Specific Manufacturing or Processing Operation Criterion — Origin Determination and Required Documents
Interlink編集部What Is the Processing Criterion?
The Processing Criterion is a rules-of-origin standard that recognizes goods as originating when specific manufacturing or processing operations are performed within the territory of the agreement between contracting countries.
While the Change in Tariff Classification (CTC) criterion and the Regional Value Content (RVC) criterion focus on changes in HS codes or value ratios, the Processing Criterion emphasizes the actual processes carried out and the country where these processes took place.
The Processing Criterion is especially important for textiles, chemicals, and processed food products. For these goods, merely performing packaging, sorting, labeling, or simple assembly in the exporting country may not qualify the product as originating.
In practice, it is necessary to check the HS code of the goods concerned and review the Product-Specific Rules of Origin (PSR) to determine which processing operations are required. Then, manufacturing process charts, production records, work instructions, and subcontractor documentation should be organized so they are ready for customs verification.
Purpose and Background of the System
The Processing Criterion is used to verify whether a product has undergone substantial processing within the territory of an agreement partner country.
Under rules of origin, goods are not recognized as originating merely because they are exported from a particular country. Substantial manufacturing or processing must have taken place within that country or the agreement region.
The Processing Criterion serves to prevent the misuse of preferential tariff rates through formalities or minor processing alone, ensuring that significant production activities have occurred within the agreement partner country.
For products where changes in HS codes or value ratios do not adequately determine origin, the key factor in origin determination is “which processing steps have been performed.”
Scope Covered in This Article
| Item | Contents Covered in This Article | Details Covered in Other Articles |
|---|---|---|
| Basics of the Processing Criterion | Organizes the origin criterion that confirms specific manufacturing or processing operations were performed within the agreement country. | Overview of EPA/FTA as a whole, preferential tariff rates by agreement, and detailed origin certification systems are covered separately. |
| Differences from CTC and RVC | Compares the focus on actual processing content rather than changes in HS codes or value proportions. | Detailed CTC determinations, RVC calculations, and HS code classifications are covered in specialist articles. |
| Relation to PSR | Deals with the process of confirming which operations are required under Product-Specific Rules of Origin. | Specific PSR details by agreement and product are found in official materials and individual articles. |
| Differences from Minor Processing | Clarifies why packaging, labeling, simple sorting, and simple assembly are distinguished from processing that confers origin. | Lists of minor processing and exclusion rules by agreement are confirmed in separate agreement documents. |
| Product-Specific Points to Note | Organizes operations to confirm for textiles, chemicals, processed foods, machinery, electrical products, and others. | Detailed process requirements and specific PSR for each product are treated in product-specific articles. |
| Verification under CPTPP and RCEP | Covers document retention, cumulation, and self-declaration when applying the Processing Criterion in CPTPP and RCEP. | Origin rules under CPTPP and RCEP are treated in dedicated articles. |
| Proof Documentation for Outsourced Processes | Addresses the need to verify subcontractor documents and processing reports for domestic outsourcing, overseas outsourcing, and multi-country operations. | Formats and management methods for outsourcing contracts, subcontracting, and supplier certificates are covered separately. |
| Preparation for Customs Post-Verification | Covers practical matters such as retaining process charts, manufacturing records, work instructions, and subcontractor documents to explain origin. | Verification response, document retention periods, and responding to customs inquiries are handled in EPA document retention articles. |
Situations Where the Processing Criterion Applies
The Processing Criterion is not freely applicable to all product categories. First, the HS code of the cargo in question should be checked, along with the Product-Specific Rules of Origin (PSR) under the relevant agreement, to confirm whether the Processing Criterion is required or recognized as an option alongside CTC or RVC.
