RESTRICTED  
  
G/RO/W/216  
 
30 September 2022  
(22-7396) Page: 1/4 
Committee on Rules of Origin  Original: English  
 
PRELIMINARY EXAMINATION OF PROPOSED NEW RULES OF ORIGIN  
UNDER THE UK DEVELOPING COUNTRIES TRADING SCHEME (DCTS)  
SUBMISSION BY THE LDC GROUP   
The following submission, dated 30 September 2022, is being circulated at the request of the 
delegation of Tanzania on behalf of the LDC Group.  
 
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1 INTRODUCTION  
1.1. As pointed out in the CRO Decision  G/RO/95 on preferential rules of origi n and the 
implementation of the Nairobi Ministerial Decision on preferential rules of origin adopted on  
14 April 2022 "Members underscore the importance of identifying and addressing as appropriate 
specific challenges that least -developed countries (LDCs) face, in complying with preferential rules 
of origin and origin requirements to effectively use trade preferences ". 
1.2. It also stated that  "Towards that end, the Committee on Rules of Origin (CRO) should continue 
its efforts to facilitat e the implementation of the Nairobi Ministerial Decision on preferential rules of 
origin for LDCs (WT/L/917/Add.1) with a view to ensuring that preferential rules of origin applicable 
to imports from LDCs are transparent and simple and contribute to facili tating market access. " 
1.3. It is concluded that '' the work of the CRO could include identifying and agreeing upon best 
practices by all Members on preferential rules of origin and related administrative requirements and 
further analyzing existing origin requirements and the utilization of trade preferences . The CRO 
should report its work to the General Council ahead of the Thirteenth Ministerial Conferenc e’’. 
1.4. Accordingly,  and pursuant to this new mandate, the LDC Group will continue analyzing 
and identifying best practices and lessons learned on rules of origin and related administrative 
procedures leading to an increase in LDC's utilization of trade preferences and understanding of the 
extent of differences in rules of origin across preference -giving countries.   
1.5. The LDC Group has noted that the UK  government has posted a series of documents available 
on the website  gov.uk  concerning a reform of their rules of origin. Hence, the LDC s have taken the 
opportunity to share with WTO members a series of prelim inary comments that would be deepened 
and further elaborated in the new future and subsequent submission.  
2 PRELIMINARY OBSERVATION S ON THE REFORM OF ROO IN THE CONTEXT OF THE UK 
DEVELOPING COUNTRIES TRADING SCHEME (DCTS)  
2.1.  The LDC Group has taken not e that the United Kingdom of Great Britain and Northern Ireland 
Government launched the new UK Developing Countries Trading Scheme (DCTS) on 16 August 2022 
to replace the EU Generalized System of Preferences (GSP) following the exit from the European 
marke t and Customs Union.  
2.2.  The information is available on the gov.uk  website including an excel website containing  briefs 
and product -specific rules of origin. While this information is widely appreciated the WTO LDC Group 
would be most grateful to receive the UK draft legislation to carry out the necessary analysis. Until G/RO/W/216  
 
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  that time this submission should be considered as a prel iminary comment to enhance dialogue and 
transparency according to the Text in MC12.   
2.3. The LDC Group notes that the  new UK DCTS is applicable to 65 countries,  aiming at 
providing  lower tariffs and simpler rules of origin requirements for exporting to th e UK such as1:  
•        continuing to offer duty -free and quota -free access to its members in all products (except 
arms and ammunition) ; 
•        simplifying and liberalizing product -specific rules of origin (PSROs) ; 
•        extending cumulation . 
2.4.  The LDC Group notes that the new rules of origin for LDCs seem to react favourably  on certain 
requests advanced by the WTO LDCs as contained in the Nairobi decision.  
2.5.  The new UK rules of origin for LDCs appear to allow up to 75% of non -originating con tent in 
the PSROs  at the highest HS2 level2 to half of all HS chapters (48). This new threshold represents a 
5% increase from the previous allowed value of non -originating materials, usually at 70%.  In this 
regard, the LDC WTO group would be interested in  getting better clarity on the methodology used 
to calculate the 75% of non -originating content, in particular, whether  the request of LDC to exclude 
the cost of insurance and freight from the value of non -originating content has been taken into 
account.  It is not clear whether the cost of insurance and freight is reduced by the value of 
non-originating material.   
2.6  On this particular issue, the LDC WTO group would like to recall paragraph 2.6 of the Nairobi 
Decision , which  provides that preference -granting Members shall:  
"Adopt a method of calculation based on the value of non -originating materials. However, 
Preference -granting Members applying another method may continue to use it. It is recognized 
that the LDCs seek cons ideration of the use of the value of non -originating materials by such 
Preference -granting Members when reviewing their preference programmes.  
Consider, as the Preference -granting Members develop or build their individual Rules of Origin 
arrangements appl icable to imports from LDCs, allowing the use of non -originating materials 
up to 75 percent of the final value of the product, or an equivalent threshold in case another 
calculation method is used, to the extent it is appropriate, and the benefits of prefe rential 
treatment are limited to LDCs. Consider the deduction of any costs associated with the 
transportation and insurance of inputs from other countries to LDCs. " 
2.7.  In this area, LDCs' expectations on best practices to be implemented by preference gr anting 
countries are related to the adjustments to the value of non -originating materials and the deduction 
of the cost of insurance and freight3 from the values of non -originating materials.  
2.8. In fact, allowing the deduction of the cost of insurance a nd freight from the value of 
non-originating materials avoids unbalances  on the final outcome of the percentage calculation. 
Suffice to consider that  "the cost of insurance and freight of inputs to an LLDCs  or SIDS may be 
almost equivalent to one -third of the value of the shipment, if not more ".4 The deduction of the cost 
of insurance and freights from the value of non -originating materials ensure s a fair comparison given 
 
