Marginal note:Definitions

• The following provision is not in force.

  1 (1) The following definitions apply in these Regulations.

  accessories, spare parts, tools, or instructional or other information materials

  accessories, spare parts, tools, or instructional or other information materials means goods that are delivered with a good, whether or not they are physically affixed to that good, and that are used for the transport, protection, maintenance or cleaning of the good, for instruction in assembly, repair or use of that good, or as replacements for consumable or interchangeable parts of that good. (accessoires, pièces de rechange, outils, modes d’emploi ou autres documents d’information)

  adjusted to exclude any costs incurred in the international shipment of the good

  adjusted to exclude any costs incurred in the international shipment of the good means, with respect to the transaction value of a good, adjusted by

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    (a) deducting the following costs if those costs are included in the transaction value of the good:

    • (i) the costs of transporting the good after it is shipped from the point of direct shipment,

    • (ii) the costs of unloading, loading, handling and insurance that are associated with that transportation, and

    • (iii) the cost of packing materials and containers; and

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    (b) if the following costs are not included in the transaction value of the good, adding

    • (i) the costs of transporting the good from the place of production to the point of direct shipment,

    • (ii) the costs of loading, unloading, handling and insurance that are associated with that transportation, and

    • (iii) the costs of loading the good for shipment at the point of direct shipment. (ajustée pour exclure tous autres frais engagés pour l’expédition internationale)

  Agreement

  Agreement means the Canada–United States–Mexico Agreement. (Accord)

  applicable change in tariff classification

  applicable change in tariff classification means, with respect to a non-originating material used in the production of a good, a change in tariff classification specified in a rule set out in Schedule 1 for the tariff provision under which the good is classified. (changement de classification tarifaire applicable)

  aquaculture

  aquaculture means the farming of aquatic organisms – including fish, molluscs, crustaceans, other aquatic invertebrates and aquatic plants – from seed stock such as eggs, fry, fingerlings or larvae, by intervention in the rearing or growth processes to enhance production, such as by regular stocking, feeding or protection from predators. (aquaculture)

  costs incurred in packing

  costs incurred in packing means, with respect to a good or material, the value of the packing materials and containers in which the good or material is packed for shipment and the labour costs incurred in packing it for shipment, but does not include the costs of preparing and packaging it for retail sale. (frais engagés pour emballer)

  CUSMA country

  CUSMA country means a Party to the Agreement. (pays ACEUM)

  Customs Valuation Agreement

  Customs Valuation Agreement means the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994, contained in Annex 1A to the Marrakech Agreement Establishing the World Trade Organization, done in Marrackech on 15 April 1994. (Accord sur l’évaluation en douane)

  customs value

  customs value means

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    (a) in the case of Canada, value for duty as defined in the Customs Act, except that for the purpose of determining that value the reference in section 55 of that Act to “in accordance with regulations made under the Currency Act” is to be read as a reference to “in accordance with subsection 2(1) of the CUSMA Rules of Origin Regulations”;

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    (b) in the case of Mexico, the valor en aduana as determined in accordance with the Ley Aduanera, converted, if that value is not expressed in Mexican currency, to Mexican currency at the rate of exchange determined in accordance with subsection 2(1); and

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    (c) in the case of the United States, the value of imported merchandise as determined by U.S. Customs and Border Protection in accordance with section 402 of the Tariff Act of 1930 of the United States, as amended, converted, if that value is not expressed in United States currency, to United States currency at the rate of exchange determined in accordance with subsection 2(1). (valeur en douane)

  days

  days means calendar days, and includes Saturdays, Sundays and holidays. (jours)

  direct labour costs

  direct labour costs means costs, including fringe benefits, that are associated with employees who are directly involved in the production of a good. (coûts de la main-d’oeuvre directe)

  direct material costs

  direct material costs means the value of materials, other than indirect materials and packing materials and containers, that are used in the production of a good. (coûts des matières directes)

  direct overhead

  direct overhead means costs, other than direct material costs and direct labour costs, that are directly associated with the production of a good. (frais généraux directs)

  enterprise

  enterprise means an entity constituted or organized under applicable law, whether or not for profit, and whether privately owned or governmentally owned or controlled, including a corporation, trust, partnership, sole proprietorship, joint venture, association or similar organization. (entreprise)

  excluded costs

  excluded costs means – with respect to net cost or total cost – sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs and non-allowable interest costs. (coûts exclus)

  fungible goods

  fungible goods means goods that are interchangeable with another good for commercial purposes and the properties of which are essentially identical. (produits fongibles)

  fungible materials

  fungible materials means materials that are interchangeable with another material for commercial purposes and the properties of which are essentially identical. (matières fongibles)

  Harmonized System

  Harmonized System means the Harmonized Commodity Description and Coding System, including its General Rules of Interpretation, Section Notes, Chapter Notes and Subheading Notes, as set out in

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    (a) in the case of Canada, the Customs Tariff;

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    (b) in the case of Mexico, the Tarifa de la Ley de los Impuestos Generales de Importacion y de Exportacion; and

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    (c) in the case of the United States, the Harmonized Tariff Schedule of the United States. (Système harmonisé)

  identical goods

  identical goods means, with respect to a good, including the valuation of a good, goods that

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    (a) are the same in all respects as that good, including physical characteristics, quality and reputation but excluding minor differences in appearance;

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    (b) were produced in the same country as that good; and

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    (c) were produced

    • (i) by the producer of that good, or

    • (ii) by another producer, if no goods that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that good. (produits identiques)

  identical materials

  identical materials means, with respect to a material, including the valuation of a material, materials that

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    (a) are the same as that material in all respects, including physical characteristics, quality and reputation but excluding minor differences in appearance;

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    (b) were produced in the same country as that material; and

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    (c) were produced

    • (i) by the producer of that material, or

    • (ii) by another producer, if no materials that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that material. (matières identiques)

  incorporated

  incorporated describes, with respect to the production of a good, a material that is physically incorporated into that good, including a material that is physically incorporated into another material before that material or any subsequently produced material is used in the production of the good. (incorporée)

  indirect material

  indirect material means a material used or consumed in the production, testing or inspection of a good but not physically incorporated into the good, or a material used or consumed in the maintenance of buildings or the operation of equipment associated with the production of a good, including

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    (a) fuel and energy;

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    (b) tools, dies and moulds;

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    (c) spare parts and materials used or consumed in the maintenance of equipment and buildings;

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    (d) lubricants, greases, compounding materials and other materials used or consumed in production or used to operate equipment and buildings;

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    (e) gloves, glasses, footwear, clothing, safety equipment and supplies;

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    (f) equipment, devices and supplies used or consumed for testing or inspecting the goods;

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    (g) catalysts and solvents; and

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    (h) any other material that is not incorporated into the good but for which the use in the production of the good can reasonably be demonstrated to be part of that production. (matière indirecte)

  interest costs

  interest costs means all costs paid or payable by a person to whom credit is or is to be advanced, for the advancement of credit or the obligation to advance credit. (frais d’intérêt)

  intermediate material

  intermediate material means a material that is self-produced and used in the production of a good and designated as an intermediate material under subsection 8(6). (matière intermédiaire)

  location of the producer

  location of the producer means

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    (a) the place where the producer uses a material in the production of the good; or

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    (b) the warehouse or other receiving station where the producer receives materials for use in the production of the good, if it is located within a radius of 75 km (46.60 miles) from the production site. (emplacement du producteur)

  material

  material means a good that is used in the production of another good, and includes a part or ingredient. (matière)

  month

  month means a calendar month. (mois)

  national

  national means a natural person who is a citizen or permanent resident of a CUSMA country, and includes

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    (a) with respect to Mexico, a national or citizen according to Articles 30 and 34, respectively, of the Mexican Constitution; and

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    (b) with respect to the United States, a “national of the United States” as defined in the Immigration and Nationality Act of the United States on the date of entry into force of the Agreement. (ressortissant)

  net cost

  net cost means total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the total cost. (coût net)

  net cost method

  net cost method means the method of calculating the regional value content of a good that is set out in subsection 7(3). (méthode du coût net)

  net cost of a good

  net cost of a good means the net cost that can be reasonably allocated to a good using the method set out in subsection 7(3). (coût net d’un produit)

  non-allowable interest costs

  non-allowable interest costs means interest costs – incurred by a producer on the producer’s debt obligations that are more than 700 basis points above the interest rate issued by the federal government for comparable maturities of the country in which the producer is located. (frais d’intérêt non admissibles)

  non-originating good

  non-originating good means a good that does not qualify as originating under these Regulations. (produit non originaire)

  non-originating material

  non-originating material means a material that does not qualify as originating under these Regulations. (matière non originaire)

  originating good

  originating good means a good that qualifies as originating under these Regulations. (produit originaire)

  originating material

  originating material means a material that qualifies as originating under these Regulations. (matière originaire)

  packaging materials and containers

  packaging materials and containers means materials and containers in which a good is packaged for retail sale. (matières de conditionnement et contenants)

  packing materials and containers

  packing materials and containers means materials and containers that are used to protect a good during transportation, but does not include packaging materials and containers. (matières d’emballage et contenants)

  payments

  payments means – with respect to royalties and sales promotion, marketing and after-sales service costs – the costs expensed on the books of a producer, whether or not an actual payment is made. (paiements)

  person

  person means a natural person or an enterprise. (personne)

  person of a CUSMA country

  person of a CUSMA country means a national or an enterprise constituted or organized under the laws of a CUSMA country. (personne d’un pays ACEUM)

  point of direct shipment

  point of direct shipment means the location from which a producer of a good normally ships that good to the buyer of the good. (point d’expédition directe)

  producer

  producer means a person who engages in the production of a good. (producteur)

  production

  production means growing, cultivating, raising, mining, harvesting, fishing, trapping, hunting, capturing, breeding, extracting, manufacturing, processing or assembling a good, or aquaculture. (production)

  reasonably allocate

  reasonably allocate means to apportion in a manner appropriate to the circumstances. (attribuer de façon raisonnable)

  recovered material

  recovered material means a material in the form of one or more individual parts that results from 

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    (a) the disassembly of a used good into individual parts; and

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    (b) the cleaning, inspecting, testing or other processing of those parts as necessary for improvement to sound working condition. (matière récupérée)

  related person

  related person means a person related to another person on the basis that

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    (a) they are officers or directors of one another’s businesses;

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    (b) they are legally recognized partners in business;

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    (c) they are employer and employee;

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    (d) any person directly or indirectly owns, controls or holds 25% or more of the outstanding voting stock or shares of each of them;

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    (e) one of them directly or indirectly controls the other;

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    (f) both of them are directly or indirectly controlled by a third person; or

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    (g) they are members of the same family, meaning they are connected as determined under paragraph 45(3)(a) of the Customs Act. (personne liée)

  remanufactured good

  remanufactured good means a good that is classified in Chapters 84 through 90 or under heading 94.02, except for any good classified under heading 84.18, 85.09, 85.10, 85.16 or 87.03 or subheading 8414.51, 8450.11, 8450.12, 8508.11 or 8517.11 and that is entirely or partially composed of recovered materials and  

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    (a) has a similar life expectancy and performs the same as or similar to such a good when new; and

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    (b) has a factory warranty similar to that applicable to such a good when new. (produit remanufacturé)

  reusable scrap or by-product

  reusable scrap or by-product means waste or spoilage that is generated by the producer of a good and that is used in the production of a good or sold by that producer. (déchets récupérables ou sous-produits)

  right to use

  right to use, for the purposes of the definition royalties, includes the right to sell or distribute a good. (droit d’utiliser)

  royalties

  royalties means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use of, or right to use, a copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, or secret formula or process, excluding those payments under technical assistance or similar agreements that can be related to specific services such as

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    (a) personnel training, without regard to where the training is performed; or

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    (b) if performed in the territory of one or more of the CUSMA countries, engineering, tooling, die-setting, software design and similar computer services, or other services. (redevances)

  sales promotion, marketing and after-sales service costs

  sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and after-sales service:

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    (a) sales and marketing promotion, media advertising, advertising and market research, promotional and demonstration materials, exhibits, sales conferences, trade shows and conventions, banners, marketing displays, free samples, sales, marketing and after-sales service literature (product brochures, catalogues, technical literature, price lists, service manuals, or sales aid information), establishment and protection of logos and trademarks, sponsorships, wholesale and retail restocking charges, or entertainment;

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    (b) sales and marketing incentives, consumer, retailer or wholesaler rebates, or merchandise incentives;

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    (c) salaries and wages, sales commissions, bonuses, benefits (for example, medical, insurance, pension), travelling and living expenses, or membership and professional fees, for sales promotion, marketing and after-sales service personnel;

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    (d) recruiting and training of sales promotion, marketing and after-sales service personnel, and after-sales training of customers’ employees, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

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    (e) product liability insurance;

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    (f) office supplies for sales promotion, marketing and after-sales service of goods, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

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    (g) telephone, mail and other communications, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

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    (h) rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centres;

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    (i) property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centres, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer; and

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    (j) payments by the producer to other persons for warranty repairs. (frais de promotion des ventes, de commercialisation et de service après-vente)

  self-produced material

  self-produced material means a material that is produced by the producer of a good and used in the production of that good. (matière autoproduite)

  shipping and packing costs

  shipping and packing costs means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding the costs of preparing and packaging the good for retail sale. (frais d’expédition et d’emballage)

  similar goods

  similar goods means, with respect to a good, goods that

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    (a) although not alike in all respects to that good, have similar characteristics and component materials that enable the goods to perform the same functions and to be commercially interchangeable with that good;

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    (b) were produced in the same country as that good; and

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    (c) were produced

    • (i) by the producer of that good, or

    • (ii) by another producer, if no goods that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that good. (produits similaires)

  similar materials

  similar materials means, with respect to a material, materials that

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    (a) although not alike in all respects to that material, have similar characteristics and component materials that enable the materials to perform the same functions and to be commercially interchangeable with that material;

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    (b) were produced in the same country as that material; and

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    (c) were produced

    • (i) by the producer of that material, or

    • (ii) by another producer, if no materials that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that material. (matières similaires)

  subject to a regional value content requirement

  subject to a regional value content requirement means, with respect to a good, that the provisions of these Regulations that are applied to determine whether the good is an originating good include a regional value content requirement. (assujetti à une prescription de teneur en valeur régionale)

  tariff provision

  tariff provision means a heading, subheading or tariff item. (poste tarifaire)

  territory

  territory means,

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    (a) for Canada, the following zones or waters as determined by its domestic law and consistent with international law:

    • (i) the land territory, air space, internal waters and territorial sea of Canada,

    • (ii) the exclusive economic zone of Canada, and

    • (iii) the continental shelf of Canada;

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    (b) for Mexico,

    • (i) the land territory, including the states of the Federation and Mexico City,

    • (ii) the air space, and

    • (iii) the internal waters, territorial sea and any areas beyond the territorial seas of Mexico within which Mexico may exercise sovereign rights and jurisdiction, as determined by its domestic law, consistent with the United Nations Convention on the Law of the Sea, done at Montego Bay on December 10, 1982; and

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    (c) for the United States,

    • (i) the customs territory of the United States, which includes the 50 states, the District of Columbia and Puerto Rico,

    • (ii) the foreign trade zones located in the United States and Puerto Rico, and

    • (iii) the territorial sea and air space of the United States and any area beyond the territorial sea within which, in accordance with customary international law as reflected in the United Nations Convention on the Law of the Sea, the United States may exercise sovereign rights or jurisdiction. (territoire)

  total cost

  total cost means all product costs, period costs and other costs incurred in the territory of one or more of the CUSMA countries where

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    (a) product costs are costs that are associated with the production of a good and include the value of materials, direct labor costs and direct overheads;

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    (b) period costs are costs, other than product costs, that are expensed in the period in which they are incurred, such as selling expenses and general and administrative expenses; and

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    (c) other costs are all costs recorded on the books of the producer that are not product costs or period costs, such as interest.