| Situation | Reason the Processing Criterion Is an Issue | Key Points to Confirm | Main Stakeholders |
|---|---|---|---|
| When handling textile products | Determining from which stage—yarn, fabric, cutting, sewing, finishing—regional processing is required is crucial. | PSR for textiles, process flowcharts, yarn and fabric documentation, sewing records | Exporter, manufacturer, importer, subcontractor |
| When handling chemical products | It may require specific reactions, purification, or synthesis rather than simple mixing or dilution. | SDS, reaction processes, manufacturing records, quality standards | Manufacturer, quality control department, exporter |
| When handling processed foods | Simple repackaging or labeling is insufficient; heating, fermentation, extraction, seasoning, or molding may be relevant. | Raw material lists, formulation sheets, manufacturing process charts, processing records | Manufacturer, exporter, importer |
| When there are subcontracted processes | If required processing stages are performed at subcontractors rather than the company itself, documentation from the subcontractors is necessary. | Subcontract agreements, processing reports, subcontractor process charts, delivery records | Exporter, manufacturer, subcontractor |
| When processing is divided across multiple countries | Origin determination may vary depending on which country performed which process and in what order. | Process flowcharts, records from factories in each country, transport documents, accumulation documentation | Exporter, manufacturer, suppliers |
| When the boundary with minor processing is an issue | Packaging, labeling, simple sorting, or basic assembly alone may not confer originating status. | Process descriptions, pre- and post-processing conditions, PSR, manufacturing records | Exporter, manufacturer, importer |
Differences Between CTC, RVC, and the Processing Criterion
Rules of origin include the Change in Tariff Classification (CTC), Regional Value Content (RVC), and the Processing Criterion.
These are all origin criteria, but each focuses on a different aspect of origin determination.
| Item | CTC | RVC | Processing Criterion | Practical Notes |
|---|---|---|---|---|
| Focus of Determination | Change in HS code | Value and cost composition | Actual manufacturing and processing steps performed | Which criterion applies should be confirmed by the Product-Specific Rules of Origin (PSR). |
| What Is Verified | Whether the tariff classification differs between non-originating materials and the finished product | Whether the regional value added exceeds a specified proportion of the finished product’s value | Whether the required processing steps under the agreement were carried out within contracting countries | Verification includes not only process names but the actual work performed. |
| Required Documentation | HS codes of the finished product and materials, PSR reference materials | FOB price, material costs, cost accounting documents, classification of originating vs. non-originating materials | Process sheets, manufacturing records, work instructions, subcontractor documentation, manufacturing process flows | Lack of documentation may prevent satisfactory explanation during customs review. |
| Typical Usage | When there is a clear change in HS codes between materials and the finished product | When sufficient value is added within the region | When the content of manufacturing processes is important, as with textiles, chemicals, processed foods, etc. | Confirm which standard is easiest to explain for each product in practice. |
| Main Risks | Errors in HS classification directly affect determination | Inability to explain calculation basis or cost documentation may occur | Inability to prove that required processes were performed through documentation | CTC, RVC, and the Processing Criterion may be combined in some cases. |
The Product-Specific Rules of Origin (PSR) may require the Processing Criterion exclusively, or allow a choice such as “CTC or RVC or Processing Criterion.” In some cases, multiple criteria may be combined, such as applying CTC along with specific processing steps.
Comparison with Other Systems
| System / Criterion | Main Role | Relation to Processing Criterion | Practical Confirmation Points |
|---|---|---|---|
| PSR | Sets the required origin criteria for each product. | Whether the Processing Criterion is necessary is first checked under the PSR. | Check the PSR corresponding to the HS code of the cargo concerned. |
| CTC | Confirms the change in HS codes between non-originating materials and the finished product. | In addition to CTC, specific processes may be required. | Confirm not only HS code changes but also the presence of process requirements. |
| RVC | Numerically verifies the share of regional value added. | RVC and the Processing Criterion may be applied selectively or in combination. | Organize calculation data and process documentation separately. |
| Minor Processing | Concept excluding simple operations that do not confer origin. | Distinguish substantial processing that meets the Processing Criterion from mere minor processing. | Check the nature of the work and changes before and after processing, not just the work name. |
| De Minimis Rule | Exceptionally permits a small amount of non-originating materials that do not meet origin criteria. | Even if materials are supplemented by the De Minimis Rule, whether process requirements are met must be confirmed separately. | Keep material criteria and process criteria distinct to avoid confusion. |
| Cumulative System | Includes originating materials or production within contracting countries for origin determination. | Processing across multiple contracting countries may be used in origin determination. | Confirm in the process flow which country performed which processing steps. |
| Shipment Criteria | Confirms the originating status of goods is not lost during transportation. | Even if the Processing Criterion is met, failure to meet Shipment Criteria could jeopardize use of preferential tariff rates. | For transit through third countries, verify through B/L or bonded storage documentation. |
Common Misunderstandings
| Misunderstanding | Actual Consideration | Possible Issues |
|---|---|---|
| The country where processing was done automatically becomes the country of origin | Simply performing some operation is insufficient; the process must meet the stipulated criteria under the Product-Specific Rules of Origin (PSR). | There is a risk of declaring goods as originating based on only minor processing. |
