Trade glossary · mechanics
Rules of origin
Criteria determining the country of origin of a product, used to apply tariffs, FTAs, and trade remedies. A car assembled in Mexico from US-made parts may be classified differently depending on origin rules.
Origin rules answer "where does this product come from?" — a question that is non-trivial when production crosses borders. Common rules: substantial transformation (the country where the last major change happened), value-added thresholds (origin = country where ≥X% of value was added), or specific production-process rules (a fabric must be woven in the FTA region for the garment to qualify). FTAs use stricter origin rules to prevent goods being routed through low-tariff partners.
Examples
- USMCA requires 75% North American content for autos to get duty-free treatment.
- EU GSP+ rules require 30% local content for developing-country exports to qualify for low tariffs.
Related terms
Free trade agreement (FTA)
A treaty between two or more countries that reduces or eliminates tariffs, quotas, and other trade barriers. Examples: USMCA, EU single market, RCEP, ASEAN.
Tariff
A tax on imported goods, usually expressed as a percentage of value (ad valorem) or a fixed amount per unit. Used to protect domestic producers or raise revenue.