  Total cost does not include profits that are earned by the producer, regardless of whether they are retained by the producer or paid out to other persons as dividends, or taxes paid on those profits, including capital gains taxes. (coût total)

  transaction value

  transaction value means the customs value as determined in accordance with the Customs Valuation Agreement, that is, the price actually paid or payable for a good or material with respect to a transaction of the producer of the good, adjusted in accordance with the principles of Articles 8(1), 8(3) and 8(4) of the Customs Valuation Agreement, regardless of whether the good or material is sold for export. (valeur transactionnelle)

  transaction value method

  transaction value method means the method of calculating the regional value content of a good that is set out in subsection 7(2). (méthode de la valeur transactionnelle)

  used

  used means used or consumed in the production of a good. (utilisé)

  value

  value means the value of a good or material for the purpose of calculating customs duties or for the purpose of applying these Regulations. (valeur)

  verification of origin

  verification of origin means a verification of origin of goods under

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    (a) in the case of Canada, paragraph 42.1(1)(a) of the Customs Act;

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    (b) in the case of Mexico, Article 5.9 of the Agreement; and

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    (c) in the case of the United States, section 509 of the Tariff Act of 1930 of the United States, as amended. (vérification de l’origine)

• The following provision is not in force.

  Marginal note:Interpretation — similar goods and similar materials

  (2) For the purposes of the definitions similar goods and similar materials, the quality of the goods or materials, their reputation and the existence of a trademark are among the factors to be considered for the purpose of determining whether goods or materials are similar.

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  Marginal note:Other definitions

  (3) For the purposes of these Regulations,

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    (a) Chapter, unless otherwise indicated, refers to a Chapter of the Harmonized System;

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    (b) heading refers to any four-digit number or the first four digits of any tariff provision set out in the “Tariff Item” column in the Harmonized System;

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    (c) subheading refers to any six-digit number or the first six digits of any tariff provision set out in the “Tariff Item” column in the Harmonized System;

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    (d) tariff item refers to the first eight digits in the tariff classification number under the Harmonized System;

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    (e) any reference to a tariff item in Chapter 4 of the Agreement or in these Regulations that includes letters is to be read as the appropriate eight-digit number in the Harmonized System as implemented in each CUSMA country; and

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    (f) books refers to,

    • (i) with respect to the books of a person that is located in a CUSMA country,

      • (A) books and other documents that support the recording of revenues, expenses, costs, assets and liabilities and that are maintained in accordance with the Generally Accepted Accounting Principles set out in the publications listed in Schedule 10 with respect to the territory of the CUSMA country in which the person is located, and

      • (B) financial statements, including note disclosures, that are prepared in accordance with the Generally Accepted Accounting Principles set out in the publications listed in Schedule 10 with respect to the territory of the CUSMA country in which the person is located, and

    • (ii) with respect to the books of a person that is located outside the territories of the CUSMA countries,

      • (A) books and other documents that support the recording of revenues, expenses, costs, assets and liabilities and that are maintained in accordance with the Generally Accepted Accounting Principles applied in that location or, if there are no such principles, in accordance with the International Financial Reporting Standards, published by the IFRS Foundation, as amended from time to time, and

      • (B) financial statements, including note disclosures, that are prepared in accordance with the Generally Accepted Accounting Principles applied in that location or, if there are no such principles, in accordance with the International Financial Reporting Standards, published by the IFRS Foundation, as amended from time to time.

• The following provision is not in force.

  Marginal note:Examples

  (4) If an example, referred to as an “Example”, is set out in these Regulations, the example is for the purpose of illustrating the application of a provision and, if there is any inconsistency between the example and the provision, the provision prevails to the extent of the inconsistency.

• The following provision is not in force.

  Marginal note:References to domestic laws

  (5) Except as otherwise provided, references in these Regulations to domestic laws of the CUSMA countries apply to those laws as they are currently in effect and as they may be amended or superseded.

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  Marginal note:Calculation of total cost

  (6) For the purposes of subsections 5(11), 7(11) and 8(8),

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    (a) total cost consists of all product costs, period costs and other costs that are recorded, except as otherwise provided in subparagraphs (b)(i) and (ii), on the books of the producer without regard to the location of the persons to whom payments with respect to those costs are made;

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    (b) in calculating total cost,

    • (i) the value of materials, other than intermediate materials, indirect materials and packing materials and containers, is determined in accordance with subsections 8(1) and (2),

    • (ii) the value of intermediate materials used in the production of the good or material with respect to which total cost is being calculated in accordance with subsection 8(8),

    • (iii) the value of indirect materials and the value of packing materials and containers is the costs that are recorded on the books of the producer for those materials, and

    • (iv) product costs, period costs and other costs, other than costs referred to in subparagraphs (i) and (ii), are the costs that are recorded on the books of the producer for those costs;

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    (c) total cost does not include profits that are earned by the producer, regardless of whether they are retained by the producer or paid out to other persons as dividends, or taxes paid on those profits, including capital gains taxes;

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    (d) gains related to currency conversion that are related to the production of the good must be deducted from total cost and losses related to currency conversion that are related to the production of the good are to be included in total cost;

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    (e) the value of materials with respect to which production is accumulated under section 9 must be determined in accordance with that section; and

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    (f) total cost includes the impact of inflation as recorded on the books of the producer, if recorded in accordance with the Generally Accepted Accounting Principles of the producer’s country.

• The following provision is not in force.

  Marginal note:Period for calculation of total cost

  (7) For the purpose of calculating total cost under subsections 5(11), 7(11) and 8(8),

  • The following provision is not in force.

    (a) if the regional value content of the good is calculated on the basis of the net cost method and the producer has elected under subsection 7(15) or 16(1) to calculate the regional value content over a period, the total cost is to be calculated over that period; and

  • The following provision is not in force.

    (b) in any other case, the producer may elect that the total cost be calculated over

    • (i) a one-month period,

    • (ii) any consecutive three- or six-month period that falls within and is evenly divisible into the number of months of the producer’s fiscal year remaining at the beginning of that period, or

    • (iii) the producer’s fiscal year.

• The following provision is not in force.

  Marginal note:Election not modifiable

  (8) An election made under subsection (7) may not be rescinded or modified with respect to the good or material, or the period, with respect to which the election is made.

• The following provision is not in force.

  Marginal note:Election considered made — period

  (9) If a producer chooses a one-, three- or six-month period under subsection (7) with respect to a good or material, the producer is considered to have chosen under that subsection a period or periods of the same duration for the remainder of the producer’s fiscal year with respect to that good or material.

• The following provision is not in force.

  Marginal note:Election considered made — cost

  (10) With respect to a good exported to a CUSMA country, an election to average is considered to have been made

  • The following provision is not in force.

    (a) in the case of an election referred to in subsection 16(1), if the election is received by the customs administration of that CUSMA country; and

  • The following provision is not in force.

    (b) in the case of an election referred to in subsection (7), 7(15) or 16(10), if the customs administration of that CUSMA country is informed in writing during the course of a verification of origin of the good that the election has been made.

Marginal note:Conversion of currency

• The following provision is not in force.

  2 (1) If the value of a good or a material is expressed in a currency other than the currency of the country where the producer of the good is located, that value must be converted to the currency of the country in which that producer is located based on the following rates of exchange:

  • The following provision is not in force.

    (a) in the case of the sale of that good or the purchase of that material, the rate of exchange used by the producer for the purpose of recording that sale or purchase; or

  • The following provision is not in force.

    (b) in the case of a material that is acquired by the producer other than by a purchase,

    • (i) if the producer used a rate of exchange for the purpose of recording another transaction in that other currency that occurred within 30 days of the day on which the producer acquired the material, that rate, and

    • (ii) in any other case,

      • (A) with respect to a producer located in Canada, the rate of exchange referred to in section 5 of the Currency Exchange for Customs Valuation Regulations for the date on which the material was shipped directly to the producer,

      • (B) with respect to a producer located in Mexico, the rate of exchange published by the Banco de Mexico in the Diario Oficial de la Federacion, under the title “TIPO de cambio para solventar obligaciones denominadas en moneda extranjera pagaderas en la Republica Mexicana”, for the date on which the material was shipped directly to the producer, and

      • (C) with respect to a producer located in the United States, the rate of exchange referred to in 31 U.S.C. 5151 for the date on which the material was shipped directly to the producer.

• The following provision is not in force.

  Marginal note:Information in other currency in statement

  (2) If a producer of a good has a statement referred to in section 9 that includes information in a currency other than the currency of the country where that producer is located, the currency must be converted to the currency of the country in which the producer is located based on the following rates of exchange:

  • The following provision is not in force.

    (a) if the material was purchased by the producer in the same currency as the currency in which the information in the statement is provided, the rate of exchange used by the producer for the purpose of recording the purchase;

  • The following provision is not in force.

    (b) if the material was purchased by the producer in a currency other than the currency in which the information in the statement is provided,

    • (i) if the producer used a rate of exchange for the purpose of recording a transaction in that other currency that occurred within 30 days of the day on which the producer acquired the material, that rate, and

    • (ii) in any other case,

      • (A) with respect to a producer located in Canada, the rate of exchange referred to in section 5 of the Currency Exchange for Customs Valuation Regulations for the date on which the material was shipped directly to the producer,

      • (B) with respect to a producer located in Mexico, the rate of exchange published by the Banco de Mexico in the Diario Oficial de la Federacion, under the title “TIPO de cambio para solventar obligaciones denominadas en moneda extranjera pagaderas en la Republica Mexicana”, for the date on which the material was shipped directly to the producer, and

      • (C) with respect to a producer located in the United States, the rate of exchange referred to in 31 U.S.C. 5151 for the date on which the material was shipped directly to the producer; and

  • The following provision is not in force.

    (c) if the material was acquired by the producer other than by a purchase,

    • (i) if the producer used a rate of exchange for the purposes of recording a transaction in that other currency that occurred within 30 days of the day on which the producer acquired the material, that rate, and

    • (ii) in any other case,

      • (A) with respect to a producer located in Canada, the rate of exchange referred to in section 5 of the Currency Exchange for Customs Valuation Regulations for the date on which the material was shipped directly to the producer,

      • (B) with respect to a producer located in Mexico, the rate of exchange published by the Banco de Mexico in the Diario Oficial de la Federacion, under the title “TIPO de cambio para solventar obligaciones denominadas en moneda extranjera pagaderas en la Republica Mexicana”, for the date on which the material was shipped directly to the producer, and

      • (C) with respect to a producer located in the United States, the rate of exchange referred to in 31 U.S.C. 5151 for the date on which the material was shipped directly to the producer.

Marginal note:Wholly obtained or produced goods

• The following provision is not in force.

  3 (1) A good is originating in the territory of a CUSMA country if the good satisfies all other applicable requirements of these Regulations and is

  • The following provision is not in force.

    (a) a mineral good or other naturally occurring substance extracted in or taken from the territory of one or more of the CUSMA countries;

  • The following provision is not in force.

    (b) a plant, plant good, vegetable or fungus, grown, harvested, picked or gathered in the territory of one or more of the CUSMA countries;

  • The following provision is not in force.

    (c) a live animal born and raised in the territory of one or more of the CUSMA countries;

  • The following provision is not in force.

    (d) a good obtained from a live animal in the territory of one or more of the CUSMA countries;

  • The following provision is not in force.

    (e) an animal obtained from hunting, trapping, fishing, gathering or capturing in the territory of one or more of the CUSMA countries;

  • The following provision is not in force.

    (f) a good obtained from aquaculture in the territory of one or more of the CUSMA countries;

  • The following provision is not in force.

    (g) fish, shellfish or other marine life taken from the sea, seabed or subsoil outside the territories of the CUSMA countries and, under international law, outside the territorial sea of non-CUSMA countries, by vessels that are registered, listed or recorded with a CUSMA country and entitled to fly the flag of that CUSMA country;

  • The following provision is not in force.

    (h) a good produced from a good referred to in paragraph (g) on board a factory ship, where the factory ship is registered, listed or recorded with a CUSMA country and entitled to fly the flag of that CUSMA country;

  • The following provision is not in force.

    (i) a good, other than fish, shellfish or other marine life, taken by a CUSMA country or a person of a CUSMA country from the seabed or subsoil outside the territories of the CUSMA countries, if that CUSMA country has the right to exploit that seabed or subsoil;

  • The following provision is not in force.

    (j) waste and scrap derived from

    • (i) production in the territory of one or more of the CUSMA countries, or

    • (ii) used goods collected in the territory of one or more of the CUSMA countries, provided that the goods are fit only for the recovery of raw materials; or

  • The following provision is not in force.

    (k) a good produced in the territory of one or more of the CUSMA countries, exclusively from a good referred to in any of paragraphs (a) to (j), or from their derivatives, at any stage of production.