| Outsourcing processing is always acceptable | It is necessary to confirm that the outsourced processing is valid under the agreement and can be documented. | Proof of processing may not be accepted during customs verification. |
| Processing Criterion is less strict than the Change in Tariff Classification (CTC) rule | The Processing Criterion specifies required operations per product and can be more stringent in some cases. | Failure to meet required processes could result in inability to justify origin. |
| Textile products become originating simply by sewing | Depending on the agreement and the product, multiple operations such as yarn production, fabric making, cutting, and sewing may be required. | There is a risk of mistakenly treating products made by sewing third-country fabric as originating goods. |
| No need to verify content if process names are the same | Even with identical process names, evaluation depends on the actual work performed and the pre- and post-processing conditions. | Process lists alone may be insufficient; manufacturing records and explanations of work performed are necessary. |
| Packing and labeling are also recognized as processing | Packing, labeling, or simple sorting may be considered minor processing under certain agreements. | Preferential tariff rates may not be granted if such operations are deemed non-substantial processing. |
| Processing done in any RCEP member country automatically qualifies as valid processing | Work performed within an RCEP member country still must satisfy the processing required by the PSR. | Overreliance on “performed in a member country” can lead to misjudging origin. |
| Freight forwarders will verify processing details | Freight forwarders may assist with coordinating transport and customs documentation but are not in a position to confirm the authenticity of processes or origin. | Misunderstandings may arise by assuming the Processing Criterion is met based solely on transport documents. |
Flow for Applying the System
| Step | What to Confirm | Key Considerations | Reference Materials |
|---|---|---|---|
| 1 | Confirm the HS code of the relevant cargo | If the HS code differs, applicable PSR and processing requirements will change. | Classification documents, specifications, catalogs, advance rulings |
| 2 | Identify the applicable EPA or FTA | The content of the Processing Criterion varies by agreement. | Agreement text, customs documents, agreement-specific guides |
| 3 | Check the Product-Specific Rules of Origin (PSR) | Verify whether the Processing Criterion applies alone or selectively with CTC or RVC. | PSR tables, agreement appendices, customs references |
| 4 | Specify the required processing under the agreement | Confirm not only the processing name but also the required processing details. | PSR provisions, agreement clauses, product-specific commentary |
| 5 | Organize the actual processing details | Confirm which processes were done, in which country, and by whom. | Process charts, manufacturing flow, production records |
| 6 | Check whether the processing is considered minor | Packing, labeling, simple sorting, or simple assembly alone may be insufficient. | Work instructions, pre- and post-processing documents, process descriptions |
| 7 | Confirm whether outsourced processing is involved | If required processes are performed by subcontractors, subcontractor documents are necessary. | Outsourcing contracts, processing reports, subcontractor process charts |
| 8 | Review the relationship with CPTPP and RCEP cumulation | Confirm whether processing across multiple contracting countries can be effectively recognized. | Cumulation documents, processing records by country, transport documents |
| 9 | Organize certificates and supporting evidence | Align the details in the Certificate of Origin or Origin Declaration with process documentation. | Certificate of Origin, Origin Declaration, process proof documents |
| 10 | Prepare for customs post-clearance verification | Retain documents to explain processing details even after Import Permit issuance. | Complete document retention, production records, subcontractor documents, explanatory materials |
4-Column Assessment Checklist
| Verification Timing | Party to Verify | Items to Verify | Action If Issues Are Found |
|---|---|---|---|
| At Start of Transaction | Importer, Exporter, Customs Broker | Relevant product, HS code, applicable EPA/FTA, PSR | If HS codes or agreements are unclear, clarify before process verification. |
| During Manufacturing and Procurement | Exporter, Manufacturer, Purchasing Department, Supplier | Raw materials, parts, manufacturing location, subcontractors, division of processes | If material or process information is insufficient, confirm with suppliers or subcontractors. |
| During Process Verification | Exporter, Manufacturer, Production Department | Which processes, in which countries, and by whom were performed | If process names alone are inadequate, supplement with details of operations and pre/post-processing conditions. |
| When Checking for Minor Processing | Exporter, Manufacturer, Quality Control Department | Whether processing is limited to packaging, labeling, sorting, cleaning, or simple assembly | If close to minor processing, reconfirm whether required steps per PSR are fulfilled. |
| When Verifying Subcontracted Processes | Exporter, Manufacturer, Subcontractor | Country of subcontractor, process details, work records, delivery records | If subcontractor documentation is lacking, obtain processing reports or process flow sheets. |
| When Preparing Certificates | Exporter, Issuing Authority, Self-Declaration Officer | Consistency between Certificate of Origin or Origin Declaration and process documentation | If certificates and process documents do not match, correct before submission. |
| At Import Declaration | Importer, Customs Broker | Certificate, Invoice, Packing List, cargo contents, shipping documents consistency | If discrepancies exist, confirm with exporter or manufacturer before declaration. |
| During Customs Post-Verification | Importer, Exporter, Manufacturer | Process details, implementation locations, subcontracted steps, retained documents, PSR compliance | If documentation is insufficient, inquire with trading partners and retain written responses. |
Distinction from Minor Processing
An important point when verifying the Processing Criterion is to distinguish it from minor processing.
