RESTRICTEDWORLD TRADE
ORGANIZATIONG/RO/W/38
20 October 1998
(98-4055)
Committee on Rules of Origin Original:  English
IMPLICATIONS OF THE IMPLEMENTATION OF
THE HARMONIZED RULES OF ORIGIN ON OTHER WTO AGREEMENTS
Proposal by Korea
The following communication, dated 14 October 1998, has been received from the Permanent
Mission of Korea.
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Pursuant to the agreement of the Committee on Rules of Origin on the implication of the
implementation of the harmonized rules of origin on other WTO Agreements, I am herewith
submitting to the Committee on Rules of Origin the proposal of the Republic of Korea which contains
its views on how harmonized rules of origin should be applied to other WTO Agreements.G/RO/W/38
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IMPLICATIONS OF THE IMPLEMENTATION OF
THE HARMONIZED RULES OF ORIGIN ON OTHER WTO AGREEMENTS
1. Concerning the scope of application, Article 1.2 of the Agreement on Rules of Origin
specifies that rules of origin include all rules of  origin used in non-preferential commercial policy
instruments, such as in the application of:  most-favoured-nation treatment under Articles I, II, III, XI
and XIII of GATT 1994; antidumping/ countervailing duties; safeguard; origin marking requirements;
and any discriminatory quantitative restrictions or tariff quotas.  They also include rules of origin used
for government procurement and trade statistics.
2. With the objective of working towards ensuring greater certainty and predictability in the global
trading system and eliminating the potential for rules of origin to serve as non-tariff barriers to trade,
Korea submits the following proposal to the Committee on Rules of Origin.  The principle of thisproposal is based on the backbone of the WTO system, that is, the non-discrimination principle
reflected in most-favoured-nation treatment (GATT Article I).
A. R
ELATIONSHIP WITH THE AGREEMENT ON ANTI-DUMPING
3. Basically, antidumping measures are based on the concept of “exporting country” rather than
"origin country". To calculate the dumping margin, derived from the difference between export priceand normal price, the domestic price of the like product in the exporting country is used as the normal
price. Only in exceptional cases referred to Article 2.2 and 2.5 does the country of origin play a role in
the Agreement on Antidumping.
• The first case (Article 2.2) refers to a situation where there are no sales of the like product
in the ordinary course of trade in the domestic market of the exporting country or low
level of sales in domestic market of the exporting country is not appropriate to be used fornormal price. In such case, the origin country of that product is meaningful.
• The second case (Article 2.5) refers to a situation where products are imported through
an intermediate country (exporting country). If the products are merely transshipped, orsuch products are not produced in the exporting country, or there is no comparable price
for them in exporting country, the comparis on for dumping margin may be made with the
price in the origin country.
4. Korea believes that when it is necessary to decide on the origin country for the above reasons,
rules of origin should be applied. For example, if manufacturing is carried out in a third country under
such conditions that the locally produced merchandis e obtains origination status, investigation in the
context of the two cases should be made based on the price in that third country.
• More specifically, if a certain operation including assembly (which is recognized as
substantial transformation by rules of origin granting origination status) takes place in athird country, imposing anti-dumping duties on a product, without a new investigation
deemed necessary due to the change of origin of the good by that operation, only on the
ground that antidumping duties were imposed previously on that product, would be a
violation of the antidumping agreement. It would also be a breach of the principle of
most-favoured-nation.
• This rationale should be applied to the case where the same operation  occurs in the
importing country instead of a third country.
5. As for the issue of circumvention of antidumping measures, negotiators in the Uruguay Round
could not agree on a specific text.  However, consid ering its non-preferential characteristics and theG/RO/W/38
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importance of most-favoured-nation treatment in Ar ticle 1.2 of the Agreement on Rules of Origin, the
rules of origin must be applied to the issue of circumvention of antidumping measures.
• The assembly case referred to in  paragraph 4 is an example which some Members see as
a clear case of circumvention. However, Korea is of the view that such a case could andshould be dealt with in the framework of the current antidumping agreement with the help
of rules of origin.
6. The rationale offered above can also be generally applied to the Agreement on Subsidy and
Countervailing measures in spite of th e difference between the two agreements.
B. R
ELATIONSHIP WITH THE AGREEMENT ON TEXTILES AND CLOTHING
7. Although the MFA is expected to be phased out as a result of the Uruguay Round, quantitative
restrictions will remain in the textiles and clothing sector until the end of 2004.  Article 5.1 of the
Agreement on Textiles and Clothing (ATC) warns of certain types of circumvention : “Membersagree that circumvention by transshipment, re-routing, false declaration concerning country or place
of origin, and falsification of official documents, frustrates the implementation of this Agreement to
integrate the textiles and clothing sector into GATT 1994.”  Articles 5.2 and 5.3 of the Agreement on
Textiles and Clothing also specify that if such kinds of circumvention take place, consultation among
the concerned Members should be held to seek a mutually satisfactory solution, and that the Membersshould take necessary action against such circumvention practices
8. However, there are other types of trade practice related to the rules of origin that are not directly
mentioned.  For instance, country A exports textiles or clothing to country B.  Faced with quantitative
restrictions, country A exports the product to country C, which is not affected by country B's quota,
and the product is processed enough to be conferred origin in country C. If that product is thenexported from country C to country B, it should be treated as the product of country C by the rules of
origin and not be regarded as subject to the quota amount set for the exports of country A.  If it is
subject to the quota, this would constitute a violation of the principle of non-discrimination, in the
sense that products wholly produced in country C and those processed and having origin in country C
are being treated differently.
9. Therefore, the Agreement on Rules of Origin should be strictly observed if the global trading
system is to remain based on the principle of non-discrimination.  
C. R
ELATIONSHIP WITH THE AGREEMENT ON SAFEGUARDS
10. Although there is no direct reference to rules of origin in the Agreement on Safeguards or GATT
Article XIX, when a quota is allocated among supplying countries pursuant to Article 5.2(b) of theSafeguard Agreement, an argument similar to the one presented in the ATC could also be made for
safeguard measures.
D. R
ELATIONSHIP WITH THE AGREEMENT ON GOVERNMENT PROCUREMENT
11. In the Uruguay Round, Article IV.1 of the Agreement on Government Procurement can be
understood to mean that the specifications in the Agreement on Rules of Origin apply to the
Agreement on Government Procurement.  That article reads, “A Party shall not apply rules of origin
to products or services imported or supplied for purposes of government procurement covered by thisAgreement from other Parties, which are different from the rules of origin applied in the normal
course of trade and at the time of the transaction in question to imports or supplies of the same
products or services from the same Parties.”  Therefore, there is no inconsistency betweenG/RO/W/38
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Article IV.1 of the Agreement on Government Procurement and Article 2.1 of the Agreement on
Rules of Origin.
E. CONCLUSION
12. The Korean government is of the view that the Ag reement on Rules of Origin needs to be applied
to the other Agreements in the WTO, such as those relating to antidumping/countervailing measures.Such applications need to be based on most-favoured-nation treatment as is emphasized in Article 1.2
of the Agreement on Rules of Origin.  The Korean government wishes to re-affirm that neither rules
of origin nor any other Agreements in the WTO should be used for protective purposes.
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