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If a shirt is sewn in Fiji using Indian cloth that was cut out in Malaysia to a New Zealand pattern, which country made it?
For a trading country like New Zealand, figuring out where a product is "from" can be important. It can determine, for example, whether the product can be imported duty-free because it is 'made' in a developing country, or whether it is subject to import quotas when it is exported. The World Trade Organisation and the World Customs Organisation are working with countries around the world to develop worldwide 'Rules of Origin' - criteria that countries can use to determine where a product is made.
Many products moving around the world in international trade include materials or components from more than one country, and may also have been manufactured or processed in more than one country. This mixture of origins can raise difficulties for importing countries. Determining a product's origin can matter for a number of reasons, for example:
Rules of origin (ROOs) are the criteria by which a product's country of origin can be determined.
Currently there is no system of ROOs that are recognised worldwide. Uncertainty about whether products will meet origin requirements can be a serious obstacle to trade. There is also the possibility that rules may be altered or manipulated and used as a protectionist measure.
The Agreement on Rules of Origin [Agreement text on the WTO website] was negotiated during the Uruguay Round, with the intention of creating a harmonised ROO system to remedy this situation. The Harmonisation Work Programme (HWP) to determine international ROOs is being carried out by the WTO and the World Customs Organisation [external link] in a joint effort.
The role of the Technical Committee on Rules of Origin, part of the World Customs Organisation, is to examine particular technical problems arising in the day-to-day administration of ROOs. The technical committee then gives advisory opinions on appropriate solutions. The role of the WTO Committee on Rules of Origin is to consider the interpretations and opinions of the technical committee, with a view to endorsing such interpretations and opinions. The committee on rules of origin can also request the technical committee to refine or elaborate its work and, in some cases, develop new approaches. All WTO members have the right to participate in both these committees.
The HWP is guided by article 9 of the ROO agreement, which sets out the criteria for establishing rules on the country of origin for any product. It provides that the country of origin is the "either the country where the good has been wholly obtained or when more than one country is concerned in the production of the good, the country where the last substantial transformation has been carried out." The harmonised rules of origin should also be objective, predictable, consistent and not trade restrictive.
When the ROO agreement was concluded, WTO members intended that the HWP should end three years after its initiation, that is by 1998. The HWP has subsequently missed several deadlines and much work remains to be done before it will be completed.