On 3 May 2017, the International Chamber of Commerce (ICC) announced that it has released recommendations on rules of origin in preferential trade agreements (PTAs), highlighting the challenges traders and suppliers face due to the lack of coherence among preferential rules of origin requirements across the globe. The announcement said, in pertinent part:
The new recommendations were issued this week as customs and business representatives from all over the world convened in Addis Ababa, Ethiopia, to discuss the complexities behind rules of origin at the World Customs Organisation (WCO) Global Origin Conference. With limited progress being made in the Doha round of multilateral trade negotiations, countries are increasingly looking to bilateral and regional PTAs as an alternative. As a result, PTAs have multiplied, with over 400 such deals currently in existence, including “mega-regional” PTA negotiations such as the Trans-Pacific Partnership (TPP) or the Transatlantic Trade and Investment Partnership (TTIP).
This proliferation of agreements has led to confusing and inconsistent market entry arrangements, which are particularly felt by small and medium enterprises (SMEs) that have fewer resources. As new PTAs increasingly overlap existing ones, diverging rules of origin regulations and procedures are becoming a trade barrier along the whole supply chain.
ICC sets forth eight recommendations calling for global horizontal cohesion through streamlining certification procedures:
1. Follow the WCO Revised Kyoto Convention
Governments party to PTA negotiations should streamline rules of origin and origin procedures by following the provisions of the WCO Revised Kyoto Convention, in line with the principles of the World Trade Organisation’s (WTO) Trade Facilitation Agreement (TFA).
2. Enable ‘extended cumulation’ or ‘cross cumulation’ between common agreements
Countries should insert provisions into PTAs allowing common bilateral parties to differing regional agreements to share or cumulate origin across trading regions and agreements.
3. Develop common procedural standards for customs verification of origin documentation
The WCO, in close cooperation with the private sector, should develop common procedural principles under PTAs in the spirit of the provisions of the WTO TFA.
4. Insert provisions for the resolution of minor origin disputes in PTAs
Origin disputes under PTAs should not be decided unilaterally by the customs authority of a single trade agreement partner. Instead, PTAs should contain provisions for resolution of such disputes within commercially responsive timeframes.
5. Consider the customs capacity of trading partners
Governments preparing to enter a PTA should ensure there are capacity building programmes in place prior to entry into force of the Agreement, particularly when dealing with developing and emerging markets.
6. Aim for horizontal global cohesion of PTA rules of origin
Standardising procedural requirements across PTAs makes trade easier, increasing transparency and predictability. It also allows business processes along the whole supply chain to be replicated and automated, further reducing trading costs.
7. Align on the starting point for PTA negotiations
Governments should align on the starting point from which to commence negotiations on trade agreements. This would help streamline international trade and ultimately reduce costs for business and consumers.
8. Consider PTAs as steps towards a multilateral agreement
The streamlining of mega-regional PTA negotiations could create momentum towards broader trade liberalisation.