RESTRICTEDWORLD TRADE
ORGANIZATIONG/RO/W/41
8 March 1999
(99-0924)
Committee on Rules of Origin
QUESTIONS ON THE UNRESOLVED ISSUE OF THE OVERALL ARCHITECTURE
OF THE HARMONIZED RULES OF ORIGIN
As agreed at the meeting of the Committee on Rules of Origin (CRO) on 22 and
26 February 1999, the Secretariat circulates herewith the questions raised by Members on theunresolved issue of the overall architecture of the harmonized rules of origin.  These questions are to
be considered by the CRO at the next meeting on 23 April 1999.  The proponents of Options A, B and
C have been invited to provide information on the questions.  The questions have also been
transmitted to the Technical Committee on Rules of Origin which may wish to consider whether it
may be able to contribute to clarifying these questions.
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A question raised by Australia
1. Could proponents of Options A, B and C further clarify each option by adding more
examples?  It would be helpful if the examples could illustrate the different origin outcomes when
several countries are involved in a number of production stages and the information upon which
origin determination would be made.
Questions raised by Canada
2. What type of information is required to apply each option (e.g. country of origin, tariff
classification, value, etc. of the good(s) used in the production of the good for which origin is
being determined)?  Is the information the same or different for each option?
3. What is the source for this information (e.g. which documents, other sources, etc.)?  Is the
source the same or different for each option?
4. Who would have these sources of information (producer of the good for which origin is being
determined, customs authorities, producer/exporter of the good(s) subsequently used in theproduction of the good for which origin is being determined)?  Are the persons the same or
different for each option?
5. What would the customs authorities do if they had reason to question the validity of the
information?
6. Would customs authorities use (accept) these types and sources of information for purposes of
providing advance rulings to the producer of the good for which origin is being determined?
7. How would the country of origin be determined  under each option in the following scenario:
the primary rule of origin for an electric razo r is a change to the HS heading covering razors
from any other HS heading except the HS heading under which electric motors are classified;G/RO/W/41
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what would be the origin (and how is it determined) of a razor produced in country B from an
electric motor that originates in country A?
Questions raised by the European Communities
8. Is the understanding correct that if the application on general interpretative Rule 3 of the HS
would result in a classification of the decorated hat on the basis of the diamonds, that the
country where the last substantial transformation has been carried out with regard to the
illustrative example would be the country of origin of the diamonds thus giving origin B to
the decorated hat?
Questions raised by Hong Kong, China
For Options B and C
9. The concept of “the product in question” and how the HS fits in with modern production
a) Would the creation of additional splits in the existing HS nomenclature be a possible
solution?  For example, if differentiation should be made between a hat and a hat withtrimmings/decorations, a split can be created for the latter and give it unique primary rule.
b) Do Members accept the creation of additional splits at this stage of the HWP?
10.
a) Would proponents of Option B elaborate on the need for detailed listing in import declaration
of how the origin is conferred?  It is our unde rstanding that certificates of origin (COs) are
currently not required for most non-restrained goods or duty free goods.  Even for products
that call for COs, the documents do not require detailed listing of how the origin is conferred.
We therefore fail to see the need for such a detailed disclosure in the future, nor the need to
differentiate between origin conferred through primary rule or residual rule.  So long as one
of these rules is met, the origin is conferred.  As we see it, such a detailed reportingrequirement serves no useful purposes and is not trade facilitating.
b) Would Option B/C entail the same need?
c) What implementation/enforcement concerns do proponents of Option B/C envisage under
Option A?
11. Do proponents of Option B/C agree that the trad ers requesting an advance ruling should be in
a position to provide the necessary information for making that ruling?  The possession of
data (be they process-related, value, weight or volume based) for parts and components isneeded under all options whenever residual rules are invoked.
Primary rules are tailor-made for the product concerned.  They lay down clearly the
requirement(s) needed to confer origin.  Residual rules, on the other hand, involve more
number of variables (in terms of parts and components) and thus less predictable.  For traders
to get a better handle in advance on the final origin rulings, primary rules are preferred.  OnG/RO/W/41
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this note, Options B and C have a much greater tendency to leave the primary rules and opt
for the residual rules, and make the issue of advance rulings more difficult.
12. How could proponents of Option B/C address th e following concerns associated with Option
B/C:
a) these options are prone to change/yield origin ou tcome arbitrarily.  (For example, if a good is
shipped to a third country in which it undergoes a minor, non-origin conferring process of
manufacture, it will be subject to a different rule (i.e. the residual rule which is supposed to be
based on an origin criterion different from that  in the primary rule) than if it were shipped
directly to the country of final consumption.);
b) obtaining the necessary information from foreign producers and administrations may be
difficult (e.g. involving commercially sensitive information) and time-consuming, this in turn
requires unnecessary record-keeping;
c) residual rules based on value standards are more difficult to apply.  Further, value standards
are influenced by currency fluctuations and other variables.  Such standards suffer from a lack
of predictability;
d) determining the cost of originating components when there is no transaction value is subject
to the vagaries of accounting systems which may vary from company to company.
13.
For Option B only
a) What is meant by the term “materials”?1  Does it refer to “raw materials/unassembled
component parts”, or “any good preceding the importation to the last country of production”?
Does it include sub-assemblies?
b) How to decide whether value, volume or weight should be used to define the essential
character of a good?
c) Does the 50% test apply only to originating “materials”?  Will the term “material” also
include the working process carried out in relation to the final good in that country?  Does the
rule intend to disregard all assembly work in the last country of production?
d) Will the value added arising from assembly work be taken into account when residual rules
are invoked?
e) What will the origin of the final good be if all countries contributing the same share of non-
originating materials?
                                                     
1 The United States has also raised the same questionG/RO/W/41
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f) How can the last country of production claim origin through the residual rule if all raw
materials/parts are imported?
For Option C only
g) What is meant by “related processing activities”?1  To calculate the “value” of these activities,
what factor(s) will be taken into account?
h) How to determine the value of the “non-originating inputs”?  By invoices?
i) What is meant by “non-originating processing activities”?  How should such activities be
reflected in the value of non-originating inputs?
j) What will the origin of the final good be if all countries (including the last country of
production) equally contribute to the final good?
A question raised by Switzerland
14. Under Option A, how can the importing country, on the basis of information obtainable in the
customs import declaration, know that an imported good has met a primary rule in the
exporting country, rather than a residual rule?
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