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Project Title

Advancing the FTAAP: Issues Related to Rules of Origin

Project Year

2024

Project Number

MAG_201_2024A

Project Session

Session 2

Project Type

Standard

Project Status

Completed Project
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Project No.

MAG_201_2024A

Project Title

*
Advancing the FTAAP: Issues Related to Rules of Origin

Project Status

Completed Project

Fund Account

*
APEC Support Fund

Sub-fund

ASF: Free Trade Area of the Asia-Pacific and Global Value Chains (FTAAP and GVCs)

Project Year

2024

Project Session

*
Session 2

APEC Funding

100,000

Co-funding Amount

0

Total Project Value

100,000

Sponsoring Forum

*
Market Access Group (MAG)

Topics

Market Access; Trade Facilitation

Committee

Committee on Trade and Investment (CTI)

Other Fora Involved

Other Non-APEC Stakeholders Involved

 

Proposing Economy(ies)

United States

Co-Sponsoring Economies

Australia; Canada; Chile; Hong Kong, China; Japan; Korea; Peru

Expected Start Date

01/12/2024

Expected Completion Date

31/12/2025

Project Proponent Name 1

Kent Shigetomi

Job Title 1

Director, Multilateral Non-Tariff Barriers

Organization 1

Office of the U.S. Trade Representative

Telephone 1

12023959459; 12024607567

Email 1

Kent_Shigetomi@ustr.eop.gov

Project Proponent Name 2

Not Applicable

Job Title 2

Not Applicable

Organization 2

Not Applicable

Telephone 2

Not Applicable

Email 2

Not Applicable

Declaration

Kent Shigetomi

Project Summary

Rules of origin are a basic element of trade. Under FTAs and unilateral preference programs, they determine if a good qualifies for reduced duties. Under non-preferential trade, they may be used to determine if trade remedies are applied. As a result, numerous actors have an interest: trade negotiators, customs officials, development officials, and manufacturers. Since 2009, changes to the trade landscape have made rules of origin more important. First, new regional trade agreements have introduced new rules that may not be easily understood. Second, three sets of changes to the Harmonized System have made many FTA rules out of date. This workshop help participants understand how rules of origin work and cover international work in the WTO and WCO. Attendees will also learn practical tools about how to update their rules of origin to reflect changes to the Harmonized System.

Relevance

Region

Determining the origin of a product is fundamental to international trade. In free trade agreements, goods must satisfy the rules of origin in order to qualify for reduced or tariff free treatment. Under non-preferential trade, origin is recorded and may help to determine quota usage. Most unilateral preference schemes require a certain amount of originating content in order to qualify for reduced duties. Trade remedies are applied to goods from specific economies, so determining the economy of origin is crucial.

The variety of actors (e.g., customs, trade, development) involved in rules of origin makes it more difficult to address issues with implementation. Rules of origin are typically negotiated by trade officials, but implemented by customs officials. As a result, customs officials may not fully understand how specific rules of origin fit into the larger international system. For example, customs officials may not be aware of the impact that the rules may have on development in the exporting economy. The trade officials who negotiated the agreement may not know how to update the rules of origin to ensure that they are aligned with changes to the Harmonized System. Development officials may be unable to determine the appropriate level of originating content to require in order to spur economic growth. In short, greater understanding of the range of issues is required.

Eligbility and Fund Priorities

This concept note seeks funding from the APEC Support Fund – Sub-Fund on Free Trade Area of the Asia-Pacific and Global Value Chains. The project addresses three of the potential FTAAP building blocks:

Issues related to the realization of the FTAAP: The 2016 APEC study “Collective Strategic Study on Issues Related to the Realization of the FTAAP” analyzed the effects of different rules of origin on regional trade. The report noted that simplification of rules of origin across trade agreements could reduce transaction costs and lead to more trade.

Information sharing on FTAs/RTAs: The project intends to study the trade agreements concluded by APEC economies in order to identify areas of convergence and divergence in rules of origin. This will inform parties to these agreements about where they may wish to modify the rules of origin to facilitate increased trade. We will also examine the unilateral preference programs to identify areas for improvement.

