An Empirical Study on the Characteristic Influences of the Rules of Origin on the Implementation of Preferential Tariffs and Trade Performance

Abstract

Purpose - This study categorizes factors that influence the utilization of preferential tariffs based on the characteristics of rules of origin (RoO) and identifies and analyzes the influence of these characteristics on the utilization of preferential tariffs and the trade performance of companies. Design/methodology - In this study, we categorized factors that have an influence on the utilization of preferential tariffs based on the characteristics of RoO and investigated and tested the influence of these characteristics on the utilization of preferential tariffs and the trade performance of companies. For empirical analysis, we categorized the characteristics of RoO into restrictiveness, complexity, and uncertainty. We then developed a research model and formulated hypotheses based on previous studies, and tested the hypotheses using statistical software-(SPSS 25.0 and AMOS 18.0.) Findings - Previous studies suggested that each characteristic of RoO is determined by unique features of a Regional Trade Agreement (RTA). This study conducted an empirical analysis on the influence of the characteristics of RoO on the utilization of preferential tariffs and trade performance. The results confirmed that, overall, the characteristics of preferential rules of origin (PRoO) are related to and influence Korean companies’ utilization of preferential tariffs and trade performance. As for the degree of the influence, the characteristics were in the order of uncertainty> restrictiveness> com-plexity. Nevertheless, complexity turned out not to have an influence large enough to change a company’s decision on the utilization of preferential tariffs. Based on these results, this study identified unique features of PRoO and related problems for Korean companies that want to utilize preferential tariffs and suggested countermeasures for their effective utilization of preferential tariffs in the future. Originality/value - Companies that want to use preferential tariffs in international trade have to satisfy PRoO. The issue of origin can be regarded as an essential part of an RTA and RoO, are a crucial criterion in using preferential tariffs. The rules are requirements to claim benefits of preferential trade agreements and are the primary reasons companies have trouble in utilizing preferential tariffs. In this sense, this study categorized the characteristics of RoO, which are a key part of an RTA, and surveyed working-level professionals in charge of international trade at Korean companies to investigate the relationship between these characteristics and the utilizations of preferential tariffs and trade performance of the companies.