RULES OF ORIGIN TRAINING MODULES

PART A. TUTORIAL

Module 7 - Annex of Product Specific Rules

Table of Contents

Module 7 - Annex of Product Specific Rules

This module comprises five topics. It explains additional Rules of Origin (ROO) used by the ASEAN-
Australia-New Zealand Free Trade Area (AANZFTA), namely those Rules that are found within the
Annex of Product Specific Rules (PSR Annex). The different variations of RVC, CTC and Specific
Process of Production Rules that are used in the Annex are explained.

• Topic 1 explains how the PSR Annex fits within the legal framework of AANZFTA.
• Topic 2 explains how to read the PSR Annex.
• Topic 3 explains how Regional Value Content (RVC) ROO is used within the PSR Annex.
• Topic 4 explains how the Change in Tariff Classification (CTC) ROO is used within the PSR
Annex.
• Topic 5 provides detailed examples of the different types of ROO used in the PSR Annex.

• Topic 7 -1: The Annex of Product Specific Rules

As discussed in earlier modules, for a good to be considered to be an AANZFTA originating good it

must:

• be wholly produced or obtained in a Party; or

• be produced in a Party exclusively from originating materials from one or more of the
Parties; or
• meet the requirement of substantial transformation as identified in Annex 2 to Chapter 3
(Rules of Origin) or in the ‘General Rule’ which is set out in Article 4.1 of Chapter 3 (Rules of
Origin).

These requirements are detailed in Article 2 (Originating Goods) to Chapter 3 (Rules of Origin).

Article 2 - Originating Goods

1. For the purposes of this Chapter, a good shall be treated as an originating good if it is either:

(a) wholly produced or obtained in a Party as provided in Article 3 (Goods Wholly Produced or
Obtained);
(b) not wholly produced or obtained in a Party provided that the good has satisfied the
requirements of Article 4 (Goods Not Wholly Produced or Obtained); or
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 (c) produced in a Party exclusively from originating materials from one or more of the Parties,

and meets all other applicable requirements of this Chapter.

• Topic 7 -2: How to read the PSR Annex

Headnote to the Annex

1. For the purpose of interpreting the Product Specific Rules set forth in this Annex:
(a) chapter means the first two digits of the tariff classification number under the HS Code;
(b) heading means the first four digits of the tariff classification number under the HS Code;
and
(c) subheading means the first six digits of the tariff classification number under the HS
Code.

2. This Annex is set out as follows:

(a) Column 1 – Tariff Heading (4-digit)
(b) Column 2 – Tariff Sub-Heading (6-digit)
(c) Column 3 – Pro duct Description
(d) Column 4 – Applicable Product-Specific Rule(s) of Origin (Origin Conferring Criteria).

3. Where a tariff heading or subheading is subject to alternative Product Specific Rules, it shall
be sufficient to comply with one of the rules.

4. Where the Product Specific Rule requires only a regional value content, the final process of
production must be performed within a Party.

5. A requirement of a change in tariff classification applies only to non-originating materials.

6. Where the change in tariff classification rule expressly excludes a change from other tariff
classifications, the exclusion applies only to non-originating materials.

7. For the purposes of column 4 of this Annex:

∗ “WO” means that the good must be wholly produced or obtained in accordance with
Article 2.1(a) (Originating Goods) of Chapter 3 (Rules of Origin);
∗ “RVC(XX)” means that the good must have a regional value content of not less than XX
per cent as calculated under Article 5 (Calculation of Regional Value Content) of Chapter
3 (Rules of Origin);
∗ “CC” means that all non-originating materials used in the production of the good have
undergone a change in tariff classification at the 2-digit level;
∗ “CTH” means that all non-originating materials used in the production of the good have
undergone a change in tariff classification at the 4-digit level;
∗ “CTSH” means that all non-originating materials used in the production of the good have
undergone a change in tariff classification at the 6-digit level.

8. Chapter notes within this Annex apply to all headings or subheadings within the indicated
chapter unless there exists a specific exclusion.

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The schedule of PSR ROO for the AANZFTA is contained in Annex 2 of Chapter 3 (Rules of Origin).
The Annex commences with the above ‘Headnotes’ which explain how to read the Annex.

