RESTRICTEDWORLD TRADE
ORGANIZATIONG/RO/M/31
21 September 2000
(00-3763)
Committee on Rules of Origin
MINUTES OF THE MEETING OF 18 JULY 2000
Chairman:  Mr. S. Simon
The agenda proposed for the meeting in WTO/AIR/1346 was adopted by the Committee on
Rules of Origin (CRO) as follows:
I. ASSESSMENT OF STATUS OF NEGOTIATIONS ON HARMONIZING OF
RULES OF ORIGIN ................................................................................................................ 1
II. ADJUSTMENTS TO "NOTIONAL WORK PROGRAMME FOR 2000"
(G/RO/M/27).................................................................................................................... ..........7
III. FINALIZATION OF AGENDA FOR SEPTEMBE R MEETI NG.......................................7
IV. DEADLINE FOR THE COMPLETION OF THE WORK PROGRAMME ON
HARMONIZING RULES OF ORIGIN .................................................................................8
V. OTHER BU SINESS............................................................................................................... ...8
I. ASSESSMENT OF STATUS OF NEGOTIATIONS ON HARMONIZING OF RULES
OF ORIGIN
1.1 The Chairman noted that the Secretariat had circulated a submission from Brazil concerning
the status of the Harmonization Wo rk Programme (HWP) (G/RO/W/58).
1.2 The representative of Brazil stated that the current method of work, a two-track approach
under which both the overall architecture and the product-specific rules had been discussed
simultaneously, was useful at the initial stage of the negotiations, since it provided a complete picture
of the work and a coherent understanding of the issues.  However, the results of the work using this
method were not as substantial as had been envisaged.  It was clear that the current approach was
inadequate.  There was a clear need for a sequencing of future negotiations in a more focused manner.
In this context, Brazil had suggested that the CRO focus first on the overall architecture, and,immediately after the completion of the work on architecture, take up the question of product-specific
rules.  It had also been indicated that the first quarter of 2001 would be the target date for the
completion of the work on architecture.
1.3 The representative of the European Communitie s, facilitator for the informal plurilateral
discussions for overall architecture, stated that there was substantial agreement on key issues,
although a complete consensus had not yet been reached.  Despite a setback after the Seattle
Ministerial Conference, the willingness to achieve a compromise had been reinstated.  With regard to
Appendix 1 (wholly obtained goods), new proposals for fishery products had been made as a new
starting-point for discussions; and consensus was being reached on other outstanding issues
concerning parts recovered from non-repairable articles.  As concerned Appendix 2, the major
problem lay in Rule 2(c).  In order to illustrate the questions concerning Rule 2(c), a motorcycle was
taken as an example:  the motorcycle not fitted with an engine (HS 8711) was produced in country A;
an engine (HS 8407) was produced in country C;  the engine was fitted in the motorcycle (HS 8711)G/RO/M/31
Page 2
in country B;  and the proposed rule was "CTH, except HS 8407".  In this case, according to one
proposal in Rule 2(c), the origin of the motorcycle would be country A, but according to another
proposal, origin could not be determined under Rule 2(c), but under Rule 2(f), where the country of
origin would be country C.  In this same situation, if the proposed rule was "CTH", both proposals
would lead to the same origin outcome, country A.  This example emphasized, as some delegations
stated, that rules of origin should be simple and practical, and that complicated options should beavoided.  It should also be noted that most outsta nding issues concerning overall architecture seemed
to be of a practical nature rather than a political one, increasing the probability of resolving the issues
through discussions.  Furthermore, due to the extensive discussions which had taken place at the
meetings of the CRO and the Technical Committee on Rules of Origin, most of the complex technical
questions had already been clarified.  In this connection, the representative of the European
Communities shared the view of Brazil that the two-track approach had been useful at the initial stage
of negotiations, since discussions on product-specifi c rules helped to enhance understanding of the
text of the architecture by demonstrating how it worked in practical situations.  However, at this stage,
focusing on the overall architecture seemed to be appropriate.  Without agreement on the architecture,
it appeared difficult to proceed further with the work on product-specific rules.  Similarly, focusing on
horizontal (or repetitive) issues would also streamline various issues concerning product-specific
rules.