Capacity Building Activities: The last CBNI workshop related to rules of origin was in 2015. Since then, two major regional trade agreements have been concluded, as well as two updates to the Harmonized System. Officials from developing economies would benefit from learning about work in the WTO and education about updating their FTA rules of origin.

The workshop would also promote the development of global value chains by addressing two of the evaluation criteria: 

Addressing trade and investment issues that impact GVCs: As noted above, preferential trade is dependent on satisfying rules of origin. When the rules are unclear or difficult to comply with, preferential trade is hampered. We aim to strengthen understanding of rules of origin so that practitioners can apply them more easily.
 
Enabling developing economies to better participate in GVCs: When developing economies are the beneficiaries of unilateral trade preferences, they must comply with the rules of origin in order to receive the tariff benefit. However, exporters (especially SMEs) may lack the ability to understand or apply the rules. The same applies to SMEs in economies that are parties to an FTA. Similarly, trade negotiators and customs officials in these economies may not understand how to apply the rules of origin in FTAs. This workshop will educate them on the latest trends.

Capacity Building
This project is intended to strengthen the ability of negotiators and customs officials in all APEC economies—and particularly those in developing economies—to understand and apply FTA and unilateral rules of origin.  Since 2009, APEC economies have negotiated 88 FTAs and RTAs, and 56 of these include a developing economy as a party. All of the APEC developing economies are party to at least one FTA or RTA. As a result, they must all understand and apply rules of origin. By enhancing the ability of negotiators and customs officials to understand rules of origin issues, economies will be able to produce higher quality rules that fulfil legitimate policy objectives, while not creating unnecessary barriers to trade.

Objectives

We aim to bridge the gap between trade negotiators and customs officials. This project has three objectives. First, we will educate participants about international work in the WTO and World Customs Organization related to rules of origin. This will help further deepen their understanding of the context of their work. Second, we will conduct capacity building work to explain how to update rules of origin in FTAs. This will help to ensure uninterrupted goods trade. Third, we will share information about different types of rules of origin in trade agreements. This will help economies develop appropriate negotiating positions in future trade negotiations.

Alignment

APEC
Since its earliest days, APEC has worked to “enhance trade and investment liberalization” (Bogor Goals) in order to facilitate “free and open trade in the Asia-Pacific region” (Osaka Action Agenda). Preferential trade in goods, which requires the determination of origin, is the backbone of that effort. In 2006, APEC Leaders launched the idea of the Free Trade Area of the Asia-Pacific, which would spur economic growth and create more opportunity. Trade in goods forms the backbone of this vision. The Aotearoa Plan of Action seeks to work to make sure “APEC’s trade and investment environment is free, open, fair, non-discriminatory, transparent and predictable.” The Putrajaya Vision 2040 seeks a “free, open, fair, non-discriminatory, transparent and predictable trade and investment environment.” Economies expressed their “support for agreed upon rules of the WTO in delivering a well-functioning multilateral trading system and promoting the stability and predictability of international trade flows.”

Forum

This concept note addresses two of the three MAG priorities. The first priority is “practical work on market access issues in support of the multilateral trading system.” The proposed project would support the work underway in the WTO Committee on Rules of Origin and the WTO Committee on Trade and Development. It would also help economies ensure that their respective free trade agreements are properly aligned with the Harmonized System (HS).  The second MAG priority is to “examine the market access implications of preferential trade agreements.” Such an analysis cannot be conducted unless an economy can accurately determine the origin of goods trade. The rules of origin must be clear and predictable to facilitate this work. 

Some of the larger trade agreements concluded by APEC economies are already using a version of the HS that is out of date. The CPTPP is using HS 2012 (two versions out of date). The ATIGA uses HS 2007 (three versions out of date). This inconsistency between tariff numbers and rules of origin can lead to application and verification problems and as a consequence the denial of preferential treatment.

