Rules of origin and trade facilitation in preferential trade agreements in Latin America

Abstract

The term rules of origin" is an economic expression referring to a set of substantive rules for identifying the source of imported goods. As with any set of rules, certain formalities must be followed which entail public and private transaction costs. The public sector has to enforce the rules of origin and implement proper controls with a view to monitoring external trade in goods, minimizing budgetary expenditures and maximizing the collection of tax revenues, while at the same time facilitating international trade. Likewise, private agents involved in external trade in goods are required to follow certain procedures, which should be efficient and expeditious. There is already an abundance of economic literature relating to rules of origin; in this paper, we are concerned with the procedures involved in complying with such rules, in both the public and the private spheres. We approach the issue from the standpoint of trade facilitation. The matter of determining the origin of internationally traded goods inevitably comes up, however, so it will be discussed, although not in depth. Although there is no single definition of the term "trade facilitation", all working definitions take into account the matter of customs procedures, and many also explicitly refer to rules of origin. In both cases, the idea is to reduce the transaction costs associated with internationally traded goods."