Origin Criteria under EPA/FTA — Product-Specific Rule Determination and Supporting Evidence
Interlink編集部What Are Origin Criteria?
Origin criteria are the rules used to determine whether cargo qualifies as "originating goods" under agreements such as EPAs and FTAs.
To benefit from preferential tariff rates such as EPA or FTA rates, the cargo must meet the origin criteria specified in the relevant agreement.
Origin criteria do not rely solely on the country from which the goods were exported. Instead, they verify where the goods were produced, what materials were used, what kind of processing was performed, and the degree of value added.
In practice, confirmation is based on a combination of HS codes, Product-Specific Rules of Origin (PSR), Change in Tariff Classification (CTC) criteria, Regional Value Content (RVC) criteria, the Processing Criterion, the Cumulation System, the De Minimis Rule, and Shipment Criteria.
Purpose and Background of the System
Under EPAs and FTAs, preferential tariff rates lower than standard customs duties may be applied to originating goods from agreement partner countries.
However, not all goods imported from an agreement partner country automatically qualify for preferential tariff treatment.
For example, even if final assembly is performed in a specific country, if the main materials or parts originate from a third country and do not meet the agreement’s rules of origin, the goods may not be recognized as originating.
Origin criteria serve as key standards to prevent non-originating products from benefiting from preferential rates through merely formal processing, ensuring that substantial production or processing has occurred within the agreement partner country.
Scope Covered in This Article
| Item | Contents Covered in This Article | Contents Covered in Other Articles |
|---|---|---|
| Overview of Origin Criteria | Organizes the basic framework of origin criteria to be confirmed when using EPA/FTA. | Details of each agreement’s provisions, tariff rates, and certification methods are covered in agreement-specific articles. |
| Relation to PSR | Explains the importance of checking the Product-Specific Rules of Origin corresponding to the HS code of the applicable cargo. | Details of PSR themselves and how to verify PSR by agreement are handled in separate articles. |
| Main Origin Criteria | Outlines the positioning of wholly obtained products, products made only from originating materials, CTC, RVC, and the Processing Criterion. | CTC, RVC, and the Processing Criterion are discussed in dedicated specialized articles. |
| Supplementary Systems | Organizes scenarios where the Cumulation System and the De Minimis Rule complement origin determination. | Requirements, calculation methods, and agreement-specific differences of cumulation and de minimis are covered in separate articles. |
| Relation to Shipment Criteria | Discusses the need to confirm whether goods maintain originating status during transport. | Details such as third-country transit, through B/L, and bonded storage documentation are covered in the article on Shipment Criteria. |
| Verification Documents | Organizes documentation including HS code data, PSR materials, bills of materials, cost data, process documentation, and transport documents. | Document formats, retention periods, and responses to customs inquiries are treated in the article on document retention and verification. |
| Freight Forwarder Involvement Scope | Clarifies the extent of support freight forwarders can provide and the scope where origin determination should not be conclusively made by them. | Customs brokers’ declaration responsibilities, importers’ explanatory duties, and expert confirmation are treated in separate articles. |
| Typical Operational Issues | Addresses common problems such as HS classification errors, unmet RVC, insufficient cumulation documentation, misapplication of de minimis, and lack of Shipment Criteria documents. | Detailed handling of each issue is covered in articles on CTC, RVC, the Processing Criterion, the Cumulation System, the De Minimis Rule, and Shipment Criteria. |
This article serves as a hub to understand overall origin criteria. Details on CTC, RVC, the Processing Criterion, the De Minimis Rule, PSR, CPTPP, RCEP, and other specific topics are covered in their respective individual articles.