Beneficiaries and Outputs

Outputs

1) Pre-Workshop Survey and Questionnaire
The project overseer will conduct an online, pre-workshop questionnaire that will aim to determine the extent to which economies understand the different aspects of preferential rules of origin and their specific areas of interest. The workshop program may be adjusted to reflect the specific areas of interest. The results will be used primarily to shape the project event (e.g., topics, speakers), and notable findings will be shared with workshop participants and the MAG. We do not intend to produce any written output of the survey results.

2) Workshop

The main focus of the project is to organize and stage a two-day in-person workshop (full day) in Korea, on the margins of MAG 2 (August 2025). The workshop will include sessions on various issues related to rules of origin, including development, structure and type of rules, and work in international organizations. The workshop will cover non-preferential rules of origin (which govern trade under normal trade relations) and preferential rules of origin (which affect unilateral trade preferences and free trade agreements). The project will cover the work conducted in the WTO and World Customs Organization on preferential rules of origin. The workshop will also include a session on how to update rules of origin to reflect changes in the Harmonized System. The workshop will also study convergence of rules of origin across free trade agreements. Collectively, these topics are directly related to APEC's goal of a Free Trade Area of the Asia Pacific.

The results of the pre-workshop questionnaire will be used to identify the areas to focus on. Key findings from the pre-workshop questionnaire will be shared with participants and reported to the MAG. At the end of the workshop, key findings and conclusions will be identified and highlighted for participants. We will also conduct a post-workshop survey to determine areas for future work.

3) Project Summary Report

An electronic report of minimum of 4 pages (excluding annexes) that will be available to all economies will be developed at the end of the workshop. It will contain the executive summary, information on the experts/speakers involved, key discussions based on experts/speakers’ materials/presentations and questions-and-answer session, key recommendations, conclusion and annexes which may include agenda, pre- event assessment/post-workshop survey results and other relevant information as appropriate. These materials will be e-mailed to participants and will be made available in the APEC project database and Meeting Document Database. It is not expected to be an official APEC publication.

Recommendations for future work will be prepared as part of the report guided by the discussions/results of the workshop. The project overseer will also survey and compile feedback from participants, especially input related to possible areas for future capacity-building activities.

Outcomes
1) The primary outcome of this project is to share information on the work related to rules of origin that is taking place in various fora, including the WTO and individual FTA/RTA negotiations. By sharing this information, trade and customs officials will be better equipped to participate in the multilateral work and more prepared to negotiate FTAs/RTAs.

2) Economies who have been unable to participate directly in the wider multilateral work will be able to provide their views, either at the workshop or through their delegates to the multilateral organizations. For example, customs officials who have to implement rules of origin will be able to communicate their views to trade officials who negotiate or modify rules of origin or maintain the Harmonized System.

3) We aim to bridge the divide between trade negotiators and customs officials. Customs officials will be able to share their experience with implementing rules of origin to trade officials. Trade officials will be able to explain their considerations regarding negotiating the rules.

Beneficiaries

The target participants for this project will primarily be trade negotiators and customs officials in APEC economies. However, since unilateral trade preferences require goods to satisfy a rule of origin, development officials may also benefit. Other ideal participants would be representatives of the WTO, World Customs Organization, and UNCTAD. Secondary beneficiaries are customs officials who implement rules of origin in their economies. When rules of origin are maintained and implemented properly, customs procedures become more predictable and trade flows more easily. As a result, traders and exporters indirectly benefit from a smoother operating customs clearance system. 

Women will actively participate in the planning, management, allocation of resources, and implementation of the project and will play key roles in planning the conference. The project overseer will actively encourage the participation of women in the conference, including as presenters at the conference.  The project seeks to have women represent at least 50 percent of the workshop participants and speakers.

Dissemination

The number, form and content of any publications: The results of the workshop will be captured into a Project Summary Report that can be published electronically on the APEC Project Database and/or the Meeting Documents Database for members’ reference. The electronic publication will include the workshop agenda, presentations, curricula vitae of speakers (if approved by the speakers) and a summary report of the workshop. This information will be accessible to the public following the workshop to ensure that only updated information is reflected therein. 

