rules of origin in international...

rules of origin in international trade

This book discusses the different aspects of the rules of origin with a multidisci-plinary perspective. It offers the first overview of the status of the negotiationson nonpreferential rules of origin under the World Trade Organization (WTO)agreement on rules of origin, after more than 10 years of negotiations, and itspossible implications for other WTO Agreements. This book deals extensivelywith preferential rules of origin both under unilateral trade instruments like theGeneralized System of Preferences, the Everything But Arms initiative, andthe Africa Growth and Opportunity Act and in free-trade areas. Inama analyzesthe experience of the United States and the European Community (EC) indeveloping the North American Free-Trade Agreement and the Pan-Europeanrules of origin. He also compares and discusses the parallel experiences of themajor southern regional trade agreements, including Mercosur, the Associa-tion of Southeast Asian Nations (ASEAN), and the ASEAN-China free-tradearea, as well as the Common Market for Eastern and Southern Africa, EasternAfrica Community, and Southern Africa Development Community in theirnegotiations of the European Partnership Agreements with the EC. It discussesthe evolution of the different sets of rules of origin, the economics of the rulesof origin, and the technical options for drafting rules of origin including amethodology for drafting product-specific rules of origin.

Stefano Inama is a project manager and senior trade and customs expert for theUnited Nations Conference on Trade and Development. He has extensivelyadvised governments, private sector, and regional trade secretariats on rulesof origin negotiations and has regularly been invited to speak on trade issuesby universities such as the Bocconi University in Milan, Italy, and ColumbiaUniversity in New York, as well as by international organizations.

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Cambridge University Press978-0-521-85190-9 - Rules of Origin in International TradeStefano InamaFrontmatterMore information

http://www.cambridge.org/9780521851909

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Rules of Origin inInternational Trade

stefano inama






cambridge university press

Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, Sao Paulo, Delhi

Cambridge University Press32 Avenue of the Americas, New York, ny 10013-2473, usa

www.cambridge.orgInformation on this title: www.cambridge.org/9780521851909

c© Stefano Inama 2009

This publication is in copyright. Subject to statutory exceptionand to the provisions of relevant collective licensing agreements,no reproduction of any part may take place without the writtenpermission of Cambridge University Press.

First published 2009

Printed in the United States of America

A catalog record for this publication is available from the British Library

Library of Congress Cataloging in Publication data

Inama, Stefano.Rules of origin in international trade / Stefano Inama.

p. cm.Includes bibliographical references and index.isbn 978-0-521-85190-9 (hardback)1. Certificates of origin. 2. Customs administration – Law and legislation.3. Customs administration. 4. Foreign trade regulation. 5. Tariff – Law andlegislation. I. Title.k4640.o74i53 2009343′.087 – dc22 2007050325

isbn 978-0-521-85190-9 hardback

Cambridge University Press has no responsibility for the persistence oraccuracy of urls for external or third-party Internet websites referred to inthis publication, and does not guarantee that any content on such websites is,or will remain, accurate or appropriate. Information regarding prices, traveltimetables, and other factual information given in this work is correct atthe time of first printing but Cambridge University Press does not guaranteethe accuracy of such information thereafter.






Contents

List of Figures page xv

List of Tables xvii

List of Acronyms xxi

Preface xxv

1. Efforts to Establish Multilateral Rules 11.1. The Concept of “Substantial Transformation” and First

Attempts to Define It at the Multilateral Level: TheKyoto Convention of 1973 and 2000 4

1.2. The UNCTAD Working Group on Rules of Origin 9

2. The Uruguay Round Agreement on Rules of Origin: TheHarmonization Work Program of Nonpreferential Rulesof Origin 172.1. The Agreement on Rules of Origin 202.2. The HWP and the Method of Work Adopted by the

TCRO to Develop HRO 262.3. Adapting the HS to Origin: Some Decisive Technical

Issues and Their Implications 342.3.1. Definition of “Assembly” in Machinery 382.3.2. Definition of “Assembly” in Textiles and Clothing 44

