Understanding the Legal Bases for Preference Management (EU)
Analyzing Preference Determination
Managing Long-Term Supplier's Declarations
Managing Preference Data for Product Identifiers

Mapping Rules of Origin

Objective

After completing this lesson, you will be able to map rules of origin.

Rules of the Regional Convention - First Version

The rules of origin defined in Appendix I to the Regional Convention as published on 26 February 2013 represent the intersection of the rules contained in the bilateral protocols to the agreements preceding the Regional Convention. Most of the preferential agreements with countries outside the PEM area contain similar rule sets.

Example of Rules of Origin

HS headingDescription of productWorking or processing, carried out on non-originating materials, which confers originating status
ex 8413Rotary positive displacement pumps

Manufacture:

  • from materials of any heading, except that of the product, and
  • in which the value of all the materials used does not exceed 40% of the ex-works price of the product
Manufacture in which the value of all the materials used does not exceed 25% of the ex-works price of the product

These rules are interpreted in the video Rules of Origin in the First Version of the Regional Convention.

Revised Rules of the Regional Convention

In comparison with the rules of the initial version of the Regional Convention, or with the rules of other preferential agreements of the EU, the revised rules of the Regional Convention in the version as amended on 7 December 2023 are considerably simplified.

Moreover, the size of the list of working and processing has been reduced approximately by half. This reduction is mainly due to the removal of rules for individual headings. There is, for example, no more rule for heading 8413. Therefore, the rules for chapter 84 apply to all products classified under heading 8413.

Examples of the Revised Rules of Origin

HeadingDescription of productWorking or processing, carried out on non-originating materials, which confers originating status
ex Chapter 84Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof; except for:

Manufacture from materials of any heading, except that of the product

or

Manufacture in which the value of all the materials used does not exceed 50 % of the ex-works price of the product

Rules of the Agreements with Japan and the United Kingdom

The rules of origin of the Agreement between the EU and Japan for an Economic Partnership (EPA) are contained in Annex 3-B. In contrast to most of the other preferential agreements of the EU including the Regional Convention, the EPA uses abbreviations instead of full texts to define rules of origin. These abbreviations are listed in the introductory notes to the rules of origin.

  • CTH: change in heading
  • MaxNOM: maximum value of non-originating materials
  • RVC: (minimum) regional value content

Example from the Agreement with Japan

Column 1

Harmonized System classification (2017) including specific description

Column 2

Product-specific rule of origin

Chapter 84Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
(…)(…)
84.09-84.20

CTH;

MaxNOM 50 % (EXW); or

RVC 55 % (FOB).

The EPA introduces the minimum value of originating materials ("regional value") as an alternative to the rules already known from other preferential agreements. This value is expressed as a percentage of the free on board (FOB) price of the product.

The rules of the Trade and Cooperation Agreement (TCA) with the United Kingdom are similar to the rules of the EPA insofar as they consist of abbreviations instead of full texts.

Example from the Agreement with the United Kingdom

Column 1

Harmonized System classification (2017) including specific description

Column 2

Product-specific rule of origin

Chapter 84Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof
(…)(…)
8413.11-8415.10

CTSH;

MaxNOM 50 % (EXW).

Unlike most of the other preferential agreements of the EU, the rules in the EPA and in the TCA frequently refer to subheadings, like in the example from the agreement with the United Kingdom. CTSH is the abbreviation of "change in subheading" used in both the EPA and the TCA.

Rules of the USMCA

The product-specific rules of origin of the USMCA are contained in Annex 4-B to chapter 2.

Similar to the agreements of the EU, the USMCA frequently requires a change of heading or subheading for a product to obtain originating status. Some of its rules of origin even stipulate a change of tariff item. As the last two digits of a tariff item differ in the three signatories, the text of the agreement uses lowercase letters as placeholders.

Note

A rule applicable to a tariff item takes precedence over a rule applicable to the heading or subheading "which is parent to that tariff item".

Rules of Origin of the USMCA (Examples)

8450.90
8450.90.aaA change to tariff item 8450.90.aa from any other tariff item.
8450.90.bbA change to tariff item 8450.90.bb from any other tariff item.
8450.90A change to subheading 8450.90 from any other heading.

A table in Section C of Annex 4-B shows the actual tariff items specific to the signatories.

Extract from Section C of Annex 4-B to Chapter 2 of the USMCA

TARIFF ITEMCANADAUSAMEXICODESCRIPTION
8450.90.aa8450.90.108450.90.208450.90.01Tubs and tub assemblies
8450.90.bb8450.90.208450.90.408450.90.02Furniture designed to receive the goods of subheading 8450.11 through 8450.20

Many rules of the USMCA require a change of heading or subheading in combination with a minimum regional value content. Rules of this type are usually alternatives to rules requiring a mere change of heading or subheading.

Example of Rules of Origin of the USMCA

8413.11-8413.82A change to subheading 8413.11 through 8413.82 from any other heading; or
A change to subheading 8413.11 through 8413.82 from subheading 8413.91 through 8413.92, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:

(a) 60 percent where the transaction value method is used; or

(b) 50 percent where the net cost method is used.

The USMCA provides for two methods of calculating the regional value content of a product:

  • Transaction value method
  • Net cost method

You will learn more about these methods in the lesson Interpreting the Log of Preference Determination.

How to Map Rules of Origin in SAP GTS

The manual mapping of rules of origin is explained in the learning journey Configuring the Essential Functions of SAP Global Trade Services.

Learning
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