An brief explanation of the "Regional Value Content-Based Rule" when determining the origin of a good for inclusion in 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
Regional Value Content–Based Rule
The RVC test allows the good to qualify using either one of two methods. These are the builddown and buildup methods.

Builddown Method
RVC = Adjusted value − Value of nonoriginating materials/Adjusted value × 100

Buildup Method
RVC = (Originating materials / Adjusted value) × 100
Using the example above, then:

We will assume that the adjusted value for the piece of furniture in question is $1,000.

The value of nonoriginating materials used in the production of the good excludes, according to Article 5.5:
  1. The costs of freight, insurance, packing, and all other costs incurred in transporting the material to the location of the producer
  2. Duties, taxes, and customs brokerage fees on the material paid in the territory of one or both of the parties, other than duties and taxes that are waived, refunded, refundable, or otherwise recoverable, including credit against duty or tax paid  or payable
  3. The cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of renewable scrap or by-products
  4. The cost of processing incurred in the territory of a party in the production of the nonoriginating materials
  5. The cost of originating materials used in the production of the nonoriginating material in the territory of a party

Rules of Origin Free Trade Agreements