RESTRICTED  
  
G/RO/W/145  
 
17 September 2013  
(13-4925)  Page: 1/2  
 Committee on Rules of Origin    
 
 DRAFT 
 
REPORT (2013) OF THE COMMITTEE ON RULES OF ORIGIN 
TO THE COUNCIL FO R TRADE IN GOODS 
 
1. This report is being submitted to the Council for Trade in Goods (CTG) in accordance with 
Article 6.1 of the Agreement on Rules of Origin  (the Agreement), which provides as follows: 
"The Committee shall review annually the implementation and operation of Parts II and III of 
this Agreement having regard to its objectives. The Committee shall annually inform the Council for Trade in Goods of developments during the period covered by such reviews." 
2. The Committee on Rules of Origin (CRO) held two clusters of informal and formal meetings 
in 2013:  on 16 to 18 April and on 13 and 26 Sept ember.  In addition, the Chairman of the 
Committee, Mr. Marhijn VISSER (The Netherlands) held a series of bilateral meetings with some 
delegations in order to discuss the future organisation of the Committee's work. 
3. The main area of work in the CRO relates to negotiations for harmonized non-preferential 
rules of origin (Harmonization Work Programme, HWP). These negotiations, mandated under Part 
IV of the Agreement, were initiated in 1995 an d conducted in collaboration with the Technical 
Committee on Rules of Origin at the World Customs Organization.  Despite substantive progress in elaborating specific rules of origin for thousands of tariff lines, the negotiations came to a virtual halt in 2007 due to divergences on a number of "core policy issues", including: 
i. "Implications". What became known as the "i mplications issue" refers to divergences 
regarding the scope of application of the newly harmonized rules of origin.  In fact, 
several trade instruments require the determination of origin, as is recalled in article 1 of 
the Agreement on Rules of Origin, including: most-favoured nation treatment in the 
determination of import duties; safeguard measures; anti-dumping investigations; countervailing duties; origin marking and labelling; discriminatory quantitative 
restrictions or tariff quotas, government procurement; and trade statistics. Members 
have extremely polarized views regarding wh ether the harmonized rules should also 
apply to such other instruments or not.  As a compromise, the Chairperson of the Committee had proposed in 2006 that each Member would choose the instruments to 
which it would apply the harmonized rules and notify the Secretariat. Nevertheless, a 
partial or selective application of the rules could not be accepted by all WTO Members. 
ii. "Dual rule for machinery":  Members also held  divergent views on the identification of 
rules for the machinery sector (about 600 tariff lines in HS Chapters 84-90), largely 
because of uncertainties regarding the utilization of harmonized rules of origin for trade remedies.  Some Members had argued that value-added rules should be used for this 
sector while other Members argued the opposite.  The Chairperson of the Committee had 
proposed, in 2006, that both tariff-shift rules and value added rules be used depending on Members' preferences ("double approach" or "dual rule"), but this pragmatic solution could not be accepted by all WTO Members. 
4. Recognizing Members' divergences on th ese two issues, the General Council, on 
27 July 2007, recommended that work on these issues be suspended until such guidance from the General Council would be forthcoming. Since then, work in the Committee has focused on marginal 
technical aspects of the HWP. In 2010, a communication from the delegations of China, India and G/RO/W/145 
 
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  Pakistan (WT/GC/W/622 and Add.1) reminded the General Council that a decision on the core 
policy issues was still pending, but no specific gu idance was forwarded to the CRO. Since then, the 
only recent significant work concerned the completi on of the transposition of the draft harmonized 
rules of origin into newer versions of the Ha rmonized System by the Secretariat (HS2002, 2007 
and 2012, documents JOB/RO/2/Rev.1, JOB/RO/3/Re.v1 and JOB/RO/4 respectively). 
5. As a result of negotiating deadlocks and of the absence of political guidance from the 
General Council, work in the CRO lost momentum and relevance.  In his bilateral consultations 
with Members in July and during the informal m eeting in September 2013, the Chairman sought to 
take stock of Members' interests and positions.  He asked Members if the harmonization of non-preferential rules of origin continued to be an important trade policy objective 18 years after the 
launch of these negotiations and whether Members were ready to intensify work, including on 
some of the core policy issues. Two views emerged clearly from these consultations: 
i. Some Members believed that fully harmonized, non-preferential rules of origin remains 
an important objective to facilitate world trade.  These Members would support an 
intensification of the Committee's work to conclude the negotiations.  These Members 
argued that non-preferential rules of origin might have lost importance for tariff treatment, but that their relevance has only increased in the context of trade remedies, 
government procurement, and labelling, etc. These Members thought, however, that full 
negotiations could only resume if there was a clear political commitment to conclude the HWP. 
ii. Other Members mentioned that concluding the negotiations is no longer a political 
priority. According to them, world trade had changed dramatically since the late 1990s, 
when the Work Programme had initiated. The WTO now covered virtually all major trading nations, so distinguishing preferen tial, MFN and non-MFN origin did not make 
sense any longer. National customs administrations now needed to focus on preferential 
origin only. They also argued that products were now "made in the world", so the concept of national origin had lost its importance.  For these Members, the Committee 
should reduce the frequency of its meetings and focus on additional areas, for instance: 
certification and verification of origin, trade in value chains and global production networks, transparency regarding non-preferen tial and preferential rules of origin and 
notifications. 
iii. Some Members, from both previous groups, also mentioned that they were ready to 
explore the possibility of concluding the HW P for a voluntary adoption by Members as 
"guidelines". 
6. As it is, the implementation and operation of the Agreement is not satisfactory as the 
adoption of harmonized non-preferential rules of or igin constitutes its central objective. During the 
informal meeting of September, several Members submitted room documents or made 
presentations describing their current non-preferenti al rules of origin.  The Secretariat delivered 
presentations on the Agreement, a summary of the notifications available, and the history of the 
HWP negotiations.  To this date, 41 Members have notified to the Secretariat that they apply some type of non-preferential rules of origin, 44 Me mbers have notified that they do not apply 
non-preferential rules and 46 Members have not submitted a notification yet.  
7. Given this difference in Members' views, it is difficult for the Chairman to draw a future 
roadmap. The Committee would therefore need the General Council to hold dedicated discussions 
on the Harmonized Work Programme in order to provide clear guidance about how best to focus 
the Committee's resources on this area of work. In the absence of any guidance from the General Council, it would be extremely difficult for the Chair of the CRO to put forward any concrete 
agenda of work for the Committee's forthcoming meeting in April 2014. 
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