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Rules of Origin in International Trade:”Spaghetti bowl” to “Kill rules”!

Rules of origin in international trade is like a passport required for travel overseas. These are used to determine the “nationality” of goods traded in the global market place. Yet, ironically no internationally agreed-upon rules of origin exist.

Each country or jurisdiction that administers a regional trade agreement e.g. the USMCA and the EU, has established its own rules of origin. These are divided into two categories: (1) rules relating to preferential treatment and (2) rules relating to non-preferential treatment. The former has two additional subsets: (1) rules on general preferential treatment for developing countries, and (2) rules relating to regional trade agreements.

With respect to trade, rules of origin should theoretically play a neutral role. However, they sometimes are used for protectionist ends: origin rules that are too restrictive or that are enforced arbitrarily expand improperly the coverage of trade restrictions.

The WTO has sought to render those restrictions more precise and to harmonize rules across countries by building on the Agreement on Rules of Origin adopted by the GATT in 1994. The GATT, which the WTO superseded, required that rules of origin be transparent and administered in a consistent, uniform, impartial, and reasonable manner. Since 1995, the WTO expanded its perspective on rules of origin.

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