Minor processing refers to simple operations that do not result in any substantial change to the goods.
Examples include packaging, repackaging, labeling, simple sorting, cleaning, basic assembly, and merely cutting or subdividing. Depending on the agreement, these may not be recognized as processing that confers origin status.
If origin were granted based solely on minor processing, it would allow goods originating from a third country to have their origin arbitrarily changed by applying only formal or superficial operations.
Therefore, rules of origin generally adopt the principle that minor processing alone does not confer origin, to prevent circumvention of origin through formal processing.
The key consideration is not whether the operation was performed, but whether the operation constitutes substantial processing that confers origin under the agreement.
Distinguishing Minor Processing from Substantial Processing
| Operation | Examples Commonly Considered Minor Processing | Examples That May Be Recognized as Substantial Processing | Points to Confirm |
|---|---|---|---|
| Packing and Repacking | Replacing boxes, bagging, label affixing | When performed as part of processing steps that alter product characteristics | Avoid assuming that packing alone confers origin. |
| Sorting and Washing | Simple sorting, dirt removal, visual inspection | When indispensable for manufacturing and causing changes in quality or properties | Verify what changes between before and after the operation. |
| Assembly | Simple assembly with minimal use of tools | Manufacturing or assembly involving multiple steps | Check complexity, number of steps, equipment, and technical details of the operation. |
| Cutting and Portioning | Simple size adjustment, repackaging into smaller units | Part of processing that defines product function or use | Confirm changes in use or shape before and after processing. |
| Mixing | Simple mixing or dilution | Manufacturing operations that change chemical or physical properties | Confirm whether new product characteristics emerge after mixing. |
| Inspection and Adjustment | Simple pre-shipment visual inspection, quantity confirmation | Adjustments, calibration, or quality stabilization steps that affect product performance | Check if the process influences product functionality, not just inspection. |
Whether a process is considered minor processing varies depending on the agreement and product. It is important not to judge solely by the process name but to verify the operation details, materials used, product condition before and after processing, and the relationship with Product-Specific Rules of Origin (PSR).
Key Points for Each Product Category
| Product Category | Typical Required Processes | Key Considerations | Primary Required Documentation |
|---|---|---|---|
| Textile Products | Spinning, weaving, knitting, cutting, sewing, finishing, etc. | Sewing alone may not suffice; verification may be needed from the yarn or fabric stage. | Documents on yarn and fabric, cutting and sewing records, process charts, subcontractor information |
| Chemical Products | Chemical reaction, purification, synthesis, extraction, specific treatments, etc. | Simple mixing, dilution, repackaging, or labeling may not meet the criterion. | SDS, manufacturing records, reaction process data, quality standards, process condition documents |
| Processed Food Products | Heating, fermentation, extraction, purification, seasoning, molding, canning, etc. | Simple repackaging or labeling alone may not confer origin status. | Raw material lists, formulation sheets, manufacturing process charts, production records, processing location documents |
| Machinery and Electrical Products | Assembly, processing, inspection, adjustment, parts of manufacturing process | It is necessary to distinguish between simple assembly and substantial manufacturing processes. | Parts lists, assembly process charts, work instructions, inspection records |
| Agricultural and Marine Processed Products | Processing, preservation treatment, preparation, drying, freezing, canning, etc. | Both the origin of raw materials and the processing steps may be relevant issues. | Raw material certifications, processing records, manufacturing process charts, quality records |
Processing Criterion for Textile Products
For textile products, the Processing Criterion becomes particularly important.
