RESTRICTED
WORLD TRADE G/RO/W/16/Rev.2
11October 1996
ORGANIZATION(96-4331)
Committee onRules ofOrigin
DRAFT REPORT OFTHE COMMITTEE ONRULES OFORIGIN
TOTHE COUNCIL FOR TRADE INGOODS1
SECTION A-BACKGROUND
Introduction
1. Thisreport covers theyears 1995and1996. Itaddresses theworkundertaken bytheCommittee
onRules ofOrigin (theCommittee) inrespect oftheimplementation ofthebuilt-in mandate forthe
harmonization ofnon-preferential rulesoforigin (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 rulesoforigin areindispensable fortheunrestricted flowofinternational
trade. They provide forpredictability andtransparency. Second, theyeliminate obstacles tothefree
flowoftrade, created bytheexistence ofdifferent national rulesoforigin withsometimes contradictory
methods fortheattribution oforigin. Finally, under conditions ofglobalization inwhich goods are
decreasingly being produced inonecountry there isanurgent necessity toagree toacommon setof
rulesfortheconferment oforigin ongoods. Discussions under theWork Programme illustrate these
difficulties andchallenges.
3. Members haverecognized andreaffirmed thatthenegotiations fortheharmonization ofnon-
preferential rules oforigin should establish rules thatcanbeapplied inanimpartial, transparent,
predictable, consistent andneutral manner. Theessential objectives andprinciples oftheHarmonization
Work Programme arecontained inArticle 9.1oftheAgreement. Annexed totheAgreement isa
common declaration withregard topreferential rules oforigin which setsoutcertain disciplines to
befollowed intheapplication ofsuchrules.
Work oftheCommittee onRules ofOrigin
4. Intheperiod under review, theCommittee heldeight formal meetings which werepreceded
byextensive informal consultations (seeAnnex IIforminutes). TheCommittee elected Mr.Chiedu
Osakwe (Nigeria) asChairman andMrs. Anikó Ivanka (Hungary) asVice-Chairperson for1995 and
re-elected them for1996.
5. Participation intheCommittee isopentoallWTO Members. Inaddition, Governments granted
observer status bytheWTO General Council, aswellasrepresentatives oftheIMF, OECD, UNCTAD,
WCO andtheWorld Bank attended Committee meetings asobservers.
1Thefinaltextasadopted bytheCommittee willbeissued asdocument G/L/119.G/RO/W/16/Rev.2
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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 on20July1995andisscheduled
forcompletion by20July1998. 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. From theinitiation oftheHarmonization Work Programme, inJuly1995, tothepresent, the
Committee hasreceived andconsidered fourReports fromtheTechnical Committee onRules ofOrigin
(seeAnnex 2).According totheAgreement onRules ofOrigin, theTechnical Committee should submit
quarterly results ofitswork totheCommittee. Atthetimeofsubmitting thisReport totheCouncil
forTrade inGoods, theFifth Report from theTechnical Committee hadbeenreceived, buthadnot
yetbeencirculated forconsideration. Consequently, inputs from thatReport were notavailable for
inclusion inthisReport.
9. Atitsmeeting of16November 1995, theCommittee began consideration oftheFirstReport
oftheTechnical Committee concerning thedefinition ofwholly obtained goods (Annex A)andthe
definition ofminimal operations orprocesses thatdonotbythemselves confer origin toagood(Annex
B).Atthatmeeting, itapproved definitions 1(a),1(b)and1(e)ofAnnex A,anddefinitions 1(a),1(b)
and1(c)ofAnnex B.TheCommittee 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 oftheHarmonization Work Programme willbefinalized. Ontheproblem ofthedefinition
oftheterm"country", theCommittee decided torequest theTechnical Committee tofullyproceed
withtheHarmonization Work Programme intheabsence ofanabstractly constructed definition of
theterm"country", andtoforward toitunresolved practical issues relating tothedefinition ofthe
term"country", forafinaldetermination.
