Rules of Origin are essential to determining the amounts of customs duties and taxes to apply on goods, in parallel with customs classification and assessment.
The WCO defines rules of origin as "the specific provisions applied by a country to determine the origin of goods and using principles established by national legislation or international agreements." (Revised Kyoto Convention). A distinction is made between two systems of Origin:
- Preferential: everything is based on bilateral or multilateral agreements (free-trade agreements (FTAs), Customs unions, free-trade areas, etc.) or unilateral non-reciprocal preferential arrangements (GSP, etc.).
- Non-preferential: each country applies its own rules, even if they can be harmonized within some regional economic unions.
What are the stakes in determining the Rules of Origin?
Rules of origin, shorten as ROOs, will establish if goods are eligible for preferential tariffs (duty-free or reduced duties) based on the FTA decisions. It is thus essential to understand those rules to benefit from a possible reduction of customs duties and taxes. Determining the country of origin can either be very simple or complex as it varies from an agreement to the other and between products.
With regard to non-preferential rules, the WCO has created a global database of trade agreements and their particular rules of origin to improve the understanding and application of preferential rules of origin. The database references the legal texts of the agreements and the various annexes concerning the rules of origin, for example those specific to the products or other additional documents. The database provides copies of the evidence or certificates of origin used in the agreements. Moreover, the platform enables the search through the Product Specific Rules (PSR) of a majority of agreement to determine the criteria of origin and to assist customs members in enhancing their capacity to verify the preferential origin of the goods.