A Tariff Shift Rule is a rule of origin that determines preferential origin by reference to changes in HTS classification between non-originating inputs and the finished good. It is the dominant preferential origin methodology in USMCA, KORUS, CAFTA-DR, and most modern U.S. FTAs.
The rule asks: do all non-originating materials used in production undergo a specified change in classification — at the chapter (2-digit), heading (4-digit), or subheading (6-digit) level — when transformed into the finished article?
Common tariff shift formulations:
- Chapter change (CC) — non-originating materials must shift from a different chapter (e.g., chapter 73 to chapter 84)
- Heading change (CTH) — change in tariff heading (e.g., from heading 7208 to 7210)
- Subheading change (CTSH) — change in tariff subheading (e.g., 8471.30 to 8471.50)
Each FTA's Product-Specific Rules of Origin (PSR or PSRO) annex specifies the required shift for each HS code. For USMCA, the PSRs are in General Note 11 to the HTSUS.
Tariff shift rules are often combined with regional value content requirements (e.g., "the good must undergo a CTH and have RVC of at least 60% transaction value"). Some products have alternative tariff shift or RVC rules (the good qualifies if it meets either).
De minimis rules typically forgive small percentages of non-originating materials that fail the tariff shift, provided the goods otherwise satisfy the rule of origin. The threshold is typically 7–10% by value for non-textiles.
Tariff shift analysis requires correct classification of both inputs and finished goods. Misclassification of an input can cause an incorrect origin determination — and an unsupported preference claim can lead to denied duty benefits plus penalties under 19 U.S.C. § 1592.