Info Service on WTO and Trade Issues (May15/03)
11 May 2015
Third World Network
Implement Bali Rules of Origin decision, say LDCs
Published in SUNS #8015 dated 5 May 2015
Geneva, 4 May (Kanaga Raja) -- The Least Developed Countries (LDCs)
group at the World Trade Organisation (WTO) has called on WTO members
to move forward on implementing the Bali Ministerial Decision of 7
December 2013 on preferential rules of origin for the LDCs.
This call came at a meeting of the WTO Committee on Rules of Origin
(CRO) on 30 April.
According to trade officials, Bangladesh, on behalf of the LDCs, presented
an elements paper for a discussion on preferential rules of origin
for LDCs. The paper outlines six questions for the preference-giving
countries aimed at better understanding how they are considering addressing
the various elements in the Bali Decision.
The aim of the paper, according to the LDC Group, is to stimulate
a discussion by putting forward to Members a set of questions as to
how they are responding to the guidelines adopted at the Bali Ministerial
Conference, with the ultimate objective of identifying possible measures
for further facilitating market access for LDC products.
The elements paper recalled Paragraph 1.1 of the Bali Decision on
Preferential Rules of Origin for LDCs which provides that "Members
should endeavour to develop or build on their individual rules of
origin arrangements applicable to imports from LDCs in accordance
with the following Guidelines". (The guidelines are laid out
in the Bali Decision.)
In its paper, the LDC Group recognised that no single form of Rules
of Origin (RoO) used by preference-giving countries to determine origin
is necessarily better than the other.
However, it said that the LDC submission to the CRO last October shows
unequivocal evidence that under certain conditions the reform of RoO
reflecting global value chains and commercial reality generates a
market response in LDCs.
"The reforms in Canada and the EU adapted the RoO to the industrial
context resulting in an increase in utilization rate, relocation of
factories to LDCs, increased manufacturing capacity, more skilled
jobs creation as well as backward linkages," said the LDC elements
It recalled Paragraph 1.3 of the Bali Decision which provides that
"it is desirable to keep the level of value addition threshold
as low as possible" and "notes that the LDCs seek consideration
of allowing foreign inputs to a maximum of 75% of value in order for
a good to qualify for benefits under LDC preferential trade arrangements".
The first question posed by the LDC group in its elements paper is:
"How preference-giving countries that are currently adopting
different percentages are moving towards the adoption of a lower percentage
requirements in case of percentage calculation of domestic content
or a greater allowance of non-originating materials to allow the insertion
of LDCs into global value chains?"
The paper noted that certain preference-giving countries are still
maintaining a value-added calculation while lessons learned demonstrated
that a value-of-materials calculation is easier to comply with in
terms of calculation, transparency and predictability.
The LDCs also asked: "How these preference-giving countries using
a percentage criterion are intending to move towards a methodology
based on a value of materials calculation taking into account the
lessons learned and the evolution of their rules of origin?"
Paragraph 1.5 of the Bali Decision provides that: "In the case
of rules based on the change of tariff classification criterion, a
substantial or sufficient transformation should generally allow the
use of non-originating inputs as long as an article of a different
heading or sub-heading was created from those inputs in an LDC...".
The LDCs note that preference-giving countries using the change of
tariff classification criterion provide, in certain cases, for a series
of exclusions of the use of materials classified in other chapters
heading or subheadings such as the following rule for certain products
of chapter 16: Manufactured from products other than those of Chapter
1, 2, 3, 5, 10, 11, 16 or 19.
The third question posed by the LDCs is: "How preference-giving
countries using a change of tariff classification are considering
to further simplify their rules of origin by eliminating or reducing
the restriction on the use of certain non-originating materials classified
in certain HS chapters, heading or subheadings?"
Paragraph 1.6 of the Bali Decision provides that "In the case
of rules that allow a specific manufacturing or processing operation
for the purpose of conferring origin, such rules should, as far as
possible, take into account the productive capacity in LDCs".
While the LDCs note that some preference-giving countries have made
considerable progress in the textile and clothing sector by allowing
a single-stage process (i. e. from non-originating fabric to finished
garment), a number of rules in other sectors like steel and metals
still demand double processing requirements that are not matching
LDC productive capacity or are not reflecting their industrial operations.
The fourth question posed by the LDCs is: "How preference-giving
countries using RoO based on specific working or processing requirements
consider moving towards a single working or processing operations
reflecting substantial transformation?"
The elements paper recalled Paragraph 7 of the Bali Decision which
states that: "Cumulation should be considered as a feature of
non-reciprocal preferential trade."
The LDCs note that many preference-giving countries are "graduating"
out of their preference schemes some developing countries or are concluding
FTAs with developing countries that are members of the same regional
trade integration group with LDCs.