Channels of dissemination: Only the APEC Project Database and/or the Meeting Document Database will be used to share workshop results. 

The target audience: The target audience would include trade negotiators, customs officials, representatives of multilateral trade and customs organizations, and representatives of trade associations. 

Any intention to sell outputs arising from this project: There is no intention to sell the outputs arising from this project. Member economies will be encouraged to disseminate results of the workshop with their respective agencies and business communities through their websites.

Gender

Please see Project Proposal in Supporting Documents folder.

Work Plan

Please see Project Proposal in Supporting Documents folder.

Risks

Please see Project Proposal in Supporting Documents folder.

Monitoring and Evaluation

Please see Project Proposal in Supporting Documents folder.

Linkages

Trade Negotiators and Customs Officials: This workshop is intended to enhance expertise with rules of origin, so trade negotiators of customs, market access, or rules of origin chapters are ideal participants. Customs officials engaged with classification or maintenance of tariff schedules would also benefit. Participants should be aware of domestic procedures required to make modifications to trade agreements. 

Private Sector and Civil Society: Because rules of origin have a direct connection to unilateral trade preferences, participants who are engaged in economic development may also have an interest. However, the connection to development issues is secondary when compared to other issues we plan to cover. Scholars who have conducted research on the effects of rules of origin on trade may also be interested. 

Representatives of international organizations: Other multilateral organizations have conducted important work on the implementation of the WTO Agreement on Rules of Origin. An official from the WTO Secretariat would be an obvious speaker. The World Customs Organization would be able to speak about modifications to the Harmonized System. 

Representatives of Other APEC Groups: Other APEC bodies cover issues related to rules.

Sustainability

There are no restrictions on the ability of economies to adopt new types of rules of origin except for unsuitability or institutional reluctance. Chemical reaction rules of origin were adopted quickly across multiple FTAs by several economies. The 2020 U.S.-Canada- Mexico FTA has new types rules of origin for autos.  By sharing information about rules of origin, we seek to prepare officials for new negotiations. We also also seek an open discussion of the challenges posed to development from rules of origin. 

The workshop aims to survey the APEC landscape to identify the challenges that economies face in trade negotiations and to help them develop rules of origin that reflect their priorities. The project overseer will follow up on participants after the workshop to check progress, answer questions, and facilitate human connections to international efforts. 

Implementing changes is time-consuming and uncertain work. Economies do not negotiate on a fixed timetable. It will, therefore, be difficult to identify change. The project overseer will monitor engagement of participating economies in trade negotiations to follow monitor changes. 

The workshop will be followed by presentations in future MAG meetings that report on the effects of the workshop that are captured in new FTAs and updates to existing ones.

Direct Labour

Not Applicable.

Are there any supporting document attached?

Yes
Project No.
Project Title
Project Status
Fund Account
Sub-fund
Project Year
Project Session
APEC Funding
Co-funding Amount
Total Project Value
Sponsoring Forum
Topics
Committee
Other Fora Involved
Other Non-APEC Stakeholders Involved
Proposing Economy(ies)
Co-Sponsoring Economies
Expected Start Date
Expected Completion Date
Project Proponent Name 1
Job Title 1
Organization 1
Telephone 1
Email 1
Project Proponent Name 2
Job Title 2
Organization 2
Telephone 2
Email 2
Declaration
Project Summary
Relevance
Objectives
Alignment
Beneficiaries and Outputs
Dissemination
Gender
Work Plan
Risks
Monitoring and Evaluation
Linkages
Sustainability
Direct Labour
Are there any supporting document attached?
hdFldAdmin
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Secretariat Comments
Reprogramming Notes
Consolidated QAF
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PD Sign Off
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Priority Within Funding Category
Monitoring Report Received
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PMU Field 1
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On Behalf Of
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Attachments
Content Type: Standard Proposal
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