  
  
G/RO/W/194  
 
5 March 2020  
(20-1779) Page: 1/5 
Committee on Rules of Origin  Original: English  
 
5TH ANNIVERSARY OF THE NAIROBI MINISTERIAL DECISION: REVIEW OF 
IMPLEMENTATION, IDEN TIFICATION OF GAPS A ND THE WAY FORWARD – 
COMMUNICATION FROM T HE LDC GROUP  
The following submission, dated 2 March 2020, is being circulated at the request of the delegation 
of Tanzania , on behalf of the LDC Group . 
 
_______________  
 
 
1  INTRODUCTION  
1.1.  The LDC believes that the Nairobi Decision on preferential rules of origin (RoO) of 2015 is a 
landmark achievement matured thanks to relentless efforts of the Least -Developed Countries  (LDC) 
WTO group and WTO member states. Yet, after five years, time has come to acknowledge that, with 
few exceptions, implementation of the Decision is lagging behind in terms of reform of rules of origin 
by preference -granting Members.  
1.2.  From 2015 to prese nt the LDC WTO group has made several submissions to the CRO to identify 
the reforms on rules of origin that the preference -granting Members should undertake to make the 
use of trade preferences more effective. The submissions of the WTO LDC group have she d light on 
aspects of rules of origin that have benefitted not only the LDCs but also the international trading 
community at large. Such work should be continued and expanded as there would be gains to open 
discussion on rules of origin at multilateral lev el in terms of transparency and best practices.  
1.3.  It is now time to recognize that the work done in the CRO is promising but that a wider mandate 
with a work program and a time horizon should be adopted at the next Ministerial Conference to 
achieve better ru les of origin for LDCs.  
1.4.  This communication  aims at setting a roadmap to such course of action.  
2  A SUMMARY  OF MAIN STEPS UNDER TAKEN FOR IMPLEMENTI NG NAIROBI DECISION:  
NOTIFICATIONS AND UT ILIZATION RATES1 (2016 -2017)  
2.1.  During 2016, the CRO's efforts for the im plementation of the Nairobi Decision that be 
summarized as follows:  
(a) "No later than 31 December 2016 each developed Preference -granting Member, and each 
developing Preference -granting Member undertaking the commitments in accordance with 
paragraph 4.1 up to that date or thereafter, shall inform the Committee on Rules of Origin 
(CRO) of the measures being taken to implement the above provisions.2"; 
(b) Calculation of utilization rates of trade preferences granted to LDCs ; and  
(c) Developing a template for notification of RoO . 
2.2.  The development of a template took most of the CRO work during 2016 as it was hoped that 
preference -giving countries would notify according to such template the eventual improvements to 
 
1 See the forthcoming UNCTAD publication . 
2 See paragraph 4.2 of the Nairobi Decision on Preferential Rules of Origin for LDCs .   G/RO/W/194  
 
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  their RoO to comply with the deadlin e of 31 December 2016 provided in paragraph 4.2 above of the 
Nairobi Decision.  
2.3.  However, it took until the WTO CRO meeting of March 2017 to achieve consensus on the 
template with the LDCs insisting on notifications to be made according to the new template to allow 
for a comprehensive review to be held at the 2017 October session of the CRO.3 Similarly  the 
methodology to calculate the utilization rates was agreed at the end of 2016 as reported by the 
Chairman during the CRO meeting of March 2017.  
2.4.  The meeting  of the CRO of October 2017 was a litmus test of the implementation of the Nairobi 
Decision as the majority of preference -granting Members  notified their rules according to the 
template allowing a first assessment. At this CRO meeting, the LDCs made substa ntive presentations 
on all items of the Nairobi Decision4 contrasting them with the notifications made by preference -
granting Member . Such presentations made by the LDCs showed in a clear and unambiguous 
language the significant gaps and divide among the n otifications made by preference granting 
countries who believed to be in compliance with the Nairobi Decision and the views and expectations 
of the LDC WTO group arising from same Decision.  
2.5.  In particular , the existing data on utilization rates was used to make a comprehensive 
presentation by the LDC WTO group5 showing the impact that reforms of RoO in the EU and Canada 
had on trade flows and utilization rates. The presentation also highlighted that no positive trade 
dynamics were observed in the US and Japa n given the absence of such reforms.  
2.6.  Yet no meaningful response was received from preference -granting Members to the arguments 
raised by the LDC in their presentations in the form of substantive submissions that could have 
contributed to a constructive di alogue.  
2.7.  Finally , the 2017 report of the CRO at the General Council pointed out that notifications of 
some preference -granting Members on utilization rates were lagging behind as it was shown in trade 
data (i.e. import statistics) not available at that time  for the following WTO preference -granting 
Members: China; Iceland; Kazakhstan; Kyrgyz Republic; New Zealand; Russian Federation; 
Tajikistan; and Turkey.  
3  STEPS MADE BY PREFER ENCE -GRANTING MEMBERS TO IMPLEMENT THE NAI ROBI 
DECISION  
3.1.  The 2017 report of the CR O to the WTO General Council6 reported, as summary of the efforts 
made to comply with the Nairobi Decision, that China had adopted new legislation introducing a 
series of simplifications to its RoO, Canada had announced changes to facilitate the requiremen ts 
for some apparel items.  Norway announced that it allowed for cumulation among LDCs while 
Australia stated it was conducting a comprehensive review of its Generalized System of Preferences 
(GSP). The Eurasian Economic Union also revised its GSP and Thail and reported its intention to 
review its preferential rules of origin.  
 