1.4 The representative of Switzerland stated that a number of issues concerning product-specific
rules had nothing to do with the architecture, therefore it might be better to continue with product-
specific rules until the situation became clear.  However, if the CRO wished to focus on the
architecture at the future meetings, some horizontal issues, such as mixture or assembly, which wereclosely tied with architectural issues, should also be discussed.
1.5 The representative of Canada, facilitator for the informal plurilateral discussions on chapters
41-43, stated that there were 12 issues and four of  those were identified as being of a horizontal
nature, meaning that they were tied to textiles.  Three issues had been resolved in 1997, thereforeMembers had discussed five issues at the plurilateral meetings in October 1999 and February 2000.
Since those two meetings Members were in a bette r position to understand the views of one another
and some options had been narrowed down.  However, the number of outstanding issues remained
unchanged.   Two obstacles to progress were identified.  First, Members' positions were very
inflexible reflecting their interests in specific products.  Secondly, there was a lack of technical detail
on the nature of the production processes needed in order to make a clear-cut case for substantial
transformation.  In this context delegations needed three things to get decisions:  more detailedtechnical information;  compromises between the posi tions taken;  and some flexibility in positions.
The representative of Canada also supported the suggestion made by Brazil to focus attention on the
architecture, on which much information had now been accumulated.  However, the facilitators for
product-specific rules should continue their intersessional discussions.  As concerned working
documents, the table prepared by the Secretariat for the discussion on agricultural products had beenextremely useful.
1.6 The representative of Chile, facilitator for the informal plurilateral discussions on chapters
12-14 and 19, stated that consensus had been reached on one issue and there was growing consensus
on four of the 12 outstanding issues discussed at the meeting in June 2000.  There were two mainobstacles to progress:  the lack of participation by developing countries;  and the complexity of the
working documents.  Flexibility in positions, standardization of working documents and consistency
of origin rules applicable to horizontal issues, were  identified as the criteria needed in order to get
decisions at future meetings.  In this context, he supported the new, focused approach suggested by
Brazil.  The architecture and horizontal issues should first be finalized before taking up the questionof product-specific rules.  However, this approach did not mean that discussions on product-specific
rules should be postponed.  The facilitators were already empowered to continue their intersessional
discussions, while the main impetus should be on architecture and horizontal issues.G/RO/M/31
Page 3
1.7 The representative of the Philippines, facilitator for the informal plurilateral discussions on
chapters 25-27 and 71, stated that significant progress had been made in these chapters. Further
progress also appeared to be possible on several issues.  However, there were some issues on which,
according to the views of some delegations, no decision would be reached until discussions were
finished, due to the possible implications of these issues for other WTO Agreements. Some Members
found it difficult to compromise at this stage when they had not yet seen the whole picture of wherecompromise would be needed.  In order to get decisions at future meetings, Members needed to
prioritize their trade interests in the various product- specific rules that they were negotiating.  If they
had very little trade in a specific product, they would be more willing to compromise.  She was open
to any new approach;  more progress could be made under Brazil's new modality.
1.8 The representative of Australia, facilitator for the informal plurilateral discussions on chapters
74-81, stated that there were 24 unresolved issues in these chapters.  During the plurilateral meetings
in February 2000, these chapters had been discussed for the first time in the CRO.  Although
scheduled for discussion, they had not been examined at the previous plurilaterals in November 1999
because the difficult chapters on iron and steel had taken up all available time on that occasion.  In
February, all 24 issues were covered in one day of discussion.  No consensus was reached on any
issue.  There was a growing consensus towards one option in the case of six issues, and in most casesthe remaining supporters of alternative options indica ted their intention to reconsider their positions.
