G/RO/W/162  
 
25 August 2016  
(16-4516) Page: 1/4 
Committee on Rules of Or igin    
 
 SUMMARY OF THE INFOR MATION SESSION ON  
NON-PREFERENTIAL RULES O F ORIGIN – 21 APRIL 2016  
1. Introduction  
1.1 In the absence of negotiations on the Harmonization Work Programme  (HWP) , the 
Committee on Rules of Origin (CRO) agreed to initiate an "educational exe rcise" to share 
experiences and learn more about the non-preferential rules of origin  currently being applied by 
some WTO Members . The Committee deemed, in fact, that a better understanding about the 
design, coverage and trade effects of existing no n-preferential rules of origin w ould be useful to 
decide how to take the work of the Committee on non -preferential rules of origin  forward 
(G/RO/M/63) .  Members, therefore, heard presentations by the World Customs Organization 
(WCO, RD/RO/20), the WTO Secretariat  (RD/RO/34), the International Chamber of Commerce 
(RD/RO/30), UNCTAD (RD/RO/31), and the International Trade Centre (RD/RO/32).   Members 
then agreed to hear additional views, and a new "information ses sion" was organized on 
21 April 2016.   As agreed by Me mbers  at the CRO meeting  (G/RO/M/66), b elow is a brief summary 
of the main points made by the speakers who took part in this information session.  
2. Mr. Martin Van der Weide , Policy Adviser on Origin at the Netherlands Chamber of 
Commerce and Deputy Chair of the International Certificate of Origin Council at the 
International Chamber of Commerce  (RO/RO/36)  
2.1 Mr. Van der Weide described the work of the International Chamber of Commerce on origin -
related matters and that of the Netherlands Chamber of Commerce.   He explained that over 
50 million certificates of origin were issued every year worldwide and about 450,000 certificates 
were delivered in the Netherlands alone to about 10,000 individual exporters who shipped goods 
to 230 destinations.   As a result, the chambers of commerce had gained experience helping firms 
comply with foreign origin requirements. On the basis of that experience, Mr. Van der Weide 
explained that:  
 Producers and exporters had difficulty  in completely understand ing rules of origin and the  
rules applicable to each case. This could attest to the complexity and variety of rules of 
origin and it could also indicate that most firms did not factor in origin in  the early stages of 
their planning. Concerns with origin compliance would only be rais ed at the time of 
exportation;  
 Non-preferential rules of origin added to the already complex web of preferential rules of 
origin. From the exporter 's viewpoint, there was no strict distinction between preferential 
and non -preferential rules:   non-preferent ial rules were simply "another" set of requirements 
and costs with which exporters ha d to deal with;  
 While compliance with preferential rules of origin allowed for a tangible benefit 
(i.e. preferential market access conditions), exporters could not identif y any clear benefits to 
counterbalance the costs of complying with non-preferential origin requirements;  
 The international harmonization of non -preferential rules of origin would facilitate 
compliance by reducing the complexity and variety of national rule s. There were indeed a 
large number of possible rules for a single product.   For instance, products of HS Chapter 17  
varied significantly :  they could be based on minimum weight or value requirements . These 
variations explained the c onfusion for producers;  G/RO/W/162  
 