Common Misconceptions
| Misconception | Actual Understanding | Potential Issues |
|---|---|---|
| Preferential tariff rates are automatically applied when importing from an EPA partner country | Even when importing from a partner country, preferential tariff rates are not applicable unless the rules of origin are met. | Preferential tariff rates may be denied after import declaration. |
| The same HS code means the same treatment regardless of the agreement | Even with identical HS codes, Product-Specific Rules of Origin (PSR) may differ across agreements such as CPTPP, RCEP, or Japan-EU EPA. | There is a risk of mistakenly applying criteria from a different agreement. |
| Having a Certificate of Origin means the rules of origin are satisfied | Although the certificate is important, customs verification may require supporting evidence for origin determination. | Lack of supporting documentation could prevent demonstration of origin compliance. |
| The freight forwarder will verify the origin status | Freight forwarders can assist with transport documents and Shipment Criteria, but they usually cannot assess origin based on materials, processes, or costs. | There is a risk of relying solely on transport documents as proof of origin determination. |
| Processing the goods in the exporting country automatically makes them originating products | Minor processing alone may not confer origin; the product must meet the PSR-defined criteria. | Packaging, labeling, or simple assembly could be mistakenly considered sufficient for origin. |
| Using the Cumulation System means all materials from partner countries automatically qualify as originating | Materials sourced from partner countries still require confirmation that they qualify as originating under the agreement. | Materials that cannot be proven as originating may be incorrectly treated as originating materials. |
| The De Minimis Rule allows ignoring small amounts of non-originating materials without conditions | The De Minimis Rule has specific thresholds, applicable product categories, value and weight criteria, and special provisions for textiles, varying by agreement. | Failure to identify excluded materials or exceed thresholds may result in denial of preferential tariffs. |
| If the rules of origin are met, Shipment Criteria do not matter | Even if origin criteria are fulfilled, failing to meet Shipment Criteria for third-country transit may cause issues with preferential tariff use. | Insufficient documents such as through Bills of Lading or bonded warehouse records can hinder explanation of maintained originating status. |
Overall Structure of Origin Criteria
There are several types of origin criteria. In practice, after confirming the HS code of the relevant cargo and the applicable agreement, it is necessary to organize which criteria will be used to explain the origin status.
| Criterion / System | Main Focus of Determination | Typical Usage Scenario | Documents to Verify | Corresponding Individual Article |
|---|---|---|---|---|
| Wholly Obtained Products | Whether fully obtained within one country or agreement area | Agricultural products, fishery products, mineral resources, etc. | Certificate of origin, catch certificate, harvesting location documents, mining location documents | Wholly Obtained Products |
| Products Made Only from Originating Materials | Whether all used materials qualify as originating under the agreement | Products manufactured using multiple originating materials | Material lists, supplier certificates, originating material documentation | Products Made Only from Originating Materials |
| Change in Tariff Classification (CTC) Criterion | Whether the HS code of non-originating materials differs sufficiently from the finished product | Industrial goods manufactured using non-originating materials | Finished product HS code, material HS codes, PSR verification documents | Change in Tariff Classification (CTC) Criterion |
| Regional Value Content (RVC) Criterion | Whether the value generated within the agreement area exceeds a specified ratio of the finished product’s value | Products difficult to explain by HS code changes alone | FOB price, cost data, material values, RVC calculation sheets | Regional Value Content (RVC) Criterion |
| Processing Criterion | Whether manufacturing or processing operations required under the agreement were carried out | Textiles, chemicals, processed food products, etc. | Process charts, manufacturing records, work instructions, subcontracted process documentation | Processing Criterion |
| Cumulation System | Whether originating materials or processing in contracting countries can be incorporated into origin determination | Supply chains spanning multiple contracting countries | Originating material documentation, supplier certificates, cumulation confirmation documents | Cumulation System |
| De Minimis Rule | Whether a small amount of non-originating materials that do not meet criteria may be allowed | Cases where small quantities of materials fail to meet CTC | Material cost data, weight documents, calculation basis documents | De Minimis Rule |
| Shipment Criteria | Whether originating goods were properly transported from the exporting country to the importing country while maintaining originating status | Cases involving third-country transit, transshipment, or temporary storage | B/L, Sea Waybill, through Bills of Lading, bonded storage documents | Shipment Criteria |
Rules of Origin and Product-Specific Rules of Origin (PSR)
Rules of origin vary depending on the product.
Therefore, you must first verify the HS code of the cargo in question and then check the Product-Specific Rules of Origin (PSR) associated with that HS code.
The PSR specifies the criteria that must be met for the cargo to be recognized as originating.
Even if goods are manufactured in the same country, the required criteria may differ depending on the product category.
In practice, errors in the HS code lead to incorrect PSR checks. For this reason, accurate confirmation of the HS code is essential when determining origin.
