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1 1 (April 20, 2016)

handle is hein.crs/govcdxt0001 and id is 1 raw text is: 0, ;0 , ri. .r , ,-- -,, April 20, 2016 TPP: Rules of Origin What is the Trans-Pacific Partnership (TPP)? The TPP is a proposed free trade agreement (FTA) among the United States and 11 Asia-Pacific countries that would reduce and eliminate tariff and non-tariff barriers on goods, services, and agriculture, and establish trade rules and disciplines that expand on commitments at the World Trade Organization (WTO) and address new 21 st century issues, such as digital trade and state-owned enterprises. It has both economic and foreign policy implications for the United States, and raises potential strategic issues regarding U.S. trade policy and broader U.S. engagement in the Asia- Pacific region. What are Rules of Origin? Like all U.S. FTAs, the TPP includes rules of origin (ROO)Ilaws, regulations and procedures used to determine the country of origin of imported products so that goods from FTA trading partners can qualify for the benefits under the agreement, particularly with respect to tariffs. Parts of finished products often come from many countries in today's global economy, which can make determining origin a complex process. Preferential ROO, as in the proposed TPP, apply to FTAs like the proposed TPP, and other non-reciprocal trade preference programs, like the African Growth and Opportunity Act (AGOA) and the Generalized System of Preferences (GSP). They ensure that only eligible trading partners receive the tariff benefits from the program or FTA, and some may also be crafted to limit the impact of these programs on import-sensitive industry sectors. They are unique to each special trade program or FTA. Non-preferential ROO apply on a most-favored-nation basis to imports from all countries with which the importing country has normal trade relations (i.e., for the United States, all WTO members except those that have an FTA with the United States or receive preferential trade treatment.) They are used to assess tariffs, enforce trade remedies (e.g., antidumping and countervailing duties), and for other purposes. Who writes ROO? For non-preferential rules of origin, there is no specific U.S. law that specifically defines the term country of origin. Instead, U.S. Customs and Border Protection (CBP) administers non-preferential rules based on a body of CBP regulations, prior agency interpretations, and court decisions. In the proposed TPP, and in other FTAs, the agreement's preferential rules of origin are negotiated by the trading partners and approved by Congress as part of the FTA implementing legislation. For special U.S. trade programs like AGOA, they are drafted and approved by Congress through legislation. Who enforces ROO? CBP interprets, administers and enforces rules of origin, as well as country of origin labeling, tariff classification, and many other laws relating to U.S. imports. Are there international rules of origin commitments? The 1994 WTO Agreement on Rules of Origin requires WTO members not to use rules of origin to disrupt trade, to apply them in a consistent, transparent, non-discriminatory, and reasonable manner, and to notify other members about any rule changes. The WTO agreement also set up a program to harmonize non-preferential rules, with negotiations conducted by a WTO Rules of Origin committee and a technical committee under the World Customs Organization (WCO), which is still ongoing. The WCO also facilitates trade by providing assistance to customs administrations worldwide on interpreting ROO and other technical issues. Figure I. Rules of Origin Uses rential $Freet-e Agreefffit Nii~fefereflt~ia Aiduiri ii! d! (m ' hie nti1; nneriinq t iiiieiiiit ir X TitAd tctS Source: World Customs Organization. Graphic by CRS. All FTAs and trade preference programs have distinctive ROO, but there are many common elements across agreements. Originating Goods. To be made in a TPP country, and receive lower tariffs, products must originate in a TPP country by satisfying one of three conditions. They must be: (1) grown, harvested, or fished in TPP countries; (2) produced in the TPP region using only TPP materials; or (3) produced in the TPP region with non-TPP country components while meeting additional product-specific ROO requirements. Cumulation. Cumulation is a trade concept that means that countries that are part of an FTA or other preferential program may cumulate inputs of final products and still receive favorable tariff benefits. In the TPP, countries will be able to use unlimited inputs from other TPP partners, which could provide an incentive to further integrate production and value chains within the TPP region. Types of Preferential Rules of Origin. As in other FTAs preferential product-specific rules in the TPP generally take one of three forms (see Figure 2). One ROO type requires that a product illustrate that it is substantially transformed .O 'T gognpo ' -pmm ggmm g , q 'M M X 11LULANJILiM,

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