. /.WORLD TRADE
ORGANIZATIONWT/DS243/5
8 May 2002
(02-2649)
Original:  English
UNITED STATES – RULES OF ORIGIN FOR TEXTILES
AND APPAREL PRODUCTS
Request for the Establishment of a Panel by India
The following communication, dated 7 May 2002, from the Permanent Mission of India to the
Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.
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On 11 January 2002, the Government of India requested consultations with the Government
of the United States pursuant to Article 4 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU), Article XXII:1  of the General Agreement on Tariffs and Trade
1994 (GATT 1994) and Article 7 of the Agreement on Rules of Origin (ARO) concerning the rules of
origin that the United States applies to textiles and apparel products under legislation adopted in 1994
and 2000.  The request was circulated to Members of the World Trade Organization on
22 January 2002 in document WT/DS243/1.  India and the United States held consultations in Geneva
on 7 February and 26 March 2002 with a view to reaching a mutually satisfactory resolution of the
matter.  Unfortunately, the consultations failed to settle the dispute.
In view of the above, India hereby requests, pursuant to Article 6 of the DSU, Article XXIII
of the GATT 1994 and Article 8 of the ARO, that a panel be established to examine, in the light of the
relevant provisions of the ARO, the rules of origin for textiles and apparel products set out in
Section 334 of the Uruguay Round Agreements Ac t (URAA) and the Statement of Administrative
Action accompanying the URAA, the subsequent modifications made by Section 405 of the Trade and
Development Act of 2000, the customs regulations implementing these Acts as well as theadministration of these Acts and regulations.
Section 334 of the URAA changed the rules of origin applicable to textile and apparel
products as from 1 July 1996.  Prior to that change, textile and apparel products, like other industrial
products, could be conferred the origin of a country if a new and different article of commerceresulted from a manufacturing or processing operation in that country.  The main changes introduced
by Section 334 were, including but not limited to, the following:
• Fabrics are deemed to originate in the country where they were formed in the greige
state by weaving or knitting.  Dying, printing and other finishing operations that are
ordinarily performed to turn greige fabric into a useful article of commerce no longerconfer origin.
• A wide range of made-up non-apparel products, such as silk scarves, blankets as well
as bed, table and kitchen linen, are deemed to originate in the country where theirconstituent fabrics are formed into the greige state.WT/DS243/5
Page 2
• For apparel products, the origin is deemed to be the country where the assembly takes
place, which means that the country where the component parts were cut into shapecan no longer be the country of origin.
The European Communities (the EC) considered th e changes in Section 334 to be inconsistent
with the United States' obligations under the ARO and other WTO agreements, and initiated disputesettlement proceedings against them (WT/DS85/1).  The EC withdrew the complaint when the
United States agreed to introduce legislation restoring the previous rules in respect of certain products.
However, the legislation actually introduced did not satisfy the EC, and it therefore initiated new
dispute settlement proceedings (WT/DS151/1).  This dispute was settled through a procès-verbal
according to which the United States agreed to introduce legislation modifying the Section 334 rules
of origin for certain products of export interest to the EC (WT/DS151/10).  Section 405 of the Trade
and Development Act of 2000 gives  effect to this procès-verbal,  but fails to reinstate the rules of
origin that applied prior to the changes introduced by Section 334 of the URAA.
As a result of the changes introduced by legislation adopted in 1994 and 2000, the rules of
origin applied by the United States now distinguish, inter alia , between:
• textiles or apparel and other industrial products;
• fabrics made of wool and fabrics mode of other fibres;
• different made-up non-apparel products that have undergone identical processing
operations;
• certain made-up non-apparel products processed from fabric made of wool or cotton
and those processed from fabric made of other fibres;  and
• made-up non-apparel products made of fabric with more than 16 per cent cotton and
those made of fabric with 16 per cent or less cotton.
The changes thus resulted in extraordinarily co mplex rules of origin for textile and apparel
products under which the criteria that confer origin vary between similar products and processing
operations.  The structure of the rules of origin, their implementation and administration, the
circumstances under which they were adopted and their effect on the conditions of competition for
textiles and apparel products demonstrate that they are used as instruments to pursue trade objectives.
Moreover, they create restrictive, distorting and disruptive effects on international trade, pose undulystrict requirements, require the fulfilment of certain conditions not related to manufacturing or
processing as a pre-requisite for the determination of the country of origin, are more stringent than the
rules applied by the United States to determine whether a good is domestic, discriminate between
Members and are not administered in a consistent, uniform, impartial and reasonable manner.  For
these reasons, India considers the United States' rule s of origin for textiles and apparel products to be
inconsistent with paragraphs (b), (c), (d) and (e) of Article 2 of the ARO.
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