In the following examples:

• Column 1 sets out the HS heading reference of the good that has been produced.
• Column 2 lists the HS subheading reference of the good.
• Column 3 sets out the HS description of goods covered by the heading or subheading
referred to in columns 1 or 2.
• Column 4 sets out the PSR for the goods. This column specifies the RVC requirement
and/or the CTC ROO that non-originating materials must undergo i.e. the required HS shift
to a different chapter, heading or subheading. In the case of AANZFTA, column 4 may also
require the goods to be wholly obtained.

Column1 Column 2 Column 3 Column 4

Tariff Heading Tariff Sub-Heading Product Description Product-Specific Rule
CHAPTER 1 LIVE ANIMALS
0101 Live horses, asses, mules and hinnies:
0101 0101.10 - Pure-bred breeding animals WO
0101 0101.90 - Other WO

Headnote 3 to the Annex states that where a HS heading or subheading is subject to alternative
PSRs, it shall be sufficient to comply with one of the ROO.

• If more than one ROO is specified, and the word “or” is included in the PSR (as below), then
either of the ROO can be satisfied for the good to be originating.

Column1 Column 2 Column 3 Column 4

Tariff Heading Tariff Sub-Heading Product Description Product-Specific Rule
1108 Starches; inulin:
- Starches: wheat
1108 1108.11 RVC(40) or CC
starch
- Starches: maize
1108 1108.12 RVC(40) or CC
(corn) starch
- Starches: potato
1108 1108.13 RVC(40) or CC
starch

• if the symbol “+” is included in the PSR (as below), then this is a combination ROO and both
of the ROO must be satisfied for the good to be originating.

Column1 Column 2 Column 3 Column 4

Tariff Tariff Sub- Product-Specific
Product Description
Heading Heading Rule
- Other parts and accessories of bodies (including cabs);
8708 8708.29 RVC(40) + CTSH
safety seat belts

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 • if the word “provided” is included in the PSR (as below), then both of the ROO must be
satisfied for the good to be originating.

Column1 Column 2 Column 3 Column 4

Tariff Tariff Sub-
Product Description Product-Specific Rule
Heading Heading
RVC(40) provided that the good is cut or knit
6111 6111.90 - Of other textile materials to shape and assembled in the territory of
one or more of the parties or CC

It is important to remember that if any ROO is not satisfied, the good is a non-originating good. Non-
originating goods are not eligible for preferential duty rates.

• Topic 7 -3: Regional Value Content in the PSR Annex

The formulas used for RVC calculations were explained in detail in Module 4.

There are two approaches that can be used to calculate RVC, the “Direct Formula” calculation and
the “Indirect/Build-Down Formula” calculation. To meet the ROO the required RVC must be met as
a result of the final process of production being performed within the AANZFTA Party.

The two formulas are reprinted below to refresh your knowledge.

Indirect/Build-Down Method

The Indirect/Build-Down Method, the RVC calculation determines the percentage of non-originating
materials used in the production of a good.

FOB – Value of Non-Originating Materials

RVC = x 100 %
FOB
where

RVC is the Regional Value Content, expressed as a percentage

FOB is the Free on Board value of the goods, inclusive of the cost of transport to the port or site of
final shipment abroad

Value of Non-Originating Materials (VNM) is the Cost Insurance Freight (CIF) value at the time of
importation or the earliest ascertained price paid for all
non-originating materials, parts or produce that are
acquired by the producer in the production of the good.
Non-originating materials include materials of
undetermined origin but do not include a material that is
self-produced.

Direct Method
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Under the Direct Method, the RVC calculation determines the RVC of goods using the value of
originating materials used in the production of the good as the basis for the calculation.

AANZFTA
Material Labor Overhead Other
+ + + Profit +
Cost Cost Cost Cost
RVC= x 100%
FOB
where

RVC is the Regional Value Content, expressed as a percentage

FOB is the Free on Board value of the goods, inclusive of the cost of transport to the port
or site of final shipment abroad

Material Cost is the value of originating materials, parts or produce that are acquired or self-
produced by the producer in the production of the good

Labour Cost includes wages, remuneration and other employee benefits

Overhead Cost is the total overhead expense. In business, overhead or overhead expense refer to
an ongoing expense of operating a business; it is also known as an "operating expense". Examples
include rent, gas and electricity.