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   Certificates of origin had been evolving over time, but not everywhere and not in the same 
manner. Obtaining the certificates and having them accepted still prove d to be a 
cumbersome process for many export destinations, involving delays and increasing 
operational costs;  
 In addition to the harmonization of the rules, the mainstreami ng and simplification of 
origin -related paperwork and procedures would also facilitate international trade. 
For instance, a reduction of origin -related documents would be useful  (different forms, 
invoices, declarations).  In addition, governments could consider simplifying the 
requir ements to obtain certificates (for instance, by centralising all requests  from a single 
national administration) and also eliminating duplicative pro cedures (e.g. certification by 
embassies or consulates).   Another suggestion made was to increase the number of 
countries which accepted electronic certificates.  
3. Mr. Sjur Klætte , Senior Advisor, Innovation Norway, Directorate of Customs & 
Excise, Norway (R D/RO/37)  
3.1 Mr. Klætte  explained that Innovation Norway focused on the promotion of Norwegian 
exports. To undertake its tasks, Innovation Norway had to understand foreign regulations, 
including rules of origin.  Thus, based on the perspective of Norwegian  exporters, some of the 
main arguments made by Mr. Klætte  included the following:  
 In the interest of businesses, governments had to strive to keep their rules of origin as 
precise and simple as possible.  In Norway, substantial transformation used to be de fined as 
"the last substantial, economically justified processing or working".  That definition created 
uncertainty, so the government decided to modify it . As from  March 2016, substantial 
transformation was defined as a change of tariff subheading or a mi nimum of 50% value 
added.  One innovative aspect was that value , under the new rules, would also  include  the 
value of software (in addition to hardware).  The rules were complemented with provisions 
defining minimal operations and a tolerance value.   These  reforms had greatly clarified the 
rules and increased certainty for businesses;  
 From the viewpoint of exporters, non -preferential rules of origin increased, together with 
preferential rules, the complexity of international trade regulations.  They created  a "chaos 
of origin";  
 Non-preferential rules of origin increased business costs by requiring firms to track their 
intermediary products in their e nterprise resource planning (ERP) systems and to invest in 
inventory management systems;  
 Rules of origin impac ted firms differently depending on their business and  production 
models.  Mr. Klætte  cited the case of a company manufacturing paint from many 
components in Norway and exporting to several different destinations.   In that case, the 
difficulty was tracking the origin of the various items and figuring out the origin of the final 
product , according to the various rules of each export destination. He also cited the case of 
a company importing parts and components from different origins to assemble 40 to 50,000 
items in Norway and export complete vessel control systems.   One particular difficulty in this 
case was that the final product was shipped in a number of different consignments.  Both 
models involved complex origin determinations, especially counting the n umber of possible 
tolerance and de minimis  rules, minimal operations, etc.  Divergences in national legislations 
could truly increase the complexity and cost of trading ; 
 For these reasons, rules should be simplified or harmonized at the international level .  As an 
alternative, governments should consider revising their rules to make them as simple, 
transparent and liberal as possible.  G/RO/W/162  
 
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  4. Mr. Jeff Whalen, Senior Counsel, Customs and International Trade, Legal 
Department at NIKE and Chairman of the Trade Committ ee at the World Federation 
of the Sporting Goods Industry (RD/RO/38)  
4.1 Mr. Whalen explained that NIKE was the world's largest manufacturer of sports and athletic 
footwear and apparel and a pioneer in the development of global value chains with manufactur ing 
activities spread over 42 countries.  Given the nature, scale and complexity of its operations, NIKE 
needed to be able to move raw materials and final products  quickly and smoothly between 
different countries . Consequently, rules of origin had a direct  impact on the operations of NIKE and 
the entire sport ing equipment industry .  Some of the main points highlighted by Mr Whalen 
included:  
 Rules of origin, preferential and non -preferential, could impact  the sporting goods industry in 
several different ways ; 
 On the one hand, p referential rules of origin could  influence economic behaviour and, in 
some cases, encourage o r force producers to relocate  production or shift suppliers to comply 
with preferential origin requirements.   On the other hand, n on-preferent ial rules of origin  
affected the documentary obligations and requirements related to country of origin marking 
(labels), trade remedies (e.g. anti -dumping) and import prohibitions (quotas or embargoes);  
 With regard to non -preferential rules of origin, some  of the hurdles met by businesses  
related to their sheer number and variety.  The country of origin could  either  be where a 
good was wholly obtained or where the last substantial transformation occurred.  The 
problem was that many countries appl ied differe nt rules for different purposes (non -
preferential vs. preferential) and even different rules under  different preferential 
agreements. In addition, national rules could  also contain a number of exceptions.   For a 
company such as NIKE, trading and shipping p roducts in over 190 countries, the number of 
different rules and possible exceptions add ed up to a real regulatory and compliance 
challenge . This challenge was amplified by the number of destinations involved in a 
company's operations ; 
 In addition, busines ses may be affected by uncertainty and the s evere penalties which 
applied, even  when no revenue loss was involved (that is, severe penalties even when only 
non-preferential origin was claimed);  
 Mr. Whalen also noted that the overlap of different rules , preferential and non -preferential , 
could produce conflicting or paradoxical origin results.  He cited the example of footwear, 
the origin of which (non -preferential) was the country where the upper was closed  
(i.e. when a piece of fabric was sewed or attached  to the upper, or when the upper was 
glued to the bottom).  The rule meant that a shoe could be entirely manufactured abroad 
and imported into the United States where it would acquire American origin if the upper was 
glued to the bottom.   In contrast, an u pper produced in Mexico with third -country 
component s would not meet preferential rules of origin when imported into the US  if, for 
instance, NAFTA rules were applied ; 
 This example illustrated  how complicate d the global origin system ha d become .  In additi on, 
it also raised  the question of the rationale for rules of origin and the policy purposes they 
supported. If the purpose were  to enable traceability and consumer information, it would be 
legitimate to say that the purpose was not fulfilled.   An upper, f or instance, was 
manufactured from 20 to 100 different pieces , so the origin as indicated in the label of a 
shoe could be one, even though 80% of the value had been produced elsewhere.   
Consumers, Mr . Whalen argued, would  likely be more interested in knowi ng the predominant 
origin of retail price rather than being informed about the place of "substantial 
transformation";  
 Moving forward, Mr Whalen argued that it would be useful to simplify and harmonize rules of 
origin internationally.   Countries could refle ct about the policy purposes which were being 
pursued through the application of complex origin requirements.  Governments could also 
consider shifting the focus of the rules away from finished goods to better reflect the critical 
steps of production, not just the last step.   Rules should, in addition, better reflect G/RO/W/162  
 
