./.WORLD TRADE
ORGANIZATIONWT/GC/63
12 August 2002
(02-4397)
General Council
8 and 31 July 2002Original:  English
STATEMENT BY JAPAN
Agenda Item No. 13
The following statement by the delegation of Japan under item 13 at the General Council
meeting of 8 and 31 July is being circulated at the request of that delegation.
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On the report of the Chairman of the Committ ee on Rules of Origin to the General Council,
Japan would like to take advantage of this opportunity to make comments on two points:  first, on the
question of the relationship between the Harmonized Rules of Origin and domestic regulations, and,
second on the value-added rules.
Seven years have already passed since the harmonization work programme for non-
preferential rules of origin started in 1995.  At its meeting in December of last year, the General
Council decided that the harmonization work programm e should be completed by the end of this year.
We hope that this deadline will be met.  It is our firm intention to make our best effort toward that
objective.
Regarding the implications of the Harmonized Rules of Origin (HRO) on other WTO
agreements, Japan has been stressing the need to clarify the relationship between the HRO on the one
hand and domestic consumer labelling requirements on foods or sanitary and phytosanitary measures
on the other, as presented in document G/RO/W/74.  The Committee on Rules of Origin had fruitful
and constructive exchange of views as is accurately reflected in its Minutes G/RO/M/40.  In theCommittee, the following line of thinking, it seems to us, was broadly shared by Members:
(i) The policy objectives for Members to carry out domestic consumer labelling on
foods, or sanitary and phytosanitary measures, are quite different from the objectives
of origin determination for customs purposes, which are to be enforced under theHarmonized Rules of Origin.
(ii) Since these objectives are not alternative to each other and no hierarchy exists
between them, there should be no conflict among them.  They are supplementary in
nature and should coexist without any particular difficulty.
Although the above might not be a definitive conclusion in a legal sense, Japan believes that it
provides useful guidelines as a working basis, thus providing comfort to Members for continuing the
current harmonization process in this Council.  In th is regard, Japan requests that the details of such
discussion, which took place during the harmonization work, be accurately recorded in an appropriate
form, for example, in the formal report of the Chai rman of the Committee, which is to be attached to
the final results of the harmonization work.  Japan is prepared to show further flexibility in the courseWT/GC/63
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of talks on many of the product-specific issues related to agricultural products, provided that the
above request of ours is accorded with an appropriate treatment as suggested above.
Secondly, Japan believes it is important that the Harmonized Rules of Origin do not create a
new trade obstacle, and they should be the ones the customs officials as well as the people actuallyengaging in trading business can apply with ease.
The harmonized rules of origin are to be used in all of the non-preferential purposes other
than those purposes such as GSP and FTA.  That means they cover very broad trade cargo.  For
example, the trade statistics will be prepared on the basis of non-preferential harmonized rules of
origin.  Therefore, if the value-added rule is adopted for the harmonized rules, it will become
necessary for companies to collect almost daily the changeable data such as exchange rates, material
cost and shipping prices in order to determine the country of origin.  It would certainly be very
burdensome for them.  Furthermore, it will also become much more burdensome for the customs to
collect and to calculate the cost information for the verification.  It is quite clear that the adoption of
the value-added rule runs counter to our fundamental objective of trade facilitation.
Furthermore, adoption of the value-added rule has a fatal defect because it could also lead to a
situation in which the origin of a product changes on a daily basis depending on the changes in
exchange rate or other cost factors, to the detrim ent of transparency, consistency and predictability.
Under the proposed rule, identical products produced in identical assembly lines may come to have
different country of origin simply because one assembly line is located in a developed country withhigher wage level while the other in a developing country with lower wage level.  Japan believes that
the value-added rule that brings about such results would compromise impartiality and neutrality, and
thus strongly opposes the adoption of such a rule.
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