2.4. Secondary or Residual Rules of Origin 462.5. The Current Status of the Harmonized Nonpreferential

Rules of Origin 472.5.1. The Architecture 472.5.2. The General Rules 50

v






vi Contents

2.6. Outstanding Product-Specific Issues 712.6.1. Fishery Products 722.6.2. Slaughtering 742.6.3. Dairy Products 752.6.4. Coffee Products 762.6.5. Refining Fats and Oils 772.6.6. Refining Sugar and Sugar Products and

Molasses 772.6.7. Cocoa Products and Chocolate 782.6.8. Juices and Wines 782.6.9. Mixtures/Blends 802.6.10. Grinding of Spices 812.6.11. Cement 812.6.12. Chemicals 822.6.13. Leather 832.6.14. Textiles and Clothing 842.6.15. Footwear 862.6.16. Coating of Steel Products 872.6.17. Machinery and Electronics 88

2.7. The Chairperson’s Proposal on Machinery andElectronic Sectors 94

2.8. Trade Policy Implications of the HWP on Rules ofOrigin and Other WTO Agreements: The Issue of“Equally all Purposes” 1022.8.1. Negotiating Issues and Proposals on the

Implications of HWP on Other WTOAgreements 108

2.8.2. Possible Implications on the Agreement onImplementation of Article VI of the GATT 1994:“Antidumping Agreement” 113

2.8.3. Possible Implications of Article IX of the GATT1994: Marks of Origin 117

2.8.4. Possible Implications of the Agreement on theApplication of Sanitary and PhytosanitaryMeasures 120

2.8.5. Possible Implications of the ARO on Textiles andClothing 123

2.8.6. Section 3 of the ARO on Trade-Related Aspectsof Intellectual Property Rights: GeographicalIndications 125






Contents vii

2.8.7. Nonpreferential Rules of Origin andCircumvention 126

2.9. Implementation Issues 1362.10. Conclusions 140

3. Preferential Rules of Origin 1743.1. The Current Rules of Origin under the Generalized

System of Preferences 1773.1.1. “Wholly Obtained” Products 1793.1.2. Products with an Import Content 180

3.1.2.1. Process Criterion 1813.1.2.2. Percentage Criterion 183

3.1.2.2.1. Canada 1833.1.2.2.2. United States 1843.1.2.2.3. Russian Federation 188

3.1.3. Preference-Giving Country or Donor CountryContent Rule 189

3.1.4. Cumulative Origin in the GSP Schemes 1903.1.4.1. The Difference between Full and Partial

Diagonal Cumulation 1943.1.4.2. Cumulation under the EC GSP Scheme

and EBA 1963.1.4.3. Derogation Procedures from Rules of

Origin under the EC GSP Scheme 1983.1.4.4. Cumulation under the Japanese GSP

Scheme 2003.1.4.5. Cumulation under the U.S. GSP

Scheme 2003.1.4.6. Cumulation under the Canadian GSP

Scheme 2013.1.5. Rules of Origin under Other Unilateral Trade

Preferences: AGOA and the Former CotonouPartnership Agreement and the EPAs 2043.1.5.1. African Growth Opportunity Agreement 2043.1.5.2. Rules of Origin under the Former Cotonou

Partnership Agreement and the CurrentInterim EPAs 214

3.1.5.3. The Trade Preferences for ACP from theFormer Lome Conventions Through theCPA and to EPAs 215






viii Contents

3.1.5.4. Rules of Origin, Cumulation andDerogations Procedures under the FormerCotonou Partnership Agreement 218

3.1.5.5. Rules of Origin under Interim EPAs and theCariforum EPAs 224

3.1.5.6. Recent Proposal by the EC Commission onNew GSP Rules of Origin from 2009 231

3.2. Contractual Rules of Origin in Free-Trade Areas 2343.2.1. The EC Pan-European Rules of Origin 2353.2.2. The EC Policy on Preferential Rules of Origin:

The Progressive Adoption of the Pan-EuropeanRules of Origin 2383.2.2.1. The Common Structure of the

Pan-European Rules of Origin 2403.2.2.1.1. Products Wholly Obtained 2403.2.2.1.2. Sufficient Working on

