RESTRICTEDWORLD TRADE
ORGANIZATIONG/RO/M/21
29 March 1999
(99-1244)
Committee on Rules of Origin
MINUTES OF THE MEETING OF 22 AND 26 FEBRUARY 1999
Chairman:  Mr. R. Wells (Australia)
The agenda proposed for the meeting, contained in WTO/AIR/1004, was adopted by the
Committee on Rules of Origin (CRO) as follows:
1. Report of the Technical Committee on Rules of Origin on progress made at its
Fifteenth Session to the Comm ittee on Rules of Origin.....................................................1
2. 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) ....................................................4
3. Progress Report to the Council for Trade in Goods on the status of the
Harmonization Wor k Programme ......................................................................................4
4. Trade facilitation (paragraphs 6.6 to 6.9 of G/C/M/34, G/RO/W/26,
G/RO/W/26/Add.1) ............................................................................................................... 5
5. Notifications under Article 5 and Paragraph 4 of Annex II of the Agreement on
Rules of Origin (G/RO/N/24) ...............................................................................................6
6. Election of  Offi cers ......................................................................................................... ......6
7. Other business............................................................................................................... ........6
1. Report of the Technical Committee on Rules of Origin on progress made at its Fifteenth
Session to the Committee on Rules of Origin
1.1 The Chairman noted that in conformity with paragraph 4 of the Report of the Committee of
Rules of Origin to the Council for Trade in Goods on the Harmonization Work Programme
(G/RO/25), the Chairman of the Technical Committee on Rules of Origin (TCRO) had submitted to
the CRO a Report on progress made at the 15th Session of the TCRO.  The Report had been circulated
to Members as document G/RO/32.
1.2 The Chairman also noted that the Secretariat had circulated document G/RO/30 concerning a
template on the unresolved issue of  the overall architecture of the harmonized rules of origin which
had been transmitted by the TCRO to the CRO for decision.  The letter of transmission from the
Chairman of the TCRO concerning the unresolved issue had also been circulated as document
G/RO/31.G/RO/M/21
Page 2
1.3 The representative of Thailand stated that the three options in the template were each based
on a different understanding as to what information was required for the application of each option.
Option A observed that options B and C “required information from foreign producers which may be
difficult or time-consuming to obtain” (paragraph 8 of document G/RO/30).  Option B observed the
opposite (paragraph 16 of document G/RO/30).  On the other hand, each of these options observedthat it only required information which was already available in the normal course of business
(paragraphs 6 and 18 of document G/RO/30).  These factual aspects should be clarified either by the
CRO or the TCRO.
1.4 The representative of India stated that in accordance with Article 3(b) of the Agreement,
origin should be ascribed to the country where the last substantial transformation had taken place.
Therefore if country B (as referred to in document G/RO/30) did not meet the criteria of substantialtransformation, it automatically requires moving backwards to apply the rule of substantial
transformation.  He also stated that Article 9 of the Agreement provided for a hierarchy of rules which
established a preference for the use of change in tariff classification as the criterion for determining
whether a substantial transformation had occurred.  Other requirements, including ad valorem
percentages or manufacturing operations, could be used only in a supplementary or exclusive manner.Since all primary rules developed to date were, according to his knowledge, based on the use of
change in tariff classification, HS-based primary ru les should be tested in country A, before applying
residual rules which were elaborated on the basis of other requirements. In the example provided in
document G/RO/30 of the hat and the diamonds, although the diamonds might add considerable value
to the hat, the primary rule for a hat clearly indicated that putting a diamond on the hat did notsubstantially transform it.  If the primary rule was not acceptable in this situation, a split heading for a
fancy hat studded with diamonds should have been created.  He further stated that under option B, if a
hat originating in country B was studded in countr y C with diamonds originating in country A, origin
was conferred to country A, although country A had not made the hat nor studded it with diamonds.