1 Section 4. Rules of origin on the Policy paper: Developing Countries Trading Scheme: government 
policy response  
2 A further 3 chapters allow 75% non -originating content in all exceptions at a HS4 level.  
3 Compendium of technical notes prepared for the LDC WTO Group on preferential rule s of origin  D.3.3. 
Discussion on non -conforming ad -valorem percentages Rules of Origin and practices by preference granting 
countries (p. 58) given that " Cost of insurance and freight of non -originating materials are exogenous factors 
depending on geogr aphical locations and have little to do with substantial transformation. " 
4 Compendium of technical notes prepared for the LDC WTO Group on preferential rules of origin - 
(page  58). G/RO/W/216  
 
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  the geographical circumstances of t hose countries  and "may greatly facilitate compliance with the 
Rules of Origin for LLDCs (16 LDCs) and SIDS (11 LDCs) "5 
2.9.  According to the information available on the website , most PSROs  allow for alternative rules 
("or") providing businesses with alternatives to meet UK requirements in case one of the rules is 
difficult to meet or measure.  
Chapter  Description  Previous PSR  New PSR  
31 Fertilisers  Manufacture from materials of any heading, except that of 
the good. However, materials of the same heading as the 
good may be used, provided that their total value does not 
exceed 20% of the ex -works price of the good or 
Manufacture in which the value of all the materials used 
does not exceed 70% of the ex -works price of t he good.  Change of tariff 
sub-heading 
(CTSH) or 
maximum non -
originating content 
of 75% (EXW).  
 
Source: Section 4.1 Product specific rules (PSRs) Policy paper: Developing Countries Trading Scheme: 
government policy response  
2.10.  The WTO LDC notes the adoption of the CTSH as an alternative to the non -originating that 
appears to be conducive to lenient PSRO. The LDC WTO group will however  provide further 
comments once the full UK legislation will be shared with the LDCs Group and carry out  a more 
detailed assessment.  
2.11.  The WTO LDC group notes that the overall aim of the UK as shown on the website "is to 
provide simplified PSROs  with a single set of rules applicable to the whole chapter  (80 chapters) 
limiting exceptions rules and variations depending on the type of product to facilitate businesses to 
meet the  Rules of Origin required to qualify for preferential tariffs. "  
2.12.  According to briefs available on the website " The government c onsider s removing all 
processing rules and replacing them with a change of tariff classification and value -added rules, as 
endorsed by LDCs "6.  
2.13.  On this specific issue The LDC WTO group would like to clarify that it has never endorsed the 
removal of all working and processing rules. On the contrary, the WTO LDC Group believes and has 
supported in the past the adoption of working or processing rules , especially in the textile and 
clothing sectors (as in the case of the EU reform in 2011) since those are easier to understand and 
more business friendly. Working or processing product -specific rules of origin may be explored in 
other sectors.  
2.14.  The WTO LDC Group notes the statement made on the gov.uk  website  also concerns the 
extension of cumulation possibilities7.  
2.15.  The WTO LDC  Group  notes that the expansion of the cumulation possibilities  facilitates 
compliance with origin requirements by LDC producers. Its enlargement in scope is, in principle , a 
positive development under UK DCTS.  
2.16. However, it remains unclear from the i nformation provided on the website a) which type of 
cumulation is provided; b) what geographical coverage is available for regional groupings; c) what 
are the possibilities  for LDCs to cumulate with UK FTA partners, and d) what are the procedural 
requireme nts. The LDC group is interested in explor ing whether cumulation would be made available 
for new mega -regionals such as the African Continental Free Trade Area (AfCFTA) and/or RCEP or 
CP-TPP.  
 
5 Compendium of technical notes prepared for the LDC WTO Group §on preferential rules of origin D.3.3. 
Discussion on non -conforming ad valorem  percentages Rules of Origin and practices by preference granting 
countries (p. 58) . 
6 New policy , 4.1 Product specific rules (PSRs)  section of the Policy paper: Developing Countries Trading 
Scheme: government policy response . 
7 4.2 Cumulation  Section o f the Policy paper: Developing Countries Trading Scheme: government policy 
response . G/RO/W/216  
 
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  2.17. Considering the AFCTFA  and other Megaregional such as RCEP  and CP -TPP as a possible 
cumulative zone would be a beneficial, making a significant difference in spurring regional and 
continental value chains.  
2.18. Finally, the LDC WTO group would be interested in better understanding the treatment in the 
UK new rul es of origin of specific issues such as:  the non -alteration rules, third country inv oicing , 
and related administration of rules of origin requirements . 
3 CONCLUSIONS  
3.1.  The WTO LDC  Group welcomes the review of the UK GSP rules of origin and the innovative 
spirit that animated the UK government in having a fresh look at their legislation using inspiration 
from the WTO Nairobi Decision on Preferential Rules for LDCs.  
3.2.  The WTO LDC  Group takes this opportunity to renew the call to other WTO members to follow 
such example and engage in fruitful deliberations according to the new mandate provided by the 
MC 12. 
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