Tariff classification change criterion

Definition and principle

The tariff classification change criterion (CTC — Change in Tariff Classification) is one of the most widely used criteria for determining whether a transformation is sufficient to confer origin. It requires the finished product to be classified under an HS (Harmonised System) code different from that of the non-originating materials used.

Levels of change

CTC may be required at different levels of the nomenclature:

• CC (Change of Chapter): change of chapter (first 2 HS digits) — the most demanding
• CTH (Change of Tariff Heading): change of heading (first 4 digits) — the most common
• CTSH (Change of Tariff Sub-Heading): change of sub-heading (first 6 digits) — the least demanding

Each free trade agreement specifies the required level for each product in its origin rule lists (annexes to the origin protocol). Delegated Regulation 2015/2446 (Annex 22-01) defines the rules for non-preferential origin.

Practical application

• Identify the HS classification of the finished product and each non-originating material used
• Verify whether the required change (CC, CTH, or CTSH) is satisfied for all non-originating materials
• Originating materials are excluded from the analysis (they are considered "neutral")
• If the requirement is not met for certain materials, check whether the tolerance rule can apply

Advantages and limitations

• Advantage: objective criterion, easy to apply once classifications are determined
• Limitation: tariff classification does not always reflect the reality of the economic transformation (a minor composition change can trigger a classification change, and vice versa)
• Certain rules provide for exceptions: specific materials excluded from the CTC calculation