Compendium of Procedural Mechanisms Used in the Application of Rules of Origin

Compendium of Procedural Mechanisms Used in the Application of Rules of Origin

Rules Of Origin Compendium

When two or more countries decide to enter into a preferential trade agreement, a focus of concern is to devise a mechanism by which the benefits of the agreement are granted only upon the importation into one member country of goods that are legitimately the produce of the other country or countries participating in the agreement, and that the goods of countries that are not participants in the agreement do not receive preferential treatment. Every preferential trade agreement, therefore, contains a set of rules of origin that are intended to ensure that the benefits of the agreement are limited to the goods produced in the member countries of the agreement. This Compendium presents an explanation of the mechanisms by which the rules of origin of trade agreements are applied.

The rules applied to determine origin employ two different basic criteria:

  • The criterion of goods “wholly produced " in a given country, where only one country enters into consideration in attributing origin; and
  • The criterion of "substantial transformation", where two or more countries have taken part in the production of the goods.  

The “wholly produced " criterion applies mainly to "natural " products and to goods made entirely from them, so that goods containing any parts or materials imported or of undetermined origin are generally excluded from its field of application. The "substantial transformation" criterion can be expressed by a number of different methods and mechanisms of application.

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