WTO LDCS GROUP EXPECTATIONS ARISING FROM THE DISCUSSIONS HELD

UNDER AGENDA ITEM (B) OF NOVEMBER 2024 AND APRIL 2025 CRO

AND SUBSEQUENT INFORMAL CONSULTATIONS

The following communication, dated 13 October 2025, is being circulated at the request of the delegation of The Gambia on behalf of the LDC group.

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This note: 1) reviews the demands made by the LDC group in light of the presentations made by some Preference Granting Members and further discussions that have taken place at the April 2025 CRO; 2) further refines and seeks clarifications from Preference Grating Members on, their specific presentations, taking in to account that the majority of the presentations made by Preference Granting Members were not circulated with sufficient advance notice[1]; and 3) reiterates and elaborates on the requests that Preference Granting Members are yet to respond to and further specifies the group's expectations.

The objective of this note is to transparently share with CRO Members, particularly Preference Granting Members, WTO LDC group's expectations for the relevant agenda items at the upcoming CRO meeting. This is so that the Committee can make meaningful progress on specific technicalities to identify trade facilitating best practices.

The present note has been prepared to facilitate discussions at next CRO meeting of 5-6 November and to support in-depth discussions and engagement with Preference Granting Members.

1  sub-Item (a): Level of ad valorem percentages

1.1.  The LDC group has identified the recent UK reform of its RoO as an example of trade‑facilitating best practice. This reform provides, inter alia, for a) the use of up to 75% of non-originating materials calculated on ex-works price; b) the deduction of cost of insurance and freight; and c) CTC as alternative criterion.

1.2.  The LDC group appreciates Australia and the UK's efforts to present their practices concerning the ad valorem requirements and continues to invite other PGMs not yet applying such practices to consider adopting them in their RoO for LDC Members.

1.3.  Australia made a presentation (_RD/RO/135/Rev.1) under item 3.A.(ii) clarifying ad valorem practices in ASTP, stating that ASTP does allow the possibility to source up to 75% non-LDC content. First, it must be noted that Australia does not offer CTC as alternative, unlike the UK rules of origin. Second it is unclear if the cost of insurance and freight is deducted as Australia applies a value‑added criteria. Third, the stated 75% threshold appears to be achievable by virtue of cumulation and therefore does not meet the best practice criteria identified by LDCs and implemented by UK.

1.4.  The overall methodology used by Australia remains rather complex as it is based on a value‑added calculation rather than a value of materials method (See sub item (B)) and doesn't provide a straightforward calculation (ASTP allows 50% non-LDC content plus 25% inputs from 179 ASTP beneficiaries). The WTO LDC group intends to further elaborate and seek additional clarifications from Australia

1.5.  The WTO LDC group noted that one Preference Granting Member suggested addressing specific challenges faced by individual LDC exporters rather than adopting a broad approach and requested clear examples of how the rules of origin hinder LDC exports.

1.6.  The WTO LDC group acknowledges that such an approach would be worthwhile to pursue. As indicated in the group's earlier communication (April 2025), this would require extensive consultations with capitals and business, supported by aid-for-trade funds. As previously suggested, the LDC group calls on donors to fund field studies to identify commercially viable levels of thresholds for the LDC Members while also allowing for alternative forms of product specific rules of origin such as CTC or specific working or processing to be used.

1.7.  On the same issue the WTO LDC group underscores that the analysing case-specific obstacles faced by LDC exporters, while useful, does not capture an important dimension of rules of origin i.e. the inhibiting role that stringent rules of origin may have on investments in manufacturing in LDCs. Firms and/or investors may be deterred from investing in manufacturing operations when the RoO require a series of working of processing operations in an LDC that make the finished product uncompetitive and commercially non-viable.

1.8.  In this respect the LDC group reiterates its request to fund field and firms-based research to identify optimal, sector-specific levels of threshold based on firm-level Bill of materials (BOM) studies in LDCs. This is to identify viable value chain rather than allocating research funds solely to ex-ante empirical or econometric assumptions.

1.9.  In accordance with the above, the WTO LDC group thanks the UK once again for funding a project to detect and document specific cases of cumulation and values chains, and request other donors to fund further research in this area, with potential positive spillovers beyond LDCs.

1.10.  The WTO LDC group reiterates its request that Preference Granting Members not currently applying – nor planning to apply - such best practices share their detailed reasons for not adopting the ad valorem percentage criterion and CTC as alternative, as adopted by UK.

2  Sub-Item (b): Method of calculation of ad valorem percentage

2.1.  The LDC group still expects a response (possibly in written format) from the PGMs which are currently not using a method of calculation of ad valorem percentage based on value of materials. In particular, the group requests concrete examples and reasons explaining why those Members consider a value-added method to be more trade-facilitating.