3 See documents  G/RO/M/68  and G/RO/84.  
4 See the following presentations made at the 2017 October meeting: "Developments Regarding 
Methods of Calculation of the Percentage Criterion" (Paragraph 1.1 of the Nairobi Decision and Item 1 of 
document G/RO/W/169) – Presentation  by Tanzania and Laos (RD/RO/52); "Developments Regarding Methods 
using a Change of Calculation of Tariff Classification Criterion to Determine Substantial Transformation" 
(Paragraph 1.2 of the Nairobi Decision and Item 2 of Document G/RO/W/169) – Presenta tion by Benin 
(RD/RO/53); "Developments Regarding Methods using a Specific Manufacturing or Processing Operation 
Criterion to Determine Substantial Transformation" (Paragraph 1.3 of the Nairobi Decision and Item 3 of 
document G/RO/W/169) – Presentation by Myanmar (RD/RO/54); "Developments Regarding Methods using a 
Combination of Requirements to Determine Substantial Transformation" (Paragraphs 1.4 and 1.5 of the Nairobi 
Decision and Item 4 of document G/RO/W/169) – Presentation by Tanzania (RD/RO/55); "Deve lopments 
Regarding Cumulation Provisions (Paragraphs 2.1 and 2.2 of the Nairobi Decision and Item 5 of document 
G/RO/W/169)" – Presentation by Cambodia (RD/RO/56); "Developments Regarding Documentary 
Requirements (Paragraph 3 of the Nairobi Decision and It em 6 of document G/RO/W/169) – Presentation by 
Nepal (RD/RO/57).  
5 See Utilization Rates under Preferential Trade Arrangements for Least developed countries (Paragraph 
4.3 of document WT/L/917/Add.1) – Presentation by Yemen (RD/RO/58).  
6 See document  G/RO/ 85. G/RO/W/194  
 
