TN/C/W/63/Add.1  
 
17 September 2013  
(13-4907)  Page: 1/3  
Trade Negotiations Committee  Original: English  
 
  NINTH WTO MINISTERIAL CONFERENCE, BA LI, INDONESIA, 3-6 DECEMBER 2013 
 
LDC PACKAGE FOR BALI 
 
COMMUNICATION BY NEPAL, ON BEHALF OF THE LDC GROUP 
Addendum 
The following communication dated 16 September 2013, is being circulated at the request of the 
delegation of Nepal on behalf of the LDC Group. 
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In line with the mandate provided in the "Decision on Measures in Favour of Least-developed 
countries" (Annex F of the Hong Kong Ministerial Declaration), the LDC Group has previously 
submitted proposals on the rules of origin applicab le to non-reciprocal preferences (see Annex 2 of 
TN/C/W/63). This paper is an abridged and revised version of that detailed proposal. It focuses on 
some core elements which the LDCs would like pref erence granting Members to implement. This is 
not an exhaustive proposal and does not prejudice the right of LDCs to come up with additional elements in the future. 
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LDC Proposal on Preferential Rules of Origin 
Mandate 
The "Decision on Measures in Favour of Least-developed countries" (Annex F of the Hong Kong 
Ministerial Declaration) states that: 
"Developed-country Members shall, and developing-country Members declaring 
themselves in a position to do so should: 
(b) Ensure that preferential rules of origin applicable to imports from LDCs are 
transparent and simple, and contribute to facilitating market access." 
The availability of duty-free and quota-free mark et access for LDCs, in order to be meaningful, 
must be accompanied by simple and transparent rules of origin. Only a combination of the two, and improvements on both fronts, will deliver effective new market access opportunities for the 
LDCs, thus helping them integrate into the multilateral trading system. 
The LDCs recognise that better rules of origin may be achieved in many different ways and that an 
assessment of the benefits of a particular set of rules would depend on the specificities of each 
Member and each product. The Members of the WTO would recognize that two issues are of critical 
importance for LDCs to effectively enjoy the pr eferential access provided by the WTO member 
countries. First one is the criteria for determination of origin of the product, which should match 
with the level of industrial development of the count ries for which preferential treatment is offered. 
Second is the cost of compliance with the rules of origin associated with documentation TN/C/W/63/Add.1 
 
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  requirement and administrative procedures, which should be kept as low as possible so that 
exporters are encouraged to avail of the opport unity.  The LDCs therefore propose to consider 
these two key elements for rules of origin to be  applied by all preference-granting Members. The 
LDCs do not propose a single set of rules but se ek simplicity, transparency and coherence, not 
harmonization.  
Proposal 
As a general rule, preference-granting Members shall design their preferential rules of origin with a 
view to providing effective market access for LDCs . They should therefore take into account the 
productive capacity of LDCs and the LDCs' ability to meet rule of origin requirements. This may translate in the following: 
1. Rules of origin should be as simple as possible; avoiding wherever possible different 
product-specific rules; 
2. In the case of rules based on the change in tariff classification criterion (CTC) or in specific 
processes (SP), the rule must require compliance with simple operations. For instance: 
a. For agro-processing products, substantial transformation shall be recognized when 
raw agricultural products are transformed into agro-processed products; 
b. For chemical products, substantial transformation shall be recognized when a 
chemical reaction takes place; 
c. For articles of apparel and clothing, substantial transformation shall be recognized 
when fabrics are assembled into finished garments; and, 
d. For machines and electrical and electronic goods, substantial transformation shall 
be recognized when parts are assembled into a finished product. 
3. In the case of rules based on local content or value added (VA), the minimum content added 
in the LDCs must be realistic given the productive capacity available in the LDCs. 
Therefore: 
a. LDCs may use foreign inputs up to a maximum of 75% of the ex-work price of 
their exports eligible for preferences (that is, the value of non-originating materials 
must not exceed 75% of the ex-work price of a product); 
b. The method identified for the calculation of such value must allow for the 
deduction of the costs related to freight and insurance of foreign inputs; 
c. When the rule requires minimum content from LDCs, that requirement must not 
exceed 15% of the ex-work price of their pr oducts (that is, the value of originating 
materials must be at least 15% of the ex-work price of a product); 
d. The method identified for the calculation of such value must allow for the inclusion 
of national or regional inland transportation costs. Because transportation costs are 
high in LDCs, particularly for landlocked LDCs, the inclusion of these costs in the calculation of local value content would allow the LDCs to meet more effectively 
this rule; 
e. The methods for the calculation of value must be simple.  
4. LDCs shall be able to cumulate with other countries to meet rules of origin requirements. In 
other words, inputs sourced from certain countries and used to manufacture products in 
the LDCs should not be deemed as foreign inputs (that is, non-originating materials). The 
LDCs should therefore be allowed to cumulate with: 
a. Other LDCs; TN/C/W/63/Add.1 
 
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  b. Preference-granting countries; 
c. Other Members with whom they form a regional group; and, 
d. Other Members with whom the preference-granting countries have signed a free 
trade agreement. 
5. The documentary requirements regarding compliance with the rules of origin must be simple 
and transparent. In particular, there shall be  no requirement to provide a proof of non-
manipulation or any other form of certification for products shipped from LDCs across 
other countries. Whenever possible, certificates of origin signed by LDC exporters shall be 
recognised (self-certification). Mutual customs co-operation could complement compliance and risk-management measures. 
6. Preference-granting Members shall notify their pr eferential rules of origin to the Committee 
on Trade and Development and a factual presenta tion of such rules shall be made in that 
Committee. This would promote an exchange of experiences, make the rules better understood and more transparent as well as favour the mainstreaming of best practices. 
7. The Committee of Trade and Development shall annually review the progress made in the 
implementation of these measures and report to the General Council. 
 
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