Negotiations on the WTO Agreement on Rules of Origin have been at an impasse for over a decade, triggering a proliferation of unilateral non-preferential rules and creating severe administrative burdens and costs for companies - especially small- and medium-sized enterprises (SMEs).
Rules of origin are the criteria used to define where a product was made and are an important component of trade rules. Non-preferential rules of origin define the origin of a good for commercial purposes only with regard to such matters as Most Favoured Nation treatment, trade statistics and import quotas. ICC warns that the increasing proliferation of such regulations for commercial policy purposes will lead to trade distortion and increased confusion for manufacturers, importers and exporters alike due to competing non-preferential origin regimes.
In a recently released statement, ICC has called for a standstill in the implementation of new country-specific rules of origin and for mutual recognition of non-preferential rules of origin for commercial purposes until the WTO Agreement is ratified.
Until ratification of WTO rules, the ICC statement recommends that non-preferential rules of origin implemented in the country of manufacture should be accepted by the country of import ("mutual recognition") and that the origin of a good should be determined only once - regardless of how many countries it is exported to.
While acknowledging that it might be challenging for Customs administration to familiarize themselves with foreign rules of origin, ICC underlines that cooperation with Customs can be organized much more easily compared to the cost of implementing numerous different rules of origin regimes by countless enterprises.
Donia Hammami, Policy Executive of the ICC Commission on Customs and Trade Facilitation said: "We urge all governments to stop diverging non-preferential rules of origin for commercial policy purposes. They serve no purpose for Customs duties.
Trade ministers may decide to put unilateral rules in place for many reasons including anti-dumping measures. However they should realize these rules are becoming a costly and a highly disproportional barrier to cross-border trade for companies of all sizes."
Marc Bauer, a member of the ICC Commission on Customs and Trade Facilitation, responsible for Customs and Export Control at the Stuttgart Chamber of Commerce stated: "Without multilateral guidelines, diverging non-preferential rules of origin of the countries of destination are becoming an administrative nightmare for business - particularly SMEs. Moreover, today's principle of last substantial transformation works well."
ICC calls on governments to ratify and honour the provisions of the World Customs Organization's Revised Kyoto Convention Specific Annex K on definitions, principles, standards and recommended practices with regard to origin.
Secretary General of the World Customs Organization (WCO) Kunio Mikuriya said: "It is helpful to have more insight on the challenges that the business community faces. The implementation of WCO instruments and tools, together with increased connectivity and understanding between Customs, other government agencies and the business community, would enhance the free flow of international trade."
"WTO negotiators should strive for a breakthrough in the WTO's Agreement on Rules of Origin negotiations," said Ms Hammami. "If WTO Members fail to make progress on a comprehensive multilateral agreement, the business community stands ready to provide full support and work with governments to move forward on multilateral agreements within different sectors based on the technical realities of modern trade."
Please click here for the ICC Policy Statement on Non-Preferential Rules of Origin for Commercial Policy Purposes
Learn more about the ICC Commission on Customs and Trade Facilitation