Comparison with Other Systems
| System / Criterion | Main Role | Relation to Origin Criteria | Practical Points to Check |
|---|---|---|---|
| PSR | Defines the required origin criteria for each product. | Entry point for verifying origin criteria. | Check the PSR corresponding to the HS code of the product concerned. |
| CTC | Verifies the change in HS codes between non-originating materials and finished products. | Typical substantive change criterion when using non-originating materials. | Confirm the HS codes of finished products and materials, the level of change, and the PSR. |
| RVC | Confirms the proportion of value added within the agreement area. | Criterion explaining origin through value and cost composition. | Check FOB price, material costs, cost data, and calculation method. |
| Processing Criterion | Confirms whether specific manufacturing or processing operations were performed. | Criterion explaining origin based on the content of processing steps. | Review process charts, manufacturing records, work instructions, and subcontractor documents. |
| Cumulation System | Includes originating materials and processing from contracting countries in origin determination. | Complements origin determination in multi-country supply chains. | Check origin of materials themselves, supplier certificates, and cumulation documentation. |
| De Minimis Rule | Exceptionally permits small amounts of non-originating materials that do not meet criteria. | Supplemental rule mainly for small quantities of materials failing CTC. | Confirm ratios, applicable products, value and weight thresholds, and excluded items. |
| Shipment Criteria | Check whether originating status is maintained during transport. | Separate from origin criteria themselves but essential for preferential tariff use. | Verify B/Ls, through Bills of Lading, and bonded storage documents when routed via third countries. |
What Are Wholly Obtained Products?
Wholly obtained products are goods that are entirely obtained or produced within a single country or agreement area.
Typical examples include natural resources, agricultural products, fishery products, and mineral resources that have been produced, extracted, or harvested from the start within that country.
For instance, agricultural products harvested, minerals mined, or fishery products caught within the contracting country may be classified as wholly obtained products.
Unlike products processed using materials from third countries, wholly obtained products are relatively straightforward to demonstrate as having been produced within that country.
However, in actual practice, documentation such as certificates of origin, catch certificates, or evidence showing the mining or harvesting location may be required.
Products Made Only from Originating Materials
Products made only from originating materials refer to finished goods where all used materials qualify as originating materials under the agreement. In such cases, even if the finished product is not fully produced within the territory, it may still be recognized as originating if all materials used are originating.
However, simply purchasing materials from an agreement partner country does not automatically make those materials originating. Each material must be checked to confirm whether it qualifies as an originating good under the agreement.
Differences Between Wholly Obtained Products, Products Made Only from Originating Materials, and Substantial Transformation Criteria
In rules of origin, the approach to verification changes depending on whether non-originating materials are used.
| Type | Use of Non-Originating Materials | Basis of Determination | Main Supporting Documents |
|---|---|---|---|
| Wholly Obtained Products | Not used | Confirmed to be entirely obtained within the country or agreement territory. | Origin documentation, harvest records, catch records, extraction records |
| Products Made Only from Originating Materials | Not used | Confirmed that all materials used qualify as originating materials under the agreement. | Materials list, supplier certificates, originating material documentation |
| CTC (Change in Tariff Classification) | May be used | Confirmed that the HS code changed at the required level under the agreement between the non-originating materials and the finished product. | Finished product HS code, material HS codes, PSR verification documents |
| RVC (Regional Value Content) | May be used | Confirmed that the added value generated within the agreement territory meets or exceeds the specified percentage. | FOB price, cost documentation, material costs, RVC calculation sheets |
| Processing Criterion | May be used | Confirmed that the manufacturing or processing operations required by the agreement were performed within the contracting country. | Process charts, production records, work instructions, subcontracting documentation |
Wholly obtained products and products made only from originating materials are cases where origin is determined without using non-originating materials. On the other hand, CTC, RVC, and the Processing Criterion are standards that may recognize a product as originating even when non-originating materials are used, provided that a substantial transformation has occurred.
Change in Tariff Classification (CTC)
The Change in Tariff Classification (CTC) criterion is a standard used to determine whether the HS code classification between non-originating materials and the finished product changes beyond the level specified by the trade agreement.
For example, when parts from a third country are used and processed within a contracting party country, the key issue is whether the HS code of the finished product shifts to a different classification than that of the materials, thus meeting the CTC requirement.
CTC is commonly applied in Product-Specific Rules of Origin. However, origin qualifications are not achieved simply by any minor HS code change; it is essential to confirm the required level of change under the agreement, such as chapter, heading, or subheading level.
