FTA Provisions for Indirect Materials

FTA Provisions for Indirect Materials

FTA Provisions for Indirect Materials


All FTAs except for Israel and Jordan have a provision for Indirect Materials. An indirect material shall be considered to be an originating material without regard to where it is produced. The term “indirect material” means a good used in the production, testing or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including– 

  • fuel and energy 
  • tools, dies and molds 
  • spare parts and materials used in the maintenance of equipment or buildings 
  • lubricants, greases, compounding materials and other materials used in production or used to operate equipment and buildings 
  • gloves, glasses, footwear, clothing, safety equipment and supplies
  • equipment, devices and supplies used for testing or inspecting the goods 
  • catalysts and solvents 
  • any other goods that are not incorporated into the good but the use of which in the production of the good can reasonably be demonstrated to be a part of that production                                                                                                                                                                                                                                               

Bahrain, Morocco and Oman

Indirect materials shall be disregarded in determining whether a good qualifies as an originating good, except that the cost of such indirect materials may be included in meeting the 35 percent value-content requirement. 

Korea

An indirect material shall be disregarded in determining whether a good is an originating good under the terms of this note, except for purposes of any applicable regional value-content or other requirements set forth in such subdivision (o);

Look to the specific FTA on how to value indirect materials, but it is usually based on the cost registered in the accounting records of the producer of the good.