RESTRICTED
WORLD TRADE G/RO/W/16
2September 1996
ORGANIZATION(96-3456)
Committee onRules ofOrigin
DRAFT REPORT OFTHE COMMITTEE ONRULES OFORIGIN
TOTHE COUNCIL FOR TRADE INGOODS
SECTION A-BACKGROUND
Introduction
1. Thisreport covers theyears 1995 and1996. Itaddresses thework undertaken bytheCommittee
onRules ofOrigin (theCommittee) inrespect oftheimplementation ofthebuilt-in mandate forthe
harmonization ofnon-preferential rules oforigin (Harmonization Work Programme); implementation
oftheAgreement onRules ofOrigin (theAgreement) ingeneral; andtheidentification ofissues arising
intheHarmonization Work Programme. Asforeseen intheAgreement (Articles 4.1,4.2and9.2(b)),
theHarmonization Work Programme isbeing jointly undertaken bytheCommittee andtheTechnical
Committee onRules ofOrigin (theTechnical Committee) established under theauspices oftheWorld
Customs Organization.
2. Multilaterally agreed rules oforigin areindispensable fortheunrestricted flow ofinternational
trade. They provide forpredictability, transparency andsimplicity ofrules oforigin. Second, they
eliminate obstacles tothefreeflow oftrade, created bytheexistence ofdifferent national rules oforigin
withsometimes contradictory evaluation methods fortheattribution oforigin. Finally, under conditions
ofglobalization inwhich goods aredecreasingly being produced inonecountry there isanurgent
necessity toagree toacommon setofrules fortheconferment oforigin ongoods. Discussions under
theWork Programme illustrate these difficulties andchallenges.
3. Members have recognized andreaffirmed thatthenegotiations fortheharmonization ofnon-
preferential rules oforigin should establish rules thatcanbeapplied inanimpartial, transparent,
predictable, consistent andneutral manner. Theessential objectives andprinciples oftheHarmonization
WorkProgrammearecontainedinArticle9.1oftheAgreement.AnnexedtotheAgreementisacommon
declaration with regard topreferential rules oforigin which setsoutcertain disciplines tobefollowed
intheapplication ofsuch rules.
Work oftheCommittee onRules ofOrigin
4. Intheperiod under review, theCommittee held eight formal meetings which were preceded
byextensive informal consultations (seeAnnex IIforminutes). TheCommittee elected Mr.Chiedu
Osakwe (Nigeria) asChairman andMrs. Anik óIvanka (Hungary) asVice-Chairperson for1995 and
re-elected them for1996.
5. Participation intheCommittee isopen toallWTO Members. Inaddition, Governments granted
observer status bytheWTO General Council, aswellasrepresentatives oftheIMF, OECD, UNCTAD,
WCO andtheWorld Bank attended Committee meetings asobservers.G/RO/W/16
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6. Atitsmeeting of16November 1995, theCommittee adopted itsrules ofprocedure, which were
approved bytheCouncil forTrade inGoods.
[Section Atobeupdated andcompleted asnecessary.]
SECTION B-STATUS REPORT OFTHE COMMITTEE 'SWORK
Implementation oftheAgreement
(i) Harmonization Work Programme
7. TheHarmonization Work Programme wasofficially launched on20July1995 andisscheduled
forcompletion by20July 1998. TheProgramme isdivided intothree Phases:
(i) Definitions ofGoods Wholly Obtained, andMinimal Operations orProcesses;
(ii) Substantial Transformation -Change inTariff Classification; and
(iii) Substantial Transformation -Supplementary Criteria.
8. Sofar,theCommittee hasreceived fourreports from theTechnical Committee (seeAnnex II).
According totheAgreement onRules ofOrigin, theTechnical Committee should submit quarterly results
ofitswork totheCommittee.
9. Atitsmeeting of16November 1995, theCommittee began consideration oftheFirst Report
oftheTechnical Committee concerning thedefinition ofwholly obtained goods (Annex A)andthe
definition ofminimal operations which donotgrant origin (Annex B).Atthatmeeting, itapproved
definitions 1(a), 1(b) and1(e) ofAnnex A,anddefinitions 1(a), 1(b) and1(c) ofAnnex B.The
Committee decided torequest theTechnical Committee torefine definitions of1(c), 1(d) and1(g)
inAnnex A.TheCommittee agreed torequest theTechnical Committee toforward ageneral format
establishing theoverall architectural design within which theresults ofthedifferent phases ofthe
Harmonization Work Programme willbefinalized. Ontheproblem ofthedefinition oftheterm
"country", theCommittee decided torequest theTechnical Committee tofully proceed with the
Harmonization Work Programme intheabsence ofanabstractly constructed definition oftheterm
"country", andtoforward toitunresolved practical issues relating tothedefinition oftheterm "country",
forafinal determination.
