Members of the Least-developed Country (LDC) Group introduced a new proposal on 20 October which they said would build upon existing guidelines for establishing preferential rules of origin in favor of LDC exports. The group expressed hope that the proposal could be part of a “package” of initiatives for LDCs which members are contemplating for the WTO’s upcoming 10th Ministerial Conference in Nairobi.
The proposal, presented as part of an informal consultation process, seeks to go beyond the 2013 Bali Ministerial Decision on preferential rules of origin for LDCs, which the group said “remained largely non-operationalized.” The new proposal would help both LDCs and preference-granting countries give effect to the guidelines with a view to attaining effective market access for LDCs on a lasting basis.
Speaking for the group, Bangladesh said it recognises that no single system of rules of origin used by preference-giving countries is better than the other. However, there is “unequivocal evidence” that, under certain conditions, the reform of rules of origin to reflect current global value chains and commercial realities can generate positive outcomes for LDCs.
Some of the key elements of the proposal include:
- Adopting simple and transparent methods for determining qualification through “substantial transformation.” For example, when using ad valorem percentage criterion, this would include adopting a maximum percentage of non-originating materials of at least 75% in the total value of the final qualifying good and allowing for the deduction of freight and insurance costs.
- Providing LDCs with cumulation1 of working and process operations and materials with other LDCs, with preference-granting countries, with GSP beneficiaries, with countries that are members of the same regional grouping, and with countries with which the preference-granting country has concluded a regional trade agreement;
- Abolishing certain requirements such as certificates of non-manipulation or any other form of certification for products shipped by LDCs across other countries, and recognizing self-certification of rules of origin.
In presenting the proposal on behalf of the LDC Group, Bangladesh noted that rules of origin were an integral part of the duty-free, quota-free treatment provided by preference-granting countries and that the proposal was based on existing best practices and drafted to reflect the real-world problems LDCs were facing in benefitting from such schemes. It looked forward to credible outcomes on this issue at the Nairobi meeting in December.
Reaction from other WTO members was mixed. While all the countries that spoke said they were ready to work with the LDC Group on the issue in a constructive manner, several said the proposal appeared too ambitious, particularly with the little time remaining until the 15-18 December Nairobi meeting. Others said they were concerned that the proposal appeared to call for binding rules whereas the 2013 Bali Ministerial Decision granted countries flexibility in the application of the guidelines, or addressed issues which remain the subject of discussion within the WTO’s rules of origin committee.
Nearly all the countries that intervened underlined the steps they have already taken, or are in the process of adopting, in order to conform to the guidelines set out under the 2013 Bali Decision.
Steffen Smidt, the facilitator for the consultations, said he would hold weekly meetings on the issue among a small group of countries starting on 27 October and would report back to the broader membership once there was progress to report.
Background
Rules of origin are the criteria used to determine where a product was made. Products that are deemed under such rules to be made in LDCs would qualify for preferential market access schemes for LDCs.
The Bali Decision sets out, for the first time, a set of multilaterally agreed guidelines to help make it easier for LDC exports to qualify for preferential market access. The Decision recognizes that each country granting trade preferences to LDCs has its own method of determining rules of origin, and it invites members to draw upon the elements contained in the Decision when they develop or build on their individual rules of origin arrangements applicable for LDCs.
The Decision also requires that members notify their preferential rules of origin for LDCs to the WTO to enhance transparency, make the rules better understood, and promote an exchange of experiences as well as mainstreaming of best practices. The WTO’s relevant bodies shall also annually review these rules of origin.
Further information on the WTO’s work regarding rules of origin can be found at www.wto.org/origin.
Details on the LDC Group and others in the WTO can be found here.