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Country of Origin

Country of origin determination through change in tariff heading

Overview

Change in tariff heading (CTH) means if the tariff heading or HS code of a non-originating material is changed as it is processed in the region, the non-originating material is recognized as an originating good. It is important to decide to what degree of CTH meets the country of origin determination standard. There are three types of CTH: 6 digits, 4 digits and 2 digits.

Example of country of origin determination through CTH
  • Example of country of origin determination through CTH
    Classification Product name Country of origin Country of origin certificate HS Code
    HS Code ABS resin China X 3926.10
    HAC8270 KR O 3926.10
    PP resin KR O 3902.10
    HSP-375 Unknown X 3902.10
    HDC HL125 KR O 3902.10
    M1252 Unknown X 3902.10
    • Product name: Car door trim (HS8708.29)
    • Agreement: Korea-EU FTA
    • Country of origin determination standard: CTH
    • 1. Find a non-originating material.
    • 2. Check the tariff heading (HS code) of the finished product and the raw material.
    • 3. Compare the tariff heading and check the CTH.
  • The 4 digits in the tariff heading of an unknown or non-originating raw material are different from those of a finished product.

    When a car door trim made of six kinds of raw materials meets the CTH, it is recognized as an originating product.

The HS code management is critical for the CTH. It is desirable to commission an expert including a customs agent to handle the task and in case there are different views in confirming the CTH, it is recommended to prepare evidence documents through the pre-confirmation of tariff conducted by the Customs Valuation and Classification Institute.

Country of origin determination through value-added standard

Overview

If a certain level of added value has been created in the region, the entitlement as an originating good is granted. Depending on the calculation method, the determination can be based on build-down method, build-up method, net cost method or MC (value of import content) method.

Example of country of origin determination through value-added standard
  • Build-up method
      • Example of country of origin determination through value-added standard(Build-up method )
        Classification Product name Country of origin Country of origin certificate Unit price (KRW)
        Raw material name ABS resin KR O 54,000
        HAC8270 KR O 20,000
        PP resin KR O 14,000
        HSP-375 Unknown X 21,000
        HDC HL125 Unknown X 17,000
        M1252 Unknown X 19,000
        Labor cost and expenses 11,000
        Local transport cost 2,000
        Unit price of finished good (FOB) 173,000
        • Product name: Car door trim (HS8708.29)
        • Agreement: Korea-US FTA
        • Country of origin determination standard: BU35 % or more
        • 1. Check if the good meets the BU35 % or more standard(If the standard figure is more than 35 %, it meets the standard.) Confirmation of the sale price = 173,000 (FOB)
        • 2. Calculate the sum of the originating material costs
          54,000 + 20,000 + 14,000 = 88,000
        • 3. Calculate using the build-up method.
        역내산 재표비 88,000 / 판매가 173,000 * 100% = 50.86%
      • 직접법은 역내산 재료비 / 조정가격 * 100% (BU 35% 이상으로 충족)
  • Build-down method
      • Example of country of origin determination through value-added standard(Build-up method )
        Classification Product name Country of origin Country of origin certificate Unit price (KRW)
        Raw material name ABS resin KR O 54,000
        HAC8270 KR O 20,000
        PP resin KR O 14,000
        HSP-375 Unknown X 21,000
        HDC HL125 Unknown X 17,000
        M1252 Unknown X 19,000
        Labor cost and expenses 11,000
        Local transport cost 2,000
        Unit price of finished good (FOB) 173,000
        • Product name: Car door trim (HS8708.29)
        • Agreement: Korea-US FTA
        • Country of origin determination standard: BD 55 % or more
        • 1. Check if the good meets the BD55 %or more standard.(If the standard figure is more than 55 %, it meets the standard.)
          Sale price = 173,000 (FOB)
        • 2. Calculate the sum of the originating material costs
          21,000 + 17,000 + 19,000 = 57,000
        • 3. Calculate using the build-down method.
        (171,000-57,000)/(판매ㄱ=173,000) * 100% = 67.05%
      • MC법은 EXW가격 분의 역외산 재료비 곱하기 100% 은 MC 50%미만으로 충족
  • MC method
      • Example of country of origin determination through value-added standard(Build-up method )
        Classification Product name Country of origin Country of origin certificate Unit price (KRW)
        Raw material name ABS resin KR O 54,000
        HAC8270 KR O 20,000
        PP resin KR O 14,000
        HSP-375 Unknown X 21,000
        HDC HL125 Unknown X 17,000
        M1252 Unknown X 19,000
        Labor cost and expenses 11,000
        Local transport cost 2,000
        Unit price of finished good (FOB) 173,000
        • Product name: Car door trim (HS8708.29)
        • Agreement: Korea-EU FTA
        • Country of origin determination standard: MC 50 % or less
        • 1. Check if the good meets the MC 50 % or less standard.(If the standard figure is less than 50 %, it meets the standard.)
          Sale price = 171,000 (EXW)
        • 2. Calculate the sum of the originating material costs.
          21,000 + 17,000 + 19,000 = 57,000
        • 3. Calculate using the MC method.
        57,000/(판매가=171,000) * 100% = 33.33%
      • MC법은 EXW가격 분의 역외산 재료비 곱하기 100% 은 MC 50%미만으로 충족

The country of origin determination through value-added standard can be responded to the future verification only with the information of raw material receipts and payments, product receipts and payments and company’s internal cost policy.

Country of origin determination through specific manufacturing or processing operation standard

If the raw materials are processed in the region in the process defined by the Agreement, the entitlement of originating good is granted. The standard is usually applied to petroleum, chemical, plastic, and textile products. To meet the standard, there should be a supporting document proving the raw material has been handled through a defined process including a production journal and list of facilities capable of performing the process.

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