For the purposes of this agreement, a good shall be deemed originating and eligible for preferential treatment if it conforms to the origin requirement under any of
the following conditions:

(a) the good is wholly obtained or produced entirely in the territory of one or both Parties; or
(b) the good is produced entirely in the territory of one or both parties, exclusively from materials whose origin conforms to the provisions of this Chapter; or
(c) the good is produced entirely in the territory of one or both Parties, using non-originating materials that conform to a change in tariff classification, a qualifying value content, or other requirements specified in Annex 4A (Product Specific Rules).

Qualifying value content

For Annex 4A (Product Specific Rules) which specifies a qualifying value content requirement, the following formula shall be applied:

QVC = FOB – VNM / FOB X 100

where
(a) QVC is the qualifying value content of the good, expressed as a percentage;
(b) FOB is the Free On Board value of the particular good determined in accordance with the WTO Customs Valuation Agreement; and
(c) VNM is the value of non-originating materials used by the producer in the production of the good.

For the purpose of calculating the value of non-originating materials, the following formula shall be applied:

VNM = TVM – QVM

where TVM is the total value of materials and QVM is the qualifying value of materials.

Product Specific Rule

Product-specific rules refers to the good that is produced entirely in the territory of one or both Parties, using non-originating materials that conform to a change in tariff classification, a qualifying value content, or other requirements specified. For PeSFTA, the schedule is listed in Annex 4A.