RULES OF ORIGIN

FOR FTA
MALAYSIA PAKISTAN
MALAYSIA JAPAN
ASEAN CHINA
ASEAN KOREA
MATRADE
12 OCTOBER 2006

Content
Background:

- Definition of ROO
- Origin criteria
- Important concepts
Malaysia - Pakistan FTA (MPFTA)
Malaysia - Japan FTA (MAJEPA)
ASEAN - China FTA (ACFTA)
ASEAN - Korea FTA (AKFTA)
Operational Certification
Procedures (OCP)

ROO Definition
The criteria used to determine the
country in which the good has been
produced or manufactured.
The basis used for international
trade purposes.
Becoming more complex since more
goods are produced from inputs/
materials coming from multiple
origins.

Why We Need ROO?

Determine whether a good qualifies for

preferential treatment under a trading
arrangement (FTA).

Ensure benefits are limited to products

originated from the contracting parties.

Preserve (increase) existing external

protection of countries within the FTA.

Originating Goods

Goods that meet the conditions

for preferential market access.

All other goods are called the

non-originating goods.

Origin Criteria

Wholly obtained or produced

Substantial Transformation (ST):

- Value added (VA) method
- Change in Tariff Classification (CTC)
- Specified Process of Manufacture

Wholly Obtained Goods

Originate entirely within the exporting country.
Includes:
- live animals born and raised in that country;
- animals obtained by hunting, trapping, fishing,
gathering or capturing in that country;
-

products obtained from live animals;

plants and plant products harvested, picked or
gathered in that country;
- products of sea-fishing and other products
taken from the sea outside a country;
- goods obtained or produced on board factory
ships;

..wholly Obtained Goods

Products taken from the sea-bed or subsoil
beneath the sea-bed outside a country;
Minerals and other naturally occurring substances;
Scrap and waste derived from manufacturing or
processing operations or from consumption in that
country and fit only for disposal or for the
recovery of raw materials; and
Goods obtained or produced in that country solely
from products referred to above

Substantial Transformation
A product has undergone sufficient working
or processing in the exporting country and
has been transformed into a new and
different article.

ST can be measured through:

- Value added (VA)/test of origin method;
- Change in Tariff Classification (CTC);
- Specified Process of Manufacture;
- Combinations of the above;

Value-added Method
Defines the degree of transformation
required in terms of:
- minimum percentage of value that must
come from the originating country; or
- maximum amount of value that come
from the use of imported parts and
materials.
Methods for calculating VA:
- net-cost method
- ex-factory method
- FOB-based (transaction value)

 Value-added Method
The results of the calculation is called:
- Local/Regional Value Content (RVC) or
- Qualifying Value Content (QVC)
Examples:
- CEPT/AFTA: 40%;
- ASEAN-China FTA: 40%
- NAFTA: 50-60%
- Singapore-Japan FTA: 60%

Net-cost method
RVC = NC VNM

x 100

NC
where

RVC is the regional value content of a good (%);

VNM is the value of non-originating materials used
by the producer in the production of the goods; and
NC is the total cost occurred in respect of all goods
produced by a producer, minus any costs related to
sales promotion, marketing, after-sales service,
packaging shipping, etc.

CEPT Local Content

Calculation of 40% local content

Value of imported
Value of undetermined
non-ASEAN materials, + origin materials, parts
parts or produce
or produce
________________________________________ x 100% < 60
FOB Price

Change in Tariff Classification

(Tariff shift rule)
Determine the origin of good by specifying the
CTC of the Harmonised System of Tariff
Nomenclature (HS)
ST occurred if a good obtained is classified in a
different tariff classification than that of its
non-originating inputs used in the process
CTC can occur at:
- Chapter level (CC): 2 digit HS
- Heading level (CTH): 4 digit HS
- Sub-heading level (CTSH): 6 digit HS
- Split heading/sub-heading

Specified Process of Manufacture

Defines certain manufacturing or
processing operations that a product must
undergo in the exporting country to confer
origin (positive test).
Or, specifying manufacturing/processing
procedures that do not confer origin
(negative test).
Often used in conjunction with CTC and/or
VA methods.
Widely applied for textiles & clothing and
chemical products.

Products Specific Rules

Product Specific Rule or PSR is applicable
to certain goods due to:
- inability of the product to meet the
general rule;
- requirement for flexible rule; or
- sensitivity of the products that requires
stringent rule.

Important Concepts

Cumulation

Tolerance or De Minimis

Absorption principle

Neutral elements

Packing and packaging

Accessories, parts and tools

Interchangeable goods/materials

Minimal operations and processes

Cumulation

Inputs originating in other countries which

are members of the regional association are
regarded as domestic input.