On a number of issues, Members indicated, encouraged by the facilitator, that they would hold
intersessional discussions by e-mail to advance the issues.  However, no intersessional e-mail
discussions had taken place.  The following obstacles to progress had been identified:  a number of
horizontal issues that cut across chapters and where progress in non-ferrous metals was inhibited bylack of progress in other chapters (e.g. cold-rolling  and assembly);  interaction with (unresolved) rules
in architecture;  no country in particular stood out as holding up progress, but there had been a general
lack of flexibility on most issues;  difficulty of trading off between non-ferrous metals and the almost
infinite number of outstanding issues in other chapters;  lack of incentive to go first in terms of
making concessions unilaterally;  sheer technical complexity of some of the issues;  complexity of thenegotiating text;  and a lack of clarity about the role of  the facilitator, e.g. with regard to intersessional
e-mail discussions.  As concerned the question of what should be done to get decisions at future
meetings, he stated that some momentum had developed at the plurilateral meeting in February, but
Members missed the opportunity to take advantage of this momentum.  Therefore, a more definite
pattern in the schedule for product-specific plurilaterals would be needed so that a set of chapters
could be dealt with in a cluster of two or three meetings within a reasonably short space of time.
Delegations needed to seek greater flexibility and ne eded to ensure they were adequately prepared for
the plurilaterals, which should include having a clear understanding of fall-back positions and room to
manoeuvre.  The role of the facilitator should also be clarified: e.g. what scope there might be for the
facilitators to become more active.
1.9 The representative of New Zealand, facilitator for the informal plurilateral discussions on
chapters 17-18 and 72-73, stated that many issues in these chapters were still outstanding.  The
following obstacles to progress had been identified for chapters 17 and 18:  lack of clarity about the
big picture;  fundamental differences between thos e who supported a "wholly obtained" approach and
those who took a more liberal view of what could confer origin (strongly interconnected with
architecture discussions and other agriculture chapters);  very little flexibility shown by delegations onkey issues;  lengthy time lapse between plurilaterals;  delegations not prepared to respond to
compromise suggestions on the spot;  some confusion about a number of the technical processes
involved (e.g. making of cocoa butter, fat and oil);  and even where issues of substantial
transformation were resolved there was still no agreement on how to express the rule.  As concerned
the question of what should be done to get decisions for chapters 17 and 18 at future meetings, shesuggested as follows:  identification of issues which were subject to the resolution of architecture or
product-specific rules in other chapters (joint discussion of these issues if appropriate (e.g. wholly
obtained));  careful consideration by all delegations as to where they had flexibility;  development of
more possible compromise solutions;  timely responses by delegations to questions and compromise
proposals;  and clarification of outstanding technical issues.  The following obstacles to progress hadG/RO/M/31
Page 4
been identified for chapters 72 and 73:  nature of the products – extremely technical processes
involved, strong national interests (origin was a real issue for the industry);  not enough flexibility
shown by delegations;  only a few delegations appeared to have given any thought to possible
compromises;  some interested Members were not engaged in the plurilateral process, making it
difficult to take final decisions;  and a number of issues involved processes which were not currently
used in practice.  As concerned the question of what should be done to get decisions at futuremeetings, she suggested as follows for chapters 72 and 73:  careful consideration by all delegations as
to where they had flexibility;  development of compromise solutions;  timely responses by delegations
to questions and compromise proposals;  encouragement of all interested Members to participate in
the discussions at an early stage;  and prioritisation of issues so that those which were of current
commercial reality were considered first.  She supported Brazil's suggestion of moving the focus to
architecture for some time, as well as the idea of having some time-frame for the work.  The time-
frame should be realistic and achievable.
1.10 The representative of Korea, facilitator for the informal plurilateral discussions on chapters
86-89, stated that although no tangible progress had been made in these chapters at the meeting in
April 2000, Members had developed a far better understanding of the issues.  It was pointed out that
in these chapters there had been many horizontal options, coming from assembly rules or value-addedrules etc.  If these horizontal options could be set aside in order to deal with them horizontally, the
number of remaining options would be reduced down to one or two.  As concerned the main obstacles
to progress, loss of momentum was singled out as the most important barrier.  In order to rekindle the
lost momentum, he suggested that the horizontal issues be put on the shelf for the time being, and that
the facilitators and the group come up with a single package for each chapter.