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  intermediate processes and materials, such as design and development and other costs 
related to intellectual property.   Designing such rules was ob viously a difficult task, but 
these changes  wew needed to match  rules of origin with modern patterns of production.  
5. Ms Dianne Tipping, Chair, Export Council of Australia and Managing Director, Excon 
International Pty. L td. (RD/RO/39)  
5.1 The Export Council of Australia, Ms . Tipping explained, was a no t-for-profit organization 
which supported Australian exporters.  This covered not only exports, but actually also imports 
because many Australian companies also needed to import raw materials, components and inputs 
to process and export their goods.   Some of the main points highlighted by Ms . Tipping were as 
follows:  
 The variety and diversity of national requirements regarding origin constitute d a challenge 
for companies that ha d to dedicate staff to understand and ensure compliance with them. 
Australia had  signed a number of preferential trade agreements, each of which contained its 
own specificities and requirements.   Some had certificates of origin under specific formats 
and prescriptions while others accepted self -certification.  Complying with these 
requirements was not necessarily difficult, but it could be costly;  
 With regard to non -preferential certificates of origin,  Ms. Tipping argued that their rationale 
or justification was not clear.   In the vast majority of cases, non -preferential origin would 
necessarily have to be checked through a certificate.   Banks may request a certificate to 
issue letters of credit  and, so metimes, the buyer himself request ed a certificate as a 
guarantee of origin.   While such concerns  were understandable, Ms. Tipping argue d that 
there could be other , less-costly ways of providing such assurance .  Certificates of origin 
were burdensome and costly, especially if one considered that it was only one in a series of 
other documents required for exportation or importation;  
 Some co untries, for instance, required embassy certification or an inspection of exports. 
Others, at the least in the case of Australia, already had thorough processes in place for the 
registration, inspection and licensing of exports (for instance by the Departm ent of 
Agriculture and Water Resources).  It was therefore legitimate to question the objectives 
which were supported by origin and certification requirements and whether a certificate of 
origin actually added value or certainty as the most appropriate ins trument to achieve such 
objectives;  
 In conclusion, to simplify origin requirements, Ms . Tipping made some recommendations . 
First, governments should move towards self -certification of origin . Second, they should 
encourage  the use of electronic certificatio n.  Third, s he also recommended simplifying and 
harmonizing rules of origin internationally.   Fourth , she argued that, if certificates continue 
to be required, it would be useful to increase the number of organisations authorised to 
issue non -preferential certificates. This could lead to a more competitive market with lower 
costs and greater accessibility for exporters.  Fifth, and finally, she argued that educating 
and training buyers and border and customs officials would be needed to simplify origin 
requirements . 
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