A summary of the rules of origin under the U.S.-Peru FTA.
Last Published: 10/21/2016
In order to receive preferential treatment under the U.S.-Peru Trade Promotion Agreement (TPA) U.S. goods exported to Peru, must qualify as originating as prescribed under the Rules of Origin section.

Use rules of origin (Annex 4.1 of the Agreement) to go directly to the product.

Except as otherwise provided in Chapter 4 of the U.S.-Peru TPA, a good is deemed originating where:

1. It is wholly obtained or produced entirely in the United States and/or Peru.
Note: "Obtained," meaning it must contain no parts or materials that originated from outside the signatory countries. Very few manufactured goods will qualify under this criterion.

2. It is produced entirely in the United States and/or Peru 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.

3. It is produced entirely in the United States and/or Peru exclusively from materials that are already originating (by meeting the qualifications described above).

How To Read the Rules of Origin
The product-specific rules of origin are written in terms of the Harmonized System (HS) of Tariff Classification, which uses six to ten digit codes to identify goods. The first six digits of an HS number are harmonized among the majority of the world's countries. The last four digits are unique to each country. The vast majority of the product-specific rules of origin under the U.S.-Peru TPA use an HS classification number. The United States uses Schedule B Codes to classify exported products from the United States and these numbers are based on the international HS system. Therefore, the first step in interpreting the "rules" is to obtain the appropriate code for the good in question.

A rule of origin may consist of:
1. A required change in tariff classification (also called a tariff shift);
2. A regional value-content (RVC) requirement;
3. Both a change in tariff classification and a regional value content requirement.
Note: It is necessary to refer to the rule associated with the product being exported. Regional value content can be applied only when it is allowed under a product-specific rule.

Some Examples
An example of a rule that employs a simple tariff shift is:
  • Rule of Origin: "A change to headings 19.02 through 19.05 from any other chapter."
  • Products: Breads, pastries, cakes, biscuits (HS 1905.90)
  • Non-U.S./Peruvian input: Flour (classified in HS chapter 11), imported from Europe (all other inputs are of U.S. origin).
Explanation: For all final goods classified under HS headings 19.05, all non-U.S. or non-Peruvian inputs must be classified in an HS chapter other than HS chapter 19 in order for the product to obtain preferential duty treatment. In this example, these baked goods would qualify for preferential treatment because the only non-originating input is classified outside of HS chapter 19. In other words, the good qualifies as originating because the imported flour (i.e., the non-originating input in this example) classified under chapter 11 (HS #11.01) shifted tariff numbers from 11.01 to 19.05 when incorporated into the finished good. However, if these products were produced with non-originating mixes (i.e., not manufactured in the United States or Peru), which are classified in HS chapter 19, then these products would not qualify because a tariff shift at the chapter level did not occur as prescribed under this rule of origin.

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
A thorough reading of Chapter Four of the U.S.-Peru TPA is necessary for anyone attempting to determine the origin of a product, and thus, whether it is eligible for preferential duty treatment. However, below are some of the factors, beyond the product-specific rules of origin, that 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 qualification criteria set forth 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 3.3.8 and Annex 3-A of the U.S.-Peru TPA for the relevant de minimis rule.
There are some cases where the de minimis rule does not apply. To review these exceptions, go to Annex 4.6 of the U.S.-Peru TPA. For textiles and apparel refer to Article 3.3.8.
Originating goods or materials of one or more of the Parties to the Agreement that are incorporated into a good in the territory of another Party are considered originating materials of the Party where the incorporation takes place.
Reminder: A good is originating when the good is produced in the United States and/or Peru, provided that the good qualifies under the rules, as discussed above, of the TPA.
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. If a company has originating and non-originating fungible goods in inventory, the U.S.-Peru TPA allows the company to treat them as originating where the importer, exporter, or producer has either physically segregated (originating from the non-originating) the fungible good or material or used any inventory management system to segregate 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, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including:
1. fuel and energy;
2. tools, dies, and molds;
3. spare parts, and materials used in the maintenance of equipment and buildings;
4. lubricants, greases, compounding materials, and other materials used in production or used to operate equipment and buildings;
5. gloves, glasses, footwear, clothing, safety equipment, and supplies;
6. equipment, devices, and supplies used for testing or inspecting the good;
7. catalysts and solvents; and
8. 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

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