10. Atitsmeeting of1February 1996, theCommittee agreed thattheExplanatory Notes tothe
definitions inAnnexes AandBoftheFirstReport should belegally binding. Itwasalsoagreed that
theCommittee should request theTechnical Committee torevisit theExplanatory Notes onthebasis
thattheywillbelegally binding. Atthismeeting, theCommittee examined theissue of"scrap and
waste" andidentified three separate concepts: scrap andwaste; articles thatcannolonger perform
theiroriginal purpose; andparts recovered from thesaidarticles. TheCommittee recognized that
theissue ofparts asanindependent issue hadnotbeenaddressed bytheTechnical Committee and
consequently agreed toreferittotheTechnical Committee. Onthequestion ofdraftdefinition 2of
Annex A,including theorigin ofgoods obtained orproduced onvessels, factory ships, structures and
installations outside acountry, analternative drafttextwasformulated asapossible basisforanagreed
definition. However, atsubsequent discussions ontheissue attheMaymeeting, different views
expressed byMembers produced fouralternative drafttextsasafurther possible basis foranagreed
definition.G/RO/W/16/Rev.2
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11. Atitsmeeting of10May1996, 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
themeaning oftheterms "produced" and"solely". TheCommittee determined theneedtotransmit
totheTechnical Committee therequest tofurther examine andclarify withaviewtopossibly defining
thefollowing terms when usedinthecontext ofwholly obtained orproduced: processing, further
processing andmanufacturing. TheCommittee noted thatthedraftdefinitions ofminimal operations
orprocesses willbere-examined throughout theHarmonization Work Programme.
12. TheCommittee alsoconsidered therecommendation from theTechnical Committee onthe
general rulesforinterpreting andapplying therulesoforigin andthegeneral format establishing the
overall architectural design oftheharmonized rules oforigin. Itwasagreed thatthedraftsubmitted
totheCommittee presented avalidbasisforthecontinuation oftheHarmonization Work Programme,
andthatthedraftneeded tobefurther developed, consistent withtheAgreement, aswork progresses.
13. TheCommittee established anIntegrated Negotiating Text(INT) fortheHarmonization Work
Programme which provides astatus report andfactual account ofallstages ofthenegotiations, including
allreservations byMembers (seeAnnex II).Itisthecommon working document andreference point
forthejointwork ofthetwoCommittees. Inestablishing theINT, itwasnoted thattheaimofsuch
atextwould betoenhance efficiency anddiscipline inthenegotiating process, assist delegations,
particularlyintheircapitals,inassessingprogressinthenegotiationsandproblemsthatexistand,finally,
alsoassist inbuilding abridge ofunderstanding between thetwoCommittees.
(ii) Notification ofnon-preferential rules oforigin
14. Notifications relating tonon-preferential rulesoforigin havebeenreceived from[49]Members
ofwhich [20]Members notified thattheydonothavenon-preferential rules oforigin (seeAnnex I).
Thisconstitutes [45]percentofMembers oftheWTO. [59]Members or[55]percenthavenotnotified.
(iii) Notification ofpreferential rules oforigin
15. Notifications relating topreferential rules oforigin havebeenreceived from [50]Members,
ofwhich oneMember notified thatitdoesnothavepreferential rules oforigin (seeAnnex I).This
constitutes [46]percentofWTO Members. [58]Members havenotyetnotified theirpreferential
rules oforigin (seeAnnex I),constituting [54]percentofWTO Members.
16. TheCommittee repeatedly expressed concern thatanumber ofMembers hadnotyetcomplied
withthenotification requirements, andurged those Members whohavenotyetdonesotosubmit their
notifications without further delay.
(iv) Other issues related toimplementation oftheAgreement
17. Further tothenotifications, theCommittee alsodiscussed additional issues linked tothe
implementation oftheAgreement. Inthisregard, concern wasexpressed bysome Members onthe
needtoavoid unilateral changes inrulesoforigin thatcreate uncertainty andhaveadverse effects on
international trade.