In order to avoid this uncomfortable situation, India made proposals under which residual rules werenot needed (except for a few items such as a multi-country mixture):  for agricultural products, origin
was to be conferred to the country in which the products were grown and obtained;  for textile
products, origin should be conferred to the country in which the processes of bleaching, dyeing,
printing, coating, making-up, assembling, etc. took place;  and for the machinery sector, origin was to
be conferred to the country in which a new product with a new characteristic or a new function was
obtained, even within the same tariff classification.  As concerns the issue of what information was
required for option B, he stated that since import documents which were filed in country C (asreferred to in document G/RO/30) would show on ly the total value of the product, the customs
authorities in country C would need to check and ve rify the value of the hat exported to country B
from country A.  He further pointed out that this unresolved issue had been transmitted to the CRO by
the TCRO after having exhausted the technical debate.  The Chairman of the TCRO, in his letter of
transmission of the unresolved issue, said that “early resolution of this issue is essential for realprogress in meeting the programme set out by the CRO for 1999”.  Therefore the CRO should resolve
this issue as soon as possible.
1.5 The representative of the United States shared the views of India, and stated that option A was
in fact the working assumption of the Harmoniza tion Work Programme (HWP) over the last three
years.  If there was concern about a fancy hat studded with diamonds, a split heading should be
created, rather than developing a general residual rule where origin might be determined on the basis
of a transformation which was less than substantial.
1.6 The representative of Switzerland stated that there were three points to be considered by the
CRO.  First, although options A, B and C differed as  to when the application of residual rules were to
be triggered, in many cases these options would generate the same origin outcomes.  Second, the
coverage of option A was limited to the extent that, unlike options B and C, it did not address the
issues of mixtures, assembly and change of tariff classification rules which excluded change fromG/RO/M/21
Page 3
certain headings.  Third, option A required information between various buyers and sellers of
upstream countries who had been involved in a number of stages of production of the goods.  This
information might not be available.  If origin was determined, as indicated in paragraph 6 of
document G/RO/30, on the basis of information available in several customs import declarations
which had been filed at each of the previous trading operations, it was necessary to know whether theorigin indications appearing on the customs import declarations were determined by a primary rule or
by a residual rule.  Information obtainable from the customs import declaration might not be enough
to satisfy the requirements of option A where origin was conferred to the last country in which a
primary rule was satisfied.
1.7 The representative of the European Communities stated that there was no added value aspect
in option B which required only a simple calculation of percentage of value, volume or weight on the
basis of information already available in the normal course of business.  This simple calculation
should not, in his view, be considered as a value content test.  He also stated that the working
assumption of the HWP over the last three years was that the good under consideration was an
exported good rather than a good in a previous stage in upstream countries.  Origin determination of
the exported goods should be based on the test of whether the processing that took place in theexporting country met the primary rule applicable to that good.  If the primary rule could not be
satisfied in the exporting country, a residual rule would be applied.  Investigating the production
history of the good seemed very difficult, given the lack of availability of information in the normal
course of business.  He further pointed out that the HS nomenclature was not developed for origin
purposes.  It would be unrealistic to identify all products classifiable in a certain tariff heading andcreate many new split headings as well as origin criteria for each new split heading.
1.8 The representative of Canada stated that at this stage it might be worthwhile discussing what
kind of information was required for the application of each option (country of origin of the input
materials, tariff classification, values, etc.).  What was the source of this information? Would the
producer of the final good normally have the information?  What would the customs authorities do if
they had reason to question the validity of the information?  What types of information would the
customs authorities require for the purposes of providing advance rulings?  Clarification of these
factual aspects was important before starting a discussion on the more fundamental question of the
respective roles of the primary and residual rules as well as on questions about certainty, predictability
and uniformity of each option in terms of its origin outcome.  He disagreed with the EC’s statement
that option B did not include a value-added test.  The EC, he assumed, did not consider the simplecalculation of the value of materials used for the production of a good as a value-added test which
might normally involve complicated cost calculation.  However, he believed that even the simple
calculation of the value of materials should be considered as a value-added test which was normally
associated with all difficult procedural problems.  Option A would generate more coherent and
consistent origin outcomes.  The primary rule applicable to a hat said that when a hat was produced incountry A, a substantial transformation took place in that country.  Although the hat was exported
afterwards to country B and underwent additional processing, the additional processing should not be
considered as substantial transformation.  Option A coherently and consistently led to the same origin
outcome as the primary rule had intended.  However, according to option B, the additional processing
occurring in country B might be considered as origin-conferring;  this meant more than onesubstantial transformation test.  If there was more than one substantial transformation, the rule would
not be coherent or consistent.
