RESTRICTEDWORLD TRADE
ORGANIZATIONG/RO/M/35
3 May 2001
(01-2277)
Committee on Rules of Origin
MINUTES OF THE MEETING OF  16 MARCH AND 4 APRIL 2001
Chairman:  Mr. S. Simon
The agenda proposed for the meeting, contained in WTO/AIR/1485, was adopted by the
Committee on Rules of Origin (CRO) as follows:
I. OVERALL ARCHITECTURE OF THE HARMONIZED RULES OF ORIGIN
(G/RO/45) ...................................................................................................................... ............2
II. PRODUCT-SPECIFIC RULES OF  ORIGIN (G/RO/41).....................................................4
A. C HAPTERS 28-40 (C HEMICAL PRODUCTS )..................................................................................5
B. C HAPTERS 68-70 ( CERAMICS ).....................................................................................................7
C. C HAPTER 71 ( PRECIOUS STONES AND METALS )..........................................................................8
D. C HAPTERS 72-73 ( IRON AND STEEL ) ...........................................................................................8
E. C HAPTERS 74-81 ( NON-FERROUS METALS ).................................................................................9
F. C HAPTERS 82-83 ( ARTICLES OF METAL )...................................................................................10
G. C HAPTERS 84, 85 AND 90..........................................................................................................11
H. C HAPTER 91 ( WATCHES AND CLOCKS ) .....................................................................................17
III. ENDORSEMENT OF PROPOSALS ON HARMONIZED RULES OF ORIGIN
(G/RO/W/62/REV.1).............................................................................................................. .17
IV. IMPLICATIONS OF THE IMPLEMENTATION OF THE HARMONIZED
RULES OF ORIGIN  ON OTHER WTO AGREEMENTS ................................................18
V. OBSERVER STATUS FOR INTERNATIONAL INTERGOVERNMENTAL
ORGANIZATIONS (G/R O/W/19/REV.3) ...........................................................................18
VI. NOTIFICATIONS UNDER ARTICLE 5 AND PARAGRAPH 4 OF ANNEX II
OF THE AGREEMENT ON RULES OF  ORIGIN (G/RO/N/30 AND 31).......................18
VII. ELECTION OF  OFFICE RS..................................................................................................19
VIII. OTHER BUSINESS............................................................................................................ ....19
(i) Draft agenda for the nineteenth session of the Technical Committee on Rules of
Origin:   technical re ctification exercise ..................................................................................19
(ii) New working methodology for the Harmonization Work Programme .....................................19
ANNEX .......................................................................................................................... .......................22G/RO/M/35
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I. OVERALL ARCHITECTURE OF THE HARMONIZED RULES OF ORIGIN
(G/RO/45)
1.1 The representative of the European Communitie s, facilitator for the informal plurilateral
discussions on the overall architecture, stated as follows:
(1) INTRODUCTION
Between 5 and 8 March 2001 the informal meeting on overall architecture was devoted to:-Definitions
-General Rules
-Appendix 1-Appendix 2
(2) RESULTS OF DISCUSSIONS(2.1) DEFINITIONSConsensus on the definitions had already been reached at the previous meeting.(2.2) GENERAL RULES
General Rule 1: Scope of Application
Consensus on this rule was reiterated.
General Rule 2: HS
Paragraph 1
Consensus on paragraph 1 had already been reached at a previous meeting.Paragraph 2
At the previous meeting the majority of delegations felt there was no need to refer specifically to
changes to origin rules resulting from amendments to  the HS.  In fact, provisions for such mechanism
fall under the scope of amendments to results of the Harmonization Work Programme referred to in
Article 6 para 3 of the Agreement on Rules of Origi n.  As some delegations have now pointed out the
need for some indication concerning the mechanism regulating amendments to harmonized rules thefacilitator offered a new text (see G/RO/45/Rev.1).
Some delegations  have questioned the adequacy of the facilitator's proposal with reference to changes
resulting from amendments to results of the Harmonization Work Programme.  A few of them felt that
it should also contain specific reference to the timely implementation of amended harmonized rules,and to give them time for further consideration, the facilitator is keeping the previous text in the
facilitator's box.  Nevertheless, delegations have in general expressed interest in the facilitator's
proposal, for further consideration.
General Rule 3: Determination of Origin
Consensus on this rule had already been reached at the previous meeting.G/RO/M/35
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General Rule 4: Neutral Elements
As the only delegation having reservations on the text lifted them, the text is now  unbracketed, except
for the addition requested by two Members.
General Rule 5: Packing and Packaging
Consensus had already been reached at the previous session.  However one delegation requested to
reopen the discussion as the text failed to cover the cases in which the container gives the whole its
essential character and the contents are thus classified with the container.  There was no support for an
addition to the text.  On the other hand, some Me mbers even felt that the final sentence of the
provision was redundant and could therefore be deleted.  The facilitator recommended that thediscussion should not be reopened at this time.  This was agreed.
General Rule 6: Accessories and Spare Parts and Tools
Consensus had already been reached at a previous session.(2.3)  APPENDIX 1
(a) Scope of Application
Consensus had been reached at a previous session.(b) Minimal Operations and Processes
Consensus was reached on this provision.  One delegation stated that it should also apply to
Appendix 2 (see G/RO/45/Rev.1).