Regional Value Content (RVC)
The Regional Value Content (RVC) is a criterion that verifies whether a specified minimum proportion of the finished product’s value has been generated within the territory of the agreement.
RVC stands for Regional Value Content and is also referred to as the regional origin ratio or regional value-added criterion.
Under the RVC criterion, origin determination is made based on originating materials, non-originating materials, labor costs, manufacturing overhead, profit, FOB price, and other factors, following the calculation methods defined in the agreement.
Even when the Change in Tariff Classification (CTC) criterion is not met, products may still qualify as originating if sufficient value has been added within the agreement area under the RVC standard.
However, a lack of cost data or calculation basis could result in difficulties demonstrating origin during customs verification.
Processing Criterion
The Processing Criterion is a rules-of-origin criterion that recognizes goods as originating when specific manufacturing or processing steps are carried out within the territory of the agreement partner country.
Processes such as chemical reactions, refining, spinning, weaving, sewing, fermentation, heating, and certain food processing methods may be specified as required for particular product categories.
Under the Processing Criterion, it is essential to provide documentation explaining not only the names of the processes but also the actual work performed, where it took place, and who carried it out.
Minor processing like packaging, labeling, simple sorting, or mere repackaging may not be sufficient to confer originating status under this criterion.
Combination of Multiple Criteria
Product-Specific Rules of Origin may require the application of multiple criteria rather than a single one.
For example, the criteria may be structured as a choice, such as “CTC or RVC,” or require multiple conditions to be met, like “CTC plus fulfilling specific processing operations.”
In cases where there is a choice, it is necessary to determine which criterion provides the clearest explanation. Some products are easier to justify under CTC, while others may be better supported by RVC when cost data is well documented.
When multiple conditions must be satisfied, meeting just one criterion is insufficient. It is essential to verify the Product-Specific Rules of Origin under the relevant agreement and ensure that all required conditions are met.
Cumulation System
The Cumulation System allows materials originating or processing performed in contracting countries to be considered when determining the origin of goods.
For example, if raw materials produced in one contracting country are further processed in another contracting country to create a finished product, those materials may be treated as originating materials.
In broad agreements such as RCEP, the Cumulation System becomes important within supply chains spanning multiple countries.
However, even when materials are sourced from a contracting country, if it cannot be demonstrated that these materials qualify as originating under the agreement, the Cumulation System may not be applied.
Verification of supplier declarations, certificates of origin, and materials documentation may be required.
De Minimis Rule
The De Minimis Rule is a system that exceptionally allows a certain proportion of non-originating materials that do not meet origin criteria within limits set by the agreement.
This rule mainly addresses cases where a small quantity of non-originating materials fail to meet the Change in Tariff Classification (CTC) criterion.
However, the De Minimis Rule is not unconditional. It requires confirmation of applicable thresholds by agreement, product-specific restrictions, value or weight limits, and special provisions for textiles.
In practice, the Product-Specific Rules of Origin (PSR) should first be reviewed, then CTC, RVC, and the Processing Criterion should be considered. The De Minimis Rule is applied as a supplementary measure when necessary.
What Are Shipment Criteria?
Shipment Criteria ensure that originating goods are properly transported from the exporting country to the importing country without losing their status as originating products along the way.
They are also referred to as direct shipment or direct consignment requirements.
Even if the goods meet the origin criteria, their originating status may be questioned if processing or alterations occur while transiting through a third country.
When goods transit through a third country, documentation may be required to demonstrate that the goods were only transshipped, temporarily stored, or held under customs control.
Difference Between Direct Shipment and Shipment Criteria
Direct shipment refers to cases where originating goods are transported directly from the exporting country to the importing country.
On the other hand, Shipment Criteria consider whether the goods maintain their originating status even when routed through a third country.
| Item | Meaning | What Is Checked | Main Documents |
|---|---|---|---|
| Direct Shipment | Goods are transported directly from the exporting country to the importing country | Whether there is no routing through a third country | B/L, Sea Waybill, Air Waybill |
| Shipment Criteria for Third-Country Routing | Confirming whether originating status is maintained even when routed through a third country | Whether operations are limited to transshipment, temporary storage, or storage under customs control | Through Bill of Lading, transshipment records, bonded warehouse documents, proof of transit |
| Points to Note | Conditions and required documents vary by agreement | Whether any processing, alteration, sale, or use occurred at the transit location | Required documentation depending on the agreement |
While Shipment Criteria are separate from origin criteria themselves, they are important for applying preferential tariff rates.