• The following provision is not in force.

  Marginal note:Goods produced from non-originating materials

  (2) A good, produced entirely in the territory of one or more of the CUSMA countries, is originating in the territory of a CUSMA country if each of the non-originating materials used in the production of the good satisfies all applicable requirements of Schedule 1 and the good satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Goods produced exclusively from originating materials

  (3) A good is originating in the territory of a CUSMA country if the good is produced entirely in the territory of one or more of the CUSMA countries exclusively from originating materials and the good satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Exceptions to change in tariff classification requirements

  (4) Except in the case of a good of any of Chapters 61 through 63, a good is originating in the territory of a CUSMA country if

  • The following provision is not in force.

    (a) one or more of the non-originating materials used in the production of that good cannot satisfy the change in tariff classification requirements set out in Schedule 1 because both the good and its materials are classified in the same subheading or same heading that is not further subdivided into subheadings and

    • (i) the good is produced entirely in the territory of one or more of the CUSMA countries,

    • (ii) the regional value content of the good, calculated in accordance with section 7, is not less than 60% if the transaction value method is used or not less than 50% if the net cost method is used, and

    • (iii) the good satisfies all other applicable requirements of these Regulations; or

  • The following provision is not in force.

    (b) the good was imported into the territory of a CUSMA country in an unassembled or disassembled form but was classified as an assembled good in accordance with Rule 2(a) of the General Rules for the Interpretation of the Harmonized System and

    • (i) the good is produced entirely in the territory of one or more of the CUSMA countries,

    • (ii) the regional value content of the good, calculated in accordance with section 7, is not less than 60% if the transaction value method is used or not less than 50% if the net cost method is used, and

    • (iii) the good satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Interpretation — goods and parts of goods

  (5) For the purposes of paragraph (4)(a),

  • The following provision is not in force.

    (a) the determination of whether a heading or subheading provides for a good and its parts is to be made on the basis of the nomenclature of the heading or subheading and the relevant Section Notes or Chapter Notes, in accordance with the General Rules for the Interpretation of the Harmonized System; and

  • The following provision is not in force.

    (b) if, in accordance with the Harmonized System, a heading includes parts of goods by application of a Section Note or Chapter Note of the Harmonized System and the subheadings under that heading do not include a subheading designated “Parts”, a subheading designated “Other” under that heading is considered to cover only the goods and parts of the goods that are themselves classified under that subheading.

• The following provision is not in force.

  Marginal note:Requirements to meet one rule

  (6) For the purposes of subsection (2), if Schedule 1 sets out two or more alternative rules for the tariff provision under which a good is classified and the good satisfies the requirements of one of those rules, the good need not satisfy the requirements of another of the rules in order to qualify as an originating good.

• The following provision is not in force.

  Marginal note:Special rule for certain goods

  (7) A good is originating in the territory of a CUSMA country if the good is referred to in Schedule 2 and is imported from the territory of a CUSMA country.

• The following provision is not in force.

  Marginal note:Self-produced material — considered material

  (8) For the purpose of determining whether non-originating materials undergo an applicable change in tariff classification, a self-produced material may, at the choice of the producer of that material, be considered a material used in the production of a good into which the self-produced material is incorporated.

• The following provision is not in force.

  Marginal note:Examples

  (9) Each of the following is an “Example” as referred to in subsection 1(4).

  • Example 1 (subsection (2)): The component that determines the tariff classification of a textile or apparel good
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces women’s wool overcoats of subheading 6202.11 from two different fabrics, one for the body and another for the sleeves. Both fabrics are produced using originating and non-originating materials. The overcoat’s body is made of woven wool and silk fabric, and the sleeves are made of knit cotton fabric.

    The following provision is not in force.

    For the purpose of determining if the women’s wool overcoats are originating goods, Producer A must take into account Note 2 of Chapter 62 of Schedule 1, which indicates that the applicable rule will apply only to the component that determines the tariff classification of the good and that the component must satisfy the tariff change requirements set out in the rule for that good.

    The following provision is not in force.

    The woven fabric (80% wool and 20% silk) used for the body is the component of the women’s wool overcoat that determines its tariff classification in subheading 6202.11 because it constitutes the predominant material by weight and makes up the largest surface area of the overcoat. This fabric is made by Producer A from originating wool yarn classified in heading 51.06 and non-originating silk yarn classified in heading 50.04.

    The following provision is not in force.

    Since the knit cotton fabric used in the sleeves is not the component that determines the tariff classification of the good, it does not need to meet the requirements set out in the rule for the good.

    The following provision is not in force.

    Producer A must determine whether the non-originating materials used in the production of the component that determines the tariff classification of the women’s wool overcoats (the woven fabric) satisfy the requirements established in the product-specific rule of origin, which requires both a change in tariff classification from any other Chapter, except from some headings and Chapters under which certain yarns and fabrics are classified, and that the good be cut or knit to shape and sewn or otherwise assembled in the territory of one or more of the CUSMA countries. The non-originating silk yarn of heading 50.04 used by Producer A satisfies the change in tariff classification requirement, since heading 50.04 is not excluded under the product-specific rule of origin. Additionally, the overcoats are cut and sewn in the territory of one of the CUSMA countries, and therefore the women’s wool overcoats would be considered to be originating goods.

  • Example 2 (subsection (2)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces t-shirts of subheading 6109.10 from knit cotton and polyester fabric (60% cotton and 40% polyester), which are also produced by Producer A using originating cotton yarn of heading 52.05 and polyester yarn made of non-originating filaments of heading 54.02.

    The following provision is not in force.

    As the t-shirt is made of a single fabric and classified under Rule 1 of the General Rules of Interpretation of the Harmonized System in subheading 6109.10, this fabric is the component that determines tariff classification. Therefore, to be considered originating by application of the tariff-shift rule for subheading 6109.10, each of the non-originating materials used in the production of the t-shirt must undergo the required change in tariff classification.

    The following provision is not in force.

    In this case, the non-originating polyester filaments of heading 54.02 used in the production of the t-shirts do not satisfy the change in tariff classification set out in the product-specific rule of origin. In addition, the weight of the non-originating polyester is over the de minimis allowance. Therefore, the t-shirts do not qualify as originating goods.

  • Example 3 (subsection (2)): Note 2 contained in Section XI – Textiles and Textile Articles (Chapters 50 through 63)
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces fabrics of subheading 5211.42 from originating cotton and polyester yarns and non-originating rayon filament. For the purpose of determining if the fabrics are originating goods, Producer A must consider Note 2 of Section XI of Schedule 1, which indicates goods classified in any of Chapters 50 through 63 is considered to be originating, regardless of whether the rayon filaments used in its production are non-originating materials, if the good meets the requirements of the applicable product-specific rule of origin.

    The following provision is not in force.

    With the exception of the rayon filaments of heading 54.03, that Note 2 of Section XI of Schedule 1 allows, all of the materials used in the production of the fabrics are originating materials, and since General Interpretative Note (d) of Schedule 1 provides that a change in tariff classification requirement of a product-specific rule of origin applies only to non-originating materials, the fabrics are considered to be originating goods.

  • Example 4 (subsection (2)): Notes 2 and 5 of Chapter 62 regarding the interpretation of the component that determines the tariff classification and the requirement for pockets.
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces men’s suits classified in subheading 6203.12, which are made of three fabrics: a non-originating fabric of subheading 5407.61 used to make a visible lining, an originating fabric of subheading 5514.41 used to make the outer part of the suit and a non-originating fabric of subheading 5513.21 used to make pocket bags.

    The following provision is not in force.

    For the purpose of determining if the men’s suits are originating goods, Producer A should take into account Note 2 of Chapter 62 of Schedule 1, which indicates that the applicable rule will apply only to the component that determines the tariff classification of the good and that the component must satisfy the tariff change requirements set out in the rule for that good.

    The following provision is not in force.

    The originating fabric used to make the outer part of the suit is the component of the suit that determines the tariff classification in subheading 6203.12 because it constitutes the predominant material by weight and makes up the largest surface area of the suit. The origin of the fabric used as visible lining is disregarded for the purpose of determining whether the suit is an originating good since that fabric is not considered the component that determines the tariff classification and there are no Chapter Notes related to visible lining for apparel goods.

    The following provision is not in force.

    Additionally, Producer A uses a non-originating fabric of subheading 5513.21 for the pocket bags of the suits, so Producer A should take into account the second paragraph of Note 5 of Chapter 62 of Schedule 1, which requires that the pocket bag fabric must be formed and finished in the territory of one or more of the CUSMA countries from yarn wholly formed in one or more of the CUSMA countries.

    The following provision is not in force.

    In this case, for the production of men’s suits, Producer A uses non-originating fabric for the pocket bag, and that fabric was not formed and finished in the territory of one or more of the CUSMA countries; therefore, the suits would be considered to be non-originating goods.

  • Example 5 (subsection (7)):
    The following provision is not in force.

    A wholesaler located in CUSMA Country A imports non-originating storage units provided for in subheading 8471.70 from outside the territory of the CUSMA countries. The wholesaler resells the storage units to a buyer in CUSMA Country B. While in the territory of Country A, the storage units do not undergo any production and therefore do not meet the rule in Schedule 1 for goods of subheading 8471.70 when imported into the territory of CUSMA Country B.

    The following provision is not in force.

    Despite the rule in Schedule 1, the storage units of subheading 8471.70 are considered originating goods when they are imported into the territory of CUSMA Country B because they are referred to in Schedule 2 and were imported from the territory of another CUSMA country.

    The following provision is not in force.

    The buyer in CUSMA Country B subsequently uses the storage units provided for in subheading 8471.70 as a material in the production of another good. For the purpose of determining whether the other good is originating, the buyer in CUSMA Country B may treat the storage units of subheading 8471.70 as originating materials.

  • Example 6 (subsection (8)): Self-produced materials as materials for the purpose of determining whether non-originating materials undergo an applicable change in tariff classification
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces Good A. In the production process, Producer A uses the originating Material X and the non-originating Material Y to produce Material Z. Material Z is a self-produced material that will be used to produce Good A.

    The following provision is not in force.

    The rule set out in Schedule 1 for the heading under which Good A is classified specifies a change in tariff classification from any other heading. In this case, both Good A and the non-originating Material Y are of the same heading. However, the self-produced Material Z is classified in a different heading than that of Good A.

    The following provision is not in force.

    For the purpose of determining whether the non-originating materials that are used in the production of Good A undergo the applicable change in tariff classification, Producer A has the option of considering the self-produced Material Z to be the material that must undergo a change in tariff classification. As Material Z is classified in a different heading than that of Good A, Material Z satisfies the requirements of the applicable change in tariff classification and Good A would qualify as an originating good.

Marginal note:Treatment of recovered materials used in production of remanufactured good

• The following provision is not in force.

  4 (1) A recovered material derived in the territory of one or more of the CUSMA countries is treated as originating provided that

  • The following provision is not in force.

    (a) it is the result of a disassembly process of a used good into individual parts;

  • The following provision is not in force.

    (b) it has undergone certain processing such as cleaning, inspection, testing or other improvement processing to ensure sound working condition; and

  • The following provision is not in force.

    (c) it is used in the production of and incorporated into a remanufactured good.

• The following provision is not in force.

  Marginal note:Recovered material not used in remanufactured good

  (2) In the case that the recovered material is not used or incorporated in the production of a remanufactured good, it is originating only if it satisfies the requirements of section 3 and it satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Requirements of Schedule 1

  (3) A remanufactured good is originating in the territory of a CUSMA country only if it satisfies the applicable requirements established in Schedule 1 and satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Examples

  (4) Each of the following examples is an “Example” as referred to in subsection 1(4).

  • Example 1:
    The following provision is not in force.

    In July 2023, Producer A located in a CUSMA country manufactures water pumps of subheading 8413.30 for use in automotive engines. In addition to selling new water pumps, Producer A also sells water pumps that incorporate used parts.

    The following provision is not in force.

    To obtain the used parts, Producer A disassembles used water pumps in a CUSMA country and cleans, inspects, and tests the individual parts. Accordingly, these parts qualify as recovered materials.

    • The water pumps that Producer A manufactures incorporate the recovered materials, have the same life expectancy and performance as new water pumps and are sold with a warranty that is similar to the warranty for new water pumps. The water pumps therefore qualify as remanufactured goods and the recovered materials are treated as originating materials when determining whether the good qualifies as an originating good.
    • In this case, because the water pumps are for use in an automotive good, the provisions of Part 6 apply. Because the water pump is a part listed in Table B of Part 6, the RVC required is 70% under the net cost method or 80% under the transaction value method.
    • The producer chooses to calculate the regional value content of the good under the net cost method as follows:
    • Water pump net cost =$ 1,000
    • Value of originating recovered materials =$600
    • Value other originating materials =$20
    • Value of non-originating materials =$280
    The following provision is not in force.

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($1,000 − $280) ÷ $1,000 × 100 = 72%

    The following provision is not in force.

    The remanufactured water pumps are originating goods because their regional value content exceeds the 70% requirement by net cost method.

  • Example 2:
    The following provision is not in force.

    Producer A, located in a CUSMA country, uses recovered materials derived in the territory of a CUSMA country in the production of self-propelled bulldozers classified in subheading 8429.11.

    The following provision is not in force.

    In the production of the bulldozers, Producer A uses recovered engines classified in heading 84.07. The engines are recovered materials because they are disassembled from used bulldozers in a CUSMA country and then subject to cleaning, inspecting and technical tests to verify that they are in sound working condition.

    The following provision is not in force.

    In addition to the recovered materials, other non-originating materials classified in subheading 8413.91 are also used in the production of the bulldozers.

    The following provision is not in force.

    Producer A’s bulldozers are considered a remanufactured good because they are classified in a tariff provision set out in the definition of remanufactured good, are partially composed of recovered materials, have a similar life expectancy and perform the same as or similar to new self-propelled bulldozers and have a factory warranty similar to new self-propelled bulldozers.

    The following provision is not in force.

    Once the recovered engines are used in the production of, and incorporated into, the remanufactured bulldozers, the recovered engines would be treated considered as originating materials for the purpose of determining if the remanufactured bulldozers are originating.

    The following provision is not in force.