Definition: 1 letter (a) through (i)
The group confirmed consensus on these definitions.Definition 2: Products of sea fishing and other products taken from the sea
At the request of the CRO Chairman the issue was not discussed.(2.4) APPENDIX 2: PRODUCT SPECIFIC RULES OF ORIGIN
Rule 1: Scope of Application
Consensus had already been reached at a previous session.Rule 2: Application of Rules
Consensus was confirmed on Rule 2(a).  As regards Rule 2(b) consensus was achieved on the
amended text (see G/RO/45/Rev.1).  As regards rule 2(c), a new text is being proposed with a view to
achieving consensus at the next meeting (see G/RO/45/Rev.1).  As regards rule 2 (d) a number of
delegations expressed some reservations as it seems more appropriate for these rules to be presentedas Chapter Notes.  Consensus was achieved on rule 2(e).
Rule 3: Determination of OriginG/RO/M/35
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As regards rule 3(a) there is growing interest in the text proposed by the facilitator and supported by
two delegations.  Some delegations, however, felt the wording could be improved.  They were invited
to offer alternative proposals.
Consensus on rule 3(b) was reconfirmed.As regards rules 3(c) and (f), it appeared from the debate that any further technical discussion would
be fruitless.  The group therefore is increasingly interested in the package offered by the proponent of
the first alternative of rule 3(c) who offered to drop its proposed text on condition that this resulted in
consensus on the first alternative of rule 3(f), and with the clear understanding that rule 3(c) applied to
goods that were almost finished, i.e. maintaining the same Harmonized System description as the
processed good.
Consensus was confirmed on rules 3(d) and (e).Rule 4: Intermediate Materials
The principle of this provision is acceptable to the whole of the group.  However, one delegation
confirmed its request for the initial  bracketed text to be included in the provision.  Another delegation
requested that the  facilitator's box should contai n an indication whereby the originating status was
acquired by fulfilling a primary rule or chapter residual rule.
Rule 5: Interchangeable goods and materials
The facilitator proposed a text following discussion in the group of the previous proposals for this
provision.  Further to the new discussion the text underwent some editorial changes (see
G/RO/45/Rev.1).  One delegation indicated that it could be necessary to mention a referenceaccounting period.  Other delegations expressed reservations on the final sentence of the text stating
that the use of this system shall not give rise to more products originating in a specific country than
would have been the case had the materials or goods been physically separated.
Rule 6:  Putting up in sets or kits
There is growing consensus that putting up in sets is not origin conferring, and that there is no need
for a specific rule.  Three delegations, on the othe r hand, maintained their request for a specific sets
and kits rule.
Rule 7:  Collection of parts
With the exception of the proponent, all delegations present were against the provision.Rule 8:  De Minimis
There was general support on the rule being kept in the introductory part to Appendix 2, although
some delegations proposed that it be accompanied by Chapter Notes fine-tuning its percentage level.
One delegation was questioning the mandatory nature of the provision.
1.2 The CRO took note of the statement.
II. PRODUCT-SPECIFIC RULES OF ORIGIN (G/RO/41)
2.1 The Vice-Chairman stated as follows:G/RO/M/35
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General Comments
- Important progress was made on many sectoral issues thanks to the spirit of compromise shown
by many Members in view of the approaching deadline for the HWP.
- In some chapters, notably chapters 72-73 (Iron and Steel), 84-85-90 (Machinery), it was a
prevailing view that agreement on some key global issues would facilitate the agreement on
product specific issues.
- The contribution of facilitators, as well as the quality service of the Secretariat, was highly
appreciated once again.
A. CHAPTERS 28-40  (CHEMICAL PRODUCTS )
No.1
- No consensus was reached.
No. 2
- No consensus was reached.  It was noted that mere putting up of medicaments in packaging for
retail sale was not origin-conferring (Note 8 for Chapter 33).  The remaining disagreement
concerned whether or not pharmaceutical dosage forms produced under stringent conditions was
origin-conferring.
No. 3
- No consensus was reached.  It was noted that mere putting up of medicaments in packaging for
retail sale was not origin-conferring (Note 8 for Chapter 33).
No. 4
- A growing support for option B was confirmed.
No.5
- A growing support for option B was confirmed.
No. 6
- It was agreed that the title of this issue be changed to "Applicability of mixture rule for Chapter
33".
No.7
- No consensus was reached.
No. 9
- Supporters of option B (US, Canada) and option C (EC) were requested to merge the two options.
Nos. 10 and 11
- No consensus was reached.
No. 12
- There was a consensus to delete this issue.
Nos. 13 and 14
- No consensus was reached.
No. 15G/RO/M/35
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- There was a consensus on option C (subject to Colombia and Mexico).
No. 16
- There was a consensus on option A (subject to Mexico).
No. 17
- There was a consensus on option A.
No. 18
- There was a growing consensus towards option A. (Canada’s position to be confirmed).
No. 19
- There was a consensus on option B.
No. 20
- There was a consensus on option B.
No. 21
- There was a consensus on option B.
No. 22
- It was agreed to deleted option B.
No. 23
- It was agreed that the primary rule of heading 35.07 should read "CTH" (subject to Mexico).
No. 24
- It was observed that issue No. 24 was an identical issue with No. 5.
No. 25
- There was a consensus on option B (subject to Thailand).
Nos. 26-27
- No consensus was reached.
No. 28
- The U.S. made a new proposal.  Other Members were requested to reconsider their positions.
No. 29
- There was consensus on option A.
Nos. 30
- No consensus was reached.
No. 31
- A growing consensus towards Option B was confirmed.
No. 32
- No consensus was reached.  A proponent of option B pointed out that mere smoking of natural
rubber should not be considered as origin-conferring.
No. 33
- There was a consensus on option B (subject to Korea and the Philippines).G/RO/M/35
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No. 34
- There was consensus on option B.
No. 35
- No consensus was reached.
No. 36
- There was consensus on option B.
No. 37
- There was a growing consensus towards option B. (Switzerland and the Philippines requested to
reconsider the position).