1.11 The representative of the United States, facilitator for the informal plurilateral discussions on
chapters 84, 85 and 90, stated that the Philippines' description of the situation in chapters 25-27 and
71 was very close to that in chapters 84, 85 and 90.  It seemed clear that Members were interested in
the bigger picture before making a move, especially in chapters 84, 85 and 90 where there was afundamental collision of views as to what the bi g picture for the final product would be.  In this
context he joined in support of two key words in Brazil's submission, focus and sequence.
1.12 The representative of the Czech Republic, facilitator for the informal plurilateral discussions
on chapters 6, 9 and 10, stated that some progress had been made in some minor issues in these
chapters, but Members were not ready for a solution in the major issues, where Members' interests
differed widely.  There were some horizontal or cross-cutting issues, such as grinding, mixing orblending, and these issues could be dealt with along with all the other horizontal issues.
1.13 The representative of Mauritius thanked Brazil for its submission of a paper and requested
that the working documents should be updated, reflecting the results of the work done to date by the
CRO.
1.14 The representative of Hong Kong, China stated that at the meeting of June 2000, for some
subjects Members had merely been taking stock of positions rather than really negotiating.  In order to
keep momentum, the plurilateral groups should meet consecutively several times to discuss the same
chapters, and Members should focus on a cluster of related product sectors each time.  As concernedthe submission from Brazil, she stated that the discussion of the overall architecture was closely
linked with the discussions on the product-specific rules.  If a certain good did not satisfy the primary
rule, origin would be determined by the residual ru les of the overall architecture.  Hong Kong, China
had supported the two-track approach to ensure that the development of the overall architecture would
not disrupt the intent of the product-specific rules.  The two-track approach could enable Members tokeep track and to reflect on the implication of one issue over the other.  However, if there was a
consensus on this matter she could go along with the consensus.
1.15 The representatives of Argentina, and Uruguay
, supported Brazil's suggestion.G/RO/M/31
Page 5
1.16 The representative of Norway stated that a major part of the work on the product-specific
rules was rather technical and required good knowledge of the principles of rules of origin as well as
of the Harmonized System.  In order to make progress in the HWP and finalize the work within a
reasonable time-frame, all countries participating in the work should reassess their positions and make
sure that their delegates had the necessary mandates, i.e. instructions from capitals with the necessary
flexibility.  The organization of meetings - plurilateral meetings followed by informal and formalmeetings of the CRO  - was a good idea, but the plurilaterals did not achieve sufficient progress.  The
plurilateral meetings had more and more become a forum for reading and confirming positions
already known, instead of being dynamic meetings where progress was being made.  Based on
experience so far, Members should strive to make th e meetings into fora for substantial consideration
of the various alternatives, instead of travelling across the globe simply to state or repeat positions on
various issues.  Positions should be communicated to the Secretariat in advance of meetings.  Norway
was of the view that the results of the HWP should be a set of rules which were simple, consistent andfunctional.  These principles seemed to have been lost during the process and Members were now
faced with almost 2,000 pages of rules of origin.  They had to assess how to make rules simpler and
more functional.  It was recognized that countries had different interests, and thus that all members
had economic considerations to maintain in certain areas.  But all areas could not be of equal
importance to all members.  The time had come for all countries to be prepared at least to makecompromises and revise their positions on issues which were of minor interest to them.  Furthermore,
all countries should look at their positions from the trade angle, asking whether their proposals for
specific rules in all cases covered goods which were traded internationally, and the importance of
such trade.  Harmonised rules of origin would be an important tool in international trade and such
rules would ensure transparency and equal treatment globally.  The General Rules and Appendix 1 –Wholly Obtained Goods – were to a large extent acceptable, even though the text could be improved
and possibly shortened.  With regard to Appendix 2 – Product Specific Rules of Origin – and
especially Rule 2 – Determination of Origin – th e appendix seemed too complicated.  There was need
for a rule on how to determine origin and apply the rules set out in the matrix, but Rule 2, as drafted,
seemed too complicated for traders and other users of the Harmonised Rules of Origin.  Rules whichwere too complicated and costly to apply were of no use either for the authorities or the traders and
producers.  With regard to product-specific rules, there were some obstacles to progress, such as:
- too many splits of 4-digit HS headings and 6-digit HS sub-headings, with a consequent loss of
transparency and consistency;
- lack of precise assessment made by proponents of the various splits as to whether the splits
were reflecting real trade, actual economic interests, or were necessary for other reasons;
- delegations had not sufficiently prepared possible fallback positions.
