U.S.-Korea Free Trade Agreement

Rules of Origin

A Regional Value Content Rule

A Regional Value Content rule is a type of rule of origin used in Annex 6-A of KORUS. Regional Value Content (RVC) rules require that a product include a certain percentage of originating content. There are two ways RVC rules may be calculated, which may vary by product. Regional value content is only applicable when specifically provided in the relevant product specific rule of origin.

A typical RVC rule may look like this:

No change in tariff classification is required, provided that there is regional value content of not less than:

(a) 35 percent under the build-up method, or

(b) 45 percent under the build-down method.

Note: There is an additional method, “net cost”, applicable to autos and most auto parts.

For both methods, Adjusted Value is defined as the value of the product for customs purposes, usually the arms-length transaction value, adjusted, if necessary, to exclude any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation. However, the actual determination of the appropriate adjusted value can only be definitively determined by the Korean Customs Service.

The Build-Up Method - minimum percentage of U.S. or Korean content

e Build Up Method - RVC = VOM divided by AV times 100

RVC is the regional value content, expressed as a percentage;

AV is the adjusted value of the product; and

VOM is the value of originating materials, other than indirect materials, acquired or self-produced and used by the producer in the production of the product.

The Build-Down Method – maximum percentage of material not from either the U.S. or Korea

e Build Down Method - RVC equals AV minus VNM divided by AV times 100

RVC is the regional value content, expressed as a percentage;

AV is the adjusted value of the product; and

VNM is the value of non-originating materials, other than indirect materials, acquired and used by the producer in the production of the product; VNM does not include the value of a material that is self-produced.

Step 3: Identify the Rule of Origin under KORUS

Note: The information presented on this website is meant to serve as a general guide. Only the agreement text and the customs regulations issued to implement the agreement are definitive. For complex issues or where interpretation is required, U.S. exporters should seek legal assistance or an advance ruling from the Korean Customs Service.