Agreement on Rules Of Origin

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Identification of the source of product is highly relevant in international trade scenario. Rules of Origin (RoO) mean laws, regulations or administrative practices for the identification of the national source of a product. The globalization has caused complex issues in international trade and it has become very difficult to determine, where a product comes from.

• The Rules of origin of a product require that it originates from a country where it is harvested or extracted.

• If manufactured exclusively from materials and labour in that country.

• If the product is the result from more than one country, it is deemed to have originated from the country in which it has last undergone a “substantial transformation”.

Agricultural products have a greater adherence to traditional production because they are primary products originating from where they are grown; and are dependent on environmental conditions most suited to the nurture of that particular crop.

Categories of RoO

There are two categories of RoO

• Preferential RoO are discriminatory trading arrangements where the products are eligible to receive beneficial access to the market. That means lower or non-tariff barriers for the particular product.

• Non-preferential RoO, as the term indicates offer no preference or discrimination of the products of the members of the regional trade agreement.

Reason for Using RoO

There are many reasons for an importing country to determine the origin of the product.

• To determine whether the product is entitled for preferential treatment if it comes from a developing country or from a member of regional trade agreement.
• To determine whether the product is subject of anti-dumping or countervailing duties or to ensure safeguard measures if it originates from a particular country.
• To determine whether import quota is applicable for a particular product originating from a particular country.
• To assume preferential treatment in free trade and preferential trade agreement
• To verify the product labelling requirement
• To be included under import statistics.

The WTO in July 1995, launched a programme on harmonising non-preferential rules of origin to be applied by all member governments, which was to be completed in July 1998.

Principles

The Underlying Principles of RoO under WTO are:

• Rules of origin must not be used as a means of protecting the market
• Rules of origin must be objective and applied in a predictable manner and must be based on positive standards.
• Origin of a product must be either from a country from where it originated or if more than one country, then from where the substantial transformation was carried out.

Last updated on: 21-12-2007