Article 412 provides that goods shall not be considered to originate if they are merely diluted with water or another substance that does not materially alter the characteristics of the goods. Thus, mere dilution--even if it results in a change in tariff classification--is not sufficient to confer origin. However, dilution coupled with another process may be sufficient to materially alter the characteristic of the goods and thereby confer origin.
Article 412 also indicates that goods will not be considered to originate if a preponderance of the evidence establishes that any production or pricing practice has been used to circumvent the intent of the Chapter 4 origin rules. The rules of origin are designed to ensure that the processing and costs incurred with respect to the products are commercially significant and appropriate to the goods, as defined by the tariff change rules and, when applicable, the value content rules.