Textile products involve multiple stages such as yarn production, weaving, knitting, cutting, sewing, and finishing, so the requirement for where processing must occur within the agreement territory is often specified in detail for each stage.
For example, simply importing fabric from a third country and only sewing it within the agreement country may not meet the Product-Specific Rules of Origin (PSR) of the applicable agreement, resulting in the product not qualifying as originating.
In contrast, some cases require the production of fabric from yarn and subsequent sewing to be carried out within the agreement territory.
Documentation for each stage is crucial for textile products. It is necessary to verify the origin of the yarn, the place of fabric production, where cutting and sewing were performed, and whether any subcontracted processing was involved, ensuring the continuity of the production process can be properly explained.
Processing Criterion for Chemicals
For chemicals, the determination of origin may depend on whether specific chemical reactions or purification processes have been conducted within the agreement partner country.
Simple mixing, dilution, repacking, or packaging alone may not qualify as sufficient processing to confer origin.
In practice, it is necessary to verify details such as raw materials, reaction steps, final products, process conditions, manufacturing records, and quality standards.
For chemicals, it is important to confirm not only the process names but also whether actual chemical changes have occurred and whether the processes meet the requirements specified in the agreement.
Processing Criterion for Food Products
For processed food products, the origin of raw materials and details of the processing steps are crucial.
Simple repackaging, labeling, or basic mixing may not qualify as processing that confers origin.
Conversely, processes such as heating, fermentation, extraction, purification, seasoning, shaping, and canning are often considered substantial processing depending on the product category.
For food products, it is necessary to organize information such as raw material lists, manufacturing process charts, formulation sheets, production records, processing locations, and the presence of outsourced steps, and then verify these against the Product-Specific Rules of Origin (PSR) under the relevant agreement.
Processing Criterion under CPTPP
Within the CPTPP, the Product-Specific Rules of Origin (PSR) may include requirements such as Change in Tariff Classification (CTC), Regional Value Content (RVC), and the Processing Criterion.
For certain products, the Processing Criterion may be required on its own, while in other cases it may be an option alongside the CTC or RVC criteria.
Since CPTPP operates on a self-declaration system, it is important for the declarant using the Processing Criterion to retain documentation that can explain the manufacturing process.
This includes organizing process charts, production records, subcontracting documents, and raw material data so they are readily available for customs verification.
Specific processing steps and conditions vary by product, so it is necessary to check the HS code of the goods and the corresponding Product-Specific Rules of Origin (PSR) under CPTPP.
Processing Criterion under RCEP
Under RCEP, the Processing Criterion may be applied within Product-Specific Rules of Origin (PSR).
Because RCEP features broad regional cumulation, when materials sourcing and processing occur across multiple RCEP member countries, it is important to clarify which processes were performed in which country.
Even if processing takes place within an RCEP member country, it must be confirmed whether the process meets the Processing Criterion specified by the agreement.
It is not sufficient that operations simply occur in an RCEP member country; compliance with the Product-Specific Rules of Origin (PSR) must be verified.
When applying the Processing Criterion under RCEP, it is necessary to review the relevant countries, RCEP Origin Country, HS codes, Product-Specific Rules of Origin (PSR), cumulation rules, certification methods, and documentation retention requirements together.
When There Are Outsourced Processes
If part of the processing is outsourced, it is necessary to verify exactly which operations were performed by the subcontractor.
Even if your company ships the finished products, if the processes required to determine origin were conducted by the subcontractor, documentation of those processes may be required.
If the subcontractor is located overseas, it should also be confirmed whether that country is a party to the agreement and whether the processes are treated as valid under the agreement.
If documentation of the outsourced processes is insufficient, origin may not be explainable during customs verification, even if the necessary processing was actually performed.
