CTSH is the abbreviation of “Change of Tariff SubHeading”

A product is considered to be sufficiently worked or processed when it is
classified in a 6-digit level of the Harmonized System,
i.e. sub-heading, which is different from those in which all the non-originating
materials used in its manufacture are classified.

Example : CETA – Roasted coffee (HS sub-heading 0901.21)
The rule for roasted coffee (HS sub-heading 0901.21) requires:

“A change from any other subheading”

The manufacturer uses the following non-originating materials:
– coffee, not roasted (HS sub-heading 0901.11)

Coffee roasted in the EU is exported to Canada as EU originating since the
CTSH rule is fulfilled, namely, all materials used in the production of the final
product are classified under a tariff sub-heading different from the tariff
sub-heading of the roasted coffee.

CTH is the abbreviation of “Change of Tariff Heading”

A product is considered to be sufficiently worked or processed when it is classified in a
4-digit level of the Harmonized System, i.e. heading, which is different from those in
which all the non-originating materials used in its manufacture are classified.

Example: PEM Convention – Seats HS heading 94.01
A rule for the seats (HS heading 94.01) requires:

“Manufacture from materials of any heading, except that of the product”

The manufacturer uses the following non-originating materials:
– sawn wood (HS heading 44.07)
– fabrics (HS heading 52.08)
– foam/porolone (HS heading 39.03).
The seats are exported to Switzerland as EU originating since the CTH rule is fulfilled,
namely all non-originating materials used in the production of the final product are
classified under tariff headings different from the tariff heading of the seats.

CC is the abbreviation of “Change of Chapter”

A product is considered to be sufficiently worked or processed when it is classified in a
2-digit level of the Harmonized System, i.e. chapter, which is different from those in
which all the non-originating materials used in its manufacture are classified.

Example : CETA – Linseed oil HS sub-heading 1516.20
The rule for the vegetable fats and oils and their fractions (HS sub-heading 1516.20) in
CETA(Free trade agreement between EU and Canada) requires:

“A change from any other chapter”

The linseed (HS heading 12.04) is imported into the EU from Turkey and is used in the
manufacture of linseed oil in the EU. Therefore, the final product obtains EU
preferential origin when exported to Canada.

Focused Value Method is to calculate the Regional Value Content(RVC)
Based on the Value of Specified Non-Originating Materials.

Case study of “Focused value method” e.g.” wiring harness”

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.

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.

Case study of “Focused value method” e.g.” wired glass sheets”

A manufacturer in a Party to CPTPP makes wired glass sheets classified to
7005.30, from cast glass of 7003.10 and steel wire of 7217 that are imported
from Brazil (a non-party).
The wired glass sheets are sold to an Australian importer for the equivalent
of AUD200 each (excluding international shipment costs).

The imported cast glass costs the manufacturer the equivalent of AUD18/kg,
with each sheet of wired glass using five kilos of cast glass.
Cost of originating materials and production processes are AUD40 per sheet.
Annex 3-D to Chapter 3 of CPTPP identifies that the ‘focused value’ PSR for
cast glass of 7003.10 is:

50 per cent under the focused value method taking into account only
the non-originating materials of heading 70.03 through 70.05

RVC = Value of the Good – FVNM / Value of the Good x 100
In this case, RVC= (200-5kg x 18) / 200 x100 = 55%

Despite the wire also being non-originating, only the non-originating cast glass is
taken into account under the focused value method.
Therefore, the RVC for the wired glass sheets is 55 per cent and they are
therefore considered TransPacific Partnership originating goods.

“Net cost” represents all of the costs incurred by the producer minus expenses for
sales promotion (including marketing and after-sales service), royalties, shipping
and packing costs and non-allowable interest costs.

Example
An electric hair curling iron (subheading 8516.32)

Retrieved from:WCO ORIGIN COMPENDIUM

An electric hair curling iron (subheading 8516.32) is made in Mexico from
Japanese hair curler parts (8516.90). Selling price value 4.40; the value of
the non-originating hair curler parts is 1.20.

Example of Product-specific rule for headings 8516.32 is

(a). 60 percent where the transaction value method is used, or
(b). 50 percent where the net cost method is used.

There are two requirements to satisfy the rule of origin.
(a) calculation, adopting for “Transaction value method”
(b) calculation, adopting for “Net cost method”

If Transaction value method is used in this example,
The formula for calculating the qualifying value content is:

On the other hand, if the Net cost method is used,
The sum of “Non-originating materials” and “Cost of production” are
considered as a Net cost.