primary rules, he stated that if a product was moving
from country A, through country B, to country C, the documentation available in country B could
possibly be made use of when the good arrived in co untry C.  He also pointed out that there was no
guarantee that the residual rule would be met in the last country of production.  In that case, tracingG/RO/M/23
Page 3
back would also be necessary.  Finally he suggested th at the last three words, "in that country", in the
text of General Rule 2(b) should also be placed in square brackets as India preferred deletion of these
words.
2.4 The representative of Japan stated that the word "where", in the case that a primary rule was
not satisfied in the last country of production, required the importer of the final product to submit
information on the production processes which had taken place in the preceding countries, which was
difficult in the normal course of business.  Therefore the option "where" was considered as hindering
trade facilitation.
2.5 The representative of Australia supported the comments made by India and stated that a
number of the questions under discussion had already been raised at the meeting of the CRO in
February 1999.  Responses to those questions (G/RO/W/41) remained relevant.
2.6 The representative of the Philippines stated that the word "where" was clearer for users.  As
concerned Appendix 2, Rule 2(c)(i), he stated that the issue of non-origin-conferring operations was
already addressed at the chapter level and in the product-specific rules, and that this subparagraph wasintended to address the issue of transshipment.  Another question was whether Appendix 2, Rule 2(e)
should be placed after Rule 2(b), or prior to Rule 2(b) or Rule 2(a).  As concerned Appendix 2, Rule
2(e), he clarified that the Philippines' proposal was for the deletion of the phrase "in the last country of
manufacture or processing of the good".  The current reference to the Philippines in Appendix 2, Rule
2(e) was not properly located and should be deleted.  The Philippines agreed with India on thedeletion of the terms "in that country" in Rule 2(b).
2.7 The representative of Switzerland stated that the issue of "provided" or "where" might not be
relevant for the change of tariff classification rules which excluded change from certain headings.  If
materials classifiable under these headings were used for the production of a good, the primary rulewas not met in the country of production.  Residual rules immediately needed to be applied to this
case, since tracing back was not applicable.  He also shared the views of Japan that in current business
practices, particularly in the machinery sector, it might be difficult to obtain information on
production processes of many parts or components, because many of them were confidential or
unknown.
2.8 The Committee took note of the statements made and agreed
 to revert to this issue at the next
meeting.
3. Continuation of the Harmonization Work Programme
3.1 The Chairman recalled that it was agreed in July 1998 (G/RO/25, para. 4) that in June 1999
the Committee would review the status of the HWP and make a recommendation on a deadline for
completion of the Work Programme.
3.2 The representative of India proposed that, to enable the CRO to complete its work on
harmonising rules of origin, the CRO meet on 19-23 July 1999 to consider the overall architecture, as
required on the basis of discussions in the CRO at its meetings on 28 June to 1 July 1999, and
unresolved issues for product-specific rules transmit ted to the CRO by the TCRO in Chapters 25-27,
41-49, 64-67, 71, 91 and 92, and that the schedule of meetings and agenda for September and October
1999 be determined in the July meeting, depending upon the progress made.  Accordingly, the
consideration of a deadline for the completion of the HWP in the CRO would be postponed to the endof the meeting of the CRO in October 1999, when Members would have a better appreciation of the
remaining work.G/RO/M/23
Page 4
3.3 The representatives of Chile, Pakistan , the Philippines  and Thailand  supported India's
proposal.
3.4 The representatives of Canada, the European Communities  and the United States  stated that
they were equally interested in the continuation of the HWP, and that valuable time should not be
taken away from completing the HWP by postponing the consideration of a deadline, given the
unlikelihood of achieving such a recommendation in October 1999.
3.5 The representative of Hungary stated that it appeared clear that it would not be possible for
the CRO to meet the November 1999 best-endeavour deadline set out in the current mandate, and that
a long procedural discussion at the October 1999 meeting on establishing a recommendation on a
deadline should be avoided.  Based on these reasons, he proposed that the CRO now recommend adeadline of July 2000 for completing the remaining work.
3.6 The representative of India had stated that it was unfortunate that some Members that were
major trading partners of Members like India were resisting even the consideration of unresolved
product-specific issues, and were attaching conditions to the continuation of the HWP which the CROhad already agreed upon last year.  It could certainly not be concluded that these Members were
equally interested in the continuation of the HWP as were India and other speakers before her.  India
and some other Members have indicated a strong will to make an extra effort to ensure completion of
the HWP in accordance with the programme that was agreed last July.  Furthermore, since the report
of the TCRO had been received in accordance with this programme, just before this meeting, it wasimportant to discuss the report so that Members could make an informed assessment of the amount of
work that was still required to be done in the CRO for the completion of the HWP.  At present, it was
not possible to gauge the extent of work still to  be carried out in the CRO.  In October 1999, the CRO
would be in a better position to take such an in formed decision.  India could not agree with the
assertion that valuable time would be taken away by  postponing the consideration of a deadline.  She
questioned the advisability of spending time at this meeting on the consideration of a deadline when it
was clear that some Members did not believe that there was a great likelihood of achieving a
recommendation in October 1999, when Members would be better informed.  She also stated that for
these reasons it was premature to consider the prop osal of Hungary for postponing the deadline from
November 1999 to July 2000.  Not only had this proposal been received at this meeting, but its
specific components were not clearly enunciated, in particular whether the proposal built in a firm
deadline of July 2000 for completion of the HWP or an extension of the existing one on a best-endeavour basis.
