Rules of Origin and Preferential Trade Agreements
Rules of Origin (RoO) are criteria used to determine the national source of a product for trade purposes. In preferential trade agreements, RoO prevent trade deflection — where goods from non-member countries are routed through a member country to gain tariff preferences. The US-Bangladesh deal's requirement that textiles use "US-origin" cotton and fibres to qualify for zero duty is a specific form of RoO.
- Types of RoO: Change in Tariff Classification (CTC), Value Addition/Regional Value Content (RVC), and Specific Process Rules (e.g., yarn-forward rule in textiles)
- The "yarn-forward rule" common in US FTAs (e.g., USMCA/NAFTA, DR-CAFTA) requires that qualifying textile products use yarn produced in member countries — the US-Bangladesh deal's cotton-sourcing requirement is a variant of this principle
- India has RoO provisions in its trade agreements: India-ASEAN FTA, India-UAE CEPA (2022), India-Australia ECTA (2022)
- Concerns about RoO circumvention led India to tighten origin verification in FTAs, particularly after reports of Chinese goods being routed through ASEAN to claim preferential tariffs
- WTO Agreement on Rules of Origin (Annex II) provides guidelines for non-preferential RoO
● Tracked since February 10, 2026 · last seen July 16, 2026 · updates as the daily brief publishes
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