Rules of Origin (RoO) are the criteria that define the origin of a product, and more specifically, describe the minimum content or processing that must be undertaken on any non-originating materials used, in order to confer local origin status on the product.

RoO form an integral part to any preferential trade arrangement in that they help ensure that any trade benefits accruing under such an arrangement are for goods that originate in the beneficiary country, rather than being claimed by goods that are produced elsewhere and that may have been transhipped through a beneficiary country, or with only minimal value being added.

RoO generally distinguish between two different types of goods:

(a) those that are wholly produced in the exporting country from local (originating) materials, and

(b) those that utilize local and foreign materials but are further processed locally in order to result in a substantial transformation. 

 

In the former, the origin status of a product tends to be undisputed and can readily be attributed to the country where the product is grown or manufactured. Examples would include products made from minerals extracted from the soil, fish caught in inland waters and processed locally, agricultural products, and any product made exclusively from locally made inputs.

In the latter scenario, RoO become particularly important since the product is made up using both local and foreign inputs; here the RoO specify what minimum amount of processing and value-adding activity must take place locally, before a product can be deemed to be of local origin.

The AGOA legislation distinguishes between textile and non-textile goods in terms of origin criteria:

Textile goods (such as wearing apparel) can qualify based on the specific processing and origin criteria set out in a number of different textile categories - such as (local) "manufacture using third country fabric", or "manufacture from regional fabric" - whereas all other goods are subject to a general 35% local content rule. Up to 15% of the 35% may comprise materials produced in the US. 

Under the 35% rule, only locally made materials and processing contributes to this threshold, and only imported materials that have undergone a double transformation and result in a substantially different material or intermediate good may be counted as 'local' content for the purpose of being included as part of the 35% minimum requirement. 

RoO are intended to ensure that only goods that have attained the economic origin of the beneficiary country will benefit from trade preferences, thus ensuring local value-adding activities and preventing transshipment of goods from other countries.

All goods exported to the US and claiming AGOA preferences must meet the relevant RoO. 

See the next section for further details.