    The rule of origin set out in Schedule 1 for subheading 8429.11 specifies a change in tariff classification from any other subheading.

    The following provision is not in force.

    In this case, because the recovered engines are treated as originating materials, and the non-originating materials, classified in subheading 8413.91, satisfy the requirements set out in Schedule 1, the remanufactured bulldozers are originating goods.

Marginal note:De minimis rule — non-originating materials

• The following provision is not in force.

  5 (1) Except as otherwise provided in subsection (3), a good is originating in the territory of a CUSMA country if

  • The following provision is not in force.

    (a) the value of all non-originating materials that are used in the production of the good and that do not undergo an applicable change in tariff classification as a result of production occurring entirely in the territory of one or more of the CUSMA countries is not more than 10%

    • (i) of the transaction value of the good determined in accordance with Schedule 3 and adjusted to exclude any costs incurred in the international shipment of the good, or

    • (ii) of the total cost of the good;

  • The following provision is not in force.

    (b) if the good is also subject to a regional value content requirement under the rule in which the applicable change in tariff classification is specified, the value of those non-originating materials is taken into account in calculating the regional value content of the good in accordance with the method set out for that good; and

  • The following provision is not in force.

    (c) the good satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Only one rule to satisfy

  (2) If Schedule 1 sets out two or more alternative rules for the tariff provision under which the good is classified and if the good is considered an originating good under one of those rules in accordance with subsection (1), the good need not satisfy the requirements of any alternative rule in order to be originating.

• The following provision is not in force.

  Marginal note:Exceptions

  (3) Subsections (1) and (2) do not apply to

  • The following provision is not in force.

    (a) a non-originating material of any of headings 04.01 through 04.06 or a non-originating material that is a dairy preparation containing over 10% by dry weight of milk solids of subheading 1901.90 or 2106.90, used in the production of a good of any of headings 04.01 through 04.06;

  • The following provision is not in force.

    (b) a non-originating material of any of headings 04.01 through 04.06 or a non-originating material that is a dairy preparation containing over 10% by dry weight of milk solids of subheading 1901.90 or 2106.90, used in the production of

    • (i) infant preparations containing over 10% by dry weight of milk solids of subheading 1901.10,

    • (ii) mixes and doughs, containing over 25% by dry weight of butterfat, not put up for retail sale of subheading 1901.20,

    • (iii) dairy preparations containing over 10% by dry weight of milk solids of subheading 1901.90 or 2106.90,

    • (iv) goods of heading 21.05,

    • (v) beverages containing milk of subheading 2202.99, or

    • (vi) animal feeds containing over 10% by dry weight of milk solids of subheading 2309.90;

  • The following provision is not in force.

    (c) a non-originating material of heading 08.05 or any of subheadings 2009.11 through 2009.39 that is used in the production of a good of any of subheadings 2009.11 through 2009.39 or a fruit or vegetable juice of any single fruit or vegetable, fortified with minerals or vitamins, concentrated or unconcentrated, of subheading 2106.90 or 2202.99;

  • The following provision is not in force.

    (d) a non-originating material of Chapter 9 that is used in the production of instant coffee, not flavoured, of subheading 2101.11;

  • The following provision is not in force.

    (e) a non-originating material of Chapter 15 that is used in the production of a good of any of headings 15.01 through 15.08, 15.12, 15.14 or 15.15;

  • The following provision is not in force.

    (f) a non-originating material of heading 17.01 that is used in the production of a good of any of headings 17.01 through 17.03;

  • The following provision is not in force.

    (g) a non-originating material of Chapter 17 or heading 18.05 that is used in the production of a good of subheading 1806.10;

  • The following provision is not in force.

    (h) a non-originating material that is a pear, peach or apricot of Chapter 8 or 20 and that is used in the production of a good of heading 20.08;

  • The following provision is not in force.

    (i) a non-originating material that is a single juice ingredient of heading 20.09 that is used in the production of a good of subheading 2009.90 or tariff item 2106.90.92 or 2202.99.22;

  • The following provision is not in force.

    (j) a non-originating material of any of headings 22.03 through 22.08 that is used in the production of a good of heading 22.07 or 22.08;

  • The following provision is not in force.

    (k) a non-originating material that is used in the production of a good of any of Chapters 1 through 27, unless the non-originating material is of a different subheading than the good for which origin is to be determined under this section; or

  • The following provision is not in force.

    (l) a non-originating material that is used in the production of a good of any of Chapters 50 through 63.

• The following provision is not in force.

  Marginal note:De minimis rule — regional value content requirement

  (4) A good that is subject to a regional value content requirement is originating in the territory of a CUSMA country and is not required to satisfy that requirement if

  • The following provision is not in force.

    (a) the value of all non-originating materials used in the production of the good is not more than 10%

    • (i) of the transaction value of the good, determined in accordance with Schedule 3 and adjusted to exclude any costs incurred in the international shipment of the good, or

    • (ii) of the total cost of the good; and

  • The following provision is not in force.

    (b) the good satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Value non-originating materials — subsections (1) and (4)

  (5) For the purposes of subsections (1) and (4), the value of non-originating materials is to be determined in accordance with subsections 8(1) to (6).

• The following provision is not in force.

  Marginal note:De minimis rule — textile goods

  (6) A good of any of Chapters 50 through 60 or heading 96.19 that contains non-originating materials that do not satisfy the applicable change in tariff classification requirements is considered originating in the territory of a CUSMA country if

  • The following provision is not in force.

    (a) the total weight of all those non-originating materials is not more than 10% of the total weight of the good, of which the total weight of elastomeric content may not exceed 7% of the total weight of the good; and

  • The following provision is not in force.

    (b) the good satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:De minimis rule — apparel and textile goods

  (7) A good of any of Chapters 61 through 63 that contains non-originating fibres or yarns in the component of the good that determines the tariff classification that do not satisfy the applicable change in tariff classification requirements is considered originating in the territory of a CUSMA country if

  • The following provision is not in force.

    (a) the total weight of all those non-originating materials is not more than 10% of the total weight of that component, of which the total weight of elastomeric content may not exceed 7% of the total weight of the component; and

  • The following provision is not in force.

    (b) the good satisfies all other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Component

  (8) For the purposes of subsection (7),

  • The following provision is not in force.

    (a) the component of a good that determines the tariff classification of that good must be identified in accordance with the first of the following General Rules for the Interpretation of the Harmonized System under which the identification can be determined, namely Rule 3(b), Rule 3(c) and Rule 4; and

  • The following provision is not in force.

    (b) if the component of the good that determines the tariff classification of the good is a blend of two or more fibres or yarns, all fibres and yarns used in the production of the component must be taken into account in determining the weight of fibres and yarns in that component.

• The following provision is not in force.

  Marginal note:Applicable requirements — materials used in component

  (9) For the purpose of determining if a good of any of Chapters 61 through 63 is originating, the requirements set out in Schedule 1 only apply to the component that determines the tariff classification of the good. Materials that are not part of the component that determines the tariff classification of the good are disregarded when determining if a good is originating. Similarly, for the purposes of this section as applicable to a good of any of Chapters 61 through 63, only the materials used in the component that determines the tariff classification is taken into account in the de minimis calculation.

• The following provision is not in force.

  Marginal note:Exception

  (10) Subsection (7) does not apply to sewing thread, narrow elastic bands or pocket bag fabric that is subject to the requirements set out in Chapter 61, Notes 2 through 4, Chapter 62, Notes 3 through 5 or for coated fabric as set out in Chapter 63, Note 2 of Schedule 1.

• The following provision is not in force.

  Marginal note:Calculation of total cost — choice of methods

  (11) For the purposes of subparagraphs (1)(a)(ii) and (4)(a)(ii), the total cost of a good is, at the choice of the producer of the good,

  • The following provision is not in force.

    (a) the total cost incurred with respect to all goods produced by the producer that can be reasonably allocated to that good in accordance with Schedule 5; or

  • The following provision is not in force.

    (b) the aggregate of each cost that forms part of the total cost incurred with respect to that good that can be reasonably allocated to that good in accordance with Schedule 5.

• The following provision is not in force.

  Marginal note:Calculation of total cost

  (12) The total cost under subsection (11) consists of the costs referred to in subsection 1(6) and is calculated in accordance with that subsection and subsection 1(7).

• The following provision is not in force.

  Marginal note:Value of non-originating materials — other methods

  (13) For the purpose of determining the value under subsection (1) of non-originating materials that do not undergo an applicable change in tariff classification, if an inventory management method recognized in the Generally Accepted Accounting Principles of the CUSMA country where the production was performed or a method set out in Schedule 8 is not used to determine the value of those non-originating materials, the following methods are to be used:

  • The following provision is not in force.

    (a) if the value of those non-originating materials is determined as a percentage of the transaction value of the good and the producer chooses under subsection 7(10) to use one of the methods recognized in the Generally Accepted Accounting Principles of the CUSMA country where the material was produced or one of the methods set out in Schedule 7 to determine the value of those non-originating materials for the purpose of calculating the regional value content of the good, the value of those non-originating materials must be determined in accordance with that method;

  • The following provision is not in force.

    (b) if the following conditions are met and the value of those non-originating materials is equal to the sum of the values of non-originating materials, determined in accordance with the election under subparagraph (iv), divided by the number of units of the goods with respect to which the election is made

    • (i) the value of those non-originating materials is determined as a percentage of the total cost of the good,

    • (ii) under the rule in which the applicable change in tariff classification is specified, the good is also subject to a regional value content requirement and paragraph (4)(a) does not apply with respect to that good,

    • (iii) the regional value content of the good is calculated on the basis of the net cost method, and

    • (iv) the producer elects under subsection 7(15), 16(1) or (10) that the regional value content of the good be calculated over a period;

  • The following provision is not in force.

    (c) if the following conditions are met, the value of those non-originating materials is the sum of the values of the non-originating materials divided by the number of units produced during the period under subparagraph (iii):

    • (i) the value of those non-originating materials is determined as a percentage of the total cost of the good,

    • (ii) under the rule in which the applicable change in tariff classification is specified, the good is not also subject to a regional value content requirement or paragraph (4)(a) applies with respect to that good, and

    • (iii) the producer elects under paragraph 1(7)(b) that, for the purposes of subsection (11), the total cost of the good be calculated over a given period; and

  • The following provision is not in force.

    (d) in any other case, the value of those non-originating materials may, at the choice of the producer, be determined in accordance with an inventory management method recognized in the Generally Accepted Accounting Principles of the CUSMA country where the production was performed or one of the methods set out in Schedule 7.

• The following provision is not in force.

  Marginal note:Value of non-originating materials — production of good

  (14) For the purposes of subsection (4), the value of the non-originating materials used in the production of the good may, at the choice of the producer, be determined in accordance with an inventory management method recognized in the Generally Accepted Accounting Principles of the CUSMA country where the production was performed or one of the methods set out in Schedule 7.

• The following provision is not in force.

  Marginal note:Examples illustrating de minimis rules

  (15) Each of the following examples is an “Example” as referred to in subsection 1(4).

  • Example 1 (subsection (1)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, uses originating materials and non-originating materials in the production of aluminium powder of heading 76.03. The product-specific rule of origin set out in Schedule 1 for heading 76.03 specifies a change in tariff classification from any other Chapter. There is no applicable regional value content requirement for this heading. Therefore, in order for the aluminium powder to qualify as an originating good under the rule set out in Schedule 1, Producer A may not use any non-originating material of Chapter 76 in the production of the aluminum powder.

    The following provision is not in force.

    All of the materials used in the production of the aluminium powder are originating materials, with the exception of a small amount of aluminium scrap of heading 76.02, that is in the same Chapter as the aluminium powder. Under subsection (1), if the value of the non-originating aluminium scrap does not exceed 10% of the transaction value of the aluminium powder or the total cost of the aluminium powder, whichever is applicable, the aluminium powder would be considered an originating good.

  • Example 2 (subsection (2)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, uses originating materials and non-originating materials in the production of fans of subheading 8414.59. There are two alternative rules established in Schedule 1 for subheading 8414.59, one of which specifies a change in tariff classification from any other heading. The other rule specifies both a change in tariff classification from the subheading under which parts of the fans are classified and a regional value content requirement. In order for the fan to qualify as an originating good under the first of the alternative rules, all of the materials that are classified under the subheading for parts of fans and are used in the production of the completed fan must be originating materials.

    The following provision is not in force.

    In this case, all of the non-originating materials used in the production of the fan satisfy the change in tariff classification set out in the rule that specifies a change in tariff classification from any other heading, with the exception of one non-originating material that is classified under the subheading for parts of fans. Under subsection (1), if the value of the non-originating material that does not satisfy the change in tariff classification specified in the first rule does not exceed 10% of the transaction value of the fan or the total cost of the fan, whichever is applicable, the fan would be considered an originating good. Therefore, under subsection (2), the fan would not be required to satisfy the alternative rule that specifies both a change in tariff classification and a regional value content requirement.

  • Example 3 (subsection (2)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, uses originating materials and non-originating materials in the production of a copper anode of heading 74.02. The product-specific rule of origin set out in Schedule 1 for heading 74.02 specifies both a change in tariff classification from any other heading, except from heading 74.04, under which certain copper materials are classified and a regional value content requirement. Therefore, with respect to that part of the rule that specifies a change in tariff classification, in order for the copper anode to qualify as an originating good, any copper materials that are classified under heading 74.02 or 74.04 and that are used in the production of the copper anode must be originating materials.

    The following provision is not in force.

    In this case, all of the non-originating materials used in the production of the copper anode satisfy the specified change in tariff classification, with the exception of a small amount of copper materials classified under heading 74.04. Subsection (1) provides that the copper anode can be considered an originating good if the value of the non-originating copper materials that do not satisfy the specified change in tariff classification does not exceed 10% of the transaction value of the copper anode or the total cost of the copper anode, whichever is applicable. In this case, the value of those non-originating materials that do not satisfy the specified change in tariff classification does not exceed the 10% limit.

    The following provision is not in force.

    However, the rule set out in Schedule 1 for heading 74.02 specifies both a change in tariff classification and a regional value content requirement. Under paragraph (1)(b), in order to be considered an originating good, the copper anode must also, except as otherwise provided in subsection (4), satisfy the regional value content requirement specified in that rule. As provided in paragraph (1)(b), the value of the non-originating materials that do not satisfy the specified change in tariff classification, together with the value of all other non-originating materials used in the production of the copper anode, will be taken into account in calculating the regional value content of the copper anode.

