Study On Rules Of Origin Of Goods

The paper consists of five chapters. The first chapter gives a brief discussion ofthe basic theory of rules of origin. Rules of origin are defined as those laws,regulations and administrative determinations of general application applied by anystate or region to determine the country of origin of goods. Rules of origin shallprovide for the country to be determined as the origin of a particular good to be eitherthe country where the good has been wholly obtained or, when more than one countryis concerned in the production of the good, the country where the last substantialtransformation has been carried out. There is little difference concerning the criterionof the wholly obtained goods. The criterion of substantial transformation includesthree concrete criteria: change in tariff classification, ad valorem percentages,manufacturing or processing operations. In relation with preference-giving or not,rules of origin can be classified into two category: nonpreferential and preferentialrules of origin.The second chapter discusses the WTO Agreement on Rules of Origin. Theabsence of a clear and binding multilateral discipline in the field of rules of origin hasbeen one of the reasons for opening the way to the utilization of rules of origin as atrade policy instrument. The growing concern over trade policy implications of rulesof origin ultimately generated efforts that matured into the long-awaited multilateraldiscipline. The WTO Agreement on Rules of Origin breaks new ground, but it onlyimplies in the nonpreferential field, including all rules of origin used innonpreferential commercial policy instruments, such as in the application of:most-favored-nation treatment under Articles I, II, III, XI, XIII of GATT1994;anti-dumping and countervailing duties under Article VI of GATT1994; safeguardmeasures under Article XIX of GATT1994; origin marking requirements under Article IX of GATT1994; any discriminatory quantitative restrictions or tariff quotas;government procurement and trade statistics. The Harmonization Work Program(HWP) of the nonpreferential rules of origin established pursuant to the WTOAgreement on Rules of Origin should have been completed by July1998. At the timeof this writing, the final agreement is still pending. The preliminary results of theHWP extended over three volumes, encompassing more than2,000pages andthousands of product-specific rules of origin. A much-needed cleaned-up version ofthe text has recently appeared with320pages. Different member has differentconsiderations. The U. S. wished not to use the results of the HWP to determine originin the context of antidumping and countervailing proceeding. On the other hand,many members wished the results be equally used for all purposes.Chapter three analyses the rules of origin in Generalized System of Preferences(GSP). The idea of preferential tariff rates in the markets of industrialized countrieswas presented by the first Secretary-General of UNCTAD, Raul Prebisch, at the FirstSession of the United Nations Conference on Trade and Development in1964. Theidea of the GSP was ultimately adopted in New Delhi, in1968, in the context ofUNCTAD II. Developing countries are granted preferential tariff treatment in themarkets of developed countries under the GSP, in order to help them increase exportearnings, promote industrialization, and accelerate rates of economic growth. TheGSP is a nonreciprocal and nondiscriminatory system of preferences in favor ofdeveloping countries. Drafting a uniform set of origin rules to be applied to thedifferent GSP schemes of preference-giving countries was the principal aim of theSpecial Committee on Preferences, at its second session. Hence, the SpecialCommittee decided to establish the working Group on Rules of Origin with the task ofinitiating consultations on technical aspects of the rules of origin with the objective ofpreparing draft origin rules to be applied uniformly in the GSP system.There weremany discussion and debates in drawing up the uniform rules of origin in the GSPsystem. The preference-giving countries did not agree uniform rules, wanting itdecided autonomously. In1974, all GSP schemes had entered into force (UNCTADdocument TD/B/442). Each preference-giving country set its own GSP rules of origin. The reform of the UNCTAD secretariat carried out in1996during UNCTAD IX inMidrand (South Africa) eliminated all UNCTAD standing committees including theSpecial Committee on Preferences and its subsidiary bodies, namely, the SessionalCommittee on Rules of Origin. Since then, the international trading community lostthe only intergovernmental forum to discuss GSP rules of origin.Chapter four examines the rules of origin of goods in regional trading agreement.Rules of origin are clearly at the very core of regional economic integration schemesbecause they ensure that preferential market access will be granted only to goods thathave actually been "substantially transformed" within the area, and not to goods thatare produced elsewhere and simply transshipped through one of the countriesparticipating in the scheme. In the absence of rules of origin it would not be possibleto discriminate against imports from third countries, so the significance of regionalintegration would be drastically diminished. This chapter mainly discusses theNAFTA and the Pan-European preferential rules of origin. When preferential rules oforigin are drafted in the context of any FTA, the NAFTA and the EU approached indealing with preferential rules of origin are largely dominating and influencing thescene.Chapter five analyses the rules of origin of goods in China, and gives somesuggestions for the perfection of China's rules of origin of goods. There is a great lagbetween China's rules of origin and the rules of origin of the U.S and EU. The rules oforigin in China did not draw much attention until very lately. The legislation of rulesof origin in China is still at a relatively low level. China should modify its criterion ofmanufacturing or processing operation to optimize the industrial structure and realizeindustry upgrading.