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  3.2.  The remaining preference -granting Member  expressed the view either formally or informally 
during the various CRO meetings held during 2016 and 2017 that their existing preferential RoO for 
LDCs were already complying with the Nairobi Decision.  
4  FURTHER SUBMISSIONS MADE BY LDCS TO BUIL D UP A DIALOGUE IN T HE CRO 
IMPLEMENTATION OF NA IROBI DECISION (2018 -2019)  
4.1.  Faced with implicit or explicit statements by preference -granting Members that the ir rules of 
origin were in conformity  with the Nairobi decision, the WTO LDC group renewed efforts in 2018 and 
2019 to bring new evidence at the CRO meetings to start a constructive dialogue.  
4.2.  These renewed efforts focused on:  
(1) A progressive examination of the each of the substantive components of the Nairobi Decision 
to show to preference -granting Members that their RoO deviated from the Nairobi Decision. 
Several possible best practices that could be adopted were also indicated;  and 
(2) Evidence from the analysis of utilization rates that some of the existing RoO were linked to 
low utilization of trade preferences.  
4.3.  Under (1), the LDCs initiated a process  in 2018 to examine each of the different substantive 
issues covered by the N airobi Decision. On the issue of change of tariff classification (CTC) a technical 
presentation was made by the LDC Group in October 20187 containing several issues for 
consideration by preference -granting Members .  
4.4.  A further submission in May 20198 examin ed in more details where and how product specific 
rules of origin of the EU and especially Japan were found not to be in compliance with Paragraphs 
1.2 and 1.4 of the Nairobi Decision.  
4.5.  A detailed annex was attached to the submission by the LDC countries c ontaining samples of 
product specific rules of origin that were found to be overly stringent and not in compliance with the 
Nairobi Decision. The annex also contained suggestions of product specific rules of origin that could 
be adopted by EU and Japan on the basis of best practices.  
4.6.  While EU and Japan appreciated the submission and engaged in bilateral meetings with the 
WTO LDC group, no concrete steps have been undertaken to respond to the concerns raised in the 
submission and its annex besides asking th e LDC WTO group to come back with a list of priorities.  
4.7.  However, it has to be recalled that for some products these priorities were already spelt out in 
the LDC submission  at product specific level. The request for priorities with no attempt to explain 
why so many exceptions to the CTC basic rule were needed did not signal a genuine attempt to 
engage in discussions.  
4.8.  To date, neither the EU nor Japan offered any response or justification on the reasons why so 
many additional  exceptions are needed to the si mple CTC. During  the bilateral meetings with Japan, 
it emerged that Japan will undergo a scheduled revision of its GSP scheme in 2021.  The pressing 
issue is whether Japan will consider the issues and proposals made by the LDCs in their submissions 
and enga ge in a constructive dialogue. The WTO LDC group would like to recall that the submission 
clearly indicated that  "several steps could also be undertaken by Japan to engage in an overall 
reform of rules of origin for LDCs ". 
4.9.  In a similar vein, the LDC submit ted a substantive paper on direct consignment9 at the 2019 
CRO meeting. As in the case of the submission concerning CTC, this document contained tables 
clearly showing where and how the legal text of some preference -granting Members were not in 
conformity with the Nairobi Decision. The same document indicated the best practices that could be 
 
7 Developments regarding Methods using a Change of Tariff Classification Criterion to Determine 
Substantial Transformation (Paragraphs 1.2 and 1.4 of the Nairobi Decision) (RD/RO/72) - Elia N. Mtweve, 
Tanzania on behalf of the LDC Group . 
8 See "Note on  Change of Tariff Classification Paragraphs 1.2 and 1.4 of Nairobi Decision " (RD/RO/79) - 
Elia N. Mtweve, Tanzania on behalf of the LDC Group . 
9 Impact of Direct Consignment Requirements on Preference Utilization by Least Developed Countries  
(G/RO/W/187) 4 October 2019.  G/RO/W/194  
 
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  adopted by those who did not conform with the Decision, namely, the adoption of the non -alteration 
principle as applied by the EU. Yet, there has been a limited respons e to such submission by 
preference -granting Member . 
4.10.   Because of time limitation the WTO LDC group has not been able to analyse  in depth the 
shortcomings and lack of conformity with the Nairobi Decision of the remaining preference -granting 
Members using ad valorem  percentage criterion or specific working of processing. Yet it is rather 
clear that even the initial analysis conducted in 201710 shows that the large majority of the 
preference -granting Members does not meet the request of the LDCs of 75% of non -originating 
materials, nor other LDCs requests concerning cumulation or other elements of the Nairobi Decision. 
These remaining issues could be discussed in a subsequent CRO meeting before the Ministerial  
Conference.  
4.11.   Under (2) above on utilization  rates, the WTO LDC Group made extensive presentations at 
the CRO of October 201711 and 201812 based on the data available at that time. The presentations 
outlined a number of impressive findings, including:  
(a) The possible impact that direct consignment rules could have on utilization rates later 
confirmed by the findings of the WTO Secretariat;13 
(b) According to the data notified by Members to the WTO Secretariat, some preference -granting 
Members, like Indi a, showed close to zero utilization rates;  and 
(c) The fact that multiple preferences available to LDCs under other preferential arrangements 
have to be taken into account in order to correctly assess the impact of rules of origin under 
each preferential s cheme.  
4.12.   Such presentations were followed by other submissions prepared by the LDCs on the 
utilization rates of Switzerland14 and most recently China15, where again significant findings were 
shown. In relation to Switzerland it was found that there are sectors  showing persistent low 
utilization rates (even for products subject to product specific rules of origin identical to those of the 
EU, where utilization rates are higher). Bilateral meetings are underway with Switzerland to address 
this issue and indicatio ns are that this could be related to direct consignment obligations.  
4.13.   The analysis of China's utilization rates again showed, as in the case of India, that there are 
significant  trade flows where utilization rates are minimal or zero.  
4.14.   The clarifications pr ovided by China at CRO meeting of October 2019, showed that utilization 
rates under other preferences16 could explain low utilization of China's LDC preferences by ASEAN 
LDCs. This response emphasized again the need for a correct and complete dataset on uti lization 
rates as an indispensable transparency and assessment tool. Yet China has notified utilization rates 
for only one year (2016) and only for DFQF preferences. Incomplete data means that a full analysis 
is currently not possible.  
4.15.   According  to the lat est status report of the WTO Secretariat,17 there are issues related to the 
notification of utilization rates concerning:  
(1) Lack of notification or incomplete notification of import statistics by preference -granting 
Member (Russia Federation and Turkey fo r instance);   
(2) Even more importantly, there are concerns over the quality and accuracy of the data notified 
to the WTO Secretariat (for instance only one year for India (2015) and for China (2016)). 
Consultations with these delegations to improve the qu ality of their submissions have yet to 
produce tangible results;  and 
 