Other Costs are the costs incurred in placing the good in the ship or other means of transport for
export including, but not limited to, domestic transport costs, storage and warehousing, port
handling, brokerage fees and service charges.

The methodology and formulas for determining the RVC are the same as previously explained in
Module 4. The differences between the ‘General Rule’ RVC(40) and the RVC ROO that are found in
the PSR Annex are:

• the required percentage is not always 40 per cent; it may vary from this figure; and
• the RVC ROO of the PSR may be used in addition to or in substitution to other ROO (this is
explained in Topic 5).

• Topic 7 -4: Change in Tariff Classification in the PSR Annex

In Module 5 we examined the CTC ROO and in particular the application of this ROO in relation to
the AANZFTA ‘General Rule’ of Change in Tariff Heading (CTH).

In this module we examine the CTC ROO used in the PSR Annex. We will examine the Change in
Tariff Chapter (CC) and Change in Tariff Subheading (CTSH) ROO. You will also be reminded of
CTH.

The CTC concept used in the PSR Annex that all non-originating materials used in the production of
a good must be classified to a different level within the HS than where the final good is classified is
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the same as we discussed in Module 5. The only difference is the HS level at which the change is
required, that is, Chapter level, Heading level or Subheading level.

If you are unsure of how CTC works it is recommended that you review Module 5 before proceeding
with this Module.

HS classification

If we examine the HS classification 0101.10 we note that:

• chapters of the HS are at the two-digit level (01);

• headings are at the four-digit level (0101); and
• subheadings are at the six-digit level (0101.10).

Change in Tariff Chapter

Within CC, the two digits of the HS code represent the chapter. Since this ROO requires a change
in chapter, the non-originating materials must come from a different chapter to the final good.

Change in Tariff Chapter

A CTC ROO at the chapter level ROO requires that all non-originating materials used in the
production of a good must be classified in a different chapter to the HS than the final good into
which they are incorporated.

Example

1. Question:

Duck meat (HS 0207.32) is produced in Singapore using live ducks (HS 0105.99) imported from
China into Singapore.

The PSR for subheading 0207.32 is “CC”.

Answer:

The live ducks are from a different chapter (01) to the duck meat (02).

Therefore the rule of ‘change of chapter’ has been met and the duck meat is an originating good.

Change in Tariff Heading

Within CTH, the four digits of the HS code represent the heading. Since the ROO requires a change
in tariff heading, the non-originating materials therefore must come from a different heading to the
final good. Under CTH, the non-originating materials can come from the same chapter as the final
good but not from the same heading.

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 CTC- Change in heading

The CTC at the heading level ROO requires that all non-originating materials used in the
production of a good have a different classification under the HS at the heading level to the final
good into which they are incorporated.

Example
2. Question:

Oak windows (HS 4418.10) are produced in Thailand using oak timber (HS 4403.91) imported
from America.

The PSR for subheading 4418.10 is “CTSH”.

Answer:

The non-originating oak timber is from a different heading (4403) to the oak windows (4418).

Therefore the rule of ‘change of heading’ has been met and the oak windows are an originating
good.

Change in Tariff Subheading

Within CTSH, the six digits of this HS code represent the subheading. Since the ROO requires a
change in tariff subheading, the non-originating materials therefore must come from a different
subheading to the final good. Now, the non-originating materials can come from the same chapter
or heading as the final good but not from the same subheading. Within the AANZFTA PSR Annex
there are no goods where there is only an option of a CTSH ROO. CTSH rules are usually used as
an addition to a RVC ROO (e.g.: RVC (35) + CTSH) or as an alternative to other rules (e.g.
RVC(40) or CTSH).

Change in Tariff Subheading

The CTC at the subheading level ROO requires that all non-originating materials used in the
production of a good have a different classification under the HS at the subheading level than
the final good into which they are incorporated.

Example
3. Question:

An electroplating machine (HS 8543.30) is produced in Singapore using non-originating

electrical machines (HS 8543.70) imported from China.

The PSR for subheading 8543.30 is “RVC(40) or CTSH”.

Answer:

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The non-originating materials are from a different subheading (HS 8543.70) to the final good (HS
8543.30).

Therefore the rule of change of subheading has been met and the electroplating machine is an
originating good.

