G/RO/W/167  
 
20 February 2017  
(17-0981) Page: 1/6 
Committee on Rules of Origin    
 
SUMMARY OF THE INFOR MATION SESSION ON  
NON-PREFERENTIAL RULES O F ORIGIN – 21 SEPTEMBER  2016  
Note by the Secretariat1 
1. Introduction  
1.1 In the absence of negotiations for the harmonization of non -preferential rules of origin , the 
Committee on Rules of Origin  (CRO) engaged  in an "educational exercise" to share experiences 
about existing  non-preferential rules of origin  and have a better understanding about the design, 
coverage and impact  of such rules (G/RO/M/63) .  In that context,  Members  heard presentations by 
international organizations, business associations and representatives of the private sector in a 
series of "information sessions" organized in 2015 and 2016 (a summary of the April 2016 session 
was circulated in document G/RO/W/162) . This document cont ains a brief summary of the 
presentations made during the session  of 21 September 2016 . 
2. Mr. Hubert Escaith, C hief Statistician in the Economic Research and Statistics 
Division and Mr. Darlan F. Martí, Trade Policy Officer  in the Market Access Division , 
WTO  (RD/RO/ 43) 
2.1 Over the past years, the WTO Secretariat has conducted research on global value chains and 
their impact on international trade however, it has not sp ecifically focused on the impact that rules 
of origin have on the formation of internationa l value chains. Mr. Escaith and Mr. Marti brief ly 
spoke about the concept of global value chains and explored some of the interfaces between such 
chains and non -preferential rules of origin : 
 A value chain , they recalled,  referred to all activities and task s which were needed to bring a 
product from its conception to final consumers. These processes did not have to happen 
across national borders .  In practice however, the y had become increasingly "global " leading 
to a situation in which production occurred in several different countries ; 
 From an origin viewpoint, the fragmentation of production meant a much more complex 
distribution of value and processes . Attributing origin ha d therefore  become an increasingly 
complex exercise , particularly in a non -preferen tial environment (under non-preferential 
rules of origin, a country of origin must be identified ); 
 While the impact of preferential rules of origin on regional integration and supply chains had 
been amply analysed, that was not true for the impact of non -preferential rules.  It was not 
entirely clear how companies incorporated non -preferential origin requirements into their 
planning, sourcing and production decisions;  
 One fact seemed clear: a s a consequence  of the fragmentation of production , the outcome 
of origin determinations could  be seen as artificial or lacking logic  since the country of "last 
substantial transformation " was not necessarily associated with the essential characteristics 
of the final product . This raised  questions with respect to the objective and design of non-
preferential rules of origin . What should the purpose of such rules be and what were they in 
practice ? What type of information could non-preferential rules of origin provide , particularly 
to consumers?  
                                                
1 This document has been prepared under the Secretariat's own responsibility and  is without prejudice 
to the positions of Members or to their rights and obligations under the WTO . G/RO/W/167  
 
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   Multiple and divergent national requirements related to origin add ed uncertainty to business 
planning, increas ing risk and costs.   In fact, the final destination of goods, for global 
companies, was not necessarily known at the time of production . Manufacturers therefore 
did not know which rules to apply . In such cases, there would be doubts about how to label  
products or prepare for other regulations (e.g. licences, anti -dumping, etc.).  Sometimes, 
the rule of origin would only be known much later, i.e. at the time of exportation;  
 Multiple and divergent national origin requirements forced  companies to invest in IT and 
manual tools to track components and verify the origin of final goods . The development 
costs of such tools could be significant , especially if considered together with t he human and 
training costs associated with them.  