3.7 In the course of discussion, there was consensus on a number of elements:- all Members emphasized the importance of the continuation and completion of the HWP;
- all Members agreed that there remained a substantial amount of work for the CRO to
complete the HWP;
- all Members agreed that they wanted to continue the substantive work on all outstanding
issues, including the overall architecture and product-specific rules, as early as possible;
- all Members agreed that they wanted to continue the substantive work on the issue of the
implications of the implementation of the harmonized non-preferential rules of origin on other
WTO Agreements;  and
- all Members emphasized the importance of early establishment of harmonized
non-preferential rules of origin for facilitating trade.
3.8 The CRO could not reach agreement on the proposal for recommendation of a deadline for the
completion of the HWP.  The CRO agreed to meet, in informal and formal sessions between
12-23 July 1999 to discuss overall architecture issues as well as unresolved issues for product-G/RO/M/23
Page 5
specific rules for Chapters, such as Chapters 25-27, 44-49 and 71, to be addressed in
plurilateral meetings among interested Members.
4. Implications of the implementation of th e harmonized rules of origin on other WTO
Agreements (G/RO/W/28/Rev.1, G/RO/W/30-34, 38 & 42)
4.1 The Chairman recalled that there had been five submissions on the table:  from India
(G/ROW/28/Rev.1, G/RO/W/30 & 42);  from the United States (G/RO/W/32);  from the Dominican
Republic and Honduras (G/RO/W/33);  from El  Salvador (G/RO/W/34);  and from Korea
(G/RO/W/38).
4.2 The representative of the United States stated that he had three questions on the submission
from India (G/RO/W/42), which might facilitate his capital's further consideration on this matter.  The
first question concerned a principle that, as suggested in the concluding remarks of document
G/RO/W/42 (page 5), "origin be developed in such a way that they do not produce adverse effects".
He wondered how "adverse effects" would be defined;   "adverse" could be defined as a rigorous rule
of origin;  it could be defined as a less than rigorous rule;  it could be viewed from the standpoint ofthe final country of production;  it could be define d differently by a country that was the penultimate
country of production;  or it could be simply the adverse effects under a given Agreement.  The
second question, which was related to the first one, concerned how the consideration of such a
principle would relate to the guiding principle of substantial transformation.  The third question
concerned the section relating to implications for anti-dumping cases.  India seemed to suggest that if,notwithstanding footnote 1 of the Agreement on Rules of Origin, the term "like product", for purposes
of anti-dumping, were defined differently than for the harmonized rules of origin, then it would be
contrary to the principle of applying the harmonized rules for all trade policy instruments.  He
requested clarification as to whether this was a suggestion that the footnote be interpreted differently.
4.3 The representative of India requested that the representative of the US submit the questions in
writing.  As a preliminary observation regarding the adverse effects, he stated that all the proposals on
the table concerning textile products appeared to be highly trade-restrictive, given the highly
decentralized and multicountry processing in the textile sector.  He also stated that India's latest
submission (G/RO/W/42) contained all th e points which India wished to raise.
4.4 The representative of the European Communities stated that he shared India's view that, as
indicated in "Summing up" in document G/RO/W/42 (page 4), if a last processing operation took
place in a country, origin determination should focus exclusively on the situation in that country, in
other words, origin determination should not go further than that processing operation.  Based on  this
observation, he wondered why India, in the context of the overall architecture, held the view that if a
certain process did not meet a primary rule applicable to a certain good, origin determination shouldnot take place in that country but in another country.
4.5 The representative of India stated that there was no contradiction in the two views held by
India.  As far as textile products were concerned, India proposed that all major processes should be
recognized as origin-conferring.  Therefore, if a production process had been carried out in a country,and if the production process met the primary rule, origin determination would take place in that
country.
4.6 The representative of the European Communities also stated that in accordance with
Article 9.1 of the Agreement on Rules of Origin, harmonized rules of origin should be neutral,
predictable and transparent, and based on the last substantial transformation.  Therefore, the HWP
should be a neutral, technical exercise based on the last substantial transformation, and should not be
influenced by other Agreements.  Articles 1.2 and 3(a) of the Agreement on Rules of Origin clearly
stated the coverage of the harmonized rules of origin.G/RO/M/23
Page 6
4.7 The representative of Canada stated that at present many countries were applying different
rules of origin and wondered how rules of origin could be harmonized without a change to the status
quo.
4.8 The representative of India requested that the representative of Canada submit his question in
writing, and stated that harmonized rules of origin should not themselves create restrictions or
distorting or disruptive effects on international trade and should not affect rights and obligations
established under present WTO Agreements.
4.9 The representative of the Philippines suggested  that the CRO should deal with this matter
Agreement by Agreement.  The representatives of Australia, Egypt , and India  supported this
suggestion.