• Topic 7 -5: Different type of ROO in the PSR Annex

ROO can be used:

• the solitary ROO used to determine origin; or

• used in combination with a RVC, CTC or Specific Process of Production ROO; or
• used as an alternative to the RVC, CTC or Specific Process of Production ROO; or
• in some cases the used as both an alternative and combination ROO, i.e., as an alternative
to ROO whereby a RVC ROO is used in addition to a different CTC ROO.

All the types of ROO will now be explained.

Solitary ROO

Solitary RVC ROO

In AANZFTA a PSR that contains a solitary RVC ROO is only used for certain automotive goods.
The RVC is generally used by itself in circumstances where the materials used to produce the good
are classified to the same HS classification as the good. Example of a solitary RVC ROO

Column1 Column 2 Column 3 Column 4

Tariff Heading Tariff Sub-Heading Product Description Product-Specific Rule
8701 8701.20 - Road tractors for semitrailers RVC(40)

RVC(40) means that the good must have a RVC of not less than 40 per cent based on the Direct or
Indirect/Build-Down formula to be originating.

Example
4. Question:

A road tractor for a semi-trailer (HS 8701.20) is produced in Thailand and sold for an FOB value
of $100,000. Non-originating engines valued at $29,000 are imported from Japan.

All other materials are produced in Thailand at a cost of $36,000 and are AANZFTA-originating.
Labour is $20,000, overheads $5,000 and profit $10,000.

The PSR for subheading 8701.20 is “RVC(40)“.

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Is the road tractor originating?

Answer:

Indirect/Build-Down method

FOB – Value of Non-Originating Materials

RVC = x 100%
FOB

$100.000 – $29.000 $71.000

RVC = = x 100 % = 71%
$100.000 $100.000

Direct method

AANZFTA
Material Labor Overhead Other
+ + + Profit +
Cost Cost Cost Cost
RVC= x 100%
FOB

$36.000 + $20.000 + $5.000 + $10.000 $71.000

RVC= x 100% = = 71%
$100.000 $100.000

As the RVC determined is greater than 40 per cent, the road tractor has met the ROO and is
originating.

Solitary CTC Rule

In AANZFTA a PSR that contains a solitary CTC ROO is mainly used within the textile chapters
(chapter 50 to 59). The solitary CTC is used, where, due to the nature of the goods being produced,
it has been decided that the CTC ROO is best placed to demonstrate that substantial transformation
has occurred. Example of a solitary CTC ROO

Column1 Column 2 Column 3 Column 4

Tariff Tariff Sub- Product-
Product Description
Heading Heading Specific Rule
Single yarn, of uncombed fibres: measuring
5205 5205.11 714.29 decitex or more (not exceeding 14 CTH
metric number)

Example
5. Question:

Cotton yarn comprising single yarn of uncombed fibres (HS 5205.11) is produced in Singapore
using uncombed cotton (HS 5201.00) imported from China.

The PSR for subheading 5205.11 is “CTH” Is the cotton yarn originating?

Answer:
9
 Uncombed cottons Cotton
from China (HS yarn (HS
5201.00) 5205.11)

The non-originating materials are from a different heading (5201) to the final good (5205).

Therefore the ROO of Change of Tariff Heading has been met and the cotton yarn is an
originating good.

Solitary Specific Process of Production ROO

In Module 6 (Specific Process of Production) ROO that are associated with the methodology used
to produce goods were discussed. Solitary Specific Process of Production ROO are mainly
associated with waste and scrap products. Example of a solitary Specific Process of Production
ROO

Column1 Column 2 Column 3 Column 4

Tariff Tariff Sub-
Product Description Product-Specific Rule
Heading Heading
Waste, parings and scrap of Origin shall be conferred to a
rubber (other than hard rubber) good of this subheading that is
4004 4004.00
and powders and granules derived from production or
obtained therefrom. consumption in a Party

Example
6. Question:

A company in Malaysia collects waste rubber products (HS 4004.00) left over from production of
motor vehicle tyres.

The waste rubber is granulated by the company in Malaysia.

The PSR for subheading 4004.00 is “Origin shall be conferred to a good of this subheading that
is derived from production or consumption in a Party”.

Is the waste rubber originating?

Answer:

10
 AANZFTA
Parties

Waste
rubber
collected
and
granulated in
Malaysia

The waste rubber was derived from production in Malaysia, an AANZFTA Party.