1.17 The Chairman summarized the discussions as follows:
"The CRO discussed in detail the status of negotiations on the overall architecture as
well as on product-specific rules in light of the following three questions:
i.) where are we;
ii.) what are the obstacles to progress; and
iii.) what do we need to do to get decisions?
Assessments provided by the facilitators and a submission from Brazil were very
useful contributions to the discussions.
As concerned the overall architecture, it was recognized that many complex technical
questions had been clarified through extensive discussions over the past two years, while the
main obstacle, Rule 2( c) and (f) of Appendix 2 remained unresolved.  The willingness to
achieve compromise appeared to be re-instituted.G/RO/M/31
Page 6
As concerned product-specific rules, it was noted that to date the CRO had resolved
only about 20 out of 481 outstanding issues transferred from the Technical Committee for
decision.  Although the number of resolved issues did not appear impressive, it was
recognized that Members had developed a better understanding of issues through detailed
technical discussions and a number of options had been narrowed down.
With regard to the main obstacles to progress in connection with product-specific
rules, the following points were identified by Members:
- lack of sufficient participation in the plurilaterals;
- lack of full comprehension of an overall picture of the harmonization work, including
the implications of the harmonized rules of origin on other WTO Agreements;
-  very little flexibility shown by delegations on key issues;-  delegations were not prepared to respond to compromise suggestions on the spot;
-  lengthy time lapse between plurilaterals on the same subjects;
-  some confusion about a number of technical processes involved;
-  some Members that had shown a strong interest earlier in certain product groups were
not engaged in the plurilateral process, making it difficult to take final decisions;
-  there was a general recognition and reaffirmation of the need to conclude the HWP as
soon as possible.
As concerned the question as to what was needed to get decisions, there was a
recognition of the need for a clean focus and sequencing of future negotiations.  Membersagreed that  more focused work on the overall architecture would require a slight adjustment
to the Notional Work Programme for the September meeting and an additional meeting in
November 2000.   At least the same amount of time will be assigned to the product-specific
rules discussions in November as had been previously agreed.   This in no way modified the
original mandate nor the two-track approach.  In this context, throughout the process it was
understood that special attention would have to be paid to cross-sectoral issues.
Some Members expressed concern about a lack of confidence in the negotiations.
However, most Members were convinced that the agreed Notional Work Programme for 2000
already increased confidence among Members and that the newly agreed work programme for
the remainder of the year 2000, with a clear focus and sequence, would further increase
confidence.
It was also pointed out that a more focused work on the overall architecture would
enhance understanding of the general picture of the harmonization work.
Members agreed that in order to maintain momentum, the future work programme
should be scheduled in a more focused manner, to the effect that the CRO could consecutively
take up the same issue without a lengthy time lapse.
Many Members raised the issue of the overall impact of certain aspects of the
harmonization work on trade facilitation in general.
There was a discussion on the negotiating text.  It was noted that the new format for
Chapters 1-24 (agricultural products and fish) circulated in July 2000 by the Secretariat was
useful.  Some Members requested the Secretariat to update the negotiating text for other
chapters on the basis of the new format."