18. Members oftheCommittee commented alsoonnotifications ofnational legislation submitted
bysome Members. Several significant issues wereraised. Forinstance, views wereexpressed that
complex procedures forcertificates oforigin andexclusive language requirements, inparticular in
relation totheapplication ofanti-dumping duties, should beavoided; theviewwasalsoexpressed
thatcertificates oforigin could constitute useful instruments inpreventing practices aimed atconcealing
theactual origin ofgoods. Tothisend,simplicity ofprocedures andconfidentiality ofproducer
information wereemphasized. However, oncertificates oforigin, theviewwasexpressed thatsuchG/RO/W/16/Rev.2
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instruments arenotcovered bytheprovisions oftheAgreement. Ontheissues raised, theCommittee
didnotcome toaconclusive view. Intheend,theCommittee agreed thatrules andprocedures in
domestic legislation mustbecompatible withGATT 1994rules, andanychanges before theconclusion
ofnegotiations should beconsistent withdisciplines governing thetransition period.
[Section Btobeupdated andcompleted asnecessary.]
SECTION C-CONCLUSIONS AND RECOMMENDATIONS
Implementation oftheAgreement ingeneral
19. TheCommittee focused ontheimplementation oftheAgreement, particularly onthe
Harmonization Work Programme.
20. Aprocedure wasadopted bytheCommittee todealwithqueries byMembers inrespect of
notifications ofnational legislations. Thisprocedure willserve toensure aproper andcoordinated
examination ofsuchnotified legislation andtoensure conformity withdisciplines established inthe
Agreement. TheCommittee recommends adherence byMembers totheguidelines established forthe
treatment ofnotifications byMembers.
21. TheCommittee recognized thatnotifications areindispensable fortheeffective andcredible
functioning oftheWTO Agreement. Lowratesofnotification restrict theability oftheCommittee
toassess theglobal status ofrulesoforigin, andconsequently theeffectiveness ofnewdisciplines once
theyareconcluded. TheCommittee callsonallMembers thathavenotyetnotified either theirnon-
preferential orpreferential rules oforigin todosowithout further delay.
Harmonization Work Programme
22. TheHarmonization Work Programme presents amixed picture ofprogress andproblems.
TheWork Programme isdivided intoPhases I,IIandIIIasprovided forinArticle 9oftheAgreement.
Phase Iislargely completed, although twoissues remain unresolved.
23. First, theorigin tobeattributed toparts recovered from articles inacountry different from
thecountry where thearticles were used(consumed) raised several issues.
24. Thekeypending issue refers toparts recovered from usedarticles notfitfortheiroriginal
purpose andnotcapable ofbeing restored orrepaired, imported, interalia,forrecycling purposes.
Onthisissue, environmental policy considerations wereraised bysome Members, thattrade insuch
articles andparts should notbeusedto"dump" scrap andwaste, toxic, hazardous andradioactive
materials inother countries. TheCommittee recognized these concerns asvalid. Atthesame time,
mostMembers endorsed theviewthattheCommittee should restrict itswork totheattribution oforigin
togoods, andexclude extra-origin considerations which riskjeopardizing thework oftheCommittee.
25. Thesecondunresolvedquestionreferstotheorigintobeattributedtogoodsobtainedorproduced
onvessels, factory ships, structures andinstallations outside acountry. Thisquestion raised several
complex issues ofinternational lawandpublic policy linked, inparticular, withthepractical application
oftheterm"country" inrelation togoods which should beconsidered asbeing wholly obtained. There
arelong-standing national positions atissue. Resolution ofthisproblem willbepossible onlyby
constructive andmutual compromises andunderstanding byMembers. Tothisend,theCommittee
isproceeding withtheHarmonization Work Programme onthebasis ofaddressing issues related to
theterm"country" onlytotheextent where therearepractical consequences fortheattribution oforigin
tospecific goods, intheinterest ofachieving theobjectives ofthisAgreement.G/RO/W/16/Rev.2
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26. TheCommittee recommends thatattention should strictly focus ontheconferment oforigin
togoods, andthatextra-origin considerations beexcluded fromitswork. While itisrecognized that
harmonization negotiations cannot beundertaken inavacuum, related issues arising should bereferred
bytheCommittee totherelevant Committees.
