Here is a case study of Value Added method.

Company A manufactures Table lamps (HS SubHeading 9405.20)

Table lamps of SubHeading 9405.20 are manufactured from the following
non-originating materials:

The lamps are sold at an ex-works price of € 20.-

The list rule for heading 94.05 requires the following working or processing to
be carried out on non-originating material:

“Manufacture in which the value of all the materials used does not exceed 50 %
of the ex-works price of the product”.

The total value of the non-originating materials used in the manufacture of one
lamp (€ 9.38) is less than 50 % of the ex-works price of one lamp (€ 20.-).

The origin requirements are fulfilled and the lamps can be regarded as
originating products.

Here is a case study of Value Added method.

Company A manufactures Plastic Boxes (HS heading 3923)

from Non-originating granules of plastics (heading 3901).

Non-originating granules of plastics are imported from country B where
is not a  Party of the FTA;

The unit price of a single Plastic Boxes is priced as:
Ex-works price of the boxes: € 10.- per box.
Value of granules used: € 4.- per box.

Example PSR for goods of subheading 3923 is:

“Manufacture in which the value of all the materials used does not exceed
50 % of the ex-works price of the product”.

As the value of the granules needed for the manufacture of one box (€ 4.-) is less
than 50 % of the value of the final box (€ 10.-), the condition to acquire originating
status is fulfilled.

Therefore, the boxes can be regarded as originating products.

But when the price of the granules soars to (€ 6.-), it’s price becomes more than
50% of the ex-works price of one box (€ 10.-).

In this situation, the condition to acquire originating status is not fulfilled.
The boxes, therefore, cannot be regarded as originating products.

Personally I do not recommend to adopt the VA method because foreseeing the
future price of the material is almost impossible.

If it’s possible, I would recommend adopting the CTC method rather than The
VA method.

Here is a case study of Value Added method.

A company in TPP Party A manufactures engine wiring harness (subheading 8544.30)
from the following materials:

• Non-originating copper wire (subheading 7413.00) imported from country B;
• Originating plastic ties (subheading 3926.90) imported from country C;
• Non-originating plastic tape (subheading 3926.90) imported from country D;
• Non-originating connectors (subheading 7326.90) imported from country E.

The unit price of a single harness is priced as:

Using the provision in Article 3.5 of the TPP Agreement on how to calculate the
regional value content (RVC), different methods can be used to determine if the
harness is originating.

The PSR for goods of subheading 8544.30 is:
A change to a good of subheading 8544.30 from any other subheading except
from heading 74.08, 74.13, 76.05, 76.14 or subheading 8544.11 through
8544.20 or 8544.42 through 8544.60; or
regional value content of not less than:
a. 35% under the build-up method
b. 45% under the build-down method
c. 60% under the focused value method taking into account only the
nonoriginating materials of heading 74.08, 74.13, 76.05, 76.14 and
subheading 8544.11 through 8544.60.

Calculate RVC:

a. Focused value method

Focused value method is based on the value of specified non-originating materials.

Since subheading 7413.00 is subject to the exception in PSR 8544.30, “Non-originating
copper wire (subheading 7413.00) imported from country B;” is the material that
does not satisfy CTC rule.

Therefore subject to “Focused value method” is only this “copper wire”

RVC = Value of the Good – FVNM / Value of the Good x 100
In this case, RVC= (380-115) / 380 x100 = 69.73%

The threshold for FVNM is 60% so the harness will be considered to be originating.
It is important to note that all the other non-originating materials of subheadings not
mentioned in the specific PSR are disregarded when using the FVNM for
calculating the RVC.

b. Build-down method

Build-down method is based on the value of non-originating materials.

RVC = Value of the Good – VNM / Value of the Good x 100
In this case, RVC= (380-215) / 380 x100 = 43.42%
Here the goods will be considered non-originating since the RVC is less than 45%.

c. Build-up method: based on the value of originating materials

Build-up method is based on the value of originating materials

RVC = VOM / Value of the Good x 100
In this case, RVC = 30 / 380 x 100 = 7.89%
The goods are non-originating using the build-up method since the RVC is less than
the required 35%.
The three methods explained above are alternatives. A good is originating if it meets
one of the methods to calculate the regional value content.

Here is a case study of De Minimis method.

Company A manufactures baby carriages (HS8715.00) in Japan and plans to
export them to Chile under Agreement between Japan and Chile.

The product specific rules for baby carriage (HS8715.00) under the Agreement are:

A change to heading 87.05 through 87.16 from any other heading; or
No required change in tariff classification to heading 87.05. through 87.16,
provided there is a qualifying value content of not less than 45 percent when the
Build-down method is used, or of not less than 30 percent when the Build-up
method is used.

To prove that the baby carriage qualifies as an originating good of Japan,
Company A decided to choose the CTC rule in this case.

Baby carriage is made from Indian aluminum bar (HS7604.10) and
Chinese handle grip (HS8715.00).

Since handle grip does not undergo “change in tariff classification from
any other heading”, baby carriage does not meet the CTC rule.
But if the value of handle grip (HS8715.00) is equivalent to 10% of transaction
value of baby carriage or less, Company A is allowed to disregard the portion of
handle grip for the purposes of the CTC rule pursuant to De Minimis provision
of Article 32.

Specific percentages referred to in Article 32(De Minimis)is here.

Here is a case study of Accumulation method.

Company A manufactures color TVs (HS8528.12) in Japan and plans to export
them to Chile under the Agreement between Japan and Chile.
Tuners (HS8529.90) which are used in the manufacturing process of the color
TV are imported from Chile.

The product specific rules for colour TV (HS8528.12) under the Agreement are:
A change to heading 85.25 through 85.28 from any other heading; or
No required change in tariff classification to heading 85.25 through 85.28,
provided there is a qualifying value content of not less than 45 percent
when the Build-down method is used, or of not less than 30 percent
when the Build-up method is used.

To prove that the color TV qualifies as an originating good of Japan, Company A
has to prove that the color TV satisfies either the CTC rule or qualifying value
content of not less than 45 percent when the Build-down method is used, or of not
less than 30 percent when the Build-up method is used.

Company A decided to choose the method based on the value of originating
materials (Build-up method) in this case.

Company A’s manufacturing costs of color TV

If Parts c (tuner) is an originating good of Chile, the color TV will qualify as an
originating good of Japan by considering Parts c as an originating material of
Japan in accordance with of Article 33.

The calculation of QVC of the color TV is:

This calculation shows that the TV qualifies as an originating good of Japan.