1.9 The representative of Hong Kong, China pointed out that the unresolved issue transmitted to
the CRO did not request the CRO to take a decision on the residual rules themselves.  However, in
order to understand the implications of options A, B and C, it seemed necessary to clarify further
points raised by delegations.  Hong Kong, China raised several additional questions.G/RO/M/21
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1.10 The positions of Members on this issue are presented in document G/RO/30;  in addition
Mexico supported option A and Morocco  supported option B.
1.11 The representative of India expressed concern that the necessary will to resolve the issue, and
indeed to take forward the work programme on harmonization, was perhaps not there.  She recalled
that the CRO had already missed one definitive deadline to conclude the harmonization work set out
in the provisions themselves, and that the CRO was now working on the basis of a best-endeavours
deadline.  She stated that the pace of the work of  the CRO on the unresolved issue transmitted by the
TCRO under consideration as well as other elements of the harmonization work had serious
implications for the CRO meeting the deadline given to  itself last year, and further that the inadequacy
of the CRO in respect of this work programme had serious lessons for other committees and bodies of
the WTO that were also engaged in various work programmes.  She added that in the light of thesubstantial work that continued to remain in areas likes the harmonization of the rules of origin which
were a part of the existing commitments, perhaps the WTO collectively was not just in a position to
take up new negotiations.  She, therefore, urged the Members of the CRO to find the necessary will to
resolve this unresolved issue and to hasten the pace of the harmonization work programme so that the
negative trade impact that India and other countries face from its lack of completion was minimizedand further marginalization of developing countries in global trade  was prevented.
1.12 In light of the discussion it was considered necessary to clarify further points raised by
delegations concerning certain administrative aspects of the application of the three options in the
template as well as points raised concerning matters of substance.  The CRO agreed to submit these
questions to the proponents of options A, B and C for further clarification.  At the same time, the
CRO considered it useful to transmit these questions also to the TCRO which may wish to consider
whether it may be able to contribute to clarifying the questions. The questions have been circulated as
document G/RO/W/41.
1.13 The Committee took note of the statements made and agreed  to revert to this issue at its next
meeting.
2. 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)
2.1 The Chairman recalled that there were five submissions on the table: from India
(G/RO/W/28/Rev.1, G/RO/W /30); from the United States (G/RO/W32); from the Dominican
Republic and Honduras (G/RO/W/33); from El  Salvador (G/RO/W/34); and from Korea
(G/RO/W/38).  The Secretariat had also circulated a working document which compiled provisions
relating to rules of origin in various WTO Agreements (G/RO/W/31).
2.2 The Committee agreed to revert to this issue at its next meeting.
3. Progress Report to the Council for Trade in Goods on the status of the Harmonization
Work Programme
3.1 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 February 1999 and to make a progress report to the
Council for Trade in Goods (CTG) (G/RO/25, paragraph 4).
3.2 The CRO adopted  its Progress Report to the CTG (G/RO/33).G/RO/M/21
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4. Trade facilitation (paragraphs 6.6 to 6.9 of G/C/M/34, G/RO/W/26, G/RO/W/26/Add.1)
4.1 The Chairman noted that, as agreed at the meeting of the CTG on 8 July 1998, the CRO was
invited to address those aspects of trade facilitation which it regarded as being related to the
Agreement on Rules of Origin.
4.2 The CRO completed its discussion on this issue, and authorized  the Chairman to send  to the
Chairman of the CTG the following summar y of discussions on Trade Facilitation:
"The Committee on Rules of Origin (CRO),  at its meetings on 15 October 1998 and
22 February 1999, discussed those aspects of trade facilitation which it regarded as being related to
the Agreement on Rules of Origin (the Agreement).
4.3 It should be noted that the preamble of the Agreement recognizes that "clear and predictable
rules of origin and their application facilitate the fl ow of international trade", and that the clarity and
predictability of rules of origin, in turn, is  to be ensured when the Agreement itself is fully
implemented by all Members.  The following aspects of the Agreement are particularly relevant for
trade facilitation: (i) implementation of Article 2 and paragraph 3 of Annex II of the Agreement; and(ii) harmonization of non-preferential rules or origin. Some delegations observed that the concept of
trade facilitation may extend beyond the present provisions of the Agreement, for example, to
administrative aspects of the application of the harmonized rules of origin.