No. 38
- There was consensus on option B.
B. CHAPTERS 68-70 ( CERAMICS )
No. 1
- It was noted that glazing under this issue did not practically take place in the normal course of
business.  Members supportin g option B (CAN, EC, US, EGY)  were requested to reconsider their
position.
No. 2
- It was noted that grinding or polishing under this issue did not practically take place in the normal
course of business.  Members supporting option A (CAN, CH, CHI, DOM, JPN, KOR) were
requested to reconsider their position.
No. 3
- Members supporting option A (CH, CHI, DOM, IND, KOR)  were requested to reconsider their
position.
No. 4
- There was a growing consensus towards option A  (with the exception of Mexico).
No. 5
- The Vice-Chairman noticed that there was agreement that change to subheadings 7019.51 to
7019.59 from fibre or yarn of subheadings 7019.19 and 7019.90 be considered as
origin-conferring, and that change among subheadings 7019.51 to 7019.59 be considered notorigin-conferring;  hence the rule should be:
- for 7019.51:  CTSH, except from subheadings 7019.52 or 7019.59;
- for 7019.52:  CTSH, except from subheadings 7019.51 or 7019.59;  and
- for 7019.53:  CTSH, except from subheadings 7019.51 or 7019.52.
No. 6
- There was consensus on option A.
No. 7-8
- No consensus was reached.
Nos. 9-11G/RO/M/35
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- There was a consensus that ‘cutting and polishing ‘ of glassware can be origin-conferring in many
circumstances.  The U.S. was requested to propose an objective criterion for the substantiality of
cutting and polishing a la textile.
No. 12
- There was consensus on option A (subject to India).
C. CHAPTER 71 ( PRECIOUS STONES AND METALS )
Nos. 1-2
- A growing consensus towards option A was confirmed.
No. 3
- All Members (US, HK, JPN, MEX, CH, CAN, IND, PHI, MAU, EC) were invited to  reconsider
the possibility of joining the compromise proposal, option B.
No. 4
- No consensus was reached.
No. 5
- It was agreed that this issue would be considered together with other horizontal issues in chapters
82-90.
D. CHAPTERS 72-73 ( IRON AND STEEL )
Nos. 1(a)(i) and (ii)
- No consensus was reached.
No. 1(a)(iii)
- It was agreed that option B be deleted.
No. 1(b)
- No consensus was reached.
No. 1(c)
- Malaysia was requested to reconsider its position.
No. 2(a)
- There was a growing consensus towards option A.  (ARG and CHI requested to reconsider the
position).
Nos. 2(b)(i), (iii), (c)(ii), (d)(ii) and (e)
- It was noted that the cold-rolling under these issues did not take place in the normal course of
business;  hence Option A Members (AUS, JPN, KOR, NZ) were requested to reconsider the
position..
Nos. 2(b)(ii), (iv)
- Members supporting options B, C, D and E were requested to streamline those options.
No. 2(c)(ii)
- A growing consensus for cold-rolling process was confirmed.  Member supporting Option B
(CHI) was requested to reconsider the position.G/RO/M/35
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No. 2(d)(i)
- A growing consensus towards option A was confirmed. Chile was requested to reconsider their
position.
No. 2 (d) (ii)
- A growing consensus towards option A was confirmed.  Chile was requested to reconsider their
position.
No. 2(e)(i)
- It was agreed that option C be deleted.
No. 3
- No consensus was reached.
No. 4
- Members supporting options B, C and D were requested to streamline those options.
Nos. 5-6
- No consensus was reached.
Nos. 7-8
- It was noted that resolution of issue Nos. 7 and 8 rested upon the definition of assembly and
simple assembly (Chapter Note 1).
No. 9
- It was noted that change to ex 73.08(c) from 73.01 and 73.04 through 73.06 might result from
simple operations;  hence Members supporting option A  (JPN, PHI, EGY, KOR, CAN) were
requested to reconsider their positions.  There was growing support for option B.
No. 10
- Members supporting option A ( SG, KOR, PHI, CH)  were requested to reconsider their positions.
No. 11
- No consensus was reached.
No. 12
- Members supporting option A ( SG, [MOR,] PHI, KOR, JPN) were requested to reconsider their
positions.
- During the discussion, it was a prevailing view  that agreement on some key global issues would
facilitate the agreement on product specific issues.  These issues included; (1) cold-rolling,  (2)
production of angles, shapes and sections,  (3) coating and  (4) assembly.
E. CHAPTERS 74-81 ( NON-FERROUS METALS )
No. 1
- It was agreed to delete option A2 (CTSHS).
No. 2
- There was consensus on option A.
No. 3G/RO/M/35
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- There was consensus on option A.
No. 4
- No consensus was reached.
Nos. 5-7
- There was consensus on option A.
No. 8
- There was a growing consensus towards option A.
Nos. 9-11
- No consensus was reached.  Members supporting option B were requested to reconsider their
positions.
No. 12
- There was consensus on option A.
Nos. 13-14
- No consensus was reached.
Nos. 15-16
- There was a growing consensus towards option B.  Canada indicated its willingness to reconsider
its position.
No. 17
- No consensus was reached.  It was noted that the assembly rule at Chapter level already addressed
this issue.
Nos. 18-20
- It was noted that parallel decisions had taken place under issue Nos. 7-9 of Chapters 72-73.
No. 21
- A growing consensus towards option B was confirmed.  Mexico was requested to reconsider their
positions.
Nos. 22-23
- There was consensus on option A.
No. 24
- No consensus was reached.