Processing – The Product-SpecificRules of Origin under thePan-European Rules of Origin 243

3.2.2.1.3. Product-Specific Rules of OriginRequirements Contained inAnnex II of the Protocols Pursuantto Article 6 of the Protocol 246

3.2.2.1.4. Additional Features of thePan-European Rules of Origin 250

3.2.2.1.5. Insufficient Working or Processing 2543.2.2.1.6. Explanatory Notes on the List of

Product-Specific Pan-EuropeanRules of Origin 256

3.2.2.1.7. Progressive Adoption of theDiagonal Cumulation under thePan-European Rules of Originand the Enlargement to thePan-Euro-MediterraneanCumulation of Origin 257

3.2.2.1.8. From Diagonal Cumulationunder the Europe Agreements tothe System of Euro-Mediterranean Cumulation 259






Contents ix

3.2.2.1.9. Recent Developments in the ECRules of Origin 269

3.2.3. Rules of Origin of North American Free-TradeAgreement 2753.2.3.1. The Main Criteria for Determining Origin

in NAFTA 2793.2.3.2. De Minimis 2823.2.3.3. Regional Value Content in

NAFTA 2873.2.3.4. Some Methodologies and Examples of

Calculations under the Net CostMethod 291

3.2.3.5. Cumulation in NAFTA 3043.2.3.6. Other NAFTA Provisions 3093.2.3.7. NAFTA Rules of Origin for Textiles and

Clothing 3163.2.3.8. Automotive Products in NAFTA 3203.2.3.9. The Evolution of the NAFTA Model of

Rules of Origin: From NAFTA to CAFTAthrough U.S.-Chile and U.S.-Singaporeand Other FTA Agreements 323

3.2.3.10. A Brief Comparison between the NAFTAModel and the Pan-European Rules ofOrigin Approaches: Techniques andSubstantive Requirements 328

4. The Economics of Rules of Origin 3374.1. The Basic Tenets of Rules of Origin and

Economics 3374.1.1. Recent Developments on the Analysis of the

Economic Effects of Rules of Origin 3404.1.2. Most Recent Studies on Economics and Rules of

Origin: The Elaboration of an Index ofRestrictiveness 345

4.1.3. Some Preliminary Conclusions on the Status ofthe Economic Analysis on Rules of Origin 358

4.2. Assessing the Impact of Rules of Origin: Evidence fromthe Utilization of Trade Preferences under theGeneralized System of Preferences 3604.2.1. Linking Low Utilization of Preferences and

Rules of Origin: A Methodology 365






x Contents

5. Drafting Preferential Rules of Origin 3895.1. Learning Drafting Rules of Origin from the Past:

Experience Gained with the Rules of Origin under theGSP 389

5.2. Specific Experiences and Lessons Learned fromDrafting and Implementing GSP Rules ofOrigin 3915.2.1. The Definition of Two Categories of Products:

Wholly Produced and Products that HaveUndergone Substantial Transformation 391

5.2.2. Negotiations and Experiences on the Definitionof the Wholly Produced Criterion 392

5.2.3. Negotiations and Experiences in Drafting OriginCriteria for the Definition of SubstantialTransformation 4005.2.3.1. An Analysis of the Experiences and Lessons

Learned under the Process Criterion 4035.2.3.1.1. An Analysis of the Specific

Requirements Related to SelectedProducts under the ProcessCriterion 408

5.2.3.1.2. Early Experience and Difficultieswith the Issue of MultistageOperations, Double Jumps, andDouble Transformations 411

5.2.3.1.3. Some Examples of Product-Specific Experiences under theProcess Criterion 413

5.2.3.1.4. Difficulties Experienced by theIntroduction of the HarmonizedSystem and the Single List 422

5.2.3.2. An Analysis of the Experiences andLessons Learned under the PercentageCriterion 426

5.2.3.2.1. Experiences and Lessons Learnedon Different Draftings of the“Percentage Criterion” 429

5.2.3.2.2. Preliminary Conclusions andLessons Learned from the






Contents xi

Different Drafting of theNumerator under the PercentageCriterion 436

5.2.3.2.3. Preliminary Conclusions andLessons Learned from theDifferent Drafting of theDenominator under thePercentage Criterion 443