Implementation of Article 2 and paragraph 3 of Annex II of the Agreement4.4 Article 2 of the Agreement establishes disciplines which Members should fulfill during the
transition period.  Similar disciplines include several procedural provisions which lead to
simplification of trade procedures if they are fu lly implemented: (i) prompt publication of rules
(Article 2(g) and paragraph 3(c) of Annex II); (ii) advance binding assessment of origin (Article 2(h)and paragraph 3(d) of Annex II); (iii) non-retroactivity of the rule application (Article 2(i) and
paragraph 3(e) of Annex II; (iv) availability of judicial review of administrative action (Article 2(j) of
paragraph 3(f) of Annex II); and (v) confidentiality of information (Article 2(k) and paragraph 3(g) of
Annex II).
4.5 In this context, attention is drawn in particular to the advance binding assessment of origin.
The CRO, at its meeting on 3 October 1997, mandated the Secretariat to conduct a survey ofMembers' practices with reference to Article 2(h) as well as paragraph 3(d) of Annex II of the
Agreement.  The Secretariat has circulated information provided by 33 Members in documents
G/RO/W/26 and G/RO/W/26/Add.1.  On the basis of th ese submissions, it appears that 13 of these 33
Members implement Article 2(h) and paragraph 3(d) of  Annex II of the Agreement.  It should also be
noted that 37 Members have notified the Secretariat that they do not have non-preferential rules oforigin (see documents G/RO/N/1-24).
4.6 It should further be noted that some Members have stated that, although they have not
established an explicit procedure, they, by way of  administrative means, are fulfilling the obligations
as provided for under Article 2(h) of the Agreement.
4.7 Finally, as concerns the implementation of paragraph 3(d) of Annex II of the Agreement,
some Members, in their responses to the Secretariat's enquiry, pointed out that preferential trade
regimes are managed by specific certificate-of-origin schemes applicable to those preferential
transactions.G/RO/M/21
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Harmonization of non-preferential rules of origin
4.8 One of the objectives of the Agreement is to harmonize and clarify non-preferential rules of
origin; i.e. to establish an international common system of non-preferential rules of origin which will
provide more certainty in the conduct of world trade.  Pursuant to Article 3(a) of the Agreement, uponcompletion of the HWP, Members should apply the harmonized rules of origin as defined in
Article 1.1 equally for all purposes as set out in Article 1.2 of the Agreement. The harmonized rules of
origin should also be "objective, understandable and predictable", and "should be administrable in a
consistent, uniform, impartial and reasonable manner" (see Article 9.1(c) and (e) of the Agreement).
4.9 Due to the complexity of the issues, the HWP, which was launched in July 1995, was not
completed within three years of its initiation as foreseen in the Agreement.  In July 1998, Membersagreed to extend the deadline, and to commit themse lves to make their best endeavours to complete
the HWP by November 1999 (see G/RO/25)".
5. Notifications under Article 5 and Paragraph 4 of Annex II of the Agreement on Rules of
Origin (G/RO/N/24)
5.1 The Chairman recalled that since the last meeting, the Secretariat had circulated one
document informing delegations of the notifications received (G/RO/N/24).  To date, 69 Members had
made notifications of non-preferential rules of origin and 72 Members had made notifications of
preferential rules of origin.  He expressed conc ern that a number of Members had not complied with
the notifications requirements, and urged Members who had not yet notified, to do so as early aspossible.
5.2 The Committee took note of the notifications and the statement of the Chairman.
6. Election of Officers
6.1 The Chairman noted that the election of the new Chairperson of the Committee should take
place at the end of the first meeting of the Committee of the new year pursuant to Rule 12 of the Rules
of Procedure of the Committee.  The Chairman of the CTG had carried out informal consultations on
a slate of names for appointment as chairpersons of subsidiary bodies in  accordance with the
established Guidelines for Appointment of Officers.  However, to date, the consultations had not been
completed.  Given this situation, the Chairman suggested that the Committee agree to postpone the
election of a Chairperson and Vice-Chairperson of this Committee and take up this matter as the first
agenda item at the nest meeting.
6.2 It was so agreed.
7. Other business
7.1 The Chairman proposed that the next meeting of the CRO take place on Friday,
23 April 1999, preceded by informal meetings on 21 and 22 April 1999.
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