F. CHAPTERS 82-83 ( ARTICLES OF METAL )
Nos. 1 and 9
- Consensus was reached that a threshold should be developed.   The delegation of Switzerland was
requested to consult with other Members with a view to submitting a single proposal for assembly
and blank rules.
No. 2
- There was consensus on option B (subject to Mexico, Canada and Chile).
No. 3G/RO/M/35
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- It was noted that an assembly rule could address this issue.
No. 4
- There was consensus on option B1 (CTH) (subject to Switzerland and Morocco).
No. 5
- There was a growing consensus towards option A1 (with the exception of EC).
No. 6
- Members supporting option A (MEX, MOR, KOR) were requested to reconsider their position.
No. 7
- There was consensus on option B.
No. 8
- There was consensus on option B.
No. 10
- No consensus was reached.
No. 11
- Members supporting option A (CAN, MAL, MEX, PHI)  were requested to reconsider their
positions.
No. 12
- The US made the following suggestion for option A:
- ex 8303(a) (armoured or reinforced safes, strongboxes and doors and safe deposit lockers for
strong rooms:  CTHS
- ex 8303(b) (cash or deed boxes and the like, of base metal):  CTH
- ex 8303(c):  CTH
- Colombia was requested to reconsider the position.
No. 13
- The Vice-Chairman proposed the "CTH" rule for this issue.
No. 14
- There was consensus on option C.
No. 15
- Consensus was reached on Option C (subject to CHI).
Nos. 16-17
- The Vice-Chairman proposed the "CTH" rule for these issues.
G. CHAPTERS 84, 85 AND 90
The proposal of Switzerland:  During the course of initial discussions of the outstanding
product-specific issues, the delegate of Switzerland offered for consideration a draft scheme for
compromising outstanding issues in chapters 84 and 85 that arise primarily from the assembly ofgoods. Thus, it was noted that the proposal did not serve as a complete solution to all the issues
remaining in these chapters;G/RO/M/35
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The proposed rules are outlined as follows:
1. For parts produced from articles of other headings - CTH2. For parts obtained from parts of the same heading - 5 part rule or 40% value-added3. For machines obtained from parts - CTH or CTSH, as appropriate4. For machines ("goods") finished from machines of the same heading/subheading - 40% value-
added
In addition, it was contemplated that  legal notes w ould be necessary in order to give effect to the
intention of the proposal.
The notes would address the following matters:A. Some limitations would be provided for CTH/CTSH rules where the change of classification
occurred as a result of simple encasement, mounting to a base, etc.
B. "Minor" parts (to be defined), e.g. parts of general use, would not be counted in the 5 parts rule.C. The value added rule would require manufacturing or processing to take place for the rule to be
applied.
D. Assembly of a machine from an unassembled collection of parts of the same heading would be
origin conferring.
E. Exceptions to the general scheme would be considered when circumstances required.
The following may serve as a draft guide to the rules:
For machines - CTH, (or CTSH from parts), or change within the heading or subheading provided
40% value-added is satisfied.
For parts - CTH or change within the heading or subheading provided the 5 part rule or 40% value-
added rule are satisfied.
In view of the possibility that the proposal may serve as a basis for settling many of the outstanding
issues, it was decided to determine the probable outcomes of those issues based on application of the
proposal. The results of the discussion are as follows.
Issue No. 1:  The Committee agreed that the assembly of machines identified under this issue could be
addressed under Rule 3, machines obtained from parts.  A delegation indicated that while it could give
favorable consideration to this tariff shift type of rule, they would wish to examine each instance to
verify that the result was substantial transformation.
Issue No. 2:  Upon observation it appeared that the applicable rule would be Rule 4, for machines
finished from machines without change of classification.  Under existing proposals this issue was
concerned with production of goods from blanks, and was addressed by chapter rules.  A proponent of
such rules indicated flexibility concerning this issue.G/RO/M/35
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Issue No. 3:  The manufacture of a finished good from an unfinished good would be covered by the
Rule 4.
Issue No. 4:  For most delegations, changes of classification by application of the second part of
GIR 2(a) would be considered as disallowed by general limitations in the overall architecture.  Those
delegations indicated as supporting Option A, under which such changes of classification would be
considered as origin conferring, were urged to reconsider their positions.
Issue No. 5:  The assembly of an unassembled good from a collection of parts classified in the same
tariff provision would be addressed under Rule 3.  A delegation suggested that this principle was not
controversial, and did not contradict any existing proposal concerning origin criteria, but for one.  The
supporter of Option C was invited to reconsider its position.
Issue No. 6:  There was agreement that change of classification by reason of packaging or
repackaging was not origin conferring for goods of this sector.  The principle has been reflected in the
overall architecture.  It was suggested that the scope of this principle could perhaps be broadened to
address packaging or repackaging in the context of rules other than change of classification rules.
Issue No. 7:   No consensus.
Issue No. 9 :  It was noted that changes in classification solely by reason of changes in use of goods
would be disallowed in the overall architecture.  The principle was widely supported.  It was noted
that some matrix rules might contradict this principle, and would need to be addressed during the
overall coherence phase.
Issue No. 10:  There was an apparent consensus that change of classification by re-certification or
retesting of machines, without accompanying processing,  was not origin conferring.Issue Nos. 11, 12 & 13:  There was no consensus.  For these items the Swiss proposal did not appear
to provide solutions.  On these issues of parts recovery, collection, and disassembly, it was recognized
that further work would be needed to define the problems and account for the practical realities that
actual countries of origin might not be known or easily determinable.  In certain respects, the idea of
assigning origin to the country of recovery woul d amount to considering disassembly, which in other
contexts was not origin conferring, as origin conferring.  Similarly, it seemed illogical for somedelegations to consider the re-assembly of disassembled goods origin conferring when the
disassembly had not been allowed.  The facilitator invited delegations to reassess these issues.