Types:
- bilateral
- diagonal
- full cumulation

ROO: 50% local content

Materials

Country A

20 % LC

Country B

30% LC

Country C

Donor country

Country D

Tolerance or De Minimis

Rules that allow certain percentage of nonoriginating materials to be used without

affecting the origin of the final product.

The rule applies to CTC and specific

manufacturing process but not affect the
value added rule.

Absorption Principle
Parts and materials which have acquired
originating status by satisfying the relevant
ROO for that product can be treated as being
of domestic origin in any further processing
and transformation.

Neutral elements
The origin of the power and fuel, plant and
equipment, including safety equipment, or
machines and tools used to obtain a good or
the materials used in its manufacture which
do not remain in the good or form part of the
good shall not be taken into account.

Packing and Packaging Materials

and Containers
The origin of packing and packaging
materials and containers presented and
classified with the goods shall be
disregarded.

Accessories, Spare Parts and Tools

To be disregarded when sold therewith
and correspond, in kind and number, to the
normal equipment thereof.

Minimal Operations and Processes

Operations or processes undertaken, by themselves
or in combination with each other for the purposes
listed below, are considered to be minimal and shall
not be taken into account in determining whether a
good has been wholly obtained in one country:
ensuring preservation of goods in good
condition for the purposes of transport or
storage;
facilitating shipment or transportation;
packaging or presenting goods for sale;

MALAYSIA-PAKISTAN FTA
(MPFTA)

Malaysia - Pakistan
Interim ROO for the Early Harvest
Programme (EHP)

Origin criteria:

- Wholly obtained or produced

- 40% value content (single/cumulative)
Cumulation: Aggregate Malaysia-Pakistan

FTA
content on final product must not
be less than 40%.

Specific rules for selected products:

textiles and textile products

jewellery

Malaysia-Pakistan
Formula for calculating the Regional Value
Content (RVC)
Value of Non
Malaysia-Pakistan +
FTA materials

Value of materials
of undetermined
origin
x 100% < 60%

FOB

Malaysia-Pakistan
PODUCT SPECIFIC RULES

Textiles and textile products

One process rule:

- spinning
- weaving
- bleaching
- dyeing
- printing
- finishing
Jewellery

Change in tariff heading (CTH)

Malaysia-Pakistan
Minimal operations and processes
Ensuring preservation of goods in good
condition for the purposes of transport or
storage.

Facilitating shipment or transportation.

Packaging or presenting goods for sale (This

excludes encapsulation which is termed
packaging by the electronics industry).

Malaysia-Pakistan
Example of PSR

5208.11.000 - Unbleached: Plain weave,

weighing not more than 100 g/m2:
A change to heading 52.08 through 52.12
from any heading outside that group,
provided that the fabric is undergone one
or more of the preparatory or finishing
operations.

Malaysia-Pakistan
Example of PSR
5509.11.000 - Containing 85% or more by

weight of polyester staple fibres: Single

yarn:

A change to heading 55.09 from any heading

outside that group, except from heading
50.04 through 50.06, 51.06 through 51.10,
52.03 through 52.07, 54.01 through 54.06 or
55.06 through 55.11.

Malaysia - Pakistan

5516.12.000 - Woven fabrics of artificial

staple fibres: Dyed
A change to heading 55.16 from any heading outside that
group or,
A change to heading 55.16 from heading 50.04 through
50.06, 51.06 through 51.10, 52.04 through 52.07,
53.06
through 53.08, 54.01 through 54.06 or 55.08 through 55.11,
provided that the fabric is dyed or
printed, undergone
one or more of the preparatory or
finishing operations;
or

A change to heading 55.16 from heading 50.04 through

50.06, 51.06 through 51.10, 52.04 through 52.07,

53.06
through 53.08, 54.01 through 54.06 or 55.08 through 55.11,
provided that the yarn is dyed prior to weaving the fabric,
undergone one or more of the
preparatory or finishing
operations.

Malaysia - Pakistan
Example of PSR

7113.11.000 - Of precious metal

whether or not plated or clad with
precious metal: Of silver, whether or
not plated or clad with other precious
metal:
A change to heading 7113 from any
other headings.

MALAYSIA-JAPAN FTA
(MAJEPA)

Malaysia - Japan
Origin criteria:
Wholly obtained or produced
40% Value Content or CTSH
Cumulation: for certain products allows

for cumulation from ASEAN countries.