Therefore the waste rubber is originating.

Combination ROO

Combined RVC and CTC ROO

Where the RVC is combined with the CTC ROO, both must be met for the good to be originating.
The combination of an RVC and a CTC is used when in addition to the required CTC a certain level
of value-added is also required to determine origin.

Example of a combined RVC and CTC ROO

Tariff Tariff Sub-

Product Description Product-Specific Rule
Heading Heading
- Other parts and accessories:
8708 8708.99 RVC(40) + CTSH
other
RVC(40) + CTSH means that the goods must meet a RVC of not less than 40 per cent based on the
Direct or Indirect/Build-Down formula and all non-originating materials used in the production of the
good must undergo a CTC at the six digit level, i.e. a change to subheading 8708.99 from any other
subheading.

Example
7. Question:

Parts for motor vehicle (HS 8708.99) produced in Malaysia are sold for $100.

The steel to make the parts (HS 7211.13) is valued at $38 and is imported from China.

The other materials were produced in Indonesia and Malaysia and are valued at $37.

Labour is $10, overheads $5 and profit $10.

The PSR for subheading 8708.99 is “RVC(40) + CTSH”.

Are the motor vehicle parts originating?

Answer:

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 Motor vehicle
Steel from China
parts
(HS 7211.13)
(HS 8708.99)

RVC - Indirect/Build-Down method

FOB – Value of Non-Originating Materials

RVC = x 100 %
FOB

$100 – $38 $62

RVC = = = 0.62 x 100 % = 62%
$100 $100

RVC – Direct method

AANZFTA
Material Labor Overhead Other
+ + + Profit +
Cost Cost Cost Cost
RVC= x 100%
FOB

$37 + $10 + $5 + $10 $62

RVC= x 100% = = 0.62 x 100% = 71%
$200 $200

Therefore the motor vehicle parts meet the RVC ROO using either RVC formula.

CTSH

The non-originating materials (HS 7211.13) must come from a different subheading than that of
the finished parts (HS 8708.99), i.e. the 6-digit HS codes must be different.

Therefore the motor vehicle parts meet the CTC ROO.

Conclusion

As the rule is RVC(40) + CTSH, both elements of the rule must be met for the parts to be
originating.

As this occurs, the motor vehicle parts are originating.

Combined RVC and Specific Process of Production ROO

Where the RVC is combined with the Specific Process of Production ROO, both requirements must
be met for the good to be originating. An RVC and a Specific Process of Production ROO are
combined when it is considered that in addition to the required Specific Process of Production a
certain level of value-added is also required to determine origin.

Example of a combined RVC and Specific Process of Production ROO

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Column1 Column 2 Column 3 Column 4
Tariff Tariff Sub-
Product Description Product-Specific Rule
Heading Heading
-Other garments, RVC(40) provided that the good is cut or
6211 6211.43 women’s or girls’: of knit to shape and assembled in the territory
man-made fibres of one or more of the parties or CC
This requirement of “RVC(40) provided that the good is cut or knit to shape and assembled in the
territory of one or more of the parties” means that the goods must achieve a RVC of not less than
40 per cent based on the Direct or Indirect/Build- Down formula and all non-originating materials
used in the production of the good must have been cut or knit to shape and assembled in the
territory of one or more of the Parties.

Example
8. Question:

Tracksuits (FOB $10, HS 6112.43 $10, HS 6112.43) are made in Laos from synthetic fabric ($5,
HS 5407.82) imported from China.

Originating cotton thread and elastic are imported from Malaysia.

The factory in Laos cuts the fabric and sews the parts together.

The PSR for subheading 6112.43 is “RVC(40) provided that the good is cut or knit to shape and
assembled in the territory of one or more of the parties or CC”.

Are the tracksuits originating?

Answer:

The manufacturer has chosen to use the combination RVC and specific process of production
rule as the manufacturer knows the good meets the RVC(40) ROO.

The good meets the RVC(40) ROO (10 – 5) / 10 x 100 = 50%.

Originating cotton and Synthetic fabric from
elastic from Malaysia China (HS 8407.82)

Synthetic
tracksuits
(FOB $10,
HS 6211.43

Additionally, as the tracksuits were cut and assembled in Laos they meet the Specific Process of
Production ROO.