5.2.3.2.4. Early Experience and LessonsLearned from Utilizing thePercentage Criterion under theGSP Schemes 444

5.2.3.2.5. Difficulties in Interpreting theTerminology Used in thePercentage Criterion 447

5.2.4. Comparisons of Formulations betweenPercentage and Process Criteria 4495.2.4.1. Comparison of Substances between

Percentage and Process Criterion 4515.3. Learning Drafting Rules of Origin from the Present 456

5.3.1. Rules of Origin in AFTA and the ASEAN-ChinaFree-Trade Area 456

5.3.2. The SADC and COMESA Experience 4715.3.3. Mercosur Rules of Origin 478

5.4. Drafting Rules of Origin: Some Lessons Learned andAdvice 4815.4.1. The Main Actors in Drafting and Administering

Rules of Origin 4815.4.2. The Main Parameters for Drafting Rules of

Origin 4865.4.2.1. A Drafting Dilemma: What Are the Good

and Bad Rules of Origin and How Should aGood Rules of Origin Be Drafted? 486

5.4.2.2. Defining the Index of TechnicalSoundness 488

5.4.2.3. Suggestions on Defining the Index ofTechnical Soundness 494

5.4.3. Defining the Index of Restrictiveness WhenDrafting Product-Specific Rules of Origin:A Methodology Used in Different Scenarios 500






xii Contents

5.4.3.1. The Experience with the EC GSPRules of Origin 503

5.4.3.2. The SADC Experience 5055.4.3.3. The ASEAN-China Free-Trade

Experience 5075.4.3.4. Negotiating Product-Specific Rules of

Origin in the Context of the EconomicPartnership Agreements 508

6. The Administration of Rules of Origin 5306.1. The Administration of GSP Rules of Origin 531

6.1.1. Issuance of Certificate of Origin Form A orDeclaration by Exporter or Importer 531

6.1.2. Direct Consignment 5346.1.3. Arrangements for Administrative Cooperation 537

6.2. The Experience of the United States on AdministeringOrigin 5386.2.1. Customs Procedures and Enforcement under

AGOA for Textiles and Clothing Products 5396.2.2. The Administration of NAFTA Rules of

Origin 5426.2.3. From NAFTA to the U.S.-Chile Agreement 545

6.3. The EC Experience in Administering Rules of Origin 5496.3.1. Procedure for the Issuance of Certificates of

Origin EUR.I and EUR-MED 5536.3.2. Optional Use of Form EUR and EUR-MED and

Mandatory Use of Form EUR.I or EUR-MED 5556.3.3. Simplified Procedures for the Issuance of

Certificates of Origin: Approved Exporters 5586.3.4. Supplier Declarations 5626.3.5. Documentary Evidence for the Issuance of

Certificates of Origin 5636.3.6. Verification of Proofs of Origin 5656.3.7. Issuance of Certificate of Origin for Cumulation

under the Pan-European Rules of Origin, GSP,Regional Cumulation, and Cotonou PartnershipAgreement 5686.3.7.1. Procedure for the Issuance of Certificates

of Origin for Cumulation under EC GSPRules of Origin 568






Contents xiii

6.3.7.2. Procedure for Issuance of Certificates ofOrigin for Cumulation under the FormerCotonou Partnership Agreement 570

6.3.8. The Procedure and Decision Making in the Caseof A Posteriori Recovery or Remission of CustomsDuties and Origin Verification in the EC 5726.3.8.1. The Procedure for Nonrecovery of

Customs Duties after Clearance 5736.3.9. The Future of the EC Rules of Origin: The

Green Paper on the Future of Rules of Origin inPreferential Arrangements and RecentDevelopments 574

6.3.10. Recent Developments Following the GreenPaper 579

6.3.11. Origin Administration and Customs Cooperationin the EC 582

6.3.12. Experience of OLAF on Origin Investigation 5876.3.13. An Overview of EC Judicial Remedies in Matters

Related to Origin and Verification Requirements 593

Index 607






Figures

4.1 Effects of stringency of rules of origin on trade creation andtrade diversion page 341

4.2 Physical content of rules of origin and costs 3454.3 Calculation of value added and rules of origin restrictiveness 3574.4 Average utilization rate of selected Asian non-LDCs, by HS