10. Atitsmeeting of1February 1996, theCommittee agreed thattheExplanatory Notes tothe
definitions inAnnexes AandBoftheFirst Report should belegally binding. Itwasalsoagreed that
theCommittee should request theTechnical Committee torevisit theExplanatory Notes onthebasis
thatthey willbelegally binding. Atthismeeting, theCommittee examined theissue of"scrap and
waste" andidentified three separate concepts: scrap andwaste; articles thatcannolonger perform
their original purpose; andparts recovered from thesaidarticles. TheCommittee recognized thatthe
issue ofparts asanindependent issue hadnotbeen addressed bytheTechnical Committee and
consequently agreed torefer ittotheTechnical Committee. Onthequestion ofdraft definition 2of
Annex A,including theorigin ofgoods obtained orproduced onvessels, factory ships, structures and
installations within andbeyond theterritorial sea,analternative draft textwasformulated asapossible
basis foranagreed definition. However, atsubsequent discussions ontheissue attheMay meeting,
different views expressed byMembers produced four alternative draft texts asafurther possible basis
foranagreed definition.
11. Atitsmeeting of10May 1996, theCommittee approved definitions 1(a), 1(b), 1(c), 1(d), 1(e)
and1(f)andthelegally binding notes tothose definitions inAnnex 2totheThird Report. With reference
todefinition 1(i),itwasagreed thattheTechnical Committee should berequested toexamine themeaningG/RO/W/16
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oftheterm"produced".TheCommitteenotedthatthedraftdefinitionsofminimaloperationsorprocesses
willbere-examined throughout theHarmonization Work Programme.
12. The Committee established anIntegrated Negotiating Text fortheHarmonization Work
Programme which provides astatus report andfactual account ofallstages ofthenegotiations, including
allreservations byMembers (seeAnnex II).Itisthecommon working document andreference point
forthejoint work ofthetwoCommittees. Inreaching thisdecision, itwasnoted thatsuch atextwould
enhance efficiency anddiscipline inthenegotiating process, assist delegations, particularly their capitals,
inassessing progress inthenegotiations andproblems thatexist and, finally, alsoassist inbuilding
abridge ofunderstanding between thetwoCommittees.
13. TheCommittee alsoconsidered therecommendation from theTechnical Committee onthedraft
overall architectural design fortheHarmonization Work Programme. Itnoted theneed forbrevity,
consistency ofthedraft overall architecture with theAgreement, andtheneed todevelop allparts of
thearchitecture aswork progresses. Itwasagreed thatthedraft submitted totheCommittee presented
avalid basis forthecontinuation oftheHarmonization Work Programme.
(ii) Notification ofnon-preferential rules oforigin
14. Notifications relating tonon-preferential rules oforigin have been received from [48]Members
ofwhich [18] Members notified thatthey donothave non-preferential rules oforigin (seeAnnex I).
Thisconstitutes [44]percentofMembers oftheWTO. [60]Members or[56]percenthave notnotified.
(iii) Notification ofpreferential rules oforigin
15. Notifications relating topreferential rules oforigin have been received from [48] Members,
ofwhich oneMember notified thatitdoes nothave preferential rules oforigin (seeAnnex I).This
constitutes [44]percentofWTO Members. [60]Members have notyetnotified their preferential rules
oforigin (seeAnnex I),constituting [56] percent ofWTO Members.
16. TheChairman oftheCommittee repeatedly expressed concern thatanumber ofMembers had
notyetcomplied with thenotification requirements, andurged those Members who have notyetdone
sotosubmit their notifications without further delay.
(iv) Other issues related toimplementation oftheAgreement
17. Further tothenotifications, theCommittee also discussed additional issues linked tothe
implementation oftheAgreement. Inthisregard, concern wasexpressed bysome Members onthe
need toavoid unilateral changes inrules oforigin thatcreate uncertainty andhave adverse effects on
international trade.
18. Members oftheCommittee commented alsoonnotifications ofnational legislation submitted
bysome Members. Several significant issues were raised. Forinstance, views were expressed that
complex procedures forcertificates oforigin andexclusive language requirements should beavoided.