3. Mr. Pascal Dorel, Senior Customs Manager Europe, Middle East, Africa and Russia, 
CISCO Systems (RD/RO/ 42) 
3.1 Cisco Systems Inc. , Mr. Dorel explained, was a US-based company producing high tech and 
informati on technology goods and solutions.  Mr. Dorel shared some insights with Members about 
how a la rge, multinational company coped  with non -preferential origin requirements : 
 In his view, t he lack of international  harmonization of substantial transformation rules had 
created a highly complex environment.  Compliance with non -preferential rules of origin was 
not only a source of cost for companies but also of risk.  Companies were forced to integrate 
origin  requirements in  their operations so that all parts and pr ocesses were continuously  
tracked, irrespective of the location where they had been produced . This could be a huge 
challenge, particularly for companies with multiple production sites and subcontractors.  In 
fact, i nstead of owing its factories, CISCO worke d largely with contract manufacturers on the 
basis of integrated and standardised processes.  As a result , tracing national origin was a 
complex and costly exercise ; 
 CISCO  had therefore developed internal rules focusing on each stage of the manufacturing 
activity to ensure that all activities went beyond simple assembly or minor operations .  In 
addition, CISCO undertook  one additional  verification at the end of the production cycle , 
before products were labelled to ensure conformity with the string iest possible criteri on; 
 One associated difficulty was that substantial transformation criteria was defined and 
interpreted differently by national customs authorities. Hence,  companies found themselves 
aiming at a moving target when seeking to attribute  origin.  In the case of CISCO , the most 
stringent origin criterion available was  applied to each product  - ensur ing that production 
would comply with all other (less -stringent) national origin requirements. To ensure these 
standards of production remain ed valid, regu lar audits and tests had to  be undertaken;  
 The International Convention on the Simplification and Harmonization of Customs 
Procedures (the revised Kyoto Convention) contained three approaches for assessing 
substantial transformation. However, the Conventio n was not binding and  the three 
approaches were vague and could yield divergent results .  This translated into  inconsistency 
in the way different countries would treat a same product.   This was further compounded by  
a lack of consistency in the expertise and capacity of different national customs authorities;  
 Another  challenge for CISCO concerned its activities related to recycling, disassembly and 
remanufacturing. These were the most complex cases from an origin viewpoint as few rules 
of origin address ed such processes .  In addition, CISCO had been gradually moving its focus 
from hardware to software production. This transformation  entail ed complex origin 
questions . For instance  it was not clear whether the costs of software development  should 
be accounted  for in the value of final products;  
 With respect to the definition of substantial value, Mr. Dorel argued that t he tariff shift 
approach was not suitable for the IT industry because it did not reflect the level of 
granularity of materials  and processes  in this industry .  Similarly, t he value added approach 
lead to inconsistencies and uncertainty , particularly for products with a very large number of 
inputs and with a strong intellectual property component.  By exclusion, the specific 
manufacturing approach  was the most adaptive approach given the variety and complexity G/RO/W/167  
 
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  of IT products.   Despite the fast -evolving nature of the IT industry, this approach offer ed the 
greatest predictability.  
 Predictability, in fact, was a fundamental factor for IT businesses, for which security in 
supply chains  was essential .  In this sense, rules of origin were a major source of risk 
because of their implications for trade remedies, product packaging and labelling, consumer 
protection and government procurement . For these reaso ns, non -preferential rules of origin 
and origin certification entailed  high compliance costs and force d multinational companies 
with a global (not regional) strategy, to divert significant resources to ensure  compliance. 
These costs could be avoided had th ere been globally  harmonized rules;  
 In conclusion, he asked WTO Members to agree that non -preferential rules of origin should 
not be a unilateral trade policy instrument. In the absence of fully harmonized rules, 
governments could elaborate sector -specific  rules of origin or at least guidelines for rules of 
origin in specific sectors.  
4. Mr. Michael Kistner, Director Corporate Department Customs, Excise Tax and 
Export Controls, Bosch GmbH  (RD/RO/ 47) 
4.1 Mr. Michael Kistner presented t he Bosch GmbH group : a tru ly global network of 276 
manufacturing sites and  440 subsidiaries employing about 375,000 associates  in 150 countries . 
While Bosch , he said, was  a company historically involved in manufacturing, it also ha d service s 
divisions , operating in areas such as repair and maintenance . Mr. Kistner shared some thoughts 
with the CRO about the impact of non -preferential rules of origin in his company:  
 In the context of specific projects in a single country (e.g. the modernisation of the Panama 
Canal ), there was no ques tion about the applicable rules of origin (i.e. the rules would be 
those of the importing country; in this case , Panama).  The problem , Mr. Kistner explained  
concerned mass market products  produced in several locations and exported globally . 
