Organizations discuss the present state of transparency on non-preferential rules of origin

Information gaps pose challenges to trade policymakers, customs, and private sector.

As part of a meeting of the Committee on Rules of Origin (CRO) at the World Trade Organization (WTO), speakers from the WTO, World Customs Organization (WCO) and International Trade Centre (ITC) discussed the issues of transparency and data availability and the vital importance of improving access to rules of origin-related information.

CRO Secretary Darlan F. Martí began by overviewing the WTO’s notification obligations specified in the WTO Agreement on Rules of Origin (ARO), and some of the limitations inherent to the existing system. Transparency within the ARO is drawn from two sources, publication and notification. The former refers to the domestic publication of laws and regulations referring to import and export- related issues, which are to be published promptly in an accessible format (such as online) so that governments and businesses can be familiarized with their details. The latter, notification, refers to the formal submission of trade-related information such as rules of origin to the WTO.

While all members are required to notify the WTO, there are currently no guidelines on the format of notifications, and no information on what type of follow-up is to be taken by the WTO upon notification. An additional pressing issue is the potential obsolescence of many notifications, the majority were made in 1995 and have not been kept up-to-date in the years since. According to Mr Martí, The information that we currently have in-house is information that we were provided 20 years ago, and we cannot know whether that information still remains valid or not.

While 80% of member states have provided information on non-preferential rules of origin, the lack of both a standard format and requirements for what information must be included significantly muddle the transparency of information provided. The problem here, according to Mr Martí, is that the information is very, very uneven. A member who has notified to the secretariat that they do not have any non-preferential rules of origin could still for example request a certificate. Mr Martí went on to give the example of a 2012 notification from one WTO member, which simply states that the country of origin of any manufactured goods shall be the country in which the last process of manufacture has been performed with no further information about certification or specific requirements.

Mr Martí concluded by identifying the issues that are currently most contributing to gaps in rules of origin-related information. First, there is often no clarity regarding the scope of application of trade rules mentioned in notifications, leading to ambiguity over issues such as what products rules apply to and how labelling requirements must adhere. Additionally, there is generally no information about certification requirements, whether they are mandatory and how exporters can meet them. Last is the above-mentioned potential obsolescence of many aging notifications; even more worrisome than the possibility that many are out of date is the fact that it is entirely unknown which are, in fact, obsolete. Together, these factors severely limit the transparency of information regarding rules of origin, and thus by extension the efficiency of international trade as a whole (presentation slides here).

Mette Werdelin Azzam, Senior Technical Officer at the World Customs Organization, next spoke about transparency limitations from the perspective of customs officials. Ms Azzam first discussed the role of customs and how it has evolved over the years, from performing solely a revenue-collecting function to its current complex role applying trade regulations, protecting society, and even working with other ministries. In order to perform all these roles, Ms Azzam said, we need information about rules of origin. Specifically, customs requires detailed information on the classification and value of goods, as well as their origin— information which often is not provided.

This lack of information limits the predictability and transparency of international trade, increasing cost and uncertainty to the detriment of importers, exporters and consumers. Part of this is certainly due to the lack of a harmonized system for non-preferential rules of origin. However, until there does exist a standardized system for all member states, transparency in the multitudes of non- preferential regimes that currently exist is all the more vital (presentation slides here). The final speaker on behalf of ITC, associate quantitative analyst Mr. Dzmitry Kniahin, discussed perceptions of the private sector towards the obstacles related to rules of origin as well as the ongoing initiative to bring more transparency to origin requirements in trade agreements and non- preferential regimes.

According to ITC business surveys on non-tariff measures conducted in 38 developing countries, rules of origin appear in the top three most common trade obstacles reported by firms, along with conformity assessments and export-related measures. The complaints focus predominantly on procedural aspects of rules of origin rather than on the strictness of origin criteria. The majority of businesses complain about preferential origin, but some complain about non-preferential origin. ITC has analysed and published non-preferential rules of origin applied by the United States, the European Union, and Switzerland - on the new online platform Rules of Origin Facilitator (FindRulesOfOrigin.org) jointly launched by ITC, WCO, and WTO. Certain aspects of non-preferential rules of origin make them more complicated than preferential rules of origin: recurring updates in national origin legislation, complexity of primary and residual rules, availability only in national language, procedural provisions buried in lengthy national customs acts, and mismatch in non- preferential rules of origin applied by the exporting and the importing countries. This poses additional challenges and requires more resources to make non-preferential rules of origin fully transparent to companies. We cannot put out information that we are not 100 per cent sure of, Mr. Kniahin added.

ITC commended the ongoing efforts within the WTO to set up a new notification template for non- preferential rules of origin. This initiative could replicate the success of notifications for rules of origin in preferential schemes granted to imports from least developed countries (LDC), which significantly improved transparency in this area and became part of business information available on the Rules of Origin Facilitator online platform ( FindRulesOfOrigin.org ), currently encompassing 114 trade agreements and preferential schemes (presentation slides here). This is why we need clear notifications that would outline whether this non-preferential rule covers trade remedies, quotas, or government procurement. We need all the details to be fully confident when disseminating information, Mr. Kniahin concluded.