Application Process Flow
| Step | Check Items | Key Considerations | Reference Documents |
|---|---|---|---|
| 1 | Identify the EPA/FTA to be used | Tariff rates, PSR, certification methods, and Shipment Criteria vary by agreement. | Agreement reference materials, customs documents, agreement-specific guides |
| 2 | Confirm the HS code of the cargo | An incorrect HS code leads to an incorrect PSR being checked. | Classification materials, specifications, catalogs, composition charts, advance rulings |
| 3 | Check the availability of preferential tariff rates | Confirm whether preferential rates are set under the applicable agreement. | Tariff tables, agreement-specific tariff documents, import declaration documents |
| 4 | Review the Product-Specific Rules of Origin (PSR) | Confirm required criteria such as wholly obtained products, CTC, RVC, and the Processing Criterion. | PSR reference materials, agreement annexes, customs documents |
| 5 | Organize which criteria will be used to prove origin | Check whether options exist or multiple conditions apply. | Decision tables, material lists, cost documents, process documentation |
| 6 | Consider the Cumulation System and the De Minimis Rule | Verify applicability of supplementary systems, target products, and proportion limits. | Supplier certificates, originating material data, calculation basis documents |
| 7 | Confirm Shipment Criteria | For third-country transit, verify whether originating status is preserved. | B/L, Sea Waybill, through Bill of Lading, bonded storage documents |
| 8 | Prepare certificate and supporting documents | Ensure consistency between the Certificate of Origin or Origin Declaration and supporting documents. | Certificate of Origin, Origin Declaration, decision basis documents |
| 9 | Declare preferential tariff application at import declaration | Confirm consistency of cargo details, certificates, and transport documents. | Invoice, Packing List, B/L, origin-related documents |
| 10 | Keep records for customs post-clearance verification | Maintain evidence explaining origin and Shipment Criteria even after Import Permit. | All retained documents, supplier certificates, cost data, process documents, transport documents |
Four-Column Checklist
| Verification Stage | Parties to Confirm With | Items to Check | Actions if Issues Are Found |
|---|---|---|---|
| At Transaction Start | Importer, Exporter, Customs Broker | Applicable EPA/FTA, partner countries, relevant products, existence of preferential tariff rates | If the agreement or tariff rates are unclear, clarify these before starting origin determination. |
| HS Code Verification | Importer, Exporter, Customs Broker | HS code of the cargo, basis of classification, HS code version used under the agreement | If classification is uncertain, consider advance ruling or expert confirmation. |
| PSR Confirmation | Importer, Exporter, Producer, Customs Broker | Product-Specific Rules of Origin applicable to the HS code | If PSR is unclear, consult agreement documents and customs guidance to avoid using incorrect criteria. |
| Origin Determination | Exporter, Producer, Importer | Wholly obtained products, originating materials only, CTC, RVC, Processing Criterion, cumulation, de minimis | If criteria are not met, consider alternative standards, material substitution, or declaration under regular tariff rates. |
| Certificate Preparation | Exporter, Issuing Authority, Self-Declaration Officer | Consistency between statements in the certificate or Origin Declaration and underlying documentation | If discrepancies occur between the certificate and supporting documents, correct them before issuance or submission. |
| Transport Arrangement | Exporter, Importer, Freight Forwarder | Shipment Criteria, direct shipment, third-country transit, transshipment, transport documents | For third-country transit, verify through B/L continuity and bonded storage documentation in advance. |
| Import Declaration | Importer, Customs Broker | Eligibility for preferential tariff, validity of certificate, consistency with cargo details | If inconsistencies arise, confirm with exporter, producer, and freight forwarder before filing the declaration. |
| Post-Clearance Customs Verification | Importer, Exporter, Producer | Fulfillment of origin criteria, evidence documentation, materials, processes, costs, Shipment Criteria | If documents are lacking, inquire with business partners and retain records of their responses. |
Main Documents to Check
| Document | Purpose of Verification | Main Holder | Issues If Missing |
|---|---|---|---|
| HS Code Reference | To identify the relevant product and applicable PSR | Importer, Exporter, Customs Broker | Risk of verifying incorrect PSR |
| Product-Specific Rules of Origin (PSR) Reference | To confirm which origin criteria apply | Importer, Exporter, Customs Broker | Risk of misunderstanding required origin criteria |