For instance, Bosch supplied  components for mobile phones  which were manufactured in 
several sites and exported to different markets . Managing origin in those cases could 
become overly complex ; 
 Attributing origin could  also prove  complex in cases  in which identical piec es, produced in 
multiple locations, may be slightly modified to suit the needs of the buyer.   This, for 
instance, was the case for parts produced  for car motors  where small changes were 
introduced to customize the parts to the specific requirements and spe cificities of each 
motor ; 
 In other cases, parts and components were bought from sub -contractors in one country, to 
be assembled in a second country and tested in a third country .  In these cases, the site of 
production was not necessarily known at the plan ning stage.   A decision to manufacture  the 
items in a different site could be taken for each case depend ing on the capacity of factories 
at a given time ; 
 Determining origin in these cases could prove complicated  and, sometimes, even impossible. 
Non-prefere ntial rules of origin  were a major nuisance in the procurement and supply 
process.   In some  cases , the applicable origin criteria would only be known at the time of 
exportation  (i.e. once the destination of a good became clear).  In this case, it could  already 
be too late (or too costly) to ensure the proper marking of origin ; 
 A related complication derived  from tracking parts, components and processes . This had to 
be done through a combination of automated and manual controls. Special production 
controls s ystems, which we re normally used for quality purposes  were used.  In the case of 
ad valorem or change of tariff heading rules, an added complication was that the full 
collaboration of suppliers was essential.  In the case of value -based rules of origin, th e 
manipulation of very sensitive information and trade secrets could be a concern.  There we re 
no international standardised electronic platforms to exchange this type of information, so 
the bulk of it had to be done manual ly and much of it was paper -based .  This translate d into 
rising administrative costs;  G/RO/W/167  
 
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   Mr. Kistner also argued that the effort to meet the requirements of non -preferential rules of 
origin was overly cumbersome because companies  had to come to a final result and 
attrib ute origin to a single  country;  
 In conclusion, simpler and standardised rules  of origin  would facilitate business and trade . 
Ideally, there should be no origin requirements unless those were needed, for instance, for 
quotas or  anti-dumping measures.   In those cases, there shoul d be a single international 
definition of substantial transformation, which would be simple to handle for businesses.  
5. Mr. Kolja Mendel, Managing Partner, Mendel Verlag GmbH & Co. KG and Mr. Marc 
Bauer, Head of Unit, Chamber of Commerce and Industry of the Stuttgart Region 
(RD/RO/ 40) 
5.1 Mr. Mendel, of Mendel Verlag GmbH & Co. KG , and Mr . Bauer, of the Chamber of Commerce 
and Industry of the Stuttgart  region, explained that their institutions had collaborated to conduct a 
study about national labelling requi rements, and in particular, the obligation, in some countries, to 
indicate  the country of origin on labels.   Mr. Mendel and Mr . Bauer presented the objectives, the 
methodology and the main findings of the study as follows:  
 The decision to initiate th is research project had been taken to compile reliable information 
to be used by companies . The study examined the information available for 108 customs 
territories in the European market access database of the European Union to answer three 
questions: (1)  were there lab elling of origin requirements ? If so, (2) d id the requirements 
apply across the board or to some products only?; and (3) d id the requirements fall under 
customs provisions or consumer protection legislation?  
 The study revealed that there was an ob ligation to always indicate the country of origin in 
23% of countries.   In 71% of countries, the indication of origin was mandatory only for 
some sectors or products (e.g. food products, pharmaceuticals and cosmetics).   
An indication of country of origin on labels was not necessary i n only 6% of countries.  
 Identifying and compiling information about country of origin marking proved much more 
complex than anticipated .  In fa ct, such r equirements derived from either customs 
regulations or consumer protection policies.   It was often very difficult to know if there 
actually was an obligation in place and what exactly it was (for instance, could abbreviations 
be used?   Should origin be eng raved or affixed?   What languages were accepted?   Was the 
marking of origin  voluntary or mandatory?  Should the origin be marked before , at or after 
importation ?).  Lack of reliable information and the complexity of legislation were major 
sources of uncertainty, risk and costs.  
