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
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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
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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
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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 -
- 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)
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2. Calculate the sum of the originating material costs
54,000 + 20,000 + 14,000 = 88,000
3. Calculate using the build-up method.
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- Build-down method
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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 -
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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.
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1. Check if the good meets the BD55 %or more standard.(If the standard figure is more than 55 %, it meets the standard.)
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- MC method
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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 -
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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.
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1. Check if the good meets the MC 50 % or less standard.(If the standard figure is less than 50 %, it meets the standard.)
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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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