Differences in Evidence Documentation Between In-House and Outsourced Processes
| Category | Details to Confirm | Main Evidence Documents | Notes |
|---|---|---|---|
| Processing in In-House Factory | Which process was performed, at which factory, and when | Production records, work instructions, process charts, inspection records, manufacturing flow diagrams | Easy to explain with internal documents, but actual work details are required beyond process names. |
| Domestic Outsourced Processes | What processing was carried out by the subcontractor | Outsourcing contracts, work instructions, processing reports, delivery records, subcontractor process charts | Documents explaining the process details from the subcontractor must be obtained. |
| Overseas Outsourced Processes | Subcontractor’s country location, whether it is an agreement member country, process details | Subcontractor documents, processing certificates, process charts, transport records, raw material transfer records | It should be confirmed whether the processing in that country can be validly recognized under the applicable agreement. |
| Processes Spanning Multiple Countries | Which country performed which process and in what order | Process flowcharts, manufacturing records from factories in each country, transport documents, cumulative verification records | Cumulative rules under CPTPP and RCEP should also be checked. |
When outsourced processing is involved, it is important to be able to explain origin not only for the company shipping the final product but also including the processing details of subcontractors.
Key Documents
| Document | Purpose of Verification | Main Holders | Issues If Missing |
|---|---|---|---|
| Product-Specific Rules of Origin (PSR) Reference | To confirm which processing operations are required | Exporter, Importer, Customs Broker | Risk of misidentifying required processing steps. |
| HS Code Reference | To identify the applicable PSR for the product | Importer, Exporter, Customs Broker | Possibility of applying a different PSR by mistake. |
| Process Chart / Manufacturing Flow | To explain the flow of production steps | Producer, Exporter | Unable to explain the overall process flow. |
| Production Records | To show evidence that the processing was actually performed | Producer, Manufacturing Department | Cannot prove that the processing steps were carried out. |
| Work Instructions | To verify which tasks were instructed | Producer, Manufacturing Department | Cannot explain the specifics of the tasks performed. |
| Raw Material List / Parts List / Formula Sheets | To confirm the relationship between materials used and processing | Producer, Purchasing Department | Cannot explain the state before and after processing. |
| Subcontractor Documentation | To verify processes performed by subcontractors | Subcontractor, Exporter, Producer | Cannot prove the subcontracted processing steps. |
| Processing Report | To confirm details of subcontracted or specific processing performed | Subcontractor, Producer | Cannot explain the activities carried out by the subcontractor. |
| Inspection Records / Quality Records | To confirm post-processing condition and quality changes | Producer, Quality Control Department | Cannot demonstrate changes resulting from processing. |
| Certificate of Origin / Origin Declaration | To verify the basis for declaring the product as originating | Exporter, Importer, Issuing Authority | Cannot confirm consistency between the certificate and processing evidence. |
When Judgment Is Difficult
Under the Processing Criterion, it can be challenging to determine HS code classification, interpret PSR, and evaluate the manufacturing process details.
This is especially true for chemical products, processed foods, textile goods, and products with complex manufacturing steps, where determining origin based solely on process names can be risky.
In cases where judgment is difficult, it may be advisable to consider prior rulings from customs or consultation with experts.
A prior ruling is a system where inquiries are made to customs before import declaration to confirm tariff classification, origin, and other matters in advance. Even when applying the Processing Criterion, if HS code or origin rule determinations are difficult, it is important to seek confirmation early.
Scope of Freight Forwarders' Involvement
Freight forwarders may assist in verifying documents such as Invoices, Packing Lists, Bills of Lading, and Sea Waybills, as well as confirming transport routes.
However, they are not in a position to verify whether the processing operations were actually conducted, assess the truthfulness of the process details, or determine origin status itself.
The responsibility to explain processing operations mainly lies with importers, exporters, and producers.
| Category | Support Typically Provided | Not to Be Determined | Practical Handling |
|---|---|---|---|
| Transport Documents | Assistance in reviewing Bills of Lading, Sea Waybills, transport routes, and Shipment Criteria documentation. | Final judgment on whether the Processing Criterion is met. | Organize transport documents separately from process evidence. |
| Customs Preparation | Assistance in verifying the presence of Invoices, Packing Lists, and proof-of-origin related documents. | Definitive verification of the accuracy of process content. | Confirm process details with exporters and producers. |
| Guidance to Shippers | Provide information on documents that should be confirmed with producers and exporters. | Guaranteeing origin status. | Limit to listing necessary documents and refer judgment to document holders. |
| Shipment Criteria | Support organizing transport documentation for direct shipping, transshipment, and intermediate points. | Determining satisfaction of the Processing Criterion under Product-Specific Rules of Origin (PSR). | Separate Shipment Criteria and the Processing Criterion as distinct points. |
| Responses to Customs Inquiries | Assist in providing transport records, document dispatch history, and gate-in/gate-out records. | Explain manufacturing records or process details on behalf of others. | Focus on supporting submission of logistics documents and connect explanation of processing to importers, exporters, or producers. |
| Verification of Outsourced Processes | Confirm presence of subcontractor documents received from exporters. | Make definitive judgments on whether required processes were actually conducted by subcontractors. | Verification of authenticity and content of subcontractor documents should be handled by exporters and producers. |
In practice, freight forwarders should not make definitive judgments on whether the Processing Criterion is met, but rather act in a supporting role to facilitate necessary documents, transport documents, customs procedures, and preparation for customs verification.