  • Example 4 (subsection (4)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, primarily uses originating materials in the production of shoes of heading 64.05. The product-specific rule of origin set out in Schedule 1 for heading 64.05 specifies both a change in tariff classification from any heading other than headings 64.01 through 64.05 or subheading 6406.10 and a regional value content requirement.

    The following provision is not in force.

    With the exception of a small amount of materials of Chapter 39, all of the materials used in the production of the shoes are originating materials.

    The following provision is not in force.

    Under subsection (4), if the value of all of the non-originating materials used in the production of the shoes does not exceed 10% of the transaction value of the shoes or the total cost of the shoes, whichever is applicable, the shoes are not required to satisfy the regional value content requirement specified in the rule set out in Schedule 1 in order to be considered originating goods.

  • Example 5 (subsection (4)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces barbers’ chairs of subheading 9402.10. The product-specific rule of origin set out in Schedule 1 for goods of subheading 9402.10 specifies a change in tariff classification from any other subheading. All of the materials used in the production of these chairs are originating materials, with the exception of a small quantity of non-originating materials that are classified as parts of barbers’ chairs. These parts undergo no change in tariff classification because subheading 9402.10 provides for both barbers’ chairs and their parts.

    The following provision is not in force.

    Although Producer A’s barbers’ chairs do not qualify as originating goods under the rule set out in Schedule 1, paragraph 3(4)(a) provides, among other things, that, if there is no change in tariff classification from the non-originating materials to the goods because the subheading under which the goods are classified provides for both the goods and their parts, the goods will qualify as originating goods if they satisfy the specified regional value content requirement.

    The following provision is not in force.

    However, under subsection (4), if the value of the non-originating materials does not exceed 10% of the transaction value of the barbers’ chairs or the total cost of the barbers’ chairs, whichever is applicable, the barbers’ chairs are considered originating goods and are not required to satisfy the regional value content requirement set out in subparagraph 3(4)(a)(ii).

  • Example 6 (subsection (6)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, manufactures an infant diaper, classified in heading 96.19, consisting of an outer shell of 94% nylon and 6% elastomeric fabric by weight and a terry knit cotton absorbent crotch. All materials used are produced in a CUSMA country, except for the elastomeric fabric, which is from a non-CUSMA country. The elastomeric fabric is only 6% of the total weight of the diaper. The good satisfies all other applicable requirements of these Regulations. Therefore, the product is considered originating from a CUSMA country as per subsection (6).

  • Example 7 (subsection (6)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces cotton fabric of subheading 5209.11 from cotton yarn of subheading 5205.11. This cotton yarn is also produced by Producer A.

    The following provision is not in force.

    The product-specific rule of origin set out in Schedule 1 for subheading 5209.11, under which the fabric is classified, specifies a change in tariff classification from any other heading outside 52.08 through 52.12, except from certain headings under which certain yarns are classified, including cotton yarn of subheading 5205.11.

    The following provision is not in force.

    Therefore, with respect to the part of the rule that specifies a change in tariff classification, in order for the fabric to qualify as an originating good, the cotton yarn that is used by Producer A in the production of the fabric must be an originating material.

    The following provision is not in force.

    At one point Producer A uses a small quantity of non-originating cotton yarn in the production of the cotton fabric. Under subsection (6), if the total weight of the non-originating cotton yarn does not exceed 10% of the total weight of the cotton fabric, it would be considered an originating good.

  • Example 8 (subsections (7) and (8)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces women’s dresses of subheading 6204.41 from fine wool fabric of heading 51.12. This fine wool fabric, also produced by Producer A, is the component of the dress that determines its tariff classification in subheading 6204.41.

    The following provision is not in force.

    The product-specific rule of origin set out in Schedule 1 for subheading 6204.41, under which the dress is classified, specifies both a change in tariff classification from any other Chapter, except from those headings and Chapters under which certain yarns and fabrics, including combed wool yarn and wool fabric, are classified, and a requirement that the good be cut and sewn or otherwise assembled in the territory of one or more of the CUSMA countries. In addition, narrow elastics classified in subheading 5806.20 or heading 60.02 and sewing thread classified in heading 52.04, 54.01 or 55.08 or yarn classified in heading 54.02 that is used as sewing thread, must be formed and finished in the territory of one or more of the CUSMA countries for the dress to be originating. Furthermore, if the dress has a pocket, the pocket bag fabric must be formed and finished in the territory of one or more of the CUSMA countries for the dress to be originating.

    The following provision is not in force.

    Therefore, with respect to that part of the rule that specifies a change in tariff classification, in order for the dress to qualify as an originating good, the combed wool yarn and the fine wool fabric made therefrom that are used by Producer A in the production of the dress must be originating materials. In addition, the sewing thread, narrow elastics and pocket bags that are used by Producer A in the production of the dress must also be formed and finished in the territory of one or more of the CUSMA countries.

    The following provision is not in force.

    At one point Producer A uses a small quantity of non-originating combed wool yarn in the production of the fine wool fabric. Under subsection (7), if the total weight of the non-originating combed wool yarn does not exceed 10% of the total weight of all the yarn used in the production of the component of the dress that determines its tariff classification, that is, the wool fabric, the dress would be considered an originating good.

  • Example 9 (subsection (7)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, manufactures women’s knit sweaters, which have knit bodies and woven sleeves. The knit body is composed of 95% polyester and 5% spandex, by weight. The sleeves are made of non-CUSMA woven fabric that is 100% polyester. All materials of the knit body are from a CUSMA country, except for the spandex, which is from a non-CUSMA country. The sweater is cut and sewn in a CUSMA country. Since the knit body gives the garment its essential character, the sweater is classified in subheading 6110.30. The product-specific rule of origin set out in Schedule 1 for subheading 6110.30 is that the good is both cut (or knit to shape) and sewn or otherwise assembled in the territory of one or more of the CUSMA countries. The sleeves are disregarded in determining whether the sweater originates in a CUSMA country because only the component that determines the tariff classification of the good must be originating and the de minimis provision is applied to that component. Moreover, the total weight of the spandex is less than 10% of the total weight of the knit body fabric, which is the component that determines the tariff classification of the sweater and the spandex does not exceed 7% of the total weight of good. Assuming that the women’s knit sweater satisfies all other applicable requirements of these Regulations, the women’s knit sweater is originating from the CUSMA country.

  • Example 10 (subsection (9)):
    The following provision is not in force.

    A men’s shirt of Chapter 61 is made using two different fabrics; one for the body and another for the sleeves. The component that determines the tariff classification of the men’s shirt is the fabric used for the body, as it constitutes the material that predominates by weight and makes up the largest surface area of the shirt’s exterior. If this fabric is produced using non-originating fibres and yarns that do not satisfy a tariff change rule, the de minimis provision is calculated on the basis of the total weight of the non-originating fibres or yarns used in the production of the fabric that makes up the body of the shirt. The weight of these non-originating fibres or yarns must be 10% or less of the total weight of that fabric and any elastomeric content must be 7% or less of the total weight of that fabric.

    The following provision is not in force.

    Alternatively, if the shirt is made entirely of the same fabric, the component that determines the tariff classification of the shirt would be that fabric, as the shirt is made out of the same material throughout. Therefore, under this second scenario, the total weight of all non-originating fibres and yarns used in the production of the shirt that do not satisfy a tariff change rule must be 10% or less of the total weight of the shirt, and any elastomeric content must be 7% or less of the total weight of the shirt, for the shirt to be considered as an originating good.

  • Example 11 (subsection (9)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces women’s blouses of subheading 6206.40 from a fabric also produced by Producer A that is composed of 90% by weight of originating polyester yarns of subheading 5402.33, 3% by weight non-originating lyocell yarn of subheading 5403.49 and 7% by weight non-originating elastomeric filament yarn of subheading 5402.44. This fabric is the component of the women’s blouses that determines its tariff classification in subheading 6206.40.

    The following provision is not in force.

    The product-specific rule of origin of Schedule 1 applicable to the women’s blouses of subheading 6206.40 requires a change in tariff classification from any other Chapter, except from those headings and Chapters under which certain yarns and fabrics, including polyester, lyocell and elastomeric filament yarns, are classified and a requirement that the good is cut and sewn or otherwise assembled in the territory of one or more of the CUSMA countries.

    The following provision is not in force.

    In this case, the non-originating lyocell yarn of subheading 5403.49 and the non-originating elastomeric filament yarn of subheading 5402.44 do not satisfy the change in tariff classification required by the product-specific rule of origin of Schedule 1, because the product-specific rule of origin for heading 62.06 excludes a change from Chapter 54 to heading 62.06.

    The following provision is not in force.

    However, according to subsection (7), a textile or apparel good classified in any of Chapters 61 through 63 that contains non-originating fibres or yarns in the component of the good that determines its tariff classification that do not satisfy the applicable change in tariff classification, is nonetheless considered an originating good if the total weight of all those fibres or yarns is not more than 10% of the total weight of that component, of which the total weight of elastomeric content may not exceed 7% of the total weight of the component, and such good meets all the other applicable requirements of these Regulations.

    The following provision is not in force.

    Since the weight of the non-originating materials used by Producer A does not exceed 10% of the total weight of the component that determines the tariff classification of the women’s blouses, and the weight of elastomeric content also does not exceed 7% of such total weight, the women’s blouses qualify as originating goods.

  • Example 12 (subsection (10)):
    The following provision is not in force.

    A producer located in a country manufactures boys’ swimwear of subheading 6211.11 from fabric that has been woven in a CUSMA country from yarn spun in a CUSMA country; however, the producer uses non-originating narrow elastic of heading 60.02 in the waist-band of the swimwear. As a result of the use of the non-originating narrow elastic of heading 60.02 in the waistband, and provided the garment is imported into a CUSMA country at least 18 months after the Agreement enters into force, the swimwear is considered non-originating because it does not satisfy the requirement set out in Note 3 of Chapter 62. In addition, subsection (7) does not apply to the narrow elastic of heading 60.02 and the good is therefore a non-originating good.

Marginal note:Set

• The following provision is not in force.

  6 (1) This section applies to a good that is classified as a set as a result of the application of Rule 3 of the General Rules for the Interpretation of the Harmonized System.

• The following provision is not in force.

  Marginal note:Requirement

  (2) Except as otherwise set out in Schedule 1, a set is originating in the territory of a CUSMA country only if each good in the set is an originating good and both the set and the goods in the set meet the other applicable requirements of these Regulations.

• The following provision is not in force.

  Marginal note:Exceptions

  (3) Despite subsection (2), a set is originating only if the value of all the non-originating goods included in the set does not exceed 10% of the value of the set.

• The following provision is not in force.

  Marginal note:Value

  (4) For the purposes of subsection (3), the value of non-originating goods in the set and the value of the set must be calculated in the same manner as the value of non-originating materials is determined in accordance with section 8 and the value of the good determined in accordance with section 7.

• The following provision is not in force.

  Marginal note:Example

  (5) Each of the following examples is an “Example” referred to in subsection 1(4).

  • Example 1: Paint set
    The following provision is not in force.

    Producer A assembles a paint set for arts and crafts. The set includes tubes of paint, paint brushes and paper, all presented in a reusable wooden box. The paint set for arts and crafts is classified in subheading 3210.00 as a result of the application of Rule 3 of the General Rules for the Interpretation of the Harmonized System and, as a result, this section applies with respect to that set. The paint, paper and wooden box are all originating as they undergo the changes required in Schedule 1. The paint brushes, which represent 4% of the value of the set, are produced in the territory of a non-CUSMA country and are therefore non-originating. The set is nonetheless originating.

  • Example 2 (subsection (2)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, uses originating materials and non-originating materials to assemble a manicure set of subheading 8214.20. The set includes a nail nipper, cuticle scissors, a nail clipper and a nail file with cardboard support, all presented in a plastic case with zipper. The items are not classified as a set as a result of the application of Rule 3 of the General Rules for the Interpretation of the Harmonized System. The Harmonized System specifies that manicure sets are classified in subheading 8214.20. This means that the specific rule of origin set out in Schedule 1 applies. This rule requires a change in tariff classification from any other Chapter. In order for the manicure set to qualify as an originating good under the rule set out in Schedule 1, Producer A may not use any non-originating material of Chapter 82 in the assembly of the manicure set.

    The following provision is not in force.

    In this case, Producer A, located in a CUSMA country, produces the nail nipper, cuticle scissors and nail clipper included in the set, and all qualify as originating goods. Despite being classified in the same Chapter as the manicure set (Chapter 82), the originating nail nipper, the cuticle scissors and the nail clipper satisfy the requirement of the applicable change in tariff classification to the manicure set. The nail file with cardboard support (6805.20) and the plastic case with zipper (4202.12) are imported from outside the territories of the CUSMA countries; however, these items are not classified in Chapter 82, so they satisfy the applicable change in tariff classification. Therefore, the manicure set is an originating good.

  • Example 3 (subsection (3)): Pants set
    The following provision is not in force.

    Producer A makes a pants set, consisting of men’s cotton denim trousers and a polyester belt, packed together for a retail sale. The trousers are made of cotton fabric formed and finished from yarn in a CUSMA country. The sewing thread is formed and finished in a CUSMA country. The pocket bag fabric is formed and finished in a CUSMA country, of yarn wholly formed in a CUSMA country. The trousers are cut and sewn in CUSMA country A. A polyester webbing belt with a metal buckle is made in a non-CUSMA country and shipped to CUSMA country A, where it is threaded through the belt loops of the trousers. The value of the belt is 8% of the value of the trousers and belt combined.

    The following provision is not in force.

    The men’s trousers are classified in subheading 6203.42. The rule of origin set out in Schedule 1 for subheading 6203.42 requires that the trousers be made from fabric produced in a CUSMA country from yarn produced in a CUSMA country. The trousers satisfy the product-specific rules of origin set out in Schedule 1 and are considered originating. However, the belt does not satisfy the rules and would not be considered originating. The set is nonetheless an originating good if the belt value is 10% or less of the value of the set. Since the value of the belt is 8% of the value of the set, the men’s trousers and belt set would be treated as an originating good.

  • Example 4 (subsection (3)): Shirt and tie set
    The following provision is not in force.

