The Concept of "Substantial Transformation" in Rules of Origin, with a Focus on the World Trade Organization (Wto) Agreement On Rules of Origin

دانشنامه حقوق اقتصادی

Volume 31, Issue 25, September 2024, Pages 98-122   

Document Type: Scientific research

DOI: 10.22067/economlaw.2024.88839.1382

Authors

Gholam Nabi Feizi Chekab¹; Vahid Raja^{* 2}

¹Associate Professor, Department of Private Law, Faculty of Law and Political Science, Allameh Tabataba'i University, Tehran, Iran

²PhD Researcher, Department of Private Law, Faculty of Law and Political Science, Allameh Tabataba'i University, Tehran, Iran

Abstract

The concept of "substantial transformation" plays a vital role in determining the origin of goods produced in multiple countries, significantly impacting the granting of trade preferences and the application of various government measures to these goods. This concept lies at the core of rules of origin, serving as a tool to identify the country where a good is truly manufactured. In the complex world of global trade, where global supply chains and multinational production are commonplace, determining the origin of goods has become a significant challenge. The concept of substantial transformation, by emphasizing fundamental changes in the production process, helps address this challenge and promotes transparency and fairness in international trade.Several subsidiary or complementary criteria, including changes in tariff classification, value-added tests, and specific production process criteria, are employed in different legal systems and trade agreements to assess whether a product has undergone substantial transformation and qualifies for origin status.This research aims to examine the concept and application of these criteria in rules of origin systems, with a particular focus on the legal approach in Iran. It will also explore how the concept of substantial transformation and its subsidiary criteria are applied in the World Trade Organization's Agreement on Rules of Origin and the latest draft consolidated text of the Harmonization Work Programme.By analyzing these dimensions, this research will provide a comprehensive insight into how substantial transformation impacts international trade, the determination of the origin of goods, and its broader implications for global trade regulations. The findings of this research can serve as a basis for reforming and improving the laws and regulations related to rules of origin in Iran and other countries.

Keywords

Substantial Transformation; International trade law; Customs Law; World Trade Organization; Rules of Origin

References

 

References

• Agreement on Rules of Origin. (1994). World Trade Organization.
• Cabinet of Ministers. (2012). Executive Regulations of the Customs Affairs Law.
• Customs Affairs Law. (2011). Islamic Consultative Assembly.
• European Commission-Taxation and Customs Union. (2022). Harmonized System - General Information. Retrieved from https://taxation-customs.ec.europa.eu/customs-4/calculation-customs-duties/customs-tariff/harmonized-system-general-information_en
• Former Iranian Customs Affairs Law. (1350/03/30 [1971/06/21]). Majles Shora Resolutions, 22(1), 6594. Retrieved from https://rc.majlis.ir/fa/law/show/96636
• Free Trade Agreement between Iran and the Member States of the Economic Cooperation Organization (ECO) (2007).
• Guardian Council. (2011). Reasoned Opinions of the Guardian Council Regarding the Customs Affairs Bill Approved on January 1, 2012.
• Inama, S. (2009). Training Module on Rules of Origin. TradeMark Southern Africa.
• Interim Agreement on the Establishment of a Free Trade Area between the Islamic Republic of Iran and the Eurasian Economic Union and its Member States. Year of Approval (2019).
• International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention). (1973). World Customs Organization.
• International Convention on the Simplification and Harmonization of Customs Procedures (Revised Kyoto Convention). (1999). World Customs Organization, Specific Annex K (Rules of Origin). (1999). World Customs Organization.
• Islamic Consultative Assembly. (2010, October 18). Expert Opinion on: “The Bill on the Accession of the Government of the Islamic Republic of Iran to the Revised Kyoto Convention on the Simplification and Harmonization of Customs Procedures”. Retrieved from https://rc.majlis.ir/fa/news/show/782776
• James, W. E. (2005). Rules of origin and rules of preference and the World Trade Organization: The challenge to global trade liberalization. In P. F. J. Macrory, A. E. Appleton, & M. G. Plummer (Eds.), The World Trade Organization: Legal, economic and political analysis (pp. 237-276). Springer
• LDC Group. (2020, March 5). 5th Anniversary of the Nairobi Ministerial Decision: Review of Implementation, Identification of Gaps and the Way Forward – Communication from the LDC Group (G/RO/W/194). World Trade Organization, Committee on Rules of Origin. https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/RO/W194.pdf&Open=True
• National Board of Trade. (2012, March). The Impact of Rules of Origin on Trade – a Comparison of the EU’s and the US’s Rules for the Textile and Clothing Sector [Report].
• Parliamentary Research Center. (2011). Expert opinion on: "Customs Affairs Bill" (Returned from the Guardian Council) (Specific to the Open Session)
• Piontek, E. (2023). European Integration and International Law of Economic Interdependence. Collected Courses of the Hague Academy of International Law.
• Regulation on Determining Amendments to the Harmonized Commodity Description and Coding System (HS) and its Explanatory Notes. (2021, December 25). With subsequent amendments and additions.
• Sadeghi, M. (2007). An Examination of the Customs Affairs Bill from the Perspective of the World Trade Organization Regulations: A Comparative Study. Commissioned by: Iranian Scientific Association of Commerce.
• WCO Origin Conference. (2017). World Customs Organization. Addis Ababa.
• Weiler, J. H. H., & Cho, S. (2006). The Law of Regional Economic Integration in the American Hemisphere. New York, NY: NYU School of Law.
• Weiler, J. H., & Cho, S. (2016).International and Regional Trade Law: The Law of the World Trade Organization. The jean monnet center for international and regional economic law and justice.
• World Customs Organization. (2015). Study on the use of change of tariff classification-based rules. World Customs Organization. Retrieved August 21, 2024, from https://www.wcoomd.org/-/media/wco/public/global/pdf/topics/origin/instruments-and-tools/comparative-study/related-documents/study-on-the-use-of-change-of-tariff-classification_based-rules-en.pdf?db=web
• World Customs Organization. (2017). WCO Origin Conference (pp. 24-50).
• World Trade Organization. (2010, November 11). G/RO/W/111/Rev.6: Draft consolidated text of non-preferential rules of origin [Harmonization work programme] (Note by the Secretariat). https://doi.org/10.6020/NM.WCO-2010-02
• World Trade Organization. (2015). Tenth WTO Ministerial Conference, Nairobi, 2015 (WT/MIN(15)/47 — WT/L/917). https://www.wto.org/english/thewto_e/minist_e/mc10_e/l917_e.htm
• World Trade Organization. (2020, March 5). Rules of Origin Agreement enters into force. Retrieved from https://www.wto.org/english/news_e/news20_e/roi_05mar20_e.htm
• World Trade Organization. (2022). Compilation of information on preferences and benefits reported in notifications to the committee on rules of origin (G/RO/W/194). World Trade Organization. Retrieved from https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/G/RO/W194.pdf&Open=True
• World Trade Organization. (n.d.). Least developed countries (LDCs) sub-committee. World Trade Organization. Retrievedfrom https://www.wto.org/english/tratop_e/devel_e/dev_sub_committee_ldc_e.htm