Common Practical Issues
| Scenario | Typical Issues | Documents to Verify | Practical Measures |
|---|---|---|---|
| Using third-country fabrics in textile products | Even if sewing is done within an agreement member country, processing from the yarn or fabric stage may be required. | Yarn/fabric data, cutting records, sewing records, PSR | Confirm whether sewing alone satisfies the requirement or if additional processing specified in the PSR is needed. |
| Performing simple mixing in chemical products | Mixing or dilution alone may be insufficient to confer origin. | SDS, reaction process data, manufacturing records, quality standards | Check if processes such as chemical reactions or purification meet the required criteria. |
| Repackaging processed food products | Simple repackaging or labeling may not be recognized as substantial processing. | Raw material lists, formulation sheets, manufacturing process charts, processing records | Verify the presence of substantial processes like heating, fermentation, extraction, or seasoning. |
| Carrying out required processes through domestic subcontracting | It may be difficult to prove which processes were actually performed by the subcontractor. | Subcontract contracts, processing reports, subcontractor process sheets, delivery records | Obtain process documentation from subcontractors and retain as proof. |
| Processes subcontracted overseas | If the subcontracting country is not an agreement member, those processes may not be recognized as valid. | Subcontractor location data, transport records, process sheets, cumulation documents | Confirm the subcontractor’s country status under the agreement. |
| Declaring origin based on minor processing only | Packing, sorting, labeling, or simple assembly alone may not confer origin. | Work instructions, process explanation documents, before-and-after processing condition records | Check against the PSR whether the processes qualify as minor or substantial. |
| Judging solely by process names | The same process name may have different implications depending on work content, equipment, and pre/post-processing conditions. | Manufacturing records, equipment information, work procedures, quality records | Ensure you can explain actual work performed rather than relying on process names alone. |
| Using multiple-country processes under RCEP | If processes are split across several RCEP member countries, careful organization of cumulation and PSR compliance is required. | Process sheets for each country, cumulation documentation, transport documents, supplier data | Organize the process flow clearly to show which steps were carried out in which countries. |
Application Scenarios for the System
Scenario 1: When Sewing Alone Is Insufficient for Garments Made from Third-Country Fabric
When importing garments under preferential tariff rates of CPTPP or RCEP, even if the sewing is done in a contracting country, the PSR requirements may not be met if the fabric used originates from a third country.
In such cases, it is necessary to verify not only the fact that the garment was sewn within the contracting country but also whether the PSR for the specific product requires processing from the yarn stage or recognizes processing from the fabric stage, and which steps—cutting, sewing, finishing—are mandated.
In practice, documentation such as yarn and fabric sources, cutting records, sewing records, and subcontractor information should be organized to determine whether sewing alone satisfies the requirements or if review of materials and processes is necessary.
Scenario 2: When Distinguishing Between Simple Mixing and Substantial Reaction Is an Issue in Chemicals
For chemicals, even if work is performed within a contracting country, simple mixing or dilution alone may be considered insufficient processing to confer origin.
However, when specific chemical reactions, purification, synthesis, extraction, or other substantive processing occurs that changes the product’s properties or use before and after processing, it may be possible to demonstrate that the Processing Criterion is met.
In this case, judgment based solely on the process name should be avoided; Safety Data Sheets (SDS), reaction process documentation, manufacturing records, quality standards, and process conditions must be reviewed to determine whether the steps correspond to those required under the PSR.
Scenario 3: When Simple Repackaging Fails to Demonstrate Origin for Processed Food Products
For processed food products, merely repackaging raw materials originating from a third country within a contracting country may not be recognized as processing sufficient to confer origin.