Chapters 61 and 62 (garments) and 64 (footwear) (1994–2000) 3634.5 Average utilization of Bangladesh, Cambodia, and Laos – HS

Chapters 61, 62, and 64, 1995–2005 3634.6 Bangladesh: EC GSP utilization rates for HS Chapters 61 and

62 (garments) (1994–2005) 3644.7 Cambodia: EC GSP utilization rates for HS Chapters 61 and 62

(garments) (1994–2005) 3654.8 Bangladesh: Imports cotton (1996–2001) 3714.9 Cambodia: Imports cotton (1996–2001) 3724.10 Bangladesh: Imports manmade and synthetic (1996–2001) 3724.11 Cambodia: Imports manmade and synthetic (1996–2001) 3724.12 Bangladesh: Exports cotton (1996–2001) 3744.13 Cambodia: Exports cotton (1996–2001) 3744.14 Bangladesh: Exports manmade and synthetic (1996–2001) 3744.15 Cambodia: Exports manmade and synthetic (1996–2001) 3754.16 Bangladesh: Comparison of imports of fabrics/exports, Chapters

61 and 62 (garments), with EC GSP utilization rate (1996–2001) 3764.17 Cambodia: Comparison of imports of fabrics/exports, Chapters

61 and 62, with EC GSP utilization rate (1996–2001) 3764.18 Bangladesh: Imports of cotton fabrics (2001) 3774.19 Cambodia: Imports of cotton fabrics (2001) 3784.20 Bangladesh: Imports of manmade fabrics (2001) 3784.21 Cambodia: Imports of manmade fabrics (2001) 378

xv






xvi Figures

4.22 Cambodia: Imports of manmade synthetic fabrics (2001) 3796.1 The legal basis as implemented through AFIS 5886.2 New case records from the reporting period by OLAF sector 5896.3 New case record from the reporting period by OLAF sector 5906.4 Customs investigations by type of fraud 591






Tables

2.1 Suggested origin criteria for certain animals and animalproducts page 31

2.2 Suggested origin criteria for coffee in various forms 332.3 Example of change of tariff heading with exception 352.4 Suggested adjustments to the HS structure 362.5 Classification of finished goods and parts in Chapter 87 402.6 Classification of finished goods and parts in Chapter 84 432.7 Example of a split chapter 452.8 Changes in U.S. textiles and apparel rules of origin 1192.9 Comparison Table: Pan-Euro and NAFTA Rules of Origin and

the Harmonized Rules of Origin 1443.1 Comparative table of GSP rules of origin 1783.2 Product-specific rules for textiles and clothing under the

Canadian initiative for LDCs 1843.3 Main GSP rules of origin: Scope of cumulation and derogation 1923.4 Production chain of garments in a partial/diagonal cumulation

scenario 1953.5 Production chain of garments in a full cumulation scenario 1953.6 Summary of rules of origin and preferential groups 2133.7 Market access status of ACP countries as regards interim EPAs 2163.8 Entry into force of the protocols on rules of origin providing for

diagonal cumulation in the Pan-Euro-Med zone 2413.9 CTH requirements 2483.10 CTH requirements and percentage rules 2483.11 Specific manufacturing processes or requirements 2493.12 Textiles rules mainly involving products classified in

ex-heading and basket rule headings 249

xvii






xviii Tables

3.13 Alternative rules of origin in Chapters 28–29, 31–39, 84–91, and94 of the HS in addition to the usual rules 250

3.14 Granting of full cumulation 2633.15 Examples of calculations 2903.16 Evolution of the NAFTA-based rules of origin 3243.17 Comparison of product-specific rules for Chapter 16 between

Pan-European and NAFTA 3303.18 Comparison of product-specific rules for Chapter 60 between



Pan-European and NAFTA 3353.21 Comparison of product-specific rules for heading 8407 between

