7.4-CAFTA-DR Rules of OriginCAFTA-DR Rules of Origin
In order to receive preferential treatment under the CAFTA-DR, U.S. goods exported to the partner countries must qualify as originating as prescribed under the Rules of Origin section of the Agreement. The Rules of Origin for the CAFTA-DR were largely modeled upon the North American Free Trade Agreement.
Go directly to the product specific rules of origin (Annex 4.1) or see the Harmonized Tariff Schedule of the United States at General Note 29, page 470.
Except as otherwise provided in Chapter 4 of the CAFTA-DR, a good is deemed originating where:
Some Examples
An example of a rule that employs a simple tariff shift is:
Regional Value Content
To view necessary information about calculating the Regional Value Content, click here.
To view examples of how to calculate the Regional Value Content, click here.
This FTA requires the following percentages be met:
Build-Down Method: 45%
Build-Up Method: 35%
Other Factors
Chapter Four of the CAFTA-DR outlines whether a good is eligible for preferential duty treatment. Below are some factors beyond the product-specific rules of origin which may be considered in making a determination of origin.
De Minimis Rule
All non-originating materials used in the production of the finished good that do not undergo a change in tariff classification are considered originating if the value of all those non-originating materials does not exceed ten percent of the adjusted value of the good, i.e., the de minimis amount. This is provided that the good meets all other applicable qualifications in Chapter 4. The de minimis rule does not apply when using the “build-down” method to calculate the RVC. The value of all non-originating materials used in the production of a good must be included in the calculation.
For textiles and apparel, please refer to Article 3.25.7 and Annex 4.1 of the CAFTA-DR for the relevant de minimis rule.
To review exceptions, go to Annex 4.6 of the CAFTA-DR.
Accumulation
Originating goods or materials refers from one or more Parties to the CAFTA-DR that are incorporated into a good in the territory of another Party to the Agreement are considered originating materials of the Party where the incorporation takes place.
Fungible Goods and Materials
Fungible goods or materials refers to goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical. The CAFTA-DR allows importers to claim a fungible good or material as originating where the importer, exporter, or producer has either physically segregated each fungible good or material or used any inventory management system that is recognized in the Generally Accepted Accounting Principles or is otherwise accepted by the party where the production is performed. Examples of inventory methods include: averaging, last-in first-out (LIFO), or first-in first-out (FIFO). Please note that physical separation of the goods is not necessary, but may be used for each fungible good or material.
Indirect Materials
Indirect materials are considered to be originating materials regardless of where they are produced. An indirect material is defined as a good used in the production, testing, or inspection of a good, but not physically incorporated into the good, including:
Go directly to the product specific rules of origin (Annex 4.1) or see the Harmonized Tariff Schedule of the United States at General Note 29, page 470.
Except as otherwise provided in Chapter 4 of the CAFTA-DR, a good is deemed originating where:
- it is wholly obtained* or produced entirely in the United States, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and/or Nicaragua.
- it is produced entirely in a signatory country using non-originating material (i.e., materials from outside the countries listed above) that satisfy the rule of origin specified in Annex 4.1 of the Agreement. See the "How To Read the Rules of Origin" section below for more information.
- A good produced entirely in the United States (and/or in one of the signatory countries of the Agreement) exclusively from materials that are already originating (by meeting the qualifications described above).
Some Examples
An example of a rule that employs a simple tariff shift is:
- Rule of Origin: "A change to heading 19.05 from any other chapter."
- Products: Breads, pastries, cakes, biscuits (HS 1905.90)
- Non-U.S., Central American, or Dominican input: Flour (classified in HS chapter 11), imported from Europe.
Regional Value Content
To view necessary information about calculating the Regional Value Content, click here.
To view examples of how to calculate the Regional Value Content, click here.
This FTA requires the following percentages be met:
Build-Down Method: 45%
Build-Up Method: 35%
Other Factors
Chapter Four of the CAFTA-DR outlines whether a good is eligible for preferential duty treatment. Below are some factors beyond the product-specific rules of origin which may be considered in making a determination of origin.
De Minimis Rule
All non-originating materials used in the production of the finished good that do not undergo a change in tariff classification are considered originating if the value of all those non-originating materials does not exceed ten percent of the adjusted value of the good, i.e., the de minimis amount. This is provided that the good meets all other applicable qualifications in Chapter 4. The de minimis rule does not apply when using the “build-down” method to calculate the RVC. The value of all non-originating materials used in the production of a good must be included in the calculation.
For textiles and apparel, please refer to Article 3.25.7 and Annex 4.1 of the CAFTA-DR for the relevant de minimis rule.
To review exceptions, go to Annex 4.6 of the CAFTA-DR.
Accumulation
Originating goods or materials refers from one or more Parties to the CAFTA-DR that are incorporated into a good in the territory of another Party to the Agreement are considered originating materials of the Party where the incorporation takes place.
Fungible Goods and Materials
Fungible goods or materials refers to goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical. The CAFTA-DR allows importers to claim a fungible good or material as originating where the importer, exporter, or producer has either physically segregated each fungible good or material or used any inventory management system that is recognized in the Generally Accepted Accounting Principles or is otherwise accepted by the party where the production is performed. Examples of inventory methods include: averaging, last-in first-out (LIFO), or first-in first-out (FIFO). Please note that physical separation of the goods is not necessary, but may be used for each fungible good or material.
Indirect Materials
Indirect materials are considered to be originating materials regardless of where they are produced. An indirect material is defined as a good used in the production, testing, or inspection of a good, but not physically incorporated into the good, including:
- fuel and energy;
- tools, dies, and molds;
- spare parts, and materials used in the maintenance of equipment and buildings;
- lubricants, greases, compounding materials, and other materials used in production or used to operate equipment and buildings;
- gloves, glasses, footwear, clothing, safety equipment, and supplies;
- equipment, devices, and supplies used for testing or inspecting the good;
- catalysts and solvents; and
- any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production.