1.18 The CRO took note of the statements made.G/RO/M/31
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II. ADJUSTMENTS TO "NOTIONAL WORK PROGRAMME FOR 2000" (G/RO/M/27)
2.1 The CRO agreed on the following agenda for subsequent meetings:
25 October-3 November 2000 Overall architecture1
20-24 November 2000 Product-specific rules
27-29 November 2000 Product-specific rules
30 November 2000 Informal meeting of the CRO
1 December 2000 Formal meeting of the CRO
2.2 The representatives of New Zealand and the United States  stated that there had been no
agreement in the CRO on the agenda for the meetings from 25 October to 3 November 2000.
2.3 The representatives of European Communities and New Zealand  stated that the agenda for
30 November and 1 December 2000 should include a stocktaking of progress made in the HWP.
III. FINALIZATION OF AGENDA FOR SEPTEMBER MEETING
3.1 The CRO agreed to hold its next meeting on Friday, 29 September 2000, on the basis of the
following agenda:
18-19 September 2000 (10 a.m.): Plurilateral meetings hosted by India to
discuss the product-specific rules of
chapters 50-56 and 58-60 (fibres, yarns,fabrics)
20 September 2000 (10.a.m.): Plurilateral meetings hosted by Singapore to
discuss the product-specific rules of
chapters 57 and 63 (carpets and made-ups)
21 September 2000 (10 a.m.): Plurilateral meetings hosted by Switzerland
to discuss the product-specific rules of
chapters 61 and 62 (apparel)
22 September 2000 (10 a.m.): Plurilateral meetings hosted by Canada to
discuss the product-specific rules of
chapters 64-67 (footwear and headgear)
25-29 September 2000 (10 a.m.): Plurilateral meetings hosted by the
European Communities to discuss the
overall architecture
29 September 2000 (3 p.m.) Informal meetings to discuss endorsement
of the proposals on the harmonized rules of
origin;  reporting of the plurilateral
meetings;  deadline for completion of thework programme on harmonizing rules of
origin;  implications of the implementation
of the harmonized rules of origin on other
WTO Agreements;  responsibilities of the
TCRO;  stocktaking of the progress made inthe HWP;  annual review of the
                                                     
1 Subject to decision to be made at the meeting of the CRO on 29 September 2000.G/RO/M/31
Page 8
implementation and operation of the
Agreement on Rules of Origin;  and other
business
29 September 2000 Formal meeting
(after the informal meeting)
IV. DEADLINE FOR THE COMPLETION OF THE WORK PROGRAMME ON
HARMONIZING RULES OF ORIGIN
4.1 The representative of the Philippines stated that the deadline issue was important and she was
encouraged by the wishes of some delegations that the work on overall architecture could be
substantially finished by the end of  the current year.  Although Members were discussing the issue of
trade facilitation in other fora, the completion of the work of the HWP itself was trade facilitating.
4.2 The representative of Mexico stated that Mexico could go along with any consensus.
4.3 The representative of Korea supported the statement made by the Philippines that tangible
results on the overall architecture as well as horizontal issues should be brought about by the end of
the current year.
4.4 The representative of India supported the statements made by Korea and the Philippines and
stated that setting a deadline for a work programme was a common practice of WTO bodies and was
already built into the Agreement on Rules of Origin itself.  The business community of Indiaquestioned why Members were engaging in discussions on trade facilitation when the HWP which
was the next trade-facilitating element, was not near conclusion.  She requested the Chairman to
intensify informal consultations with Members and to report the outcome of the consultations to the
CRO at the next meeting in September.
4.5 The CRO took note of the statements made and agreed
 to revert to this issue at the next
meeting.  The Chairman stated that he would undertake further informal consultations with Members
on this matter before the next meeting of the CRO.
V. OTHER BUSINESS
- Agreement between the European Communities and the United States on rules of origin.
5.1 The representative of India stated that the mutually agreed solution between the EC and the
US concerning the dispute on changes in rules of origin by the US had not been circulated.
5.2 The representative of the United States stated that the notification would be made soon.2
__________
                                                     
2 Circulated in document G/RO/D/3/Add.1