 In fact, mandatory country of origin labelling was a major concern for both small and large 
companies because the requirements were often not well understood.   Yet, c ustoms officials 
were intransigent regarding the examination of documents  so it was paramount that the 
commercial invoice, the certificate of origin and any products labels indicated an identical  
origin .  If not, goods risked being retained or rejected, even if there were valid reasons  for 
the discrepancy . 
 The distinction between customs and consumer protection regulations was found to be 
releva nt because origin criteria could be contained in either or in both.  The result of the 
application of both regulations could be different , resulting in a mismatch in the origin 
informed .  Divergent requirements could also stem from the fact that national c ourts could 
interpret rules of origin and consumer protection requirements.  
 Mr. Kolja and Mr. Bauer recommended  improving access to information and making marking 
requirements more transparent .  In addition , one possible simplification would be to require 
the mandatory labelling of consumer goods only, not intermediate goods (not intended for 
retail sale).   In other words, mandatory origin marking should be restricted to those cases 
where traceability serve d a clear purpose.   Another recommendation made was that origin 
marks and traceability should be enforced through market surveillance by consumer 
protection authorities, not by customs officials.  G/RO/W/167  
 
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  6. Mr. Onur Murat Çetin, Chief Manager of Logistics at Arçelik A.Ş., Turkey 
(RD/RO/ 46) 
6.1 Arçelik , Mr. Çetin explained, was  part of the Koç Holding, a group actually composed of 
about 100 companies in 33 countries and accounting for about 10% of Turkey' s total exports. 
Arçelik was the leading brand in Turkish household appliances . The company produce d very 
different goods, from air c onditioners  to vacuum cleaners, from TV sets to mobile phones. 
Mr. Çetin, share d the following insights with Members:  
 Turkish re quirements for non -preferential origin confer red an "economic" nationality to 
goods but did not confer any other benefit s (unlike preferential origin) . Non -preferential 
origin was obtained either by the goods being "wholly obtained" in one country or, when  two 
or more countries were involved in product ion, the country where the last substantial, 
economically justified worki ng or processing was carried out ; 
 These requirements were contained in a 1999 Customs Legislation and in regulations which 
laid out the necessary definitions and principles .  In addition, specific amendments were  
adopted in 2009 to provide additional general and specific, primary and secondary rules 
related to textile and non -textile products (Annex 5 and 6 respectively) ; 
 A specific certif icate of origin had to  be presented by all goods imported under 
non-preferential conditions.  
7. Mr. Humberto Siúves, Regional Trade Compliance Counsel , Google Brazil  
(RD/RO/ 45) 
7.1  Mr. Humber Siúves noted that Google trade d on a large number of IT products a nd, 
therefore faced similar challenges to those which had been highlighted by previous speakers.  
Instead of repeating those challenges, he preferred to share insights from his previous personal 
experience as legal counsel assisting small and medium compan ies in Brazil:  
 Undisputedly,  Mr. Siúves argued,  transparency and predictability were paramount to 
business development and international trade.   While that was true for all companies, big, 
multinational companies could afford  to devote the necessary resour ces to minimizing the 
risks associated with compliance and regulatory uncertainty.  Smaller companies , however,  
were much less equipped for that.   Those were the lenses through which he proposed to 
assess the benefits of multilateral harmonization of rules  of origin.   In that respect, 
Mr. Siúves shared the recent experience of Brazil, where non-preferential rules of origin  
legislation had been introduced in 2010 ; 
 Before the legislation, companies  in Brazil  had no guidelines to assess non -preferential 
origin , a situation which generated uncertainty.   In addition, smaller exporting firms would 
struggle to identify  and understand the requirements of foreign countries  in a foreign 
language .  This translated sometimes in impediments.  In addition, in case of veri fication, 
the importing company would be in a very vulnerable position because it did not have 
sufficient knowledge about processes carried out abroad ; 
 The introduction of new legislation on non -preferential origin in Brazil had  changed that  by 
spelling ou t the criteria used to attribute origin and the liab ility related to origin certification .  