    Producer A makes a boys’ shirt and tie set in a CUSMA country. The shirt is constructed from 55% cotton, 45% polyester, solid colour, dyed, woven fabric, classified in subheading 5210.31. The fabric contains 73.2 total yarns per square centimetre and 76 metric yarns. The shirt is packaged in a retail polybag with a coordinating colour, 100% polyester, woven fabric tie. The yarns used in the shirt fabric are spun in a non-CUSMA country and the fabric is woven and dyed in the same non-CUSMA country. The shirt fabric is sent to the CUSMA country where it is cut and sewn into finished garments. The coordinating tie is made in a non-CUSMA country from fabric that is woven in that country from yarns that are spun in that country. The value of the coordinating tie is approximately 13% of the value of the set.

    The following provision is not in force.

    The shirt is classified under heading 62.05. The shirt satisfies the product-specific rule of origin for heading 62.05 set out in Schedule 1 and is considered originating because it is wholly made from fabric of subheading 5210.31 (not of square construction, containing more than 70 warp ends and filling picks per square centimetre, of average yarn number exceeding 70 metric) and cut and sewn into finished garments in the CUSMA country. On the other hand, the tie does not satisfy the product-specific rule for heading 62.15 and would not be considered originating. For the purposes of the sets rule, provided the tie is valued at 10% or less of the value of the set, the set will be considered as originating. However, since the value of the coordinating tie is approximately 13% of the value of the set, the shirt and tie set would not be considered as an originating good.

  • Example 5 (subsection (3)): Chef set
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces a chef set for retail sale using originating and non-originating materials. This set includes an apron, cooking gloves and a chef hat. The chef set is classified in heading 62.11 as a result of the application of Rule 3 of the General Rules for the Interpretation of the Harmonized System. For this reason, subsection (3) applies to this set. Both the apron and cooking gloves meet the product-specific rules of origin for their respective product categories and are therefore considered to be originating. The chef hat, which represents 9.7% of the value of the set, is produced in the territory of a non-CUSMA country and is therefore non-originating. The set is nonetheless an originating good because less than 10% of the value of the set is non-originating.

Marginal note:Calculation

• The following provision is not in force.

  7 (1) Except as otherwise provided in subsection (6), the regional value content of a good must be calculated, at the choice of the importer, exporter or producer of the good, on the basis of either the transaction value method or the net cost method.

• The following provision is not in force.

  Marginal note:Transaction value method

  (2) The transaction value method for calculating the regional value content of a good is as follows:

  RVC = (TV − VNM) ÷ TV × 100

  where

  RVC

  is the regional value content of the good, expressed as a percentage;

  TV

  is the transaction value of the good, determined in accordance with Schedule 3 with respect to the transaction in which the producer of the good sold the good, adjusted to exclude any costs incurred in the international shipment of the good; and

  VNM

  is the value of non-originating materials used by the producer in the production of the good, determined in accordance with section 8.

• The following provision is not in force.

  Marginal note:Net cost method

  (3) The net cost method for calculating the regional value content of a good is as follows:

  RVC = (NC − VNM) ÷ NC × 100

  where

  RVC

  is the regional value content of the good, expressed as a percentage;

  NC

  is the net cost of the good, calculated in accordance with subsection (11); and

  VNM

  is the value of non-originating materials used by the producer in the production of the good determined, except as otherwise provided in sections 14 and 15, in accordance with section 8.

• The following provision is not in force.

  Marginal note:Non-originating materials — values not included

  (4) For the purpose of calculating the regional value content of a good under subsection (2) or (3), the value of non-originating materials used by a producer in the production of the good must not include

  • The following provision is not in force.

    (a) the value of any non-originating materials used by another producer in the production of originating materials that are subsequently acquired and used by the producer of the good in the production of that good; or

  • The following provision is not in force.

    (b) the value of any non-originating materials used by the producer in the production of a self-produced material that is an originating material and is designated as an intermediate material.

• The following provision is not in force.

  Marginal note:Self-produced material

  (5) For the purposes of subsection (4),

  • The following provision is not in force.

    (a) in the case of any self-produced material that is not designated as an intermediate material, only the value of any non-originating materials used in the production of the self-produced material is to be included in the value of non-originating materials used in the production of the good; and

  • The following provision is not in force.

    (b) if a self-produced material that is designated as an intermediate material and is an originating material is used by the producer of the good with non-originating materials — whether or not those non-originating materials are produced by that producer — in the production of the good, the value of those non-originating materials is to be included in the value of non-originating materials.

• The following provision is not in force.

  Marginal note:Net cost method — when required

  (6) The regional value content of a good must be calculated only on the basis of the net cost method if Schedule 1 does not provide a rule for the good based on the transaction value method.

• The following provision is not in force.

  Marginal note:Net cost method — change permitted

  (7) If the importer, exporter or producer of a good calculates the regional value content of the good on the basis of the transaction value method and the customs administration of a CUSMA country subsequently notifies that importer, exporter or producer in writing, during the course of a verification of origin, that

  • The following provision is not in force.

    (a) the transaction value of the good, as determined by that importer, exporter or producer, is required to be adjusted under section 4 of Schedule 3, or

  • The following provision is not in force.

    (b) the value of any material used in the production of the good, as determined by that importer, exporter or producer, is required to be adjusted under section 4 of Schedule 6,

  the importer, exporter or producer may choose that the regional value content of the good be calculated on the basis of the net cost method, in which case the calculation must be made within 30 days after the producer receives the notification, or such longer period as that customs administration specifies.

• The following provision is not in force.

  Marginal note:Net cost method — no change permitted

  (8) If the importer, exporter or producer of a good calculates the regional value content of the good on the basis of the net cost method and the customs administration of a CUSMA country subsequently notifies that importer, exporter or producer in writing, during the course of a verification of origin, that the good does not satisfy the applicable regional value content requirement, the importer, exporter or producer of the good may not recalculate the regional value content on the basis of the transaction value method.

• The following provision is not in force.

  Marginal note:Clarification

  (9) Nothing in subsection (7) is to be construed as preventing any review or appeal under Article 5.15 of the Agreement, as implemented in each CUSMA country, of an adjustment to or a rejection of

  • The following provision is not in force.

    (a) the transaction value of the good; or

  • The following provision is not in force.

    (b) the value of any material used in the production of the good.

• The following provision is not in force.

  Marginal note:Value of identical non-originating materials

  (10) For the purposes of the transaction value method, if non-originating materials that are the same as one another in all respects, including physical characteristics, quality and reputation but excluding minor differences in appearance, are used in the production of a good, the value of those non-originating materials may, at the choice of the producer of the good, be determined in accordance with one of the methods set out in Schedule 7.

• The following provision is not in force.

  Marginal note:Calculating net cost of good

  (11) For the purposes of subsection (3), the net cost of a good may be calculated, at the choice of the producer of the good, by

  • The following provision is not in force.

    (a) calculating the total cost incurred with respect to all goods produced by that producer, subtracting any excluded costs that are included in that total cost, and reasonably allocating, in accordance with Schedule 5, the remainder to the good;

  • The following provision is not in force.

    (b) calculating the total cost incurred with respect to all goods produced by that producer, reasonably allocating, in accordance with Schedule 5, that total cost to the good, and subtracting any excluded costs that are included in the amount allocated to that good; or

  • The following provision is not in force.

    (c) reasonably allocating, in accordance with Schedule 5, each cost that forms part of the total cost incurred with respect to the good so that the aggregate of those costs does not include any excluded costs.

• The following provision is not in force.

  Marginal note:Calculation of total cost

  (12) Total cost under subsection (11) consists of the costs referred to in subsection 1(6) and is calculated in accordance with that subsection and subsection 1(7).

• The following provision is not in force.

  Marginal note:Calculation of net cost of good

  (13) For the purpose of calculating the net cost under subsection (11),

  • The following provision is not in force.

    (a) excluded costs are the excluded costs that are recorded on the books of the producer of the good;

  • The following provision is not in force.

    (b) excluded costs that are included in the value of a material that is used in the production of the good are not to be subtracted from or otherwise excluded from the total cost; and

  • The following provision is not in force.

    (c) excluded costs do not include any amount paid for research and development services performed in the territory of a CUSMA country.

• The following provision is not in force.

  Marginal note:Non-allowable interest

  (14) For the purpose of calculating non-allowable interest costs, the determination of whether interest costs incurred by a producer are more than 700 basis points above the interest rate of comparable maturities issued by the federal government of the country in which the producer is located is to be made in accordance with Schedule 9.

• The following provision is not in force.

  Marginal note:Use of averaging over a period

  (15) For the purposes of the net cost method, the regional value content of the good, other than a good with respect to which an election to average may be made under subsection 16(1) or (10), may be calculated, if the producer elects to do so, by

  • The following provision is not in force.

    (a) calculating the sum of the net costs incurred and the sum of the values of non-originating materials used by the producer of the good with respect to the good and identical goods or similar goods, or any combination thereof, produced in a single plant by the producer over

    • (i) a one-month period,

    • (ii) any consecutive three- or six-month period that falls within and is evenly divisible into the number of months of the producer’s fiscal year remaining at the beginning of that period, or

    • (iii) the producer’s fiscal year; and

  • The following provision is not in force.

    (b) using the sums referred to in paragraph (a) as the net cost and the value of non-originating materials, respectively.

• The following provision is not in force.

  Marginal note:Application

  (16) The calculation made under subsection (15) applies with respect to all units of the good produced during the period chosen by the producer under paragraph (15)(a).

• The following provision is not in force.

  Marginal note:No change to goods or period

  (17) An election made under subsection (15) may not be rescinded or modified with respect to the goods or the period to which the election is made.

• The following provision is not in force.

  Marginal note:Period considered to be chosen

  (18) If a producer chooses a one-, three- or six-month period under subsection (15) with respect to a good, the producer is considered to have chosen under that subsection a period or periods of the same duration for the remainder of the producer’s fiscal year with respect to that good.

• The following provision is not in force.

  Marginal note:Method and period for remainder of fiscal year

  (19) If the use of the net cost method is required or chosen and an election is made under subsection (15), the regional value content of the good is to be calculated on the basis of the net cost method over the period chosen under that subsection and for the remainder of the producer’s fiscal year.

• The following provision is not in force.

  Marginal note:Analysis of actual cost

  (20) Except as otherwise provided in subsection 16(9), if the producer of a good has calculated the regional value content of the good under the net cost method on the basis of estimated costs, including standard costs, budgeted forecasts or other similar estimating procedures, before or during the period chosen under paragraph (15)(a), the producer must conduct an analysis at the end of the producer’s fiscal year of the actual costs incurred over the period with respect to the production of the good.

• The following provision is not in force.

  Marginal note:Option to treat any material as non-originating

  (21) For the purpose of calculating the regional value content of a good, the producer of that good may choose to treat any material used in the production of that good as a non-originating material.

• The following provision is not in force.

  Marginal note:Examples

  (22) Each of the following examples is an “Example” as referred to in subsection 1(4).

  • Example 1: Point of direct shipment (with respect to the definition adjusted to exclude any costs incurred in the international shipment of the good)
    The following provision is not in force.

    A producer has only one factory at which the producer manufactures office chairs. Because the factory is located close to transportation facilities, all units of the finished good are stored in a factory warehouse 200 m from the end of the production line. Goods are shipped worldwide from this warehouse. The point of direct shipment is the warehouse.

  • Example 2: Point of direct shipment (with respect to the definition adjusted to exclude any costs incurred in the international shipment of the good)
    The following provision is not in force.

    A producer has six factories, all located within the territory of one of the CUSMA countries, at which the producer produces garden tools of various types. These tools are shipped worldwide and orders usually consist of bulk orders of various types of tools. Because different tools are manufactured at different factories, the producer decided to consolidate storage and shipping facilities and ships all finished products to a large warehouse located near the seaport from which all orders are shipped. The distance from the factories to the warehouse varies from 3 km to 130 km. The point of direct shipment for each of the goods is the warehouse.

  • Example 3: Point of direct shipment (with respect to the definition adjusted to exclude any costs incurred in the international shipment of the good)
    The following provision is not in force.

    A producer has only one factory, located near the centre of one of the CUSMA countries, at which the producer manufactures office chairs. The office chairs are shipped from that factory to three warehouses leased by the producer, one on the west coast, one near the factory and one on the east coast. The office chairs are shipped to buyers from these warehouses, the shipping location depending on the shipping distance from the buyer. Buyers closest to the west coast warehouse are normally supplied by the west coast warehouse, buyers closest to the east coast are normally supplied by the warehouse located on the east coast and buyers closest to the warehouse near the factory are normally supplied by that warehouse. In this case, the point of direct shipment is the location of the warehouse from which the office chairs are normally shipped to customers in the location in which the buyer is located.

  • Example 4 (subsection (3)): Net cost method
    The following provision is not in force.

    A producer located in CUSMA country A sells Good A that is subject to a regional value content requirement to a buyer located in CUSMA country B. The producer of Good A chooses to calculate the regional value content of that good using the net cost method. All applicable requirements of these Regulations, other than the regional value content requirement, have been met. The applicable regional value content requirement is 50%.

    The following provision is not in force.

    In order to calculate the regional value content of Good A, the producer first calculates the net cost of Good A. Under paragraph (11)(a), the net cost is the total cost of Good A (the aggregate of the product costs, period costs and other costs) per unit, minus the excluded costs (the aggregate of the sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs and non-allowable interest costs) per unit. The producer uses the following figures to calculate the net cost:

    • Product costs:
      • Value of originating materials$30.00
      • Value of non-originating materials$40.00
      • Other product costs$20.00
    • Period costs:$10.00
    • Other costs:$0.00
    • Total cost of Good A, per unit:$100.00

    The following provision is not in force.

    
    

    • Excluded costs:
      • Sales promotion, marketing and after-sales service costs$5.00
      • Royalties$2.50
      • Shipping and packing costs$3.00
      • Non-allowable interest costs$1.50
    • Total excluded costs:$12.00

    The following provision is not in force.

    The net cost is the total cost of Good A, per unit, minus the excluded costs.

    • Total cost of Good A, per unit:$100.00
    • Excluded costs:- $12.00
    • Net cost of Good A, per unit:$88.00

    The following provision is not in force.