Issue No. 14:  The applicable rule would be Rule 1: CTH.  In this issue the attachment of motors from
outside the heading to parts within the heading would be covered by this simple rule.  It was explained
that in the normal case these operations entail more than mere encasement, because the operations
involve putting the motor on a base and adding a functional element to create a new part.  To the
extent that the operations amounted to simple assembly, the CTH result might be denied by
application of Note A to disallow operations such as encasement or mounting, if so decided.
Issue No. 15:  The probable outcome would also be Rule 1, CTH.  The manufacture of parts using
goods from outside the heading would normally be considered origin conferring.
Issue No. 16:  The probable outcome would be rule 3, CTH/CTSH.  Use of machine tools from
outside the relevant heading would satisfy the rule .  If an existing machining center was finished,
enhanced or further assembled using parts outside the heading origin would probably be determined
under Rule 4.  The machining center itself would not change classification, but further work might
satisfy the 40% value added rule.G/RO/M/35
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Issue No. 17:  Origin would probably be determin ed under Rule 3, CTH/CTSH.  In this instance,
CTSH would allow the use of machining centers to produce multi-station transfer machines.  It was
observed that this issue seemed to present the anomalous case of a machine functioning in effect as a
part in the production of a machine.  The limitations of Note A could apply to prevent the tariff shift
rule from conferring origin if the assembly involved merely connecting the elements.
Issue No. 18:  The probable rule would Rule 4.  An alternative interpretation would consider the non-
numerically controlled machine tools as parts, and Rule 3 would apply to the assembly of numerically
controlled machines using the former.
Issue No. 19:  The addition of ciphering capabiliti es (software and hardware) to equipment would be
treated as finishing operations.  Origin probably to be determined under Rule 4.
Issue Nos. 20 to 31:  While it appeared that rules 3 and 4 would be applied to most of these issues, it
was observed that the proposal may not provide satisfac tory results in view of the fact that the goods
of heading 8471 may be presented either as stand alone machines or in the form of separately housed
systems and that the association of the machines in the form of systems may require only simple cableconnections.
Issue No. 32:  Rule 2.
Issue No. 33:  Rule 1, however note A may apply as mounting on a base seems all that is involved.
Issue No. 34:  Rule 4.
Issue No. 35:  Rule 3, with the possible application of Note A.
Issue No. 36:  This issue is not covered by the proposal.
Issue No. 37:  Rule 1 but Note A may also apply.
Issue No. 38:  Rule 3.  Delegates were invited to consider option B, CTSH.
Issue No. 39:  This is a repackaging issue not covered by the proposal. No consensus was reached.
Issue No. 40:  Rule 3.
Issue No. 41:  Rule 3 but note A may also apply.
Issue No. 42:  Rule 3 but note A may also apply.
Issue No. 43:  Rule 3.
Issue No. 44:  Rule 3.
Issue No. 45:  Rule 2.
Issue No. 46:  Rule 4.
Issue No.47:   Rule 3.
Issue No. 48:  Rule 4.G/RO/M/35
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Issue No. 49:  Rule 3 for parts and rule 4 for sets of machines
Issue No. 50:  Rule 3 but note A may apply.
Issue No. 51:  This issue is not covered by the proposal.
Issue No. 52:  This issue is not covered by the proposal.
Issue No. 53:  Rule 3 or 4 with respect to the assembly issue.
Issue No. 54:  Rule 4 with respect to the assembly issue.
Issue No. 55:  Rule 4.
Issue No. 56:  Rule 3.
Issue No. 57:  Rule 4.
Issue No.58:  Rule 2.
Issue No.59:  Rule 4.
Issue No.60:  Rule 4.
Issue No.61:  This issue concerns programming and is not covered by the proposal.
Issue No.62:  This issue concerns programming and is not covered by the proposal.
Issue No.63:  This issue concerns programming and is not covered by the proposal.
Issue No.64:  Rule 4.
Issue No.65:  Rule 4.
Issue No. 66:  Rule 4.
Issue No.67:  Rule 4, but note A may apply.
Issues in Chapter 90
Issue No. 75:  Growing consensus for Option A.  One delegation moved from Option B to Option A.
Issue No. 76:  No consensus.
Issue No. 77:  No consensus.  The facilitator observed that as a matter of coherence, delegates would
wish to note that the Committee had already approved a rule for cables of 8544.70 permitting very
similar production operations to be origin conferring.
Issue No. 78:  No consensus.  The proponent of Option C undertook to review its position.
Issue No. 79:  A proponent of Option C undertook to review its position.
Issue No. 80:   The proponent of Option C indicated it would review.G/RO/M/35
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Issue No. 81:   Option A1 was widely supported.  The proponent of Option B2 is to review its
position.
Issue No. 82:  Growing consensus for Option B1.
Issue No. 83:  No change in positions.  Option A is widely supported.
Issue No. 84:  No consensus.  The proponent of Option D is to review its position.
Issue No. 85  :  No consensus.  The proponent of Op tion D indicated that it considered the issue to be
one of simple assembly, but would review its position.  This proponent was invited to consider the
determination of origin under its proposal, as this would lead to results that another considered
unacceptable by application of the overall architecture.  It was noted that under the terms of the Swiss
compromise proposal this issue could be addressed under Rules 1 or 3, with possible exceptions under
Note A.
Issue No. 86:  Growing consensus for Option A1.