| Certificate of Origin | To verify documentation for preferential tariff rate application | Exporter, Issuing Authority, Importer | May be unable to demonstrate basis as certification |
| Origin Declaration | To declare origin under a self-certification system | Exporter, Importer, Producer | Cannot confirm consistency between declaration and supporting documents |
| Invoice / Packing List | To verify cargo details, value, quantity, and trading terms | Exporter, Importer | Cannot verify consistency between cargo and certification documents |
| Raw Material List / Parts List / Materials List | To verify materials used and their origin | Producer, Exporter | Cannot distinguish originating from non-originating materials |
| Manufacturing Process Chart | To confirm which processes occurred in which countries | Producer, Exporter | Cannot explain the difference between the Processing Criterion and minor processing |
| Cost Calculation Data / RVC Calculation Data | To demonstrate compliance with the value-added criterion | Producer, Exporter, Importer | Cannot demonstrate satisfaction of RVC threshold |
| Supplier Certificate | To verify origin and value of materials | Supplier, Producer, Exporter | Cannot explain cumulation or treatment as originating materials |
| Subcontracting Process Documents | To confirm processing performed by subcontractors | Subcontractor, Producer, Exporter | Cannot explain implementation of subcontracted processes |
| B/L, Sea Waybill, Air Waybill | To verify transport routes and Shipment Criteria | Freight Forwarder, Shipping Line, Airline, Importer | Cannot explain direct shipment or transportation routes |
| Through Bill of Lading / Transshipment Documents | To confirm origin status maintenance when transiting through third countries | Freight Forwarder, Shipping Line, Importer | May be unable to explain Shipment Criteria |
Scope of Freight Forwarder Involvement
Freight forwarders may assist with verifying documents related to origin criteria, such as Invoices, Packing Lists, B/Ls, Sea Waybills, and Arrival Notices.
They may also support organizing transportation routes and shipping documents necessary for confirming Shipment Criteria.
However, freight forwarders are generally not responsible for making the final determination regarding the origin of the cargo itself.
Determining origin requires information such as HS codes, raw materials, manufacturing processes, cost calculations, and supplier details, which should be managed by the importer, exporter, or producer.
| Category | Assistance Typically Provided | What Should Not Be Concluded | Practical Approach |
|---|---|---|---|
| Transportation Documents | Can assist with verifying B/Ls, Sea Waybills, Air Waybills, and Arrival Notices. | Should not make final judgments on whether cargo qualifies as originating under the agreement. | Keep transportation documents separate from origin determination materials. |
| Shipment Criteria | Can assist in organizing documents related to direct shipments, transshipments, third-country transit, and through Bills of Lading. | Should not provide definitive legal judgments on whether Shipment Criteria under the agreement are met. | For third-country transit, confirm with the shipper whether bonded storage documents or transit documentation are required. |
| Customs Preparation | Can assist in checking for the presence of Invoices, Packing Lists, and origin certification documents. | Should not make determinations on compliance with PSR, CTC, RVC, or the Processing Criterion. | Confirm the basis of origin with importer, exporter, or producer. |
| Guidance to Shippers | Can guide shippers on documents they should confirm with exporters, importers, and producers. | Should not guarantee origin based on cost data or manufacturing processes. | Limit to providing lists of required documents; final judgments should be confirmed with document holders. |
| Customs Inquiry Response | Can assist in submitting transportation records, document transmission history, and in/out gate records. | Should not explain origin based on materials, processes, or cost on behalf of the shipper. | Focus on supporting submission of logistics documents; direct origin explanations to importer, exporter, or producer. |
| Ongoing Transaction Management | Can assist with organizing transportation routes and document patterns for identical cargo shipments. | Should not conclude that origin criteria are met solely because prior shipments followed the same route. | Confirm changes in materials, costs, processes, agreements, or PSR with the shipper. |
In practical freight forwarding operations, it is safer to define the role of the freight forwarder as supporting necessary documentation, transportation routes, customs procedures, and readiness for customs inquiries, rather than making definitive judgments on whether EPA preferential tariff rates apply.
