Quick Answer
Rules of origin are the criteria used to decide which country a product comes from. According to the World Trade Organization (WTO), countries generally apply the principle of substantial transformation, tested in three ways: change of tariff classification, ad valorem (value-added) percentage, and specific manufacturing or processing operations. Origin determines which tariffs, anti-dumping duties, preferential rates and marking rules apply, so in triangular or multi-country trade, where goods are transshipped or where bills of lading are switched does not change their origin.
What Are Rules of Origin Used For?
The WTO lists these uses of rules of origin:
- Implementing trade policy measures such as anti-dumping duties and safeguards
- Deciding whether imports receive most-favored-nation (MFN) or preferential treatment (for example, free trade agreement rates)
- Trade statistics
- Labeling and origin marking requirements
- Government procurement
In other words, the same product can face completely different duty rates depending on which country it is deemed to originate from.
3 Ways to Determine Origin
The WTO notes that while substantial transformation is widely recognized, each country applies it differently:
| Test | Meaning | Concept example |
|---|---|---|
| Change of tariff classification | The processed product has a different HS code from its inputs | Inputs processed in Country A into a product with a different HS code may be deemed Country A goods |
| Ad valorem percentage | Value added in a country reaches a set percentage | Processing and materials from a country account for the required share of the product’s value |
| Manufacturing or processing operation | A specified key process is completed | Origin is conferred only after the specified key processing steps |
Rules and thresholds differ by country and by trade agreement, so the same product exported to different countries may get different origin results and must be checked case by case.
Taiwan’s criteria
Article 5 of Taiwan’s Regulations Governing Certificates of Origin and Certificates of Processing defines substantial transformation as processing that changes the first six digits of the input’s Taiwan import tariff code, or, if the code doesn’t change, adds more than 35% value (or meets key processes announced by the Trade Administration). Sorting, repacking, packaging, relabeling and simple assembly are not substantial transformation. See How to Apply for a Certificate of Origin in Taiwan.
How Is Origin Related to Triangular Trade?
Triangular and multilateral trade change the contract relationships and the flow of documents, not where the goods are made. In practice:
- Transshipment doesn’t change origin: Taiwan’s Customs Administration states that foreign goods transshipped through Taiwan in triangular trade may not be marked as made in Taiwan.
- Switching bills of lading doesn’t change origin: a switch B/L can only change details such as shipper and consignee; marine insurer Skuld also notes that using switch bills to conceal origin or evade sanctions is illegal. See What Is a Switch Bill of Lading?
- Simple processing may not be substantial transformation: whether origin is conferred depends on the importing country’s or agreement’s rules.
Taiwan’s Origin Marking Rules and Penalties
A press release from Taiwan’s Customs Administration, Ministry of Finance, dated 16 July 2024, explains:
- Under Article 17(2) of the Foreign Trade Act and the export regulations, export goods made in Taiwan must be marked “Made in Republic of China”, “Made in Taiwan, Republic of China” or “Made in Taiwan” (or an equivalent in another language) on the goods or their inner or outer packaging, prominently and durably.
- If export goods are not marked as required or are falsely marked, Customs refers the case to the Trade Administration, Ministry of Economic Affairs.
- Under Article 28 of the Foreign Trade Act, the Trade Administration may issue a warning, impose a fine of NT$60,000 to NT$3,000,000, or suspend exports and imports for one month to one year; in serious cases it may revoke the exporter/importer registration.
Checklist Before Multi-Country Trade
- Confirm each product’s actual place of manufacture and main input sources.
- Check the destination country’s rules of origin for the product and whether anti-dumping duties apply.
- If using free trade agreement preferences, confirm the goods meet the agreement’s rules of origin and prepare a certificate of origin.
- Keep origin marking, the certificate of origin and the commercial invoice consistent.
- Refuse requests to “relabel the origin” or “launder origin through transshipment”.
How Tang Sugar Can Help
Tang Sugar’s triangular and multilateral trade service plans the most suitable supply route within the law, based on each country’s tariff agreements and rules of origin, and keeps logistics, payments and documents consistent. Our principle: truly professional multilateral trade stays out of gray areas. To evaluate an export route, contact us.
FAQ
What are rules of origin?
Rules of origin are the criteria for deciding which country a product comes from, affecting tariffs, anti-dumping duties, preferential rates, trade statistics and origin marking.
How is country of origin determined?
The WTO notes that countries generally apply substantial transformation, tested by change of tariff classification, ad valorem percentage or specific manufacturing or processing operations; rules differ by country and agreement.
Can goods transshipped through Taiwan be labeled Made in Taiwan?
No. Taiwan’s Customs Administration states that foreign goods transshipped through Taiwan in triangular trade may not be marked as Taiwan origin; origin depends on substantial transformation and related rules.
What is the penalty for false origin marking in Taiwan?
According to Taiwan’s Customs Administration, the Trade Administration may issue a warning, impose a fine of NT$60,000 to NT$3,000,000, or suspend exports and imports for one month to one year under Article 28 of the Foreign Trade Act, and may revoke the trader’s registration in serious cases.
What is substantial transformation?
It is the principle that a product originates where it was last substantially transformed, tested by change of tariff classification, value-added percentage or specific processing operations.
What are the RCEP rules of origin?
RCEP (Regional Comprehensive Economic Partnership) mainly uses a 40% regional value content test or a change of tariff classification test; which applies depends on each product’s product-specific rule (PSR). To claim preferential tariffs, a proof of origin is also required.
Further Reading
- What Is Triangular Trade? Definition and Who It Suits
- Entrepot Trade vs Triangular Trade vs Transit Trade
- What Is a Switch Bill of Lading?
- What Is an OBU?
Sources
- Laws & Regulations Database of Taiwan: Regulations Governing Certificates of Origin and Certificates of Processing (Article 5; in Chinese)
- World Trade Organization: Technical Information on Rules of Origin
- Ministry of Finance, Taiwan: Export goods must be correctly marked with origin (2024-07-16; in Chinese)
- Customs Administration, Taiwan: Triangular trade (in Chinese)
- Skuld: Switch bills of lading