Pan-European and NAFTA 3364.1 Example of possible implications for noncompliance and

application of trade instruments 3384.2 Textiles rules mainly involving products classified in

ex-headings and basket rule headings 3504.3 Cadot and De Melo restrictiveness index 3534.4 Alternative indexes of SL PSRO restrictiveness 3554.5 Expected trade effects from full utilization of preferential

schemes: EC non-ACP LDCs 3824.6 Expected trade effects from full utilization of preferential

schemes: EC non-ACP LDCs – selected countries and markets 3844.7 Expected trade effects from full utilization of preferential

schemes: EC ACP LDCs 3855.1 Examples of drafting differences in product-specific rules of

origin 4045.2 Examples of drafting differences in product-specific rules of

origin 4055.3 Examples of drafting differences in product-specific rules of

origin 4065.4 Differences in substantive requirements 4095.5 Examples of Single List requirements 4245.6 Example of stringency of a CTH criterion 4275.7 Overview of the percentage criterion rules used by some

preference-giving countries 4305.8 Comparisons between the Canadian percentage and some

specific working and processing operations under the processcriterion 453






Tables xix

5.9 Extract from SACU proposed list of product-specific rules oforigin 506

5.10 Comparison table among Cotonou rules, ESA, and SADCproposed rules on selected most exported products to the EC,including possible alternative common rules 517

6.1 Comparison of certification requirements and relativelegislation among different FTAs 540






Acronyms

Acronym Definition

ACFTA ASEAN-China Free-Trade AreaACP African, Caribbean, and PacificAD antidumpingADA Antidumping AgreementAFIS Antifraud Information SystemAFTA ASEAN Free-Trade AreaAGOA African Growth and Opportunity ActALADI Associacion Latino Americana de IntegracionARO Agreement on Rules of OriginASCM Agreement on Subsidies and Countervailing MeasuresASEAN Association of Southeast Asian NationsATC Agreement on Textiles and ClothingBTN Brussels Tariff NomenclatureCACM Central American Common MarketCAFTA Central American Free-Trade AreaCAFTA-DR CAFTA-Dominican RepublicCARICOM Caribbean Common MarketCBI Caribbean Basin InitiativeCBP Customs and Border Protection (U.S.)CC change of chapterCCC Community Customs CodeCC Committee Customs Cooperation CommitteeCCCN Council Cooperation Customs NomenclatureCCRA Canada Customs and Revenue AgencyCEEC Central and Eastern European CountriesCEFTA Central European Free-Trade AgreementCEPT Common Effective Preferential TariffCIF cost insurance and freight

xxi






xxii Acronyms

CIS Customs Information SystemCITA Committee for the Implementation of the Textiles

AgreementsCOMESA Common Market for Eastern and Southern AfricaCPA Cotonou Partnership AgreementCRO Committe on Rules of OriginCTC change of tariff classificationCTH change of tariff headingCTHS change of tariff heading splitCTSH change of tariff subheadingCTSHS change of tariff subheading splitCUSFTA Canada-U.S. Free-Trade AreaDC developing countryDFQF Duty-Free Quota-Free (Initiative)DRAM dynamic random-access memoryDSU Dispute Settlement UnderstandingDTI Department of Trade and IndustryEAC East Africa CommunityEBA Everything But Arms (Initiative)EC European CommunityECJ European Court of JusticeECSC European Coal and Steel CommunityEEA European Economic AreaEEC European Economic CommunityEEZ exclusive economic zoneEFTA European Free-Trade AreaEPA Economic Partnership AgreementEPROM erasable programmable read-only memoryESA Eastern and Southern AfricaEWS-C Early Warning System for CustomsEWS-E Early Warning System for ExciseFAO Food and Agricultural OrganizationFDI Foreign Direct InvestmentFOB Free On BoardFPA Fisheries Partnership AgreementsFTA free-trade areaGAAP generally accepted accounting principlesGATT General Agreement on Tariffs and TradeGC General CouncilGIR General Interpretation RuleGPT General Preferential TariffGSP Generalized System of PreferencesHIC high-income countryHRO Harmonized Rules of Origin






