An explanation of the "Rules of Origin" that can be utilized when exporting under a free trade agreement. This article is part of "A Basic Guide to Exporting", provided by the U.S. Commercial Service, to assist companies in exporting. Last Published: 10/20/2016
One of the key ways to take advantage of the Free Trade Agreement (FTA) is to understand the Rules of Origin (ROOs). Put simply, to qualify for the reduced-duty benefit, the product exported must originate from an FTA party or must contain a specified percentage of U.S. inputs and components. Each FTA has its own Rules of Origin that describe how exported goods shipped to a country or a region may qualify for duty-free or reduced-duty benefits. Because the ROOs are FTAspecific and product-specific, they need to be followed carefully.
The next section presents a general overview of the steps that must be taken before a good can be qualified for an FTA benefit. The different types of ROOs are examined, and the specific ways products may qualify for FTAs are explained. These include the concept of substantial transformation and product-specific and percentage-based formulas used in qualifying products for FTAs. How the ROOs are applied to specific FTAs is explained, and the ROOs for textiles, chemicals, and agricultural products, as well as the de minimis provision, fungible goods, and shipping spare parts and accessories, are all discussed.
To receive preferential treatment under an FTA, the exported good:
1. Must be made in the FTA territory
2. Must meet the appropriate Rule of Origin pertaining to specific products and the specific FTA
3. Must be documented as originating via appropriate certifications or information provided to the importer or its representative broker
Each FTA contains a specific chapter on Rules of Origin Procedures and lists all product-specific ROOs by Harmonized System (HS) numbers. The final texts of all FTAs can be found at 1.usa.gov/1ph6Np9.