27. While substantial progress hasbeenmade inPhase IIoftheHarmonization Work Programme,
thePhase isbehind schedule duetothecomplexities involved. Notwithstanding these delays, the
CommitteeconsidersthattheHarmonizationWorkProgrammeshouldbecompletedwithinthethree-year
timeframe. Tothisend,additional steps needtobetaken, inaccordance withtheprovisions ofthe
Agreement, toensure adherence tothetimeframe. Note should betaken oftheongoing efforts to
further improve theefficiency ofthejointwork bytheCommittee andtheTechnical Committee. In
addition, theIntegrated Negotiating TextfortheHarmonization Work Programme isasignificant and
useful document thatwillfacilitate theHarmonization Work Programme. Itprovides thebasis for
measuring theprogress andtheefficiency ofthenegotiations, aswellasthecoherence oftherules
thatarebeing established.G/RO/W/16/Rev.2
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Annex I
1. Members thathavenotified 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)
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)
NewZealand (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)
SlovakRepublic(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 thathavenotified thattheydonothaveNon-Preferential Rules ofOrigin
Bolivia (G/RO/N/9)
BruneiDarussalam
(G/RO/N/5)
Chile (G/RO/N/6)
Costa Rica(G/RO/N/1)
DominicanRep.(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)
Uganda (G/RO/N/12)
Uruguay (G/RO/N/12)G/RO/W/16/Rev.2
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3. Members thathavenotnotified Non-Preferential Rules ofOrigin
Antigua andBarbuda
Bahrain
Bangladesh
Barbados
Belize
Benin
Botswana
Brazil
Burkina Faso
Burundi
Cameroon
Central African Republic
Côted'Ivoire
Cyprus
Djibouti
Dominica
Ecuador
Egypt
Fiji
GabonGhana
Grenada
Guatemala
Guinea Bissau
Guinea, Rep.of
Guyana
Haiti
Indonesia
Israel
Kuwait
Lesotho
Liechtenstein
Macau
Malawi
Maldives
Mali
Mauritania
Mozambique
Myanmar
NamibiaNigeria
Pakistan
Papua NewGuinea
Paraguay
Qatar
Rwanda
Saint KittsandNevis
Saint Lucia
SaintVincentandGrenadines
Sierra Leone
Solomon Islands
SriLanka
Suriname
Swaziland
Tanzania
Togo
United Arab Emirates
Zambia
Zimbabwe
4. Members thathavenotified 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)
DominicanRep.(G/RO/N/5)
EC(G/RO/N/1)
Ecuador (G/RO/N/12)
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)
Uganda (G/RO/N/12)
US(G/RO/N/1 &6)
Uruguay (G/RO/N/5)
Venezuela (G/RO/N/1)
5. Member thathasnotified thatitdoes nothave Preferential Rules ofOrigin
Hong Kong (G/RO/N/1).G/RO/W/16/Rev.2
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6. 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
Egypt
Fiji
Gabon
Ghana
GrenadaGuatemala
Guinea Bissau
Guinea, Rep. of
Guyana
Haiti
Iceland
Israel
Kuwait
Lesotho
Liechtenstein
Macau
Malawi
Maldives
Mali
Mauritania
Mozambique
Myanmar
Namibia
Nigeria
PakistanPapua New Guinea
Qatar
Romania
Rwanda
St.Kitts &Nevis
Saint Lucia
Saint Vincent &Grenadines
Sierra Leone
Solomon Islands
South Africa
SriLanka
Suriname
Swaziland
Tanzania
Togo
United Arab Emirates
Zambia
ZimbabweG/RO/W/16/Rev.2
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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)
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.]