China Implements WTO Commitments on Rules of Origin

By Jeanette K. Chan and Auria Styles, Paul, Weiss, Rifkind, Wharton & Garrison, Hong Kong

It is no secret that the People's Republic of China is one of the world's largest trading powers, and one of the largest global centres for trade processing. In 2003, according to Vice Minister of Commerce Yu Guangzhou, processing trade comprised about 48%, or US$404.8 billion, of China's total trade with the world.¹ Accordingly, rules of origin are critical to China's trading relationships, and understanding how they work is critical for practitioners and investors alike.

Rules of origin are the standards by which the origin of goods is determined for purposes of deciding whether goods enter a country under preferential or non-preferential terms. Non-preferential rules of origin are used for determining tariffs, quotas, countervailing duties and anti-dumping procedures. Preferential rules of origin apply to goods originating and traded among countries that have a preferential trading relationship. The ability to determine the origin of goods is one of the most fundamental elements of the international economy and is critical to preventing circumvention of preferential rules through minimal processing or trade diversion.