It is necessary to confirm whether substantial processing such as heating, fermentation, extraction, purification, seasoning, shaping, or canning is performed according to the product category.
In practice, materials such as raw material lists, formulation sheets, manufacturing process charts, processing locations, and production records should be organized to demonstrate that the operation is more than simple packaging and that the substantial processing required by the PSR is implemented.
Scenario 4: When the Required Processing Is Performed by a Subcontractor but Documentation Is Insufficient
If the necessary processing to confer origin is conducted by a subcontractor, internal documents from the exporting company alone may be inadequate to fully explain that the processing occurred.
Without subcontract agreements, work instructions, processing reports, subcontractor process tables, or delivery records, customs post-clearance verification cannot sufficiently clarify “which processes were performed, where, and by whom.”
In such cases, it is important to obtain process documentation from subcontractors before issuing certificates and retain these as supporting materials for origin certificates or declarations.
Scenario 5: When Coordination of Multiple Country Processes and Cumulation under RCEP Is Required
Under RCEP, materials procurement and processing may span multiple RCEP contracting countries.
In this situation, simply confirming that work occurred in an RCEP country is insufficient; it is necessary to specify which processes were performed in which country and whether these meet the Processing Criterion required by the PSR.
In practice, factory process sheets, manufacturing records, transport documents, and cumulation data from each country should be organized and used to explain origin in a way consistent with RCEP Origin Country rules, the cumulation system, and PSR conditions.
Points to Note
When applying the Processing Criterion, it is necessary to verify the relevant agreement and the Product-Specific Rules of Origin (PSR).
It is important to confirm whether the Processing Criterion is a standalone condition, an option alongside CTC or RVC, or a combined requirement.
Documents explaining not only the process names but also the actual work performed are required.
Minor processing such as packaging, labeling, sorting, cleaning, or simple assembly may not be recognized as qualifying processing under some agreements.
For textile products, confirming the stages such as yarn, fabric, cutting, and sewing is crucial. In chemical products, the presence or absence of specific chemical reactions or refining steps can be relevant. For processed food products, it is necessary to distinguish between mere repackaging and substantial processing.
If subcontracted processes are involved, process documentation from the subcontractor may be required. For overseas subcontracting, it is also necessary to confirm whether the subcontracting country is a party to the agreement.
When judgment is difficult, prior rulings or expert consultation may be considered. Insufficient supporting documentation may result in inability to demonstrate origin during customs verification.
Practical Checklist
- Have you confirmed the HS code of the applicable cargo?
- Have you identified the EPA or FTA to be used?
- Have you verified the Product-Specific Rules of Origin (PSR)?
- Have you confirmed whether the Processing Criterion applies to the product?
- Have you checked whether it is an option between CTC and RVC, or a combined requirement?
- Have you identified the processing operations required under the agreement?
- Can you explain the actual processing steps using the process flowchart?
- Are manufacturing records and work orders properly retained?
- Are you avoiding judgments based solely on minor processing?
- If outsourced processing is involved, have you obtained documentation from the subcontractor?
- If processing occurs overseas, have you confirmed that the country is a party to the agreement?
- Have you verified the relationship with the accumulation systems of CPTPP or RCEP?
- Do the statements on the Certificate of Origin or Origin Declaration match the processing documentation?
- Are processing records retained in preparation for customs review?
Summary
The Processing Criterion is a rule-of-origin standard that verifies what substantive processing the cargo underwent and in which country.
Unlike CTC or RVC, this criterion places emphasis on the actual content of the processes performed, making documents such as process flowcharts, manufacturing records, work instructions, and subcontractor documentation critical.
Especially in textiles, chemicals, and processed food products, simple packaging or labeling alone is not sufficient; it is necessary to confirm whether the substantial processing required under the relevant agreement has been carried out.
Under the Processing Criterion, it is important not only to confirm that the process occurred, but also to demonstrate that the process corresponds to the specific operations required by the Product-Specific Rules of Origin (PSR) under the applicable agreement.
In practice, it is essential to organize HS codes, PSR, processing operations, distinctions from minor processing, treatment under CPTPP and RCEP, and subcontracted process documentation to be ready to respond to customs inquiries.
The Processing Criterion is not a system judged only by the process name. Continuous management to explain which process was performed, in which country, by whom, and based on which evidence is crucial.
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.