WORLD TRADE
ORGANIZATIONG/RO/48
24 September 2001
(01-4526)
Committee on Rules of Origin
REPORT BY THE CHAIRMAN OF THE COMMITTEE ON RULES OF ORIGIN
TO THE GENERAL COUNCIL
1. Background
1.1 Pursuant to Article 9.2(a) of the Agreem ent on Rules of Origin, the harmonization work
programme for non-preferential rules of origin (HWP) was launched in July 1995 and scheduled to becompleted within three years of its initiation, i.e. by July 1998.   The deadline was extended until the
end of 1999, but even the extended deadline was passed without completion of the HWP.
1.2 On 15 December 2000, the General Council adopted the following decision  to expedite the
completion of the HWP:
"Members undertake to expedite the remaining work on the harmonization of non-preferential
rules of origin, so as to complete it by the time of the Fourth Ministerial Conference, or by the
end of 2001 at the latest. The Chairman of the Committee on Rules of Origin (CRO) shall
report regularly, on his own responsibility, to the General Council on the progress being
made. The first such report would be submitted to the Council at its first regular meeting in
2001, and subsequently at each regular meeting until the completion of the work programme."
(WT/L/384)
1.3 Such report has been made to the General Council meeting on 9 February, 9 May and
18-19-July 2001 respectively.  This is a comprehensive report to the General Council Special Session
on Implementation, setting out the achievements of the HWP as well as the remaining work.
2. Assessment of  the progress of the HWP
2.1 In June 1999  when the WCO Technical Committee on Rules of Origin submitted the final
results of its technical work on the Harmonization Work Programme, 486 outstanding
product-specific issues were before the Committee (G/RO/41).  Despite its best efforts, the Committee
had resolved only 22 issues by September 2000, averaging less than one consensus per each of its
23 meetings over the three-year period (G/RO/M/11-33).
2.2 The pace of the HWP began to pick up in  October 2000, when the Chairman of the General
Council sent a letter to the Chairman of the Committee, indicating the General Council'sdetermination to complete the harmonization  work programme before the Doha Ministerial
Conference.  An awareness of the need to expedite the work was reflected in the flexibility shown by
many Members during the Committee meeting in November 2000, with the result that consensus was
reached on eight issues (G/RO/M/34).
2.3 Since then,  as summed up in the following table, the number of resolved issues increased
exponentially;  24 issues in March; 42 issues in May;  and 67 issues in July 2001.G/RO/48
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Number of  issues referred to the CRO Number of resolved issues
486 September 1997-September 2000:  22 (less than 1
per session)
November 2000:  8
March 2001:  24May 2001:  42
July: 2001: 67
Total:  163 ( with 323 outstanding issues)
2.4 This encouraging progress was made also thanks to   the new working methodology adopted
by the CRO in April 2001 (G/RO/M/35, paragraph 8.3).  The positions recommended by the
Chairman under the new methodology served as a neutral basis for negotiations and many Members
showed welcome flexibility to support the Chairman's recommendations.
2.5 Another important issue discussed at the CRO since the 15 December 2000 Decision of the
General Council is the implications of the implementation of the harmonized rules of origin on other
WTO Agreements.  The discussion took place at the meeting of the CRO held on 23 July 2001, on the
basis of the CRO discussion held since May 1998.  In this context, submissions had been received
from the Dominican Republic and Honduras (G/RO/ W/33), El Salvador (G/RO/W/34), India
(G/RO/W/28/Rev.1, G/RO/W/30, 42 and 50), Japa n (G/RO/W/66), Korea (G/RO/W/38) and the
United States (G/RO/W/32, 48 and 56).
2.6 The summary of  CRO discussions on 23 July 2001 is as follows:- The informal discussion on the implications of the HWP for other WTO agreements was
conducted with respect to (1) the implications of the completed harmonized rules and (2)theimplications of the proposed rules for harmonization.
- Discussions on both subjects were lively and helped to identify many of the important
problems that should be addressed both before and after the completion of the HWP.
However, the discussion could not lead to any agreement on concrete actions.
- All the Members agreed that any discussion on the implications of the HWP should be
conducted in such a manner as to facilitate the HWP and should not hinder its progress.