Common Practical Issues
| Situation | Frequent Issues | Documents to Check | Practical Measures |
|---|---|---|---|
| Judging origin based only on simple assembly | Simply assembling third-country components within an agreement partner country may fail to meet CTC or Processing Criterion requirements. | PSR, HS code change documents, process charts, documentation confirming minor processing | Confirm whether simple assembly qualifies as minor processing or meets required processing steps. |
| Failure to meet RVC | A high proportion of non-originating materials may result in not meeting the specified value-added criterion under the agreement. | FOB price, non-originating material costs, cost records, RVC calculation sheets | Consider material substitutions, review calculation methods, and assess whether alternative criteria can be applied. |
| HS classification errors | Incorrect HS code assumptions when checking PSR can cause issues with preferential tariff application after import. | Classification documents, product specifications, composition sheets, advance rulings, PSR reference materials | Recheck HS codes and, if necessary, review past declarations and future transactions. |
| Lack of cumulation proof | Even when using materials originating in a partner country, proof of origin for those materials themselves may be unavailable. | Supplier certificates, originating material documents, cumulation verification materials | Obtain evidence not only of partner country sourcing but also confirming materials meet origin requirements under the agreement. |
| Misapplication of the De Minimis Rule | Incorrect judgment of the proportion or applicable product scope of non-originating materials can make it impossible to explain product origin. | Material price data, weight data, de minimis calculation sheets, agreement applicability criteria | Verify proportions, applicable products, exclusions, and special provisions for textile products. |
| Insufficient transshipment documentation | For cargo transiting third countries, failure to present through Bill of Lading or bonded storage records may occur. | B/L, Sea Waybill, transit country documents, handling records, bonded warehouse documents | Secure required transportation documents in advance when goods transit a third country. |
| Inconsistency between certificates and supporting documents | Discrepancies may exist between origin certificates or declarations and material lists, process charts, or cost data. | Origin certificates, Origin Declarations, material lists, process charts, RVC calculation sheets | Verify certificate details against supporting documents before filing declarations and correct discrepancies. |
| Applying standards from a different agreement | Even for identical HS codes, PSR or certification methods may differ among CPTPP, RCEP, Japan-EU EPA, and others. | PSR for relevant agreements, tariff rate documents, certification method references | Do not apply decisions from one agreement to another; verify requirements for each specific agreement. |
Application Scenarios for the System
Scenario 1: When Neither CTC nor the Processing Criterion Is Met Due to Simple Assembly
There are cases where goods assembled from third-country parts within the agreement country are claimed as originating products based on final assembly in the exporting country.
However, if the HS codes of the finished product and major parts do not change at the levels required by the agreement, the Change in Tariff Classification (CTC) criterion may not be satisfied. Additionally, if the assembly involves only simple screw fastening or attaching parts, issues may arise under the Processing Criterion or minor processing standards.
In such cases, review the HS codes, Product-Specific Rules of Origin (PSR), process charts, work instructions, and conditions before and after processing to determine whether CTC, Regional Value Content (RVC), or the Processing Criterion can be applied. If none are met, consider declaring under the standard tariff rate rather than preferential rates, or reexamine the manufacturing process.
Scenario 2: Incorrect Application Order of the Cumulation System and the De Minimis Rule
In broad agreements such as RCEP, materials sourced from contracting countries may be treated as originating materials. Meanwhile, the De Minimis Rule may also apply to small quantities of non-originating materials.
However, assuming cumulation applies solely because materials come from contracting countries, or handling non-originating materials under de minimis without checking their origin, can undermine the origin determination rationale.
In practice, first classify each material as originating or non-originating. Separate materials eligible for cumulation from those to be considered under de minimis. Then preserve supplier certificates, origin documentation, material pricing, and weight records accordingly.
Scenario 3: Preferential Tariff Issues Due to Insufficient Shipment Criteria Documentation Despite Meeting PSR
There are cases where goods meet the PSR and hold origin certificates and declarations, yet Shipment Criteria documentation falls short due to transport via third countries.
For example, if cargo transshipped or temporarily stored in a third country cannot provide through Bills of Lading, bonded storage documents, or proof that no processing or alteration occurred at the transit point, maintaining originating status may be problematic.
