July 08, 2021
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Non-preferential Rules of Origin: “When you turn your back on an issue – it only gets bigger!”

Photo from WCO News

The following article is not intended to be a scholarly or even comprehensive review of past or current activities under the World Trade Organization’s Agreement on Rules of Origin, or a detailed analysis of the differences between preferential versus non-preferential rules of origin (which I am assuming most readers of this magazine already understand). Rather, this article offers more of a personal and subjective perspective on the problems associated with non-preferential rules, and humbly proposes possible approaches and options to minimize these problems, or at least stimulate discussions about potential remedies. These options are largely based on the perceived structure and architecture of the issues.

The context

It is common knowledge that preferential and non-preferential rules of origin have this in common: they represent costly administrative challenges to both the private and public sectors. However, there are also significant differences between them.

For example, preferential rules, albeit complex, are “product specific” established rules and, in most cases, it can be determined that the product in question either originates or does not originate. Furthermore, it is usually safe to assume that product specific rules have been agreed upon by all the parties and, in this sense, they represent a negotiated agreement by at least two parties. Debate as one may about the economic benefits of bilateral or “mega-regional” preferential trade agreements, the very fact that they always feature relatively clear preferential rules of origin is one certain benefit.

By contrast, as it now stands, non-preferential rules are essentially unilateral and specific to a single country of import. Moreover, many lack the specificity of preferential product specific rules and, in a world of global value networks, economic operators dealing with products not wholly obtained in a single country face the challenges of identifying the country in which the “last substantial transformation” occurred. In other words, non-preferential rules do not feature the binary “originating or not originating” benefits of preferential rules of origin, nor are they the result of agreement between two or more parties.

Read full article

https://mag.wcoomd.org/magazine/wco-news-95-june-2021/non-preferential-rules-of-origin/

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