Tothisend, simplicity ofprocedures andconfidentiality ofproducer information were emphasized.
However, oncertificates oforigin, theview wasexpressed thatsuch instruments arenotcovered by
theprovisions oftheAgreement. Furthermore, theview wasalsostrongly expressed thatrules oforigin
should notbeused tocircumvent anti-dumping duties orcountervailing measures. Intheend, the
Committee agreed thatrules andprocedures indomestic legislation must becompatible with GATT
1994 rules, andanychanges before theconclusion ofnegotiations should beconsistent with disciplines
governing thetransition period.G/RO/W/16
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SECTION C-CONCLUSIONS AND RECOMMENDATIONS
Implementation oftheAgreement ingeneral
19. The Committee focused ontheimplementation oftheAgreement, particularly onthe
Harmonization Work Programme.
20. Aprocedure wasadopted bytheCommittee todeal with queries byMembers inrespect of
notifications ofnational legislations. This procedure willserve toensure aproper andcoordinated
examination ofsuch notified legislation andtoensure conformity with disciplines established inthe
Agreement. TheCommittee recommends adherence byMembers totheguidelines established forthe
treatment ofnotifications byMembers.
21. TheCommittee recognized thatnotifications areindispensable fortheeffective andcredible
functioning oftheWTO Agreement. Low rates ofnotification restrict theability oftheCommittee
toassess theglobal status ofrules oforigin, andconsequently theeffectiveness ofnewdisciplines once
they areconcluded. TheCommittee calls onallMembers thathave notyetnotified either their non-
preferential orpreferential rules oforigin todosowithout further delay.
Harmonization Work Programme
22. TheHarmonization Work Programme presents amixed picture ofprogress andproblems. The
Work Programme isdivided intophases I,IIandIIIasprovided forinArticle 9oftheAgreement.
Phase Iislargely completed, although twoissues remain unresolved. These are,first, theorigin to
beattributed toparts recovered from articles; and, second, theorigin ofgoods obtained orproduced
onvessels, factory ships structures andinstallations within andbeyond theterritorial sea.
23. Onparts, several questions need toberesolved. Forinstance, what origin should beattributed
toparts recovered from articles inacountry different from thecountry where thearticles were used
(consumed)?
24. Furthermore, ontheissue ofparts recovered from usedarticles, imported, inter alia,forrecycling
purposes, environmental policy considerations were raised bysome Members, thattrade inused articles
andparts should notbeused to"dump" scrap waste, toxic, hazardous andradioactive materials inother
countries. TheCommittee recognized these concerns asvalid. Atthesame time, most Members endorsed
thevirtually unanimous recommendation from theTechnical Committee inBrussels thattheTechnical
Committee should technically restrict itswork totheattribution oforigin togoods, andexclude extra-
origin considerations which riskjeopardizing thework oftheCommittee.
25. Thesecondunresolvedissueaddressesthequestionoftheorigintobeattributedtogoodsobtained
orproduced onvessels, factory ships, structures andinstallations within andbeyond theterritorial sea.
Complex issues oflawandpublic policy areinvolved which touch onthedefinition oftheterm "country".
There arelong-standing national positions atissue. Resolution ofthisproblem willbepossible only
byconstructive andmutual compromises, andunderstanding byMembers, andbyagreement tofocus
onusages oftheterm "country" only totheextent where there arepractical consequences forthe
attribution oforigin tospecific goods. Ifthisproblem istoberesolved, national objectives should
beguided bytrade liberalization andtheoverall goals ofaliberal trading order.
26. TheCommittee recommends thatattention should strictly focus ontheconferment oforigin
togoods, andthatextra-origin considerations beexcluded from itswork. While itisrecognized that
harmonization negotiations cannot beundertaken inavacuum, related issues arising should bereferred
bytheCommittee totherelevant Committees.G/RO/W/16
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27. Phase IIoftheWork Programme isbehind schedule. This Phase scheduled forcompletion
inOctober 1996 willnotmeet thedeadline. Consequently, itishighly unlikely thatPhase IIIscheduled
tobegin inOctober 1996 will begin before 1997 attheearliest. [toberevised inSeptember as
appropriate] This wasunavoidable, given thetechnical complexities ofPhase II.Although anumber
ofissues remain unresolved inthisphase, andin-depth discussions onsome product sectors have not
beencompletedyet,substantialprogresshasbeenmade.Noteshouldbetakenoftheimportantfoundation
laidattheTechnical Committee foranaccelerated examination ofthevarious headings andsub-headings
oftheHarmonized System (HS).
