The Rules of Origin are important in the context of making an assessment on the application of preferential tariff under an FTA. Hence, without the rules of origin, the preferential tariffs under an FTA cannot be implemented. Moreover, the nonmembers to the FTA are not provided with the benefit of the preferential tariffs, agreed between the FTA partners.
Some of the common criteria used in the rules of origin are –
- Change in tariff classification (this could be at the tariff chapter, tariff heading or tariff sub heading level)
- Regional value addition
- Substantial manufacturing or processing by excluding some minimal operations.
International Trade Law includes the appropriate rules and customs for handling trade between countries. However, it is also used in legal writings as trade between private sectors, which is not right.
This branch of law is now an independent field of study as most governments has become part of the world trade, as members of the World Trade Organization (WTO).
Since the transaction between private sectors of different countries is an important part of the WTO activities, this latter branch of law is now a very important part of the academic works and is under study in many universities across the world.