In such situations, organize not only origin criterion documents but also transportation routes, B/Ls, Sea Waybills, transshipment records, and bonded storage documents. Freight forwarders can assist in compiling transport documentation; however, final decisions on preferential tariff application should be coordinated by importers, customs brokers, and where necessary, customs authorities.
Scenario 4: Misclassification of HS Code Leading to Applying Incorrect PSR
Reviewing origin criteria requires first confirming the accurate HS code of the targeted goods. An incorrect HS code leads to applying the wrong PSR, which can invalidate the entire origin determination.
For example, if goods are classified under an incorrect HS code and assessed as meeting the CTC based on that classification, preferential tariff application may be challenged during customs post-clearance inspections.
In such cases, verify classification basis through tariff classification documents, specifications, component lists, usage descriptions, and advance rulings. Confirming or reasonably clarifying HS classification is essential before proceeding with the review of origin criteria.
Scenario 5: Origin Certificate Provided but Supporting Documentation Cannot Be Explained
Even if an origin certificate or declaration is submitted at import declaration, this alone may not fully explain fulfillment of origin criteria.
During customs post-verification, in addition to the certificate contents, documentation such as material lists, cost data, process charts, supplier certificates, RVC calculation worksheets, and Shipment Criteria documents may be requested.
In this case, at the time of obtaining the certificate, clarify which criterion was used to determine origin and retain related evidence. It is practically important not to rely solely on the certificate but to be prepared to explain the basis of the determination.
Important Points
When verifying origin criteria, an incorrect HS code may lead to referencing the wrong Product-Specific Rules of Origin that need to be checked.
Origin criteria and certification methods vary by agreement, so even for the same product, standards may differ under CPTPP, RCEP, Japan-EU EPA, and other agreements.
Minor processing alone may not qualify a product as originating. When applying the RVC criterion, cost data and calculation details are required. When applying the Processing Criterion, documentation that explains the actual manufacturing processes is necessary.
When using the Cumulation System, origin documentation of the materials themselves must be prepared. The De Minimis Rule has restrictions that vary by agreement. For transshipment via third countries, Shipment Criteria should be confirmed.
It is necessary to retain not only the Certificate of Origin but also the documentation supporting the determination. Without sufficient evidence, it may be difficult to explain the origin status during customs verification.
Practical Checklist
- Have you identified the applicable EPA/FTA?
- Have you confirmed the HS code for the cargo concerned?
- Have you checked whether preferential tariff rates are established?
- Have you reviewed the Product-Specific Rules of Origin (PSR)?
- Have you determined whether to apply wholly obtained goods, originating materials only, CTC, RVC, or the Processing Criterion?
- If multiple criteria are required, have you verified all conditions?
- If using the Cumulation System, have you reviewed the origin documentation for materials?
- If employing the De Minimis Rule, have you confirmed its applicability and calculation basis?
- In cases of third-country transit, have you checked Shipment Criteria?
- Have you reviewed the Certificate of Origin or Origin Declaration?
- Do the certificate details align with the supporting documentation?
- Are supporting documents retained to prepare for customs verification?
- Are you avoiding completely delegating origin determinations to the freight forwarder?
Summary
Origin criteria are the core standards used to determine whether goods qualify as originating products under agreements such as EPAs and FTAs.
They are not based simply on the country of manufacture or export. Instead, determination is made by examining HS codes, Product-Specific Rules of Origin, materials, manufacturing processes, value added, and types of processing involved.
In practice, it is essential to organize criteria such as wholly obtained products, products made solely from originating materials, CTC, RVC, the Processing Criterion, the Cumulation System, the De Minimis Rule, and Shipment Criteria, as well as to retain the necessary supporting documentation.
Origin criteria serve as a key gateway topic for utilizing EPAs and FTAs. For each relevant agreement and product, the PSR, certification methods, Shipment Criteria, and document retention requirements should be reviewed and maintained so that customs verification can be smoothly managed.
When confirming origin criteria, the most critical practical task is to consistently organize which agreement applies, for which HS code, under which criteria, and based on which documents origin status is explained.
This article is provided for general informational purposes only; for item-specific tariff classification, origin determination, customs treatment, or legal interpretation, confirm with customs authorities, customs brokers, legal advisers, or other qualified specialists.