Specific rules for selected products:

textiles and clothing
agriculture and processed agricultural products
leather and footwear products
cement

Malaysia - Japan

Formula for calculating the RVC

FOB - Value of Non-originating Material x 100%

FOB

Malaysia-Japan

Refrigerator:
Part A (Japan) -

US$ 200

Part B (Japan) -

US$ 100

Part C (China) -

US$ 200*

Part D (India) -

US$ 200*

Other Costs (N/A)

FOB Price

US$1,000

US$ 300

US$1,000- US$400* x 100 = 60%

US$1,000
The product (refrigerator) qualifies as an originating
good.

Malaysia - Japan
PRODUCT SPECIFIC RULES

Textiles and clothing

Two process rule:

- spinning
- weaving
- bleaching
- dyeing
- printing
- finishing

Flexibility one of the processes could be

done within the ASEAN countries.

Malaysia - Japan
Agriculture
and
processed
agricultural products (Chapter 1 -21)

Exclusive wholly obtained or Chapter

Change (CC) with allowable cumulation

from ASEAN countries.
Leather

and footwear
(Chapters 41, 43 and 64)
Exclusive wholly obtained.

products

Malaysia - Japan

Cement (Chapter 25)

Cement

clinkers

and

portland

cement change in tariff heading

(CTH)
Other white cement change in

tariff subheading (CTSH)

Malaysia - Japan

De Minimis : A good that does not undergo

a change in tariff classification (CTC) shall
be considered as originating if:
if the value of non-originating materials
(NOM) does not exceed 10% of the
FOB value of the good; or

for textiles and apparel, if the weight

of NOM does not exceed 7% of the
total weight of the product.

Malaysia - Japan
Example of PSR
Chapter 52 - Cotton

A change to heading 52.04 through 52.07

from any heading outside that group,
provided
that,
where
non-originating
materials of heading 52.03 are used, each of
the non-originating materials is carded or
combed in the territory of either Country or
a third state which is a member country of
the ASEAN.

Malaysia - Japan

Chapter 61 - Articles of Apparel and Clothing

Accessories, Knitted or Crocheted
A change to heading 61.01 through 61.17 from
any other chapter, provided that, where nonoriginating materials of heading 50.07, 51.11
through 51.13, 52.08 through 52.12, 53.09
through 53.11, 54.07 through 54.08, 55.12
through 55.16 or chapter 60 are used, each
of the non-originating materials is knitted or
crocheted in the territory of either Country
or a third State which is a member country
of the ASEAN.

Malaysia - Japan

1604.13 - Sardines, sardinella and brisling or

sprats
A

change to subheading 1604.13 from any

other chapter, provided that, where nonoriginating materials of chapter 3 are used,
each of the non-originating materials is obtained
by fishing in the territory of a third State
which is a member country of the ASEAN or
taken by vessels, which are registered in and sail
under the flag of a third State which is a
member country of the ASEAN, from the sea
outside the territorial sea of that third State.

Malaysia - Japan
Chapter 41 - Raw Hides and Skins
(Other than Furskins) and Leather:

A change to heading 41.01 through

41.03 from any other chapter.

ASEAN-CHINA FTA
(ACFTA)

ASEAN-China
Based on CEPT ROO and OCP
Origin criteria:
Wholly obtained or produced
40% Value Content
Cumulative incl. all ASEAN countries and

(excl. Hong Kong, Taiwan, Macau)

Specific rules for selected products:

textiles products
preserved fish food

leather goods and furskin products

footwear

China

ASEAN-China

Formula for calculating the RVC

Value of Non
ACFTA materials

Value of materials
of undetermined
origin
x 100% < 60%

FOB Price

ASEAN-China
PSR as the Only Rule
Applicable to 6 wool and woven

products.

PSR for other products is being

negotiated

Products (input) must be wholly

obtained from within ACFTA.

40% Value Added or other rules

cannot be applied for these products

ASEAN-China

PSR as the Alternative Rule

Applicable to 466 products covering:

- textiles and textiles products;

- preserved fish food;
- leather goods, furskin products;
- footwear.
Exporters can choose whether to use

40% VA rule or alternative PSR.

ASEAN-China

The Alternative Rule is based on:

- specific process of manufacture
for textiles and textiles products
(adopted from CEPT ROO).
- Change of Tariff Classification
(CTC) for other products, mostly
Change of Tariff Heading (CTH).

ASEAN-China
Minimal operations and processes

Ensuring preservation of goods in good

condition for the purposes of transport
or storage.
Facilitating shipment or transportation.
Packaging or presenting goods for sale
(This excludes encapsulation which is
termed packaging by the electronics
industry).