As a result of these evolutions, developing countries members of the
same regional trade integration group of LDCs may be excluded from
the scope of cumulation granted to LDCs. This may reduce substantially
the scope of cumulation for LDCs and may have significant adverse
effects, they said.
The fifth question posed by the elements paper is: "How preference-giving
countries are considering measures to remove or alleviate the adverse
effects that may diminish the value of cumulation for LDCs once developing
countries member of the same regional trade integration group are
graduated from GSP schemes or become no longer eligible for cumulation
since they are part of an FTA with the preference-giving country?"
The paper cited Paragraph 1.8 of the Bali Decision dealing with administrative
requirement of rules of origin: "The documentary requirements
regarding compliance with the rules of origin should be simple and
transparent. For instance, requirement to provide proof of non-manipulation
or any other prescribed form for a certification of origin for products
shipped from LDCs across other Members may be avoided. With regard
to certification of rules of origin, whenever possible, self-certification
may be recognized".
The LDCs note that under the Trade Facilitation Agreement they are
requested to engage on a number of trade reforms to facilitate trade
while many preference-giving countries are still requiring documentary
evidence of non-manipulation that is particularly challenging for
landlocked and island LDCs.
"Progress has been made by some preference-giving countries towards
accepting self-certification. However, the LDCs are not benefiting
from particular technical assistance for administering self-certification
that may be particularly demanding during the transition phase."
Finally, taking into consideration the demands that the Trade Facilitation
Agreement may pose to LDCs: (a) How preference-giving countries are
considering the elimination of documentary evidence of "non-manipulation"?;
(b) What measures are being considered by preference-giving countries
to implement self-certification by LDCs?; (c) What measures and programmes
of technical assistance are being considered by preference-giving
countries when moving to accept self-certification or other similar
administration like registered exporters?
According to trade officials, Nepal, Cambodia, Tanzania, Yemen and
Laos, who are members of the LDC Group, expressed support for Bangladesh.
Nepal underlined that work on preferential rules of origin is one
of the priorities for LDCs in the WTO's post- Bali work. It said that
the variety of schemes currently in place create many "hassles"
for LDC exporters.
Laos said that not much has happened on the issue since the Bali Ministerial
Conference of 2013 and that it was time to think about making the
Yemen also said that there has been no meaningful implementation of
the 2013 Bali Decision.
According to trade officials, Tanzania expressed concerns over what
it said were the high LDC-origin content requirements in the Generalised
System of Preference (GSP) schemes of the United States and Japan.
Cambodia voiced concerns about the changes that were introduced in
the European Union's GSP system in 2014 which disadvantage certain
Cambodian exports such as bicycles.
According to trade officials, the US questioned the conclusions of
the LDC Group's October 2014 paper citing decisions by companies to
relocate production to LDCs based on changes in the rules of origin
schemes of the EU and Canada. It asked whether other factors affecting
these decisions were taken into account.
The US maintained that the decline in US-bound LDC exports claiming
GSP benefits cited in the October 2014 paper was due to the expiration
of the US GSP programme in July 2013 as well as the suspension of
Bangladesh's GSP benefits in September 2013 in the wake of the Rana
It recalled that the Senate Finance Committee and House Ways and Means
Committee both recently approved legislation that would renew GSP
and other preferences.
According to trade officials, the EU said that it would soon send
its answers to the six questions posed in the elements paper and that
it did not see changes to its GSP system posing any problems for Cambodia.
Canada said its rules of origin system was generally consistent with
the Bali Decision guidelines.
According to trade officials, China noted that changes in the scope
of product coverage under its duty-free benefits for LDC imports which
took effect in the beginning of 2015 had already led to a 27% increase
in LDC imports (volume terms) through the month of March.
According to trade officials, the WTO secretariat made a presentation
on existing non-preferential rules of origin as well as the current
state of play in the WTO's harmonisation work programme, which has
not moved since 2007.
Forty-four members have informed the WTO that they apply their own
non-preferential rules of origin while 50 members said they do not.
According to trade officials, China and Chinese Taipei highlighted
the importance of reviving efforts to establish globally harmonised
rules of origin while Australia, Canada and the US questioned the
need for such harmonisation.
[Article 9.2 of the Agreement on Rules of Origin mandated a work programme
to establish globally harmonised rules of origin, to be taken up soon
after entry into force of the WTO and completed within three years
of its initiation. Thus, this work, initiated in 1995, and to be undertaken
in cooperation with the Customs Cooperation Council, should have been
completed by 1998, but has been stalled by the major developed countries.
Some of the issues referred by the Customs Cooperation Council to
the General Council for decision remain stuck there, with the US and
others questioning the need under the special plea of global value
chains and other concepts. SUNS] +