2.2.  UK presented their practice under item 3.C.(iv) at the April CRO meeting, clarifying that they use the value of materials calculation and allow the deduction of costs of freight and insurance from the value of non-originating materials.

2.3.  As the UK has provided details on the best practice namely the deduction of costs of freight and insurance from the value of non-originating materials – the LDC are inviting other PGMs to explain the following:

a._         why they do not allow the deduction of the cost of insurance and freight from the value of non-originating materials; and

b._         why they believe that the inclusion of such costs works more effectively for firms in LDCs.

3  Sub-Item (c): Evidence of direct consignment

3.1.  The LDC group identifies the "non-alteration" principle introduced by the EU, and other similar arrangements applied by Australia and New Zealand, as the best practices regarding evidence of consignment. Such practices are trade facilitating and consistent with the spirit of the WTO TFA.

3.2.  The WTO LDC group wishes to thank the EU for its clear and transparent presentation (_RD/RO/137) on the EU's proof of direct consignment practice (non-alteration principle).The presentation and the subsequent discussion provided a better understanding of how this best practice operates in concrete terms and the rationale for its adoption. In particular, the WTO LDC group wishes to recall the following features of the non-alteration principle so that other preference granting Members may better understand its merits.

a._         The EU stated that non-alteration principle "was based on trust in traders, exporters, and logistics operators, with customs authorities verifying compliance only if there were doubts over a possible manipulation of the products during transit."

b._         The EU further noted that that any documentary proof of compliance with non‑alteration principle "could be provided to EU customs authorities, but that such documents were only due in case of doubt about a possible manipulation of the goods during transit."

c._         Finally, the EU stated that "Under the previous regime, certificates of non‑manipulation from transit points were required. Such certificates could still be used by operators, but alternative documents could include other documents, such as bills of lading."

3.3.  As stated in the CRO report, the WTO LDC group would be grateful if the EU could circulate the relevant legal text and, where possible, concrete examples drawn from practices in EU member States

3.4.  Australia shared their practice concerning direct consignment. However, Australia's presentation provided limited information concerning documentary evidence required for custom procedures. As presented: "Australia emphasized that goods did not need to be shipped directly from a beneficiary LDC to Australia. The focus was on the product rather than the route. The only constraint was that Australia must be the intended destination. Minor operations like storing and labelling were permitted, and documentary requirements were basic, encouraging self-certification."[2]

3.5.  The WTO LDC group would be grateful if Australia could consider providing additional information and concrete cases to better explain how Australia's approach aligns with or is equivalent to, the EU's non-alteration principle. From their presentations, it seems that Australia must be the intended destination. The statement seems to suggest that sales made via intermediaries or wholesalers may find it difficult to comply with such a requirement.

3.6.  The LDC group appreciates Japan's written submission (_G/RO/LDC/N/JPN/1/Rev.1/Add.1) as it transparently sets out Japan's practices on direct consignment in detail. Japan confirmed that its practice is not equivalent to non-alteration principle but indicated possible future developments on documentary requirements (contingent on internal/domestic discussion).

3.7.  The WTO LDC group urges Japan to undertake the necessary reforms to introduce the non‑alteration principle

3.8.  Preference Granting Members that have not adopted the non-alteration principle are invited to state the reasons for non-adoption and explain why their alternative practices do not create difficulties for LDC exporters.

3.9.  The LDC group thanks Australia, Japan and the EU for sharing their experiences concerning direct consignment in the April CRO meeting.

4  Sub-Item (d): Rules based on the Change of tariff classification criterion

4.1.  The LDC group identified UK DCTS PSRO with regard to its CTC provisions as the best practices based on:

a._         the application of simple CTH in most cases with few exceptions; and

b._         the provision of alternative ad valorem rules in addition to CTC i.e. CTH of 75% VNOM.

4.2.  Therefore, the LDC group requested, in its April document, that PGMs not yet using CTC to explore the possibility of complementing their existing ad valorem across-the-board percentages for the LDC Members with CTC or specific working or processing as an alternative for specific sectors.

4.3.  The LDC group reiterates its invitation to PGMs that are using a combined requirement, i.e. requiring compliance with both ad valorem and CTC at the same time, to provide justification for the adoption of such combined requirements.

4.4.  The LDC group reiterates its request to PGMs that are using CTC to start considering further liberalizing their CTC rule by introducing simple CTH or CTSH whenever possible and/or by introducing alternative rules such as ad valorem or specific working or processing.