ASEAN-KOREA FTA
(AKFTA)

ASEAN-Korea
Origin criteria:
Wholly obtained or produced
40% RVC or CTH
Cumulative includes all ASEAN countries

Korea

Specific rules for selected products:

agriculture products
textiles products
process agricultural products
Iron and steel
automotive

and

ASEAN-Korea

Formula for calculating RVC

Built-up Method
RVC = Value of Originating Material x 100%
FOB

Build-down Method
RVC = FOB - Value of Non-originating Material x 100%
FOB

ASEAN-Korea

PSR as the Only rule

General rule of 40% RVC or CTH
cannot be applied for these products
The rules are based on:
- wholly obtained in a territory of the
exporting country
- wholly obtained within AKFTA
- process rule
- Change in Tariff Classification at
various level: CC, CTH or CTSH
- combination of RVC and/or CTC

ASEAN-Korea
Agriculture (Chapter 1 14)

wholly obtained in the territory of the

exporting country except:
- 25

tariff lines - wholly obtained in the

territory of any party

- 27 tariff lines RVC at various % or CTC at

various level.

Processed agricultural products (Ch 15 - 24)

RVC or CTC or combination of RVC and/or

CTC

ASEAN-Korea
Textiles and clothing

Chapters 50 - 59: generally CTC or

RVC 40%. Certain tariff lines require
CTC accompanied by at least two
preparatory or finishing operations.

Chapters 61 - 63 : CC provided that

the good is both cut and sewn in the
territory of any party.

ASEAN-Korea

Other industrial products

(124 tariff lines)

RVC

CTC
Combination of RVC and/or CTC

ASEAN-Korea

De Minimis : A good that does not undergo

a change in tariff classification shall be
considered as originating if:

if the value of NOM does not exceed

10% of the FOB value; or
for textiles and apparel, if the weight
of NOM does not exceed 10% of the
total weight of the product.

ASEAN-Korea
Example of PSR
0305.20 - Livers and roes of fish,

dried, smoked, salted or in brine

Wholly-Obtained or Produced in
the territory of any Party.

ASEAN-Korea
1604.16 - Anchovies

Change to Subheading 1604.16 from any

other Chapter, provided that the materials
from Chapter 3 are Wholly-Obtained or
Produced in the territory of any Party; or A
regional value content of not less than 40
percent of the FOB value of the good,
provided that the materials from Chapter 3
are Wholly-Obtained or Produced in the
territory of any Party.

ASEAN-Korea
51.05 - Wool and fine or coarse animal

hair, carded or combed (including

combed wool in fragments).

Change to Heading 51.05 from any

other Chapter; or A regional value

content of not less than 40 percent of
the FOB value of the good.

ASEAN-Korea

61.04 - Women's or girls' suits, ensembles,

jackets, blazers, dresses, skirts, divided
skirts, trousers, bib and brace overalls,
breeches and shorts (other than swimwear)
knitted or crocheted.
Change to Heading 61.04 from any other
Chapter, provided that the good is both cut
and sewn in the territory of any Party; or A
regional value content of not less than 40
percent of the FOB value of the good.

OPERATIONAL
CERTIFICATION
PROCEDURES

Certificate of Origin

Certificate of Origin (CO)

Form MPFTA for Malaysia-Pakistan

Form XX for Malaysia-Japan

Form E for ASEAN-China

Form AK for ASEAN-Korea

For export to ASEAN countries, exporters

can choose to use either CEPT Form D or
FTAs Forms.
Advisable to use Form D, unless using
other FTA Forms could render more benefits

Certificate of Origin

Application for the CO:

MITI is the sole issuance authority

Forms are available from FMM and its
branches.

Pre-exportation verification to
determine the origin of a product is
required prior to CO approval.

Result of the verification is valid for

two years.

Certificate of Origin

Claim for preferential tariff treatment

Present the CO to Customs Authority
of the importing party.

if there is reasonable doubt, Customs

Authority of the importing party may
request issuing authority of the
exporting party to conduct retroactive
check.

if not satisfied, the Customs Authority

may conduct verification
visit to the
manufacturers premise in
exporting
country.

Certificate of Origin
Time limit for presentation of CO

Normal

Extension

Force
Majeure
Discretion

MPFTA

4 months 6 months

JMEPA
ACFTA

12
months
4 months 6 months

Discretion

AKFTA

6 months

Discretion

Fraudulent Act

Government Authorities concerned

shall cooperate in the action to be
taken in the territory of the
respective Party against the persons
involved.

Each Party is responsible to provide

legal sanction for fraudulent acts
related to a Certificate of Origin.