The tracksuits are therefore originating goods.

Combined CTC and Specific Process of Production ROO

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Where the CTC is combined with the Specific Process of Production ROO, both must be met for the
good to be originating. The combination of the CTC and a Specific Process of Production ROO is
used when in addition to the required Specific Process of Production a certain level of tariff shift is
also required to determine origin.

Example of a combined RVC and CTC ROO

Column1 Column 2 Column 3 Column 4

Tariff Tariff Sub- Product
Product-Specific Rule
Heading Heading Description
CC provided that where the starting material is
- Electric
6301 6301.10 fabric, the fabric is raw or unbleached fabric and fully
blankets
finished in the territory of one or more of the parties
This ROO means that to be originating the good must meet the CC ROO (the CTC at the chapter
level (two-digit level)) and, if the starting material is fabric, it must raw or unbleached fabric and be
fully finished in the territory of one or more of the Parties.

Example
9. Question:

Electric blankets (HS 6301.10) are made in Viet Nam from unbleached wool fabric (HS 5111.11)
and electrical wiring (HS 8544.11) imported from China.

The factory in Viet Nam fully finishes the fabric before using it to make the electric blankets.

The PSR for subheading 6301.10 is “CC provided that where the starting material is fabric, the
fabric is raw or unbleached fabric and fully finished in the territory of one or more of the parties”.

Are the electric blankets originating?

Answer:

Unbleached wool
fabric from China Electrical wiring from
(HS 5111.11) China (HS 8455.11

Electric
blanket (HS
6301.10)

The fabric was fully finished in Viet Nam and the non-originating materials are from different HS
chapters to the final good (Chapters 51 and 85 compared to Chapter 63).

Therefore the CC ROO and the Specific Process of Production ROO have both been met.

The electric blankets are originating goods.

Alternative Option ROO

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Alternative Option of an RVC or CTC ROO

With this ROO, a manufacturer/exporter can choose to obtain origin by fulfilling either the RVC or
the CTC ROO. The goods do not have to satisfy both ROO. The choice of which ROO to fulfil is at
the discretion of the producer. The producer can make an assessment based on their current
practices and the type of ROO best suited to their production processes

Example of a PSR that provides the option of either CTC or RVC ROO

Column1 Column 2 Column 3 Column 4

Tariff Tariff Sub- Product-Specific
Product Description
Heading Heading Rule
8412.39 Pneumatic power engines and
8412 8412.39 RVC(40) or CTSH
motors: other
The above ROO is met when either

1. the RVC is achieved (the RVC content is not less than 40 per cent, based on the Direct or
Indirect/Build-Down formula); or
2. a CTSH (all non-originating materials used in the production of the good have undergone a
CTC at the six digit level, i.e. a change to subheading 8412.39 from any other subheading)
has be realised.

NOTE:

Alternative ROO use the word OR to separate the different alternatives provided to a
manufacturer/exporter, remembering that only one of the alternatives needs to be met to confer
origin;

while

Combination ROO use a + or the word provided to show that the rule is one “two part” or combined
ROO and all parts of the ROO must be met to confer origin.

Example
10. Question:

Pneumatic engines (FOB $100, HS 8412.39) are made in Cambodia from parts for engines
($20, HS 8412.90) and steel ($50, HS 7211.13) imported from China.

The PSR for subheading 8412.39 is “RVC(40) or CTSH.

Are the pneumatic engines originating?

Answer:

The good fail to meet the RVC(40) ROO as the determined percentage is only 30 per cent (100
– (20+50)) / 100 x 100 = 30%.

As the ROO is met be meeting either the RVC(40) or the CTSH ROO having failed to meet the
RVC(40) ROO the pneumatic engines can still be originating if they meet the CTSH ROO.

The non-originating materials are from different HS subheadings to the final good (subheadings
15
8412.90 and 7211.13 compared to subheading 8412.39).

Therefore the CTSH ROO has been met.

The pneumatic engines are originating goods

.
Parts for engine Steel from China
from China ($20, ($50, HS
HS 8412.90) 7211.13)

Pneumatic
engines
(FOB $100,
HS 8412.39)

11. Question:

Concrete pumps (HS 8413.40) produced in Indonesia are sold for $50,000.