28. TheCommittee recognizes thatinspite ofthetechnical andpolicy complexity anddelays, the
Integrated Negotiating TextfortheHarmonization Work Programme, andtheoverall architectural design
fortheharmonized rules oforigin, aresignificant instruments thatwillfacilitate theHarmonization
Work Programme. They provide thebasis formeasuring theprogress andtheefficiency ofthe
negotiations, aswell asthecoherence oftherules thatarebeing established.
29. Finally, notwithstanding thedelays being experienced under Phase II,theCommittee considers
thatthenegotiations fortheharmonization ofnon-preferential rules oforigin should becompleted within
thethree-year time frame. Tothisend,necessary steps should betaken toensure adherence tothetime
frame.G/RO/W/16
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Annex I
1. Members thathave notified Non-Preferential Rules ofOrigin
Argentina (G/RO/N/2 &10)
Australia (G/RO/N/1)
Canada (G/RO/N/1)
Colombia (G/RO/N/1)
Côted'Ivoire (G/RO/N/11)
Cuba (G/RO/N/3)
Czech Rep. (G/RO/N/2)
EC(G/RO/N/1)
Hong Kong (G/RO/N/1)
Hungary (G/RO/N/2)Japan (G/RO/N/1)
Korea (G/RO/N/1)
Madagascar (G/RO/N/11)
Malta (G/RO/N/4)
Mexico (G/RO/N/12)
Morocco (G/RO/N/2)
New Zealand (G/RO/N/1)
Norway (G/RO/N/8)
Peru (G/RO/N/4 &5)
Poland (G/RO/N/8)Romania (G/RO/N/1)
Senegal (G/RO/N/10)
Slovak Republic (G/RO/N/1)
Slovenia (G/RO/N/5 &7)
South Africa (G/RO/N/3)
Switzerland (G/RO/N/4)
Tunisia (G/RO/N/7)
Turkey (G/RO/N/8)
US(G/RO/N/1 &6)
Venezuela (G/RO/N/1 &10)
2. Members thathave notified thatthey donothave Non-Preferential Rules ofOrigin
Bolivia (G/RO/N/9)
BruneiDarussalam
(G/RO/N/5)
Chile (G/RO/N/6)
Costa Rica (G/RO/N/1)
Dominican Rep. (G/RO/N/9)ElSalvador (G/RO/N/10)
Honduras (G/RO/N/3)
Iceland (G/RO/N/5)
India (G/RO/N/1)
Jamaica (G/RO/N/4)
Kenya (G/RO/N/9)Malaysia (G/RO/N/6)
Mauritius (G/RO/N/1)
Nicaragua (G/RO/N/10)
Philippines (G/RO/N/6)
Singapore (G/RO/N/3)
Thailand (G/RO/N/1)
Trinidad&Tob.(G/RO/N/7)G/RO/W/16
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3. Members thathave notnotified Non-Preferential Rules ofOrigin
Antigua andBarbuda
Bahrain
Bangladesh
Barbados
Belize
Benin
Botswana
Brazil
Burkina Faso
Burundi
Cameroon
Central African Republic
Cyprus
Djibouti
Dominica
Ecuador
Egypt
Fiji
Gabon
GhanaGrenada
Guatemala
Guinea Bissau
Guinea, Rep. of
Guyana
Haiti
Indonesia
Israel
Kuwait
Lesotho
Liechtenstein
Macau
Malawi
Maldives
Mali
Mauritania
Mozambique
Myanmar
Namibia
NigeriaPakistan
Papua New Guinea
Paraguay
Qatar
Rwanda
Saint Kitts andNevis
Saint Lucia
SaintVincentandGrenadines
Sierra Leone
Solomon Islands
SriLanka
Suriname
Swaziland
Tanzania
Togo
Uganda
United Arab Emirates
Uruguay
Zambia
Zimbabwe
4. Members thathave notified Preferential Rules ofOrigin
Argentina (G/RO/N/10)
Australia (G/RO/N/1)
Bolivia (G/RO/N/1)
Brazil (G/RO/N/12)
BruneiDarussalam
(G/RO/N/4)
Canada (G/RO/N/1, 6&8)
Chile (G/RO/N/6)
Colombia (G/RO/N/1)