4.5.  The WTO LDC Group noted that at the April CRO meeting no PGM delegation took the floor on this agenda item.

4.6.  The LDCs reiterate their request, recalling that the LDC group presented two extensive submissions on this topic.[3]

Sub-Item (e): Proof of Origin (certificate of origin and self-certification)

4.7.  EU shared their practice concerning self-certification under item 3.A.(ii), with a presentation _RD/RO/137. The WTO LDC group wishes to thank the EU for its presentation that allowed several clarifications on its method of self-certification that is considered by the LDC one of the best practices in this field. In particular, the EU shared their experience in introducing self-certification to replace paper-based COs issued and stamped by certifying authorities, which remain in use by several PGMs. It should be noted that the EU did not see any relevant or measurable cases of increased fraud during and after the introduction of self-certification. The LDC believes that this finding is particularly significant since it sheds light on the conventional wisdom that the introduction of self-certification leads to increases of fraud.

4.8.  China made a presentation as well under item 3.A.(i), noting that the title of the presentation was "an overview of China's self-certification system for LDCs".[4] However, the WTO LDC group wishes to point out that, as recognized by China during the discussions after its presentation, the system presented is not a self-certification system but rather concerns E‑COs. China does not allow self-certification, as clarified by the Chinese delegate.

4.9.  The LDC group thanks China and the EU for their presentations in the April CRO, clarifying their respective practices concerning proof of origin and appreciates the EU for sharing their experiences on self-certification.

4.10.  The LDC group welcomes the presentation made by China. However, the LDC group does not consider this system as a provision equivalent to self-certification identified as best practice. Therefore, the LDC group further invites China to start considering the adoption of self-certification.

4.11.  The LDC group expects a response (preferably in written form) from the PGMs that do not plan to adopt self-certification, stating the rationale for their decision.

5  Sub-Item (f): Cumulation provisions

5.1.  The LDC group identified the following practices to be adopted by PGMs regarding the issue of cumulation:

a._         Products originating from beneficiaries and former beneficiaries of the GSP/GPT should continue to be considered as originating by LDCs for the purpose of cumulation, even when the LDC has graduated or signed an FTA.

b._         PGMs should provide extended cumulation, which allows LDCs to request cumulation with other Members that have signed FTAs with the PGMs.

c._         Preference-Granting Members not adopting such best practices are invited to state the reasons for not adopting these principles and to make written submissions or presentations. 

5.2.  The LDC group shared the draft cumulation study under item 3.A.(iii) in the last CRO meeting.

5.3.  The LDC group and UNCTAD will present the final results of the cumulation study at the November CRO.

5.4.  The LDC group invites PGMs to share their views and practices on cumulation.

6  Sub-Item (G): switzerland's utilization study

6.1.  The LDC group thanks Switzerland for the updates provided in the April CRO concerning its DFQF programme for the LDCs.

6.2.  The LDC group would like to know if the utilization study, which was mentioned in the last CRO, is now available. If yes, the LDC group invites Switzerland to share the study as it provides important information for further trade facilitation, even if it refers to past utilization rates.

6.3.  In this context, the LDC group recalls previous bilateral discussions with Switzerland where low utilization of the Swiss preferences was attributed to goods being transhipped or customs-cleared in the EU before being shipped to Switzerland. The LDC group is still waiting for Switzerland to report to the CRO how it intends to find an appropriate solution to this issue.

7  Sub-Item (H): Notification of non-preferential rules of origin (NPRO)

7.1.  The LDC group notes the encouragement of the Chairperson to make use of the voluntary notification template. The LDC group is interested in further discussing the application of non-preferential rules of origin (_JOB/RO/8/Rev.3) in international trade to better understand the possible implications arising from recent trade developments.

7.2.  Discussion on NPRO should go beyond the process of notification and focus on enhancing understanding of the scope and application of NPRO especially when the LDC and other WTO members exports must comply with NPRO of the importing Members. This would help both economic operators and customs authorities comply more effectively with origin requirements especially considering that some important trading partners of LDC exports, namely the EU have undertaken a significant open review exercise of their rules of origin and the relevance of NPRO in the current trading environment.

7.3.  The LDC group would like to request the Chairperson to consider the insertion of one agenda item at the next CRO during the formal session titled "Discussions and exchange of experiences on the application of non-preferential rules of origin", where WTO and UNCTAD secretariat as well as other relevant organizations and Member States may share initial experiences and lessons learned on NPRO.

7.4.  The insertion of this agenda item underscores the importance of transparency and understanding of NPRO and the need to engage in discussion in the CRO.

7.5.  We encourage Members to make full use of the new notification template, and to contribute actively at the next CRO session under this agenda item as this will provide much-needed clarity, assist economic operators in navigating requirements, and ultimately contribute to facilitating trade, as stated by the LDC group during the meeting with the Chairperson.

8  SUB Item (I): Utilization rates of PGMs

8.1.  As anticipated under the "Utilization of trade preferences" the WTO LDC group may make a new submission at the next CRO in 2026. The WTO LDC group invites PGMs to maintain their notifications up to date.

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