Discussion of value-added criteria
On 15 March 2001, the EC offered on overview of possible approaches to the problems raised
by assembly  operations in Chapters 84-85 and 90(see Annex).  The EC, together with other
delegations supporting the EC's position, considered assembly to be substantial under certain
circumstances, and illustrated the possibilities of expressing such substantial transformation through
changes in classification, i.e. Change in Tariff (S ub-) Heading or CT(S)H.  As the HS was primarily
designed as a dual-purpose commodity classification and statistical system, depending on the structureof the chapters, it could or could not be an appropriate basis for origin purposes.  In fact, there were
two main cases of incongruity between HS classification and origin criteria:
(1) the case where a change in classification did not reflect a substantial transformation because the
jump in tariff classification amounted to a very limited transformation (possibly a simple assembly);
(2) the case where a substantial transformation was not captured by the HS classification because the
initial and finished products were in the same heading.
To obviate to the limitations posed by the CT(S)H approach, Article 9, paragraph 2, letter
c(iii), of the Agreement on Rules of Origin (ARO) specified that other requirements could be used in
a supplementary or exclusive manner.  Because of the difficulties posed by a supplementaryrequirement expressed in terms of a specific production process, the EC together with other
delegations was advocating the use of an ad valorem  percentage criterion as an alternative.
The EC stressed that the criterion it was proposing was based on the value added through a
manufacturing process.  It further emphasized that it would propose rules expressed in terms of valueadded only for HS sections XVI through XVIII, as for issues concerning assembly contained in other
chapters outside these sections, it was willing to study other criteria different from value added.
The EC argued that the technical explanations it offered were demonstrating that expressing
rules through the value added requirement was the simplest and most appropriate solution to issuesraised by assembly in the chapters in question.  The EC appreciated the interest shown by delegations
that were not currently applying rules based on this criterion at the same time that it questioned the
stance of those delegations that were opposing the resolution of outstanding issues via the expressionG/RO/M/35
Page 17
of origin rules based on value added even though they were parties to agreements containing such
rules.
H. CHAPTER 91 ( WATCHES AND CLOCKS )
No. 1
- No consensus was reached;  hence two options remain on the table.
No. 2
- There was a growing consensus towards option A.
No. 3
- It was agreed that option A be deleted.  There was growing support for option B.
No. 4
- It was noted that change from parts would be only a simple assembly;  hence Members supporting
option B were requested to reconsider their positions.
No. 5
- The Vice-Chairman proposed "CTH, or change from parts to finished goods classified in the same
heading" for subheadings 9113.10 and 9113.20, and "CTH" for subheading 9113.90 and heading
91.14.
No. 6
- There was consensus on option B.
- HS ex 9113.90(a):  It was agreed that the primary rule for split subheading ex 9113.90(a) be
"CTH".
2.2 The CRO took note of the statements.
III. ENDORSEMENT OF PROPOSALS ON HARMONIZED RULES OF ORIGIN
(G/RO/W/62/REV.1)
3.1 The CRO endorsed as follows:
- Option B of Issue No. 11 of chapters 44-49.  The origin rule of heading 49.01 should read
"CTH";
- Option A of Issue No. 2 of chapters 93-97.  The origin rule of subheading 9305.90 should
read "CTH", and "Comments" in column E should read "CH has proposed a Chapter Note onassembly";
- Option A of Issue No. 4 of chapters 93-97.  The origin rule of subheading 9306.90 should
read "CTSHS";
- Option B of Issue No. 8 of chapters 93-97.  Split subheadings ex 9401.69(b) and
ex 9403.60(a) should be deleted;
- Option B of Issue No. 9 of chapters 93-97.  Split subheading ex 9401.69(a) should be deleted;G/RO/M/35
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- The following Chapter Note of Chapter 95 of Issue No. 16 of chapters 93-97:  "for the
purpose of those rules of origin which refer to a change of classification (i.e. change of
heading), the change resulting from change of use itself shall not confer origin";
- Option A of Issue No. 21 of chapters 93-97.  The origin rule of split headings 96.01(b) and
96.02(b) should read "CTHS";  and
- Option A of Issue No. 29 of chapters 93-97.  The origin rule of split subheading 9614.29(b)
should read "CTSHS".
3.2 The representatives of Malaysia and Thailand  reserved their positions on Issue No. 5 of
chapters 44-49.  The CRO agreed to revert to this issue at the next meeting.
IV. IMPLICATIONS OF THE IMPLEMENTATION OF THE HARMONIZED RULES
OF ORIGIN ON OTHER WTO AGREEMENTS
4.1 The CRO agreed to revert to this issue at the next meeting.
V. OBSERVER STATUS FOR INTERNATIONAL INTERGOVERNMENTAL
ORGANIZATIONS (G/RO/W/19/REV.3)
5.1 The Chairman drew the attention of the CRO to document G/RO/W/19/Rev.3 which set out
the situation with respect to observer status of international intergovernmental organizations.  The
Committee had received one new request for observer status in the Committee from the Common
Market for Eastern and South Africa (COMESA).  The General Council had adopted procedures for
observer status for international intergovernmental organizations in July 1996, which was contained in
Annex 3 of document WT/L/161.  According to those procedures, requests for observer status were tobe considered on a case-by-case basis by each WTO body to which a request had been addressed,
taking into account such criteria as the nature of the work of the organization concerned, the nature of
its membership, the number of WTO Members in the organization, reciprocity with respect to access
to proceedings, documents and other aspects of observership, and whether the organization had been
involved in the past with the work of the GATT/WTO.   At its meeting on 7 February 1997, the
General Council agreed, with regard to international intergovernmental organizations, (a) that the
organizations which already had observer status in the General Council on an ad hoc basis be grantedobserver status immediately;  (b) that for international intergovernmental organizations whose
requests had not yet been considered, the Chairman  would conduct consultations;  (c) to invite the
other WTO bodies to proceed in a similar way.
