Least developed countries struggle with tariff preferences

Documentation and direct shipment requirements reduce use of tariff preferences by LDCs. 

The impact of product rules of origin on the use of tariff preferences by least developed countries (LDCs) was the focus of discussion at a meeting of the World Trade Organization (WTO) Committee on Rules of Origin last week.

Rules of origin are the criteria used to define where a product is made and are important for implementing other trade policy measures, including preferences in favour of developing countries or LDCs.

A WTO Secretariat paper found that LDCs were often unable to fully use preferences even when their exports were subject to simple origin requirements.

For example, 82% of imports of fruits, vegetables, and plants by preference-granting WTO members from LDCs did not receive any tariff preference, despite being eligible for such treatment. Certain factors, such as certification of origin and/or transportation requirements, could explain under-utilization, the Secretariat noted.

The WTO also looked at what impact direct consignment (also known as direct shipment or direct transport) requirements may be having on the use of tariff preferences by LDCs. Landlocked LDCs were most likely to be affected by direct shipment requirements with 52% of goods from those countries not receiving tariff preferences, despite being eligible. Establishing proof of direct shipment seems to be a costly issue for exporters of landlocked LDCs.

A number of WTO members commented on the two issues and agreed to continue to discuss these matters in the committee to identify specific aspects of these requirements which may need to be relaxed.