4.10 The representative of Egypt stated that the Secretariat could provide Members with
information as to how the rights and obligations under WTO Agreements could be affected by the
HWP.
4.11 The Chairman stated that the Secretariat had already circulated factual information on this
matter (G/RO/W/31).  However, the Secretariat would consult with other Divisions to find out
whether additional contributions of a factual nature could be provided.
4.12 The representative of Mexico stated that the objective of the work of the CRO on this issue
was not to examine other WTO Agreements as such, but to examine the implications of the proposals
under the HWP on these Agreements.
4.13 The Committee took note of the statements made and agreed  to revert to this issue at a future
meeting.
5. Second progress report to the Council fo r Trade in Goods on the status of the
Harmonization Work Programme
5.1 The Chairman recalled that the CRO, at its meeting on 6 July 1998, had agreed to review the
status of the Harmonization Work Programme in June 1999 and to make a progress report to the
Council for Trade in Goods (CTG) (G/RO/25, para. 4).  A draft progress report was now before the
Committee.
5.2 The representative of Hong Kong, China stated  that he needed more time to reflect on the
draft report.  The CRO adopted its progress report to the CTG (G/RO/38) on an ad referendum  basis.
Hong Kong, China joined consensus later on.
6. Election of Vice-Chairperson
6.1 The CRO elected Mr. S.I.M. Nayyar (Pakistan) as Vice-Chairman of the CRO for 1999.
7. Implementation of the Agreement on Rules of Origin in areas beyond the
Harmonization Work Programme
7.1 The representative of the United States stated that during the past several days the CRO had
given a great deal of intense attention to the HWP.  There was no doubt that every Member had a
great stake in this work, and that every Member considered its completion to be very important.  Like
others, the US was committed to working hard towa rds completion of the HWP.  During the informal
discussions of the past few days, however, it  was observed that on occasion Members wouldG/RO/M/23
Page 7
inadvertently refer to the HWP as the Agreement.  While this was undoubtedly a simple mistake, it
served to underscore the reason for some concerns previously raised in the CRO about the importance
of the Agreement, which dealt with much more than simply mandating the CRO to work towards
harmonization of non-preferential rules of origin.  The CRO had recently undertaken a survey with
regard to the implementation and operation of ce rtain important provisions in the Agreement that
operated to allow the private sector to obtain, even in advance of trade being conducted, binding
assessments as to how origin would be determined.  These provisions were applicable to all current
origin regimes, preferential and non-preferential, and were intended to provide important
predictability and transparency.  However, studying even the limited number of responses to the
survey received thus far, it was apparent that these important provisions of the Agreement on Rules of
Origin, such as Article 2(h), were not operating as  intended and providing the private sector what it
needed to conduct trade more efficiently.  He urged that the Committee should continue to give thisissue the necessary attention to ensure that all parts of the Agreement were being implemented
consistent with its objectives.
7.2 The CRO took note of the statements made.
8. Agreement between the United States and the European Communities on
rules of origin
8.1 The representative of Pakistan stated that Pakistan, along with other Members, had opted to
be a third party in the consultations held between the US and the EC on the question of what some
Members called arbitrary changes in rules of origin by the US.  Pakistan had participated in one of the
consultations held in January 1999.  He had not heard anything on the subject since.  He had learnt
that an agreement had been reached between the US and the EC.  Since this reported agreement would
have implications for some other Members, he request ed either the US or the EC to let them know the
details of the agreement or provide them with a copy of the agreement.  He stated that the US and theEC were obliged to notify their agreement to Members for the purposes of transparency.  It was
necessary for Members to know whether such an agreement would affect their rights and obligations.
8.2 The representative of India stated that India had also been a third party at those consultations
held on 15 January 1999.  She was grateful to Pakistan for providing this opportunity to second
Pakistan's request for information on the reported agreement that had been reached between the US
and the EC on this subject, and also urged the two countries to notify their agreement to the DSB in
accordance with the normal practices.
8.3 The representative of Switzerland stated that Switzerland was also a third party at the
consultations, and supported fully the statements made by Pakistan and India.
8.4 The representative of Hong Kong, China supported the request by Pakistan for the sake of
transparency.
8.5 The CRO took note of the statements made.
9. Date of the next meeting
9.1 The CRO agreed as follows:
" The CRO will hold informal meetings on 12, 13, and 15 July 1999 at 10 a.m. respectively in
order to discuss "overall architecture of the harmonized rules of origin" (G/RO/37/Add.1,
pp. 137-163);G/RO/M/23
Page 8
The dates 14, 16, 19 to 22 July 1999 are open for interested Members to hold bilateral and
open-door plurilateral meetings to discuss produ ct-specific rules and other issues related to
the HWP.  Two Members have already indicated their intention to hold open-door
plurilaterals on the following product-speci fic rules (G/RO/39): chapters 25-27 (mineral
products); chapters 44-49 (wood and paper); and chapter 71 (precious stones and metals).Members holding plurilaterals should inform the Secretariat as soon as possible;  and
The CRO will hold a formal meeting on 23 July 1999 at 11 a.m. to sum up the results of the
informal meetings mentioned above."
__________