5.2 The CRO agreed to revert to the matter at an appropriate time in the future, in light of the fact
that consultations were still going on in the General Council on the question of observer status for
international intergovernmental organizations.
VI. NOTIFICATIONS UNDER ARTICLE 5 AND PARAGRAPH 4 OF ANNEX II OF THE
AGREEMENT ON RULES OF ORIGIN (G/RO/N/30 AND 31)
6.1 The Chairman recalled that since the last meeting the Secretariat had circulated two
documents informing delegations of notifications submitted.  To date, 73 Members had made
notifications of non-preferential rules of origin and 75 Members had made notifications of preferential
rules of origin.G/RO/M/35
Page 19
6.2 The Chairman expressed concern that a number of Members had not yet complied with the
notification requirements.  He urged Members who ha d not yet notified to do so as early as possible.
6.3 The Committee took note of the statement.
VII. ELECTION OF OFFICERS
7.1. The CRO elected Mr. Ho Young Ahn (Korea) as Chairman of the CRO for 2001.  The CRO
agreed to postpone the election of Vice-Chairperson and to take up this matter at its next meeting.
VIII.  OTHER BUSINESS
(i) Draft agenda for the nineteenth session of the Technical Committee on Rules of Origin
(TCRO):  technical rectification exercise
8.1 The representative of the Philippines expressed concern that the TCRO had included the
technical rectification exercise as an agenda item despite the fact that there was no clear mandate from
the CRO.
8.2 The CRO took note of the statement.
(ii) New working methodology for the Harmonization Work Programme
8.3 The CRO adopted a new working method as follows:
"Background
Many Members stated that the fundamental modification of the methodology was necessary
in order to meet the goal of ‘completing the HWP by  the Fourth Ministerial’.  They suggested that a
single package of the harmonised non-preferential rules of origin should be prepared in time to serve
as a basis of meaningful negotiation and final agreement.  Based on the Chairman's proposal the CRO
agreed as follows:
Outline of the New Methodology (with time-frame)
- Outstanding issues in the template in the negotiating document (G/RO/41) would be split into
stand-alone issues (chapter-specific issues) and horizontal issues (ex: assembly rule, value-
added rule).
- As the first step, the collection of  Chair's recommendations  for stand-alone issues would be
provided for each group of chapters identified below.  The collection of the Chair’srecommendations would serve as a basis for further negotiation, and cannot be deemed to
prejudice the position of any Member.
- Chapters  1-24  (agricultural products and fish)
- Chapters 25-27 (mineral products)
- Chapters 28-40 (chemicals)- Chapters 41-43 (leather)G/RO/M/35
Page 20
- Chapters 44-49 (wood and paper)
- Chapters 50-63 (textiles)
- Chapters 64-67 (footwear and headgear)
- Chapters 68-70 (ceramics)- Chapter  71 (precious stones and metals)- Chapters 72-73 (iron and steel)- Chapters 74-81 (non-ferrous metals)- Chapters 82-83 (articles of metal)
- Chapters 84-85,90 (machinery)
- Chapter  86-89 (transportation equipment)- Chapter   91 (watches)- Chapters 92 (musical instruments) and- Chapters 93-97 (other articles)
 - (12 April 2001) The Chairman would circulate the collection of recommendations  to all
Members for their consideration at the meeting of the CRO in May.
- (7-18 May 2001)(*)    Chapters 1-24 (agricultural products), 50-63 (textile products) and 64
(footwear), including the Chairman's recommendations concerning these chapters, would be
discussed in the first week of the two w eek session.  The Chairman's recommendations
concerning other chapters would be discussed at the CRO in the second week of the session.
- (8 June 2001)(**) As the second step, the collection of Chair’s recommendations for all
issues, including both stand-alone and horizontal issues, would be provided for all the
chapters.
- (2-13 July 2001)(*)(**) The collection of Chair’s recommendations would be discussed at the
CRO.
- (9-13 November 2001) The results of the HWP shall be submitted to the 4
th Ministerial
Conference.
(*) On the last day of the CRO meeting, the CRO will review the status of the progress and, if
necessary, make changes to the agenda and methodology for future meeting and make arrangement
for further meetings.
(**) The dates are subject to adjustment.
Mechanism for the provision of  collection of recommendationsG/RO/M/35
Page 21
- The split of issues into stand-alone and horizontal issues and the proposed recommendations
for each issue would be provided by the Chair in consultation with the facilitators for each
group of chapters as identified above.
- In preparing the recommendations, the Chair a nd the facilitators shall be guided by the
criterion of substantial transformation as stipulated in Article 9 of the Agreement on Rules of
Origin.  Any other criterion may onl y be of a complementary nature.G/RO/M/35
Page 22
ANNEX
ORIGIN RULES FOR PRODUCTS RESULTING FROM AN ASSEMBLY OPERATION IN
CHAPTERS 84 TO 90 - USE OF THE VALUE ADDED CRITERION TO EXPRESS
SUBSTANTIAL TRANSFORMATION
1. Introduction
In accordance with Article 9, par. 1(b) of the Agreement on Rules of Origin (ARO), when
more than one country is concerned in the production of a particular good, rules of origin should
provide for the country or origin to be the country where the last substantial transformation has been
carried out.  With regard to the manufacture of products covered by HS Chapters 84 to 90 (machinery,electrical equipment, vehicles, etc.) it appears that, in most cases, the last transformation consists of
an assembly operation.