    The net cost ($88) and the value of non-originating materials ($40) are needed in order to calculate the regional value content. The producer calculates the regional value content of Good A under the net cost method in the following manner:

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	(88 - 40) ÷ 88 × 100
    	=	54.5%

    The following provision is not in force.

    Therefore, under the net cost method, Good A qualifies as an originating good, with a regional value content of 54.5%.

  • Example 5 (paragraph (11)(a)):
    The following provision is not in force.

    A producer in a CUSMA country produces Good A and Good B during the producer’s fiscal year.

    The following provision is not in force.

    The producer uses the following figures, which are recorded on the producer’s books and represent all of the costs incurred with respect to both Good A and Good B, to calculate the net cost of those goods:

    • Product costs:
      The following provision is not in force.

      Value of originating materials$2,000

      The following provision is not in force.

      Value of non-originating materials$1,000

      The following provision is not in force.

      Other product costs$2,400

    • Period costs (including $1,200 in excluded costs):$3,200
    • Other costs:$400
    • Total cost of Good A and Good B:$9,000
    The following provision is not in force.

    The net cost is the total cost of Good A and Good B, minus the excluded costs incurred with respect to those goods.

    • Total cost of Good A and Good B:$9,000
    • Excluded costs:- $1,200
    • Net cost of Good A and Good B:$7,800
    The following provision is not in force.

    The net cost must then be reasonably allocated, in accordance with Schedule 5, to Good A and Good B.

  • Example 6 (paragraph (11)(b)):
    The following provision is not in force.

    A producer in a CUSMA country produces Good A and Good B during the producer’s fiscal year.

    The following provision is not in force.

    In order to calculate the regional value content of Good A and Good B, the producer uses the following figures that are recorded on the producer’s books and incurred with respect to those goods:

    • Product costs:
      The following provision is not in force.

      Value of originating materials$2,000

      The following provision is not in force.

      Value of non-originating materials$1,000

      The following provision is not in force.

      Other product costs$2,400

    The following provision is not in force.

    Period costs (including $1,200 in excluded costs):$3,200

    The following provision is not in force.

    Other costs:$400

    The following provision is not in force.

    Total cost of Good A and Good B:$9,000

    The following provision is not in force.

    Under paragraph (11)(b), the total cost of Good A and Good B is then reasonably allocated, in accordance with Schedule 5, to those goods. The costs are allocated in the following manner:

    	Allocated to Good A	Allocated to Good B
    Total cost ($9,000 for both Good A and Good B)	$5,220	$3,780

    The following provision is not in force.

    The excluded costs ($1,200) that are included in the total cost allocated to Good A and Good B, in accordance with Schedule 5, are subtracted from that amount.

    Total excluded costs:	Excluded cost allocated to Good A ($)	Excluded cost allocated to Good B ($)
    Sales promotion, marketing and after-sale service costs$500	290	210
    Royalties$200	116	84
    Shipping and packing costs$500	290	210
    Net cost (total cost minus excluded costs):	$4,524	$3,276

    The following provision is not in force.

    Therefore the net cost of Good A is $4,524 and the net cost of Good B is $3,276.

  • Example 7 (paragraph (11)(c)):
    The following provision is not in force.

    A producer located in a CUSMA country produces Good C and Good D. The following costs are recorded on the producer’s books for the months of January, February and March, and each cost that forms part of the total cost is reasonably allocated, in accordance with Schedule 5, to Good C and Good D.

    	Total cost: Good C and Good D (in thousands of dollars)	Allocated to Good C (in thousands of dollars)	Allocated to Good D (in thousands of dollars)
    Product costs:
    Value of originating materials	100	0	100
    Value of non-originating materials	900	800	100
    Other product costs	500	300	200
    Period costs (including $420 in excluded costs):	5,679	3,036	2,643
    Minus excluded costs	420	300	120
    Other costs:	0	0	0
    Total cost (aggregate of product costs, period costs and other costs):	6,759	3,836	2,923

  • Example 8 (subsection (12)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces Good A that is subject to a regional value content requirement. The producer chooses to calculate the regional value content of that good using the net cost method. Producer A buys Material X from Producer B, located in a CUSMA country. Material X is a non-originating material and is used in the production of Good A. Producer A provides Producer B, at no charge, with moulds to be used in the production of Material X. The cost of the moulds that is recorded on the books of Producer A has been expensed in the current year. Pursuant to subparagraph 4(1)(b)(ii) of Schedule 6, the value of the moulds is included in the value of Material X. Therefore, the cost of the moulds that is recorded on the books of Producer A and that has been expensed in the current year cannot be included as a separate cost in the net cost of Good A because it has already been included in the value of Material X.

  • Example 9 (subsection (12)):
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces Good A that is subject to a regional value content requirement. The producer chooses to calculate the regional value content of that good using the net cost method and averages the calculation over the producer’s fiscal year under subsection (15). Producer A determines that during that fiscal year Producer A incurred a gain on foreign currency conversion of $10,000 and a loss on foreign currency conversion of $8,000, resulting in a net gain of $2,000. Producer A also determines that $7,000 of the gain on foreign currency conversion and $6,000 of the loss on foreign currency conversion is related to the purchase of non-originating materials used in the production of Good A and $3,000 of the gain on foreign currency conversion and $2,000 of the loss on foreign currency conversion is not related to the production of Good A. The producer determines that the total cost of Good A is $45,000 before deducting the $1,000 net gain on foreign currency conversion related to the production of Good A. The total cost of Good A is therefore $44,000. That $1,000 net gain is not included in the value of non-originating materials under subsection 8(1).

  • Example 10 (subsection (12)):
    The following provision is not in force.

    Given the same facts as in Example 9, except that Producer A determines that $6,000 of the gain on foreign currency conversion and $7,000 of the loss on foreign currency conversion is related to the purchase of non-originating materials used in the production of Good A the total cost of Good A is $45,000, which includes the $1,000 net loss on foreign currency conversion related to the production of Good A. That $1,000 net loss is not included in the value of non-originating materials under subsection 8(1).

Marginal note:Value of material used in production

• The following provision is not in force.

  8 (1) Except as otherwise provided for non-originating materials used in the production of a good referred to in section 14 or subsection 15(1), and except in the case of indirect materials, intermediate materials and packing materials and containers, for the purpose of calculating the regional value content of a good and for the purposes of subsections 5(1) and (4), the value of a material that is used in the production of the good is

  • The following provision is not in force.

    (a) except as otherwise provided in subsection (4), if the material is imported by the producer of the good into the territory of the CUSMA country in which the good is produced, the transaction value of the material at the time of importation, including the costs incurred in the international shipment of the material;

  • The following provision is not in force.

    (b) if the material is acquired by the producer of the good from another person located in the territory of the CUSMA country in which the good is produced

    • (i) the price paid or payable by the producer in the CUSMA country where the producer is located,

    • (ii) the value as determined for an imported material in paragraph (a), or

    • (iii) the earliest ascertainable price paid or payable in the territory of the CUSMA country where the good is produced; or

  • The following provision is not in force.

    (c) for a material that is self-produced

    • (i) all the costs incurred in the production of the material, including general expenses, and

    • (ii) an amount equivalent to the profit added in the normal course of trade or equal to the profit that is usually reflected in the sale of goods of the same class or kind as the self-produced material that is being valued if no self-produced material that has been used in its production has been valued including the amount equivalent or equal to the profit according to this paragraph.

• The following provision is not in force.

  Marginal note:Adjustments

  (2) The following costs may be deducted from the value of a non-originating material or material of undetermined origin if they are included under subsection (1):

  • The following provision is not in force.

    (a) the costs of freight, insurance and packing and all other costs incurred in transporting the material to the location of the producer;

  • The following provision is not in force.

    (b) duties and taxes paid or payable with respect to the material in the territory of one or more of the CUSMA countries, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable;

  • The following provision is not in force.

    (c) customs brokerage fees, including the cost of in-house customs brokerage services, incurred with respect to the material in the territory of one or more of the CUSMA countries; and

  • The following provision is not in force.

    (d) the cost of waste and spoilage resulting from the use of the material in the production of the good, minus the value of any reusable scrap or by-product.

• The following provision is not in force.

  Marginal note:Documentary evidence required

  (3) If the cost or expense listed in subsection (2) is unknown or documentary evidence of the amount of the adjustment is not available, no adjustment is to be made for that particular cost or expense.

• The following provision is not in force.

  Marginal note:Unacceptable transaction value

  (4) For the purposes of paragraph (1)(a), if the transaction value of the material referred to in that paragraph is unacceptable or if there is no transaction value in accordance with Schedule 4, the value of the material must be determined in accordance with Schedule 6 and, if the costs referred to in subsection (2) are included in that value, those costs may be deducted from that value.

• The following provision is not in force.

  Marginal note:Costs recorded on books

  (5) For the purposes of subsection (1), the costs referred to in paragraph (1)(c) are the costs referred to in that paragraph that are recorded on the books of the producer of the good.

• The following provision is not in force.

  Marginal note:Designation of self-produced material as intermediate material

  (6) For the purpose of calculating the regional value content of a good, the producer of the good may designate as an intermediate material any self-produced material that is used in the production of the good, provided that, if an intermediate material is subject to a regional value content requirement, no other self-produced material that is subject to a regional value content requirement and is incorporated into that intermediate material is also designated by the producer as an intermediate material.

• The following provision is not in force.

  Marginal note:Particulars

  (7) For the purposes of subsection (6),

  • The following provision is not in force.

    (a) in order to qualify as an originating material, a self-produced material that is designated as an intermediate material must qualify as an originating material under these Regulations;

  • The following provision is not in force.

    (b) the designation of a self-produced material as an intermediate material is to be made solely at the choice of the producer of that self-produced material; and

  • The following provision is not in force.

    (c) except as otherwise provided in subsection 9(6), the proviso set out in subsection (6) does not apply with respect to an intermediate material used by another producer in the production of a material that is subsequently acquired and used in the production of a good by the producer referred to in subsection (6).

• The following provision is not in force.

  Marginal note:Value of intermediate material

  (8) The value of an intermediate material is, at the choice of the producer of the good,

  • The following provision is not in force.

    (a) the total cost incurred with respect to all goods produced by the producer that can be reasonably allocated to that intermediate material in accordance with Schedule 5; or

  • The following provision is not in force.

    (b) the aggregate of each cost that forms part of the total cost incurred with respect to that intermediate material that can be reasonably allocated to that intermediate material in accordance with Schedule 5.

• The following provision is not in force.

  Marginal note:Calculation of total cost

  (9) Total cost under subsection (8) consists of the costs referred to in subsection 1(6) and is calculated in accordance with that subsection and subsection 1(7).

• The following provision is not in force.

  Marginal note:Rescission of designation

  (10) If a producer of a good designates a self-produced material as an intermediate material under subsection (6) and the customs administration of a CUSMA country into which the good is imported determines during a verification of origin of the good that the intermediate material is a non-originating material and notifies the producer of this in writing before the written determination of whether the good qualifies as an originating good, the producer may rescind the designation in which case the regional value content of the good is to be calculated as though the self-produced material were not so designated.

• The following provision is not in force.

  Marginal note:Effect of rescission

  (11) A producer of a good who rescinds a designation under subsection (10) may, not later than 30 days after the day on which the customs administration referred to in subsection (10) notifies the producer in writing that the self-produced material is a non-originating material, designate as an intermediate material another self-produced material that is incorporated into the good, subject to the proviso set out in subsection (6).

• The following provision is not in force.

  Marginal note:Second rescission

  (12) If a producer of a good designates another self-produced material as an intermediate material under subsection (6) and the customs administration referred to in subsection (10) determines during the verification of origin of the good that that self-produced material is a non-originating material,

  • The following provision is not in force.

    (a) the producer may rescind the designation in which case the regional value content of the good is to be calculated as though the self-produced material were not so designated; and

  • The following provision is not in force.

    (b) the producer may not designate another self-produced material that is incorporated into the good as an intermediate material.

• The following provision is not in force.

  Marginal note:Indirect materials

  (13) For the purpose of determining whether a good is an originating good, an indirect material that is used in the production of the good

  • The following provision is not in force.

    (a) is considered to be an originating material, regardless of where that indirect material is produced; and

  • The following provision is not in force.

    (b) if the good is subject to a regional value content requirement, for the purpose of calculating the net cost under the net cost method, has a value that is equal to the costs of that material that are recorded on the books of the producer of the good.

• The following provision is not in force.

  Marginal note:Packaging materials and containers

  (14) Packaging materials and containers, if classified under the Harmonized System with the good that is packaged therein, must be disregarded for the purpose of

  • The following provision is not in force.

    (a) determining whether all of the non-originating materials used in the production of the good undergo an applicable change in tariff classification;

  • The following provision is not in force.

    (b) determining whether a good is wholly obtained or produced; and

  • The following provision is not in force.

    (c) determining under subsection 5(1) the value of non-originating materials that do not undergo an applicable change in tariff classification.

• The following provision is not in force.

  Marginal note:Value of packaging materials and containers — cases where taken into account

  (15) If packaging materials and containers are classified under the Harmonized System with the good that is packaged therein and that good is subject to a regional value content requirement, the value of those packaging materials and containers must be taken into account as originating materials or non-originating materials, as the case may be, for the purpose of calculating the regional value content of the good.

• The following provision is not in force.

  Marginal note:Packaging materials and containers — self-produced

  (16) For the purposes of subsection (15), if packaging materials and containers are self-produced materials, the producer may choose to designate those materials as intermediate materials under subsection (6).

• The following provision is not in force.

  Marginal note:Packing materials and containers

  (17) For the purpose of determining whether a good is an originating good, packing materials and containers are disregarded.

• The following provision is not in force.

  Marginal note:Fungible materials and fungible goods

  (18) A fungible material or fungible good is an originating good if

  • The following provision is not in force.

    (a) when originating and non-originating fungible materials

    • (i) are withdrawn from an inventory in one location and used in the production of the good, or

    • (ii) are withdrawn from inventories in more than one location in the territory of one or more of the CUSMA countries and used in the production of the good at the same production facility,

    the determination of whether the materials are originating is made on the basis of an inventory management method recognized in the Generally Accepted Accounting Principles of, or otherwise accepted by, the CUSMA country in which the production is performed or an inventory management method set out in Schedule 8; or

  • The following provision is not in force.

