Rules of Origin under Bilateral and Regional Free Trade Agreements

The Project at A Glance

As part of its export strategy, Panama aims to better utilise tariff preferences under its trade agreements. However, complex and varied rules of origin (RoOs) and limited training hinder their use. To help address this, International Economics delivered training on the RoOs under the Canada-Panama Free Trade Agreement (CPFTA) and Panama’s other trade agreements.

The project was part of the Expert Deployment Mechanism for Trade and Development (EDM) program, funded by GAC and implemented by Cowater International.

What We Found

Panama is a key logistical and financial hub in Central America. However, its exports are concentrated in a few products like agricultural goods, seafood, and minerals. As part of its export development strategy, Panama aims to increase the use of tariff preferences under its more than 20 bilateral and regional trade agreements.

To benefit from preferential tariffs, exports must comply with RoOs, but the associated compliance costs can be burdensome, especially for smaller firms with limited resources. These costs may discourage exporters from using preferences, thereby undermining the effectiveness of trade agreements. Additionally, overlapping RoOs from multiple trade agreements create a “spaghetti bowl” effect, complicating monitoring and enforcement for government authorities. Conducting effective site visits and document verification is also resource-intensive, requiring skilled personnel and infrastructure from government agencies.

To address these challenges, International Economics assisted Panama’s National Customs Authority (ANA) and the Ministry of Trade and Industry (MICI) by providing training to government officials, industry representatives, and academics on interpreting and administering RoOs, under Panama’s key preferential trade agreements.

Our Strategy and Impact

Panama’s lack of specialised training in RoOs has led to the underutilisation of preferential tariffs and the inconsistent application of rules by both government authorities and the private sector. Our Team delivered capacity-building exercises on RoOs under the CPFTA and other trade agreements. The training targeted government officials, industry associations, and academia. For government officials, it covered RoO administration, monitoring, verification procedures, and customs controls. For industry associations, the focus was on disseminating accurate RoO information to small and medium-sized enterprises, including product classification and documentation requirements. For academia, the training helped develop local experts and integrate RoO concepts into curricula. The long-term goal is to increase the use of Panama’s preferential trade agreements, boosting exports, revenue, employment, and contributing to poverty reduction.

Our Core Solutions

The cross-cutting nature of trade is such that it requires a comprehensive, integrated, and inclusive framework. While well-designed trade policies are vital to delivering long-term benefits for economies, so is the need for effective implementation.

At International Economics, we support the public and private sectors in navigating the policy and negotiation landscape regarding international trade. This includes establishing robust monitoring and evaluation framework through sophisticated real-time dashboards and reporting systems to ensure the best outcomes. We provide advocacy services to empower delegations and negotiators to participate effectively in trade negotiations and deliberations and advocate for their countries’ interests and positions.