Acronyms xxiii

HS Harmonized SystemHTS Harmonized Tariff ScheduleHTSUS Harmonized Tariff Schedule of United StatesHWP Harmonization Work ProgramISIC International Standard Industrial ClassificationLDC least-developed countryLDCT LDC tariffMARSUR Maritime SurveillanceMFN most-favored nationMMTZ Malawi, Mozambique, Tanzania, and ZambiaNAFTA North American Free-Trade AgreementOCT overseas countries and territoriesOCU Operations Control UnitODI Overseas Development InstituteOECD Organisation for Economic Co-operation and DevelopmentOJ Official Journal of the European CommunitiesOLAF Office Europeen de Lutte Anti-FraudeQUAD quadrilateral countries (the EC, United States, Japan, and

Canada)RBM ring-binder mechanismRMG ready-made garmentRTA regional trade agreementRVC regional value contentSAARC South Asian Association for Regional CooperationSACU South African Customs UnionSADC Southern Africa Development CommunitySME square-meter equivalentSPS sanitary and phytosanitarySSA sub-Saharan African (country)TAXUD Taxation and Customs Union Directorate-General

(European Commission)TCRO Technical Committee on Rules of OriginTDCA Trade and Development Cooperation AgreementTRIP trade-related aspects of intellectual property (rights

agreement)UNCTAD United Nations Conference on Trade and DevelopmentUNIDO United Nations Industrial Development OrganizationURAA Uruguay Round Agreements ActUSTR U.S. Trade RepresentativeVAR value-added ruleWAEMU West African Economic and Monetary UnionWCO World Customs OrganizationWITS World Integrated Trade SolutionsWTO World Trade Organization






Preface

As I start writing the preface to this book, my mind goes back to the late 1980s,when technical issues on rules of origin began to arise from the surge of exportsof the “Asian Tigers” and the trade defense mechanisms by the EuropeanCommunity (EC) and United States. The issue was mainly related to thealleged circumvention of such trade defense mechanisms in which manufac-turers affected by the antidumping (AD) investigations relocated some workingor processing operations in neighboring countries or directly in the export mar-ket. This move was counteracted by origin findings of the EC and the UnitedStates that indicated that the product exported from the neighboring countriesor manufactured in their territory was in fact subject to only minimal workingor processing, resulting in the product’s having the same origin of the productsubject to AD duties.

These were the times when rules of origin started to make headlines inthe press. The trading community and AD lawyers were suddenly interestedin origin issues. I quickly realized that rules of origin were an ideal issue forcontention because they provided the grounds for arbitrary or discretionarypractices under the cover of technical and obscure details. Only a select fewwere part of these early developments. Hardly any international rule, conven-tion, or multilateral instrument could provide guidance to these initial debates.

Administrations were slow to answer, demonstrating once again that businesslife evolves at a faster pace than rule-making, and, to put it simply, rules of originwere, and to some extent still are, a no man’s land in international trade law.

Apart from the Kyoto Convention, the first international effort to put rulesof origin on a multilateral track was carried out under the United NationsConference on Trade and Development, which convened in the beginningof the 1970s in the context of the Generalized System of Preferences workinggroups on rules of origin without much success, but a lot of useful technicalwork was carried out.

xxv






xxvi Preface

About 20 years later, the World Trade Organization Agreement on rules oforigin started the Harmonization Work Program of nonpreferential rules oforigin. Once again a lot of excellent technical work was carried out, but finalagreement, although close, is still pending at the time of this writing.

I have had the privilege to be exposed to the multidisciplinary nature of rulesof origin, and I have drafted this book with the deliberate intent of coveringthese different aspects. A second important feature of this book is linked tomy personal career, which has allowed the mixing of academic and researchexperiences with technical assistance to developing countries in the field fortwo decades. Much of the material in this book derives from the unfoldingof these experiences. The drafting of this book has also been guided by thedesire to maintain a certain degree of pragmatism and to provide the readerwith a multidisciplinary instrument to understand rules of origin and theirimplications.

The views expressed in this book are entirely mine and do not necessarilyreflect the views of the United Nations Conference on Trade and Developmentor any other United Nations agency.

Stefano Inama (June 2008)






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