Côted'Ivoire (G/RO/N/11)
Cuba (G/RO/N/3)
Czech Rep. (G/RO/N/2)
Dominican Rep. (G/RO/N/5)
EC(G/RO/N/1)
ElSalvador(G/RO/N/10&11)
Honduras (G/RO/N/3 &10)Hungary (G/RO/N/2)
India (G/RO/N/1)
Indonesia (G/RO/N/4)
Jamaica (G/RO/N/4)
Japan (G/RO/N/6)
Kenya (G/RO/N/9)
Korea (G/RO/N/7)
Madagascar (G/RO/N/11)
Malaysia (G/RO/N/4)
Malta (G/RO/N/4)
Mauritius (G/RO/N/1)
Mexico (G/RO/N/12)
Morocco (G/RO/N/2)
New Zealand (G/RO/N/1)
Nicaragua (G/RO/N/10)
Norway (G/RO/N/8)Paraguay (G/RO/N/12)
Peru (G/RO/N/1)
Philippines (G/RO/N/4)
Poland (G/RO/N/8)
Senegal (G/RO/N/10)
Singapore (G/RO/N/3 &4)
Slovak Republic (G/RO/N/1)
Slovenia (G/RO/N/5 &7)
Switzerland (G/RO/N/6)
Thailand (G/RO/N/1 &4)
Trinidad &Tob. (G/RO/N/7)
Tunisia (G/RO/N/7)
Turkey (G/RO/N/8)
US(G/RO/N/1 &6)
Uruguay (G/RO/N/5)
Venezuela (G/RO/N/1)
*Hong Kong hasnotified thatithasnopreferential rules oforigin (G/RO/N/1).G/RO/W/16
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5. Members thathave notnotified Preferential Rules ofOrigin
Antigua &Barbuda
Bahrain
Bangladesh
Barbados
Belize
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cen. African Rep.
Costa Rica
Cyprus
Djibouti
Dominica
Ecuador
Egypt
Fiji
Gabon
GhanaGrenada
Guatemala
Guinea Bissau
Guinea, Rep. of
Guyana
Haiti
Iceland
Israel
Kuwait
Lesotho
Liechtenstein
Macau
Malawi
Maldives
Mali
Mauritania
Mozambique
Myanmar
Namibia
NigeriaPakistan
Papua New Guinea
Qatar
Romania
Rwanda
St.Kitts &Nevis
Saint Lucia
Saint Vincent &Grenadines
Sierra Leone
Solomon Islands
South Africa
SriLanka
Suriname
Swaziland
Tanzania
Togo
Uganda
United Arab Emirates
Zambia
Zimbabwe
[ANNEX Itobeupdated.]G/RO/W/16
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Annex II
1. Minutes ofMeetings oftheCommittee onRules ofOrigin
- 4April 1995 (G/RO/M/1)
- 27June 1995 (G/RO/M/2)
- 16November 1995 (G/RO/M/3)
- 29November 1995 (G/RO/M/4)
- 1February 1996 (G/RO/M/5)
- 10May 1996 (G/RO/M/6)
- 13September 1996 (G/RO/M/7)
- 11October 1996 (G/RO/M/8)
2. Reports oftheTechnical Committee onRules ofOrigin
- G/RO/1 (First Report)
- G/RO/4 (Second Report)
- G/RO/5 (Third Report)
- G/RO/6 (Fourth Report)
- G/RO/7 (Fifth Report)
3. Letters from theChairman oftheCommittee onRules ofOrigin totheChairman oftheTechnical
Committee onRules ofOrigin
- Working languages oftheTechnical Committee onRules ofOrigin (6April 1995, G/RO/W/1)
- Initiation oftheHarmonization Work Programme (20July 1995, G/RO/W/4)
- Definition oftheterm "country": establishment ofadrafting group (29June 1995, G/RO/W/5)
- Harmonization ofrules oforigin (2January 1996, G/RO/W/9)
- Harmonization ofrules oforigin (1February 1996, G/RO/W/11)
- IntegratedNegotiatingTextfortheHarmonizationWorkProgramme(22May1996,G/RO/W/13)
- Harmonization ofrules oforigin (21May 1996, G/RO/W/14)
4. Integrated Negotiating Text fortheHarmonization Work Programme
- G/RO/W/13
- G/RO/W/13/Rev.1
[ANNEX IItobeupdated.]