10 See footnote 4 above . 
11 See Utilization rates under preferential trade arrangements for LDCs (Paragraph 4.3 of 
WT/L/917/A dd.1), presentation by Yemen on behalf of the LDCs, October 2017 . 
12 See Utilization rates under prefere ntial trade arrangements for LDCs (Paragraph 4.3 of 
WT/L/917/A dd.1), presentation by Tanzania on behalf of the LDCs, October 2018 . 
13 See document G/RO/W/185 . 
14 See document G/RO/W/186 . 
15 See document G/RO/W/192 . 
16 In the specific case ASEAN -China Free Trade Area. 
17 See document G/RO/W/163/Rev.7 of 24 February 2020 . G/RO/W/194  
 
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  (3) The data notified must encompass import statistics under other preferential schemes available 
to LDCs ( preference -granting Member  should progressively notify the utilization rates of other 
preferences granted to LDC to make possible a transparent and efficient assessment of the 
use made of their DFQF schemes).  
5  WHAT THE LDCS ARE EX PECTING FROM MC 12  
5.1.  As briefly summarized above, there is a n imbalance between the efforts deployed by LDCs 
countries in the CRO since the Nairobi Decision in terms of submissions, analysis, and the level of 
the response so far received from preference -granting Members.  Implementation of the Ministerial 
Decision sh ould remain a shared responsibility and not rest exclusively on evidence brought by the 
LDC Group.  Ensuring that " preferential rules of origin applicable to imports from LDCs are 
transparent and simple and  contribute to facilitating market access.18" is a clear objective of the 
multilateral community  embedded since 2005 in the Hong Kong WTO Ministerial Decision and 
reinforced in target 17.12 of the Sustainable Development Goals ( SDGs ).19 
5.2.  The LDCs believe that is therefore necessary to strengthen the mandate o f the Committee on 
Rules of Origin at the 12th Ministerial Conference by : 
a. setting clearer obligations for preference granting members  regarding an intensification of 
their efforts to monitor the impact of their RoO on LDCs' imports and to simplify requirem ents 
in line with the provisions of the Nairobi Decision and the best practices as illustrated by the 
LDC Group in past submissions to the CRO ; and 
b. strengthen ing the role of the WTO Secretariat to monitor conformity with Nairobi Decision. 
This will have significant spill over  benefits for the entire international trading system in an 
area that is currently unregulated . 
5.3.  A strong mandate of the Committee on Rules of Origin will lead to an effective p articipation by 
both Geneva and capital -based experts in the Committee meetings with a clear agenda on the work 
ahead.  
5.4.  To reach this objective the LDC group will engage with preference -granting Members to develop 
appropriate language to be submitted for co nsideration of Ministers at the next Ministerial 
Conference.  
__________  
 
18 See Hong Kong WTO Ministerial Decision on Measures in Favour of Least -Developed Countries, 2005 . 
19 Target 17 .12 of SDG 17 reads as follows Realize timely implementation of duty -free and quota -free 
market access on a lasting basis for all least developed countries, consistent with World Trade Organization 
decisions, including by ensuring that preferential rules of origin applicable to imports from least developed 
countries are transparent and simple, and contribute to facilitating market access . 