Indirect materials |
---|
Also referred to as neutral elements.
A provision which specifies that the origin of certain materials (referred to as indirect or neutral) used in the production process should not be taken into account when determining the origin of the final good. Some agreements state that all indirect materials shall be considered originating.
These materials do not constitute direct parts or inputs (are not physically incorporated in the final product) but are used in the production process or to support the operations of the facilities where the production process takes place.
While indirect materials are defined in detail under each agreement, some common examples include: fuel and energy used in the production process, tools and equipment used in factory.
Example:
A part is manufactured in a plant in country A. It is to be exported to country B under A-B FTA. The rule of origin for this part requires non-originating materials not to exceed 40% of the final value of the part. Machines used to manufacture the part, spare parts used in the maintenance of these machines and the fuel used to run these machines are all originating in a non-FTA third country C. Similarly, the safety equipment and protective clothing used by the factory workers comes from non-FTA countries. While calculating the value added rule of origin, the non-originating machines, spare parts used to maintain them, fuel, safety equipment and protective clothing are disregarded or calculated as originating (depending on the agreement).
Click here for more information on WCO website.
More Glossary |
---|