3. Assessment of the remaining work
3.1 Although the HWP has clearly been expedited  and the resolution of 141 issues over the last
ten months is significant, it should be recognized that 323 issues are still before the Committee .  (The
September session of the CRO is being held on 24 September- 8 October,  and its outcome has not
been reflected in this comprehensive report).
3.2 The following table is the sectoral and statistical analysis of the issues resolved and those still
to be resolved.  As the table shows,  significant progress was made in Chapters 25-27 (mineral
products), 28-40 (chemicals), 41-43 (leather), 44-49 (wood and paper), 68-70 (ceramics), 74-81
(non-ferrous metals) and 82-83 (articles of metal).  In contrast, a large number of outstanding issues
from Chapters 1-24 (agricultural products), 50-63 (textiles), 64-67 (footwear), 71 (precious stones and
metals), 72-73 (steel), 84-90 (machinery), 91 (clocks and watches), 93-97 (miscellaneous articles)
remain unresolved.G/RO/48
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PRODUCT GROUPS NUMBER OF
ISSUES REFERRED
TO THE CRONUMBER OF
RESOLVED
ISSUES%
1-24 (Agricultural products) 125 29 23
25-27 (Mineral products) 10 8 80
28-40 (Chemicals) 38 19 50
41-43 (Leather 8 6 75
44-49 (Wood and paper) 11 7 64
50-63 (Textiles) 83 31 37
64-67 (Footwear) 14 6 43
68-70 (Ceramics) 12 6 50
71 (Precious stones and metals) 5 0 0
72-73 (Steel) 12 2 17
74-81 (Non-ferrous) 24 14 58
82-83 (Articles of metal) 17 12 71
84-90 (Machinery) 86 9 10
91 (Clocks and watches) 6 1 17
92 (Musical instruments) 2 1 50
93-97 (Miscellaneous articles) 33 12 36
TOTAL 486 163 34
3.3 In his report to the General Council on 18-19 July 2001, the CRO Chair identified the major
obstacles facing the HWP as follows:
(Confirmation of the General Council's mandate)  The delegates at the CRO should be firmly
reminded that the HWP is to be completed by the Fourth Ministerial.
(Identification of the threshold rule)  With resp ect to most of the issues remaining before the
CRO, solutions can be found only through agreement on the applicable threshold rule.  As an
example, there is no question that assembly is origin- conferring.  However, assembly cannot
be always origin-conferring.  Thus, the real question is to identify the threshold of the
assembly work, over which assembly can be considered as "substantial transformation".
So far, there has been no meeting of mind on this critical issue.  Some delegations believe that
value-added rule can provide a general threshold rule, especially for machinery chapters.
Other delegations find it difficult to accept value added rule for technical difficulties
involved.  For this reason, no substantial progress could be made in the CRO’s discussion
held on 9-11 July on the machinery chapters.  Without the resolution of this critical issue,
further meaningful progress in the HWP is difficult to be expected"  (WT/GC/M/66, pages48-49).
3.4 The General Council took note of the above report and provided further guideline as follows:
"- With respect to the confirmation of the General Council’s mandate, the General
Council reaffirmed commitment to complete the Harmonized Work Programme by
the agreed deadline.
- That would require delegations in the CRO to work even harder, and show a more
pragmatic and flexible attitude.  The trade-facilitating aspect of the work of the
Committee on the HWP was a point that had to be borne in mind as well.G/RO/48
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- The Chairman of the General Council asked Members to convey the tenor of this
discussion to their representatives in the Committee, and  ensure that it would be
reflected in its future work.  Despite its technical nature, this was important work and
deserved high-level attention within missions.
- The Chairman also asked delegations to consider senior-level representation at the
upcoming September-October meeting.
- With respect to the threshold rule in particular, the Chairman urged Members to show
increased flexibility and pragmatism on the "threshold" rules, as that was a key for a
successful outcome.
- The Chairman reminded the Council that there was also the implementation-review
mechanism of the Special Session of the General Council , which must at least be
open if the General Council wished to follow up." (WT/GC/M/66, paragraph 181).
3.5 The CRO takes note of the General Council’s guideline as cited above, and  would continue to
make best efforts so that maximum progress should be made within the period mandated by the
General Council through its Decision of 15 December 2000.
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