Engines valued at $20,000 (HS8408.20) are imported from Japan and pumps (HS 8481.40)
valued at $15,000 are imported from USA.

All other materials are produced in Indonesia at a cost of $5,000 and are AANZFTA-originating.
Labour is $5,000, overheads $1,000 and profit $4,000.

The ROO for subheading 8413.40 is “RVC(40) or CTSH”.

Are the concrete pumps originating?

Answer:

RVC - Indirect/Build-Down method

FOB – Value of Non-Originating Materials

RVC = x 100 %
FOB

$50.000 - ($20.000 + $15.000) $15.000

RVC= = x 100% = 30%
$50.000 $50.000

RVC – Direct method

AANZFTA
Material Labor Overhead Other
+ + + Profit +
Cost Cost Cost Cost
RVC= x 100%
FOB

$5.000 + $5.000 + $1.000 + $4.000 $15.000

RVC= = x 100% = 30%
$50.000 $50.000

Therefore the concrete pumps do not meet the RVC ROO.

16
CTSH
The non-originating materials (HS 8408.20 and HS 8481.40) must come from a different sub-
heading than that of the concrete pump (HS 8413.40), i.e. the 6-digit HS codes must be
different.

Therefore the concrete pumps do meet the CTC ROO.

Conclusion
As the ROO is RVC(40) or CTSH only one of the optional ROO has to be met for the concrete
pump to be originating. In this instance the CTC ROO is met.

Therefore the concrete pumps are originating.

Alternative Option of an RVC or a CTC ROO or a different level CTC ROO that is combined with a
RVC ROO

With this type of ROO, manufacturers/exporters can choose to obtain origin by either fulfilling the
ROO of an RVC or a CTC ROO, or the ROO of a different level CTC that is combined with an RVC
ROO. If the different level CTC is chosen then both the CTC and the RVC must be met to obtain
origin. The choice of which ROO to fulfil is left to the manufacturers/exporters. Having a different
level HS shift using the CTC ROO for certain products combined with a RVC ROO ensures that the
required amount of transformation of the input materials has taken place.

Below is an example of a ROO that provides the option of either a RVC or a CTC or a different CTC
with the addition of a RVC.

Column1 Column 2 Column 3 Column 4

Tariff Tariff Sub-
Product Description Product-Specific Rule
Heading Heading
Cooking appliances and plate
RVC(40) or CTH or
7321 7321.11 warmers: for gas fuel or for both
RVC(35) + CTSH
gas and other fuels
This ROO means that origin can be obtained by:

• an RVC(40) (a regional value content of not less than 40 per cent based on the Direct or
Indirect/Build-Down formula); or
• a CTH (all non-originating materials used in the production of the good have undergone a
change in HS at the four digit level, i.e. a change to heading 7311 from any other heading);
or
• an RVC of not less than 35 per cent based on the Direct or Indirect/Build-Down formula and
all non-originating materials used in the production of the good have undergone a change in
HS at the six-digit level, i.e. a change to subheading 7321.11 from any other subheading.

Example
12. Question:

Gas stoves (HS 7321.11) are produced in Cambodia and sold for $100.

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The PSR for subheading 7321.11 is “RVC(40) or CTH or RVC(35) + CTSH”.

Burner rings (HS 7321.90) valued at $64 are imported from China.

Other parts (HS 7321.90) are valued at $14 and were produced in Indonesia and are AANZFTA-
originating.

Labour is $10, overhead is $2 and profit is $10.

Are the gas stoves originating?

Answer:

RVC(40) ROO

RVC - Indirect/Build-Down method

FOB – Value of Non-Originating Materials

RVC = x 100 %
FOB

$100 – $64
RVC = x 100 % = 36%
$100

RVC – Direct method

AANZFTA
Material Labor Overhead Other
+ + + Profit +
Cost Cost Cost Cost
RVC= x 100%
FOB

$14 + $10 + $2 + $10 $36

RVC= = x 100% = 36%
$100 $100

As 36 per cent is less than the required 40 per cent the good does not meet the solitary RVC
ROO

CTH ROO

The non-originating burner rings (HS 7321.90) must come from a different heading than that of
the stove (HS 7321.11), i.e. the four-digit HS codes must be different. As they come from the
same heading (HS 7321) the good does not meet the CTC ROO. The gas stoves are therefore
originating because they meet the RVC(35) + CTSH ROO.

