An brief explanation of "The Percentage-Based Rule" when considering the rules of origin for a product when exporting under a free trade agreement. This article is part of "A Basic Guide to Exporting", provided by the U.S. Commercial Service, to assist companies in exporting.
Last Published: 10/20/2016
Percentage-Based Rules: Doing the Math

Regional Value Content–Based Rule
RVC-based rules require that a good include a certain percentage of FTA content. You can calculate RVC-based rules four ways. Which you use depends on the product and on the FTA. 

RVC-based rules are net cost (NC), transaction value (TV), builddown, and buildup. 

The net cost rule calculates the RVC as the net cost of the goods minus the value of nonoriginating materials expressed as a percentage. 

Net Cost Method
RVC = (NC − VNM × 100) / NC
  • The transaction value rule calculates the RVC as the transaction value of the goods minus the value of the nonoriginating material expressed as a percentage.
Transaction Value Method
RVC = (TV − VNM × 100) / TV
  • RVC = Regional value content, expressed as a percentage
  • TV = Transaction value of the good adjusted to FOB (amount paid or payable)
  • NC = Net cost (amount to produce a good)
  • VNM = Value of nonoriginating materials used by the producer in the production of the good
Buildup Method
RVC = (VOM / AV) × 100
  • RVC = The regional value content, expressed as a percentage
  • AV = The adjusted value (the value for customs purposes)
  • VOM = The value of originating materials that are acquired or self-produced and used by the producer in the production of the good
Builddown Method
RVC = ((AV − VNM) / AV) × 100
  • RVC = The regional value content, expressed as a percentage
  • AV = The adjusted value (the value for customs purposes)
  • VNM = The value of nonoriginating materials that are acquired and used by the producer in the production of the good. VNM does not include the value of a material that is self-produced.




Rules of Origin Free Trade Agreements