Rules of Origin
Rules of Origin define the origin of products and establish whether goods qualify for preferential tariffs or other trade benefits under specific trade agreements.
Rules of Origin help prevent trade circumvention and ensure that trade benefits are granted only to products originating from countries that are party to a specific trade agreement. These rules are particularly relevant in free trade agreements, preferential trade arrangements, and tariff programs, where certain goods can receive preferential treatment (such as reduced or eliminated tariffs) if they meet the origin criteria specified in the trade deal.
Types of Rules of Origin
Wholly Obtained Criterion: Firstly, goods that are exclusively produced in the territory of the party to a preferential trade arrangement, without using any materials from other nations, fall under the category of goods exclusively produced in the territory. This includes plants, minerals, or live animals, among other products.
Substantial Transformation Criterion: Among the rules of origin, this one applies when a product undergoes significant processing or manufacturing in a particular country, changing its essential characteristics.
Value-Added Criterion: Lastly, this is a rule used to evaluate the amount of value that is added to a product in a particular country. It is commonly measured as a percentage of the total ex-factory price of the product. Thus, this criterion helps determine the level of local content or processing that must be present in a product for it to qualify as originating from that specific country in the context of trade agreements or customs regulations.