Combined RVC + CTSH ROO

We have already calculated that the RVC is 36 per cent. Therefore the RVC component of this
ROO has been met as 36 per cent is greater than the required 35 per cent. However, to be
originating the CTSH ROO must also be met. The non-originating burner rings (HS 7321.90)
must come from a different subheading than that of the stove (HS 7321.11), i.e. the six-digit HS
codes must be different. As they come from a different subheading the CTSH part of the rule has
been met.
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Conclusion

As the RVC for the stove is 36 per cent the RVC(40) ROO has not been met. As the non-
originating materials are from the same heading as the stoves (HS 7311) the CTH ROO has not
been met. However, as the ROO provides a choice of ROO the stove can still be considered
against the third option of RVC(35) + CTSH. As the RVC is 36 per cent its meets the first part of
the ROO and as the materials are from a different subheading (HS 7321.90 compared to HS
7321.11) its meets the second part of the ROO. Both parts of the combination ROO have been
met. The good has therefore met the ROO of this PSR and is originating.

Burner rings Parts from

from China ($64, Indonesia ($14,
HS 7321.90) HS 7321.90)

Gas stoves
(FOB $100,
HS 7321.11)

13. Question:

Table knives (HS 8211.91) produced in Singapore are sold for $10.00.

Metal handles (HS 8211.95) valued at $5.60 are imported from Japan.

The blades (HS 8211.94) for the knives are valued at $3.75 and were produced in Indonesia and
are AANZFTA-originating.

Total costs and profit are $0.65.

The PSR for subheading 8211.91 is “RVC(40) or CC”.

Are the table knives originating?

Answer:

RVC - Indirect/Build-Down method

FOB – Value of Non-Originating Materials

RVC = x 100 %
FOB

$10,00 – $5,60 $4,40

RVC = = x 100 % = 44%
$10,00 $10,00
RVC – Direct method

AANZFTA
Material Labor Overhead Other
+ + + Profit +
Cost Cost Cost Cost
RVC= x 100%
FOB

RVC= $3,75 + $0.65 = $4,40 x 100% = 44%

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 $10,00 $10,00

Therefore the final good meets the RVC ROO.

CC

The non-originating materials (HS 8211.95) must come from a different chapter than that of the
knives (HS 8211.31), i.e. the two-digit HS code must be different Therefore the final good does
not meet the CC ROO.

Conclusion

As the rule is RVC(40) or CC and the knives met the RVC(40) ROO, they are originating.
Because the ROO is “or”, it does not matter that the CC ROO was not met. Originating status is
granted when any one of the ROO is met.

14. Question:

Wooden furniture (HS 9403.50) is produced in Malaysia and sold for $100.

Parts of the furniture (HS 9403.90) were imported from China.

These parts had a value of $63. AANZFTA-originating materials produced in Malaysia had a
value of $34.

Total costs and profit were $3.

The PSR for subheading 9403.50 is “RVC(40) or CTH or RVC(35) + CTSH”.

Is the wooden furniture originating?

Answer:

RVC - Indirect/Build-Down method

FOB – Value of Non-Originating Materials

RVC = x 100 %
FOB

$100 – $63 $37

RVC = = x 100 % = 37%
$10,00 $10,00

RVC – Direct method

AANZFTA
Material Labor Overhead Other
+ + + Profit +
Cost Cost Cost Cost
RVC= x 100%
FOB

$34 + $3 $37
RVC= = x 100% = 37%
$10,00 $10,00

Therefore the final good does not meet the solitary RVC ROO.

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CTH

The non-originating materials (HS 9403.90) must come from a different heading than that of the
furniture (HS 9403.50), i.e. the four-digit HS codes must be different As the HS codes at the
CTH level are the same in this instance, the final good does not meet the CTH ROO.

CTSH

The non-originating materials (HS 9403.90) must come from a different subheading than that of
the furniture (HS 9403.50), i.e. the six-digit HS Codes must be different. Therefore the final good
meets the CTSH ROO.

Conclusion

Even though neither of the solitary ROO (RVC(40) or the CTH) have been met, the furniture is
originating because the RVC(35) plus the CTSH has been met. The reason is that the ROO has
three options to demonstrate origin. Originating status is granted when any one of these three
ROO is met.

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