This had been benefi cial, particularly for goods for which quotas, import licences or anti -
dumping measures were in place ; 
 In sum, the establishment of national leg islation had brought legal certainty and 
transparency with relation to origin. In addition, it ha d brought clarity to the administrative 
processes related to origin by identifying clear  liabilities ; 
 If such benefits were noted locally, there would, arguabl y, be interest in developing global 
rules related to origin .  Multilateral rules of origin  would make it easier for small and medium 
enterprises to comply  with non -preferential rules of origin and certificates. This could make 
a positive contribution to be tter integrating small and medium enterprises to global markets ; G/RO/W/167  
 
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   Mr. Siúves acknowledged the difficulties in achieving this objective but argued that the effort 
could be easier than it seemed because there certainly were similarities in the rules of origin  
adopted by WTO Members.  He asked whether international organizations had examined the 
rules to identify  such similarities and argued that this type of analysis would be useful in 
gauging the cost -benefit of harmonization  negotiations . 
8. Mr. Wouter van Duij n, Global Trade, Customs and Compliance Specialist EMEA, 
Ashland Europe, Middle East & Africa, Ashland Services B.V.  (RD/RO/ 41) 
8.1 Mr. Wouter van Duijn explained that Ashland was one of the world's leading specialty 
chemical companies,  with more than 10,0 00 employees and with customers in more than 100 
countries.  The company was active in the pharmaceutical industry, in personal care, in the paints 
and coating industry , as well as in other more specialised chemical industries.  Based on the 
experience of a company trading in several components and final products, Mr . van Duijin reported 
as follows:  
 Global trade compliance had three main objectives .  First, to protect the company and the 
brand to minimize trade compliance costs and risks.   Regulatory compli ance was important 
because it related to a company's image and how trustworthy it was perceived to be. 
Second, compliance also aimed at optimizing operations to deliver financial savings 
whenever possible.   Third, compliance teams contribute d to supply cha in security by 
minimizing the  number of holds or disruption s to inputs imported and the right classification, 
certification, testing and documentation of exports.   To accomplish these goals, Ashland had 
to maintain a main team in the Netherlands, seconded by te ams in the United States; 
South  America;  and China;  
 To determine non -preferential origin, Ashland's teams examined finished products; that is, 
their tariff classification and country of production (the company  had 15 sites in several 
countries of the European Union).  This examination required close collaboration with 
suppliers to obtain evidence about origin and a long -term supplier  declaration.  Rules of 
origin would then be applied manually, to ensure that a tariff shift requirement was met and 
to exclude risks related to insufficient processing (relabelling, repackaging or simple 
blending);  
 One of the common difficulties that the company face d concerned the restriction, in some 
markets, was to mark products of "EU origin".  The European Union was a single customs 
territory , but the need to indicate a national origin could generate problems , especially  in 
cases where a minimal operation had occurred . 
 Another  particular challenge  stemming from the lack of harmonized rules was that, in the 
chemical indu stry, several processes could be considered (or not ) as minimal processes. In 
fact, not all products derive d from a chemical reaction and blending, grinding and diluting 
were commonplace . Whenever the rule was unclear or subject to interpretation, there wo uld 
be an increased risk for the establishment of certificates of origin and other documents.  
 Two elements compounded such challenges.   The first , that suppliers themselves did not 
understand well origin requirements and were unable at times to provide the  type of 
evidence that foreign customs would request.   The second was that there were huge 
variations in the requirements and expectations of customs authorities.  While some were 
satisfied with invoices, others require d additional documents such as a supp lier declaration 
or other proof of origin.   Some accepted copies, others not.  Some preferred  digital 
certificates, others not.  
 According to Mr. van Dujin, businesses  wouldn't necessarily mind rules of origin as long as 
the rules were clear, easy to unders tand and interpret and stable.  
 Finally, any initiative to reduce operational and documentary costs related to origin would be 
welcome.   Such costs were related to the IT systems necessary to track products and 
materials, to the time and human resources nee ded to manage and verify non -preferential 
origin and to the actual p rocedures  involved (different sorts of fees).  
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