2. Appraisal of assembly as the last substantial transformation for products classified within
Chapters 84 to 90
With regard to the manufacture of products of Chapters 84 to 90, the specific question is
whether and, if so, under which conditions, assembly may be considered as a substantial process or
operation to determine the origin of the product. The variety of operations which may be described as
"assembly" (from very simple or so-called screw-driver operations through highly sophisticatedassemblies) makes it impossible to conclude, as a general rule, that assembly can be considered as a
substantial and thus origin-conferring operation. In fact, when evaluating assembly operations, one
generally comes to the conclusion that such operations do not constitute in themselves an important
stage of manufacture nor represent a substantial transformation.
It is worth adding that assemblies that are substantial operations are often difficult to
distinguish from other simpler assemblies merely on the basis of a classification or a technical
criterion. For these reasons, the EC considers that whenever either the classification or the technical
criterion is not decisive in determining whether an operation is substantial, it is necessary to take
account of the value added by the assembly operation as an alternative criterion.
3. Appraisal of possible origin rules for goods resulting from an assembly operation
The ARO stipulates that, where possible, the cr iterion of substantial transformation should be
expressed by means of the change in tariff (sub)heading. However, the Agreement further lays down
that, where the exclusive use of the HS nomenclature does not allow for the expression of substantial
transformation, the Technical Committee shall consider and elaborate upon the use, in asupplementary or exclusive manner, of other requirements, including ad val orem percentages and/or
manufacturing or processing operations. Followin g is an analysis of the various methods of
expression of substantial transformation and their appropriateness for assembly operations of products
in Chapters 84 to 90.
3.1. Manufacturing or processing operations
The ARO stipulates that, where the criterion of manufacturing or processing operations is
used, the operation that confers origin on the product concerned must be precisely specified. In the
cases of assembly for the HS Chapters in question such a criterion obviously entails a number ofpractical difficulties. The constant evolution in production technologies implies constant changes in
production processes in sectors such as for instance electronics, telecommunications, computers and
medical apparatus.  Consequently, creating a precise and comprehensive list describing specific
production processes appears to be virtually impossible as the processes described would becomeG/RO/M/35
Page 23
obsolete within a few years, or even more rapidly so given the increasing speed of technological
changes. The EC is therefore of the opinion that, in general, manufacturing or processing operations
expressing the rule of origin for the products concerned is not a realistic option.
3.2. The change-of-tariff (sub)heading rule (CTH or CTSH rule)
In the case of assembly operations, a CTH or CTSH rule may be easy to fulfil as very often
parts are classified in a (sub)heading other than that of the finished product. However, such a rule has
the disadvantage that it does not distinguish between simple and more complicated assemblies. The
change of classification rule can only be used in those cases where the assembly appears to be such an
important stage in the manufacturing process that it can, without any discussion, be considered as a
substantial operation.
Concerning the application of the CTH/CTSH rule to assemblies, and in particular with
regard to the determination of the minimum change  within the nomenclature that meets the criterion
of the substantial transformation, the following consideration should be borne in mind: the mere
assembly of previously manufactured parts is sufficient to confer on the resulting product the origin ofthe country in which assembly took place, provided that such assembly represents the decisive
production stage during which the use to which the component parts are to be put becomes definite
and the goods in question are given their specific qualities.
The EC is of the opinion that the condition concerning the component parts is not met when
these parts are classified in the same heading as the product or when they are classified in a heading
indicating that they are parts suitable for use solely or principally with the assembled product.
Admittedly, the fact that they are classified in a specific heading indicates that the use to which they
are to be put has already become definite before their incorporation in the finished product.
Therefore, it is proposed that with regard to assembled products, the CTH/CTSH rule be applied asfollows:
· where parts are classified in the same heading (in most cases in another subheading) as the
finished product, the CTH rule is appropriate;
· where parts are classified in a specific heading (e.g. heading 8407 - rotary internal combustion
piston engines: parts suitable for use solely with such engines are classified in heading 8409),
the CTH rule shall exclude this specific heading (e.g. rule for 8407 :  Manufacture frommaterials that are classified in a heading other than that of the product with the exception of
heading 8409).
3.3. The added-value rule
The CTH/CTSH rule as described above is fairly stringent and the use of a number, however
small, of parts that do not meet the rule prevents a product from obtaining originating status in the
country of assembly. It is therefore appropriate to provide for an alternative rule that captures those
cases where assembly is sufficiently substantial even though the above-mentioned CTH/CTSH rules
are not met. For such cases, the value-added criteri on referred to Art. 9 (2) (c) (iii) of the ARO may
serve as an alternative criterion.
The following wording is proposed:  "Manufacture where the increase in value acquired as a
result of working and processing and, if applicable, the incorporation of parts originating in the
country of manufacture represents at least 45 % of the ex-works price of the product".
For the purposes of calculating the percentage it is worth noting that:G/RO/M/35
Page 24
(a) the term "ex-works price" shall mean the price to be paid for the product obtained to the
manufacturer in whose undertaking the last working or processing is carried out (this price
shall not include internal taxes which are, or may be, repaid when such product is exported);
(b) the term "value acquired as a result of working and processing and incorporation of parts
originating in the country of manufacture" shall mean the increase in value resulting from theassembly itself, together with any preparatory, finishing and checking operations, and from
the incorporation of any parts originating in the country where the operations in question were
carried out, including profit and the general costs borne in that country as a result of the
operations.
4. Conclusion
Value-added rules are, therefore, the simplest and most appropriate way of expressing origin
rules based on the criterion of substantial transformation for products in HS Chapters 84 to 90. Suffice
it to indicate that in practice, the value added by an assembly operation is calculated as follows: the
ex-works price of the product obtained minus the value of all the non-originating materials (customs
value for imported materials or ex-works price for the other materials).
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