    (b) when originating and non-originating fungible goods are commingled and exported in the same form, the determination of whether the goods are originating is made on the basis of an inventory management method recognized in the Generally Accepted Accounting Principles of, or otherwise accepted by, the CUSMA country from which the good is exported or an inventory management method set out in Schedule 8.

• The following provision is not in force.

  Marginal note:Choice for fiscal year

  (19) The inventory management method selected under subsection (18) must be used throughout the fiscal year of the producer or the person that selected the inventory management method.

• The following provision is not in force.

  Marginal note:Claim

  (20) An importer may claim that a fungible material or good is originating if the importer, producer or exporter has physically segregated each fungible material or good so as to allow its specific identification.

• The following provision is not in force.

  Marginal note:Choice of inventory management method

  (21) If fungible materials referred to in paragraph (18)(a) and fungible goods referred to in paragraph (18)(b) are withdrawn from the same inventory, the inventory management method used for the materials must be the same as the inventory management method used for the goods, and if the averaging method is used, the respective averaging periods for fungible materials and fungible goods are to be used.

• The following provision is not in force.

  Marginal note:Written notice

  (22) A choice of inventory management methods under subsection (18) is considered to have been made when the customs administration of the CUSMA country into which the good is imported is informed in writing of the choice during the course of a verification of origin of the good.

• The following provision is not in force.

  Marginal note:Accessories, spare parts, tools, or instructional or other information materials

  (23) For the purposes of subsections (24) to (27), accessories, spare parts, tools, or instructional or other information materials are covered when

  • The following provision is not in force.

    (a) they are classified and delivered with, but not invoiced separately from, the good; and

  • The following provision is not in force.

    (b) their type, quantity and value are customary for the good within the industry that produces the good.

• The following provision is not in force.

  Marginal note:Exclusion

  (24) Accessories, spare parts, tools, or instructional or other information materials are to be disregarded for the purpose of determining

  • The following provision is not in force.

    (a) whether a good is wholly obtained;

  • The following provision is not in force.

    (b) whether the non-originating materials used in the production of the good satisfy a process or change in tariff classification requirement set out in Schedule 1; or

  • The following provision is not in force.

    (c) under subsection 5(1), the value of non-originating materials that do not undergo an applicable change in tariff classification.

• The following provision is not in force.

  Marginal note:Value for regional value content

  (25) If a good is subject to a regional value content requirement, the value of accessories, spare parts, tools, or instructional or other information materials is to be taken into account as originating materials or non-originating materials, as the case may be, in calculating the regional value content of the good.

• The following provision is not in force.

  Marginal note:Designation

  (26) For the purposes of subsection (25), if accessories, spare parts, tools or instructional or other information materials are self-produced materials, the producer may choose to designate those materials as intermediate materials under subsection (6).

• The following provision is not in force.

  Marginal note:Originating status

  (27) A good’s accessories, spare parts, tools, or instructional or other information materials have the originating status of the good with which they are delivered.

• The following provision is not in force.

  Marginal note:Examples illustrating the provisions on materials

  (28) Each of the following examples is an “Example” as referred to in subsection 1(4).

  • Example 1 (subsection (4)): Transaction value not determined in a manner consistent with Schedule 6
    The following provision is not in force.

    Producer A, located in CUSMA country A, imports a bicycle chainring into CUSMA country A. Producer A purchased the chainring from a middleman located in CUSMA country B. The middleman purchased the chainring from a manufacturer located in CUSMA country B. Under the laws of CUSMA country A that implement the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade, 1994, the customs value of the chainring was based on the price actually paid or payable by the middleman to the manufacturer. Producer A uses the chainring to produce a bicycle and exports the bicycle to CUSMA country C. The bicycle is subject to a regional value content requirement.

    The following provision is not in force.

    Under subsection 3(1) of Schedule 6, the price actually paid or payable is the total payment made or to be made by the producer to or for the benefit of the seller of the material. Section 1 of that Schedule defines “producer” and “seller” for the purposes of that Schedule. A producer is the person who uses the material in the production of a good that is subject to a regional value content requirement. A seller is the person who sells the material being valued to the producer.

    The following provision is not in force.

    The transaction value of the chainring was not determined in a manner consistent with Schedule 6 because it was based on the price actually paid or payable by the middleman to the manufacturer, rather than on the price actually paid or payable by Producer A to the middleman. Thus, subsection (4) applies and the chainring is valued in accordance with Schedule 6.

  • Example 2 (subsection (7)): Value of intermediate materials
    The following provision is not in force.

    A producer located in a CUSMA country produces a bicycle that is subject to a regional value content requirement under subsection 3(2). The producer also produces a chainring that is used in the production of the bicycle. Both originating materials and non-originating materials are used in the production of the chainring. The chainring is subject to a change in tariff classification requirement under subsection 3(2). The costs to produce the chainring are the following:

    • Product costs:
      • Value of originating materials$1.00
      • Value of non-originating materials$7.50
      • Other product costs$1.50
    • Period costs (including $0.30 in royalties):$0.50
    • Other costs:$0.10
    • Total cost of the chainring:$10.60
    The following provision is not in force.

    The producer designates the chainring as an intermediate material and determines that, because all of the non-originating materials that are used in the production of the chainring undergo an applicable change in tariff classification set out in Schedule 1, the chainring would, under subsection 3(2) qualify as an originating material. The cost of the non-originating materials used in the production of the chainring is therefore not included in the value of non-originating materials that are used in the production of the bicycle for the purpose of determining the regional value content of the bicycle. Because the chainring is designated as an intermediate material, the total cost of the chainring, which is $10.60, is treated as the cost of originating materials for the purpose of calculating the regional value content of the bicycle. The total cost of the bicycle is determined in accordance with the following figures:

    • Product costs:
      • Value of originating materials
        • - intermediate materials$10.60
        • - other materials$3.00
      • Value of non-originating materials$5.50
    • Other product costs:$6.50
    • Period costs:$2.50
    • Other costs:$0.10
    • Total cost of the bicycle:$28.20
  • Example 3 (subsection (7)): Effects of the designation of self-produced materials on net cost
    The following provision is not in force.

    The ability to designate intermediate materials helps to put the vertically integrated producer who is self-producing materials that are used in the production of a good on par with a producer who is purchasing materials and valuing those materials in accordance with subsection (1). The following situations demonstrate how this is achieved:

    The following provision is not in force.

    Situation A

    The following provision is not in force.

    A producer located in a CUSMA country produces a bicycle that is subject to a regional value content requirement of 50% under the net cost method. The bicycle satisfies all other applicable requirements of these Regulations. The producer purchases a bicycle frame, which is used in the production of the bicycle, from a supplier located in a CUSMA country. The value of the frame determined in accordance with subsection (1) is $11.00. The frame is an originating material. All other materials used in the production of the bicycle are non-originating materials. The net cost of the bicycle is determined as follows:

    • Product costs:
      • Value of originating materials (bicycle frame)$11.00
      • Value of non-originating materials$5.50
      • Other product costs$6.50
    • Period costs (including $0.20 in excluded costs):$0.50
    • Other costs:$0.10
    • Total cost of the bicycle:$23.60
    • Excluded costs (included in period costs):$0.20
    • Net cost of the bicycle:$23.40

    The following provision is not in force.

    The regional value content of the bicycle is calculated as follows:

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($23.40 − $5.50) ÷ $23.40 × 100
    	=	76.5%

    The following provision is not in force.

    The regional value content of the bicycle is 76.5% and the bicycle, therefore, qualifies as an originating good.

    The following provision is not in force.

    Situation B

    The following provision is not in force.

    A producer located in a CUSMA country produces a bicycle that is subject to a regional value content requirement of 50% under the net cost method. The bicycle satisfies all other applicable requirements of these Regulations. The producer self-produces the bicycle frame that is used in the production of the bicycle. The costs to produce the frame are the following:

    • Product costs:
      • Value of originating materials$1.00
      • Value of non-originating materials$7.50
      • Other product costs$1.50
    • Period costs (including $0.20 in excluded costs):$0.50
    • Other costs:$0.10
    • Total cost of the bicycle frame:$10.60

    The following provision is not in force.

    Additional costs to produce the bicycle are the following:

    • Product costs:
      • Value of originating materials$0.00
      • Value of non-originating materials$5.50
      • Other product costs$6.50
    • Period costs (including $0.20 in excluded costs):$0.50
    • Other costs:$0.10
    • Total additional costs:$12.60

    The following provision is not in force.

    The producer does not designate the bicycle frame as an intermediate material under subsection (6). The net cost of the bicycle is calculated as follows:

    		Costs of the bicycle frame (not designated as an intermediate material) ($)	Additional costs to produce the bicycle ($)	Total ($)
    Product costs:
    Value of originating materials		1.00	0.00	1.00
    Value of non-originating materials		7.50	5.50	13.00
    Other product costs		1.50	6.50	8.00
    Period costs (including $0.20 in excluded costs):		0.50	0.50	1.00
    Other costs:		0.10	0.10	0.20
    Total cost of the bicycle:		10.60	12.60	23.20
    Excluded costs (in period costs)		0.20	0.20	0.40
    Net cost of the bicycle (total cost minus excluded costs):				22.80

    The following provision is not in force.

    The regional value content of the bicycle is calculated as follows:

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($22.80 − $13.00) ÷ $22.80 × 100
    	=	42.9%

    The following provision is not in force.

    The regional value content of the bicycle is 42.9% and the bicycle, therefore, does not qualify as an originating good.

    The following provision is not in force.

    Situation C

    The following provision is not in force.

    A producer located in a CUSMA country produces a bicycle that is subject to a regional value content requirement of 50% under the net cost method. The bicycle satisfies all other applicable requirements of these Regulations. The producer self-produces the bicycle frame that is used in the production of the bicycle. The costs to produce the frame are the following:

    • Product costs:
      • Value of originating materials$1.00
      • Value of non-originating materials$7.50
      • Other product costs$1.50
    • Period costs (including $0.20 in excluded costs):$0.50
    • Other costs$0.10
    • Total cost of the bicycle frame:$10,60

    The following provision is not in force.

    Additional costs to produce the bicycle are the following:

    • Product costs:
      • Value of originating materials$0.00
      • Value of non-originating materials$5.50
      • Other product costs$6.50
    • Period costs (including $0.20 in excluded costs):$0.50
    • Other costs:$0.10
    • Total additional costs:$12.60

    The following provision is not in force.

    The producer designates the frame as an intermediate material under subsection (6). The frame qualifies as an originating material under subsection 3(2). Therefore, the value of non-originating materials used in the production of the frame is not included in the value of non-originating materials for the purpose of calculating the regional value content of the bicycle. The net cost of the bicycle is calculated as follows:

    		Costs of the bicycle frame (designated as an intermediate material) ($)	Additional costs to produce the bicycle ($)	Total ($)
    Product costs:
    Value of originating materials		10.60	0.00	10.60
    Value of non-originating materials			5.50	5.50
    Other product costs			6.50	6.50
    Period costs (including $0.20 in excluded costs):			0.50	0.50
    Other costs:			0.10	0.10
    Total cost of the bicycle:		10.60	12.60	23.20
    Excluded costs (in period costs)			0.20	0.20
    Net cost of the bicycle (total cost minus excluded costs):				23.00

    The following provision is not in force.

    The regional value content of the bicycle is calculated as follows:

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($23.00 − $5.50) ÷ $23.00 × 100
    	=	76.1%

    The following provision is not in force.

    The regional value content of the bicycle is 76.1% and the bicycle, therefore, qualifies as an originating good.

  • Example 4: Originating materials acquired from a producer who produced them using intermediate materials
    The following provision is not in force.

    Producer A, located in CUSMA country A, produces switches. In order for the switches to qualify as originating goods, Producer A designates subassemblies of the switches as intermediate materials. The subassemblies are subject to a regional value content requirement. They satisfy that requirement and qualify as originating materials. The switches are also subject to a regional value content requirement and, with the subassemblies designated as intermediate materials, are determined to have a regional value content of 65%.

    The following provision is not in force.

    Producer A sells the switches to Producer B, located in CUSMA country B, who uses them to produce switch assemblies that are used in the production of Good B. The switch assemblies are subject to a regional value content requirement. Producers A and B are not accumulating their production within the meaning of section 9. Producer B is therefore able, under subsection (6), to designate the switch assemblies as intermediate materials.

    The following provision is not in force.

    If Producers A and B were accumulating their production within the meaning of section 9, Producer B would be unable to designate the switch assemblies as intermediate materials because the production of both producers would be considered to be the production of one producer.

  • Example 5: Single producer and successive designations of materials subject to a regional value content requirement as intermediate materials
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces Material X and uses Material X in the production of Good B. Material X qualifies as an originating material because it satisfies the applicable regional value content requirement. Producer A designates Material X as an intermediate material.

    The following provision is not in force.

    Producer A uses Material X in the production of Material Y, which is also used in the production of Good B. Material Y is also subject to a regional value content requirement. Under the proviso set out in subsection (6), Producer A cannot designate Material Y as an intermediate material, even if Material Y satisfies the applicable regional value content requirement, because Material X was already designated by Producer A as an intermediate material.

  • Example 6: Single producer and multiple designations of materials as intermediate materials
    The following provision is not in force.

    Producer X, located in CUSMA country X, uses non-originating materials in the production of self-produced materials A, B and C. None of the self-produced materials are used in the production of any of the other self-produced materials.

    The following provision is not in force.

    Producer X uses the self-produced materials in the production of Good O, which is exported to CUSMA country Y. Materials A, B and C qualify as originating materials because they satisfy the applicable regional value content requirements.

    The following provision is not in force.

    Because none of the self-produced materials are used in the production of any of the other self-produced materials, then even though each self-produced material is subject to a regional value content requirement, Producer X may, under subsection (6), designate all of the self-produced materials as intermediate materials. The proviso set out in subsection (6) only applies if self-produced materials are used in the production of other self-produced materials and both are subject to a regional value content requirement.

  • Example 7 (subsection (23)):
    The following provision is not in force.

    The following are examples of accessories, spare parts, tools, or instructional or other information materials that are delivered with a good and form part of the good’s standard accessories, spare parts, tools, or instructional or other information materials:

    • (a) consumables that must be replaced at regular intervals, such as dust collectors for an air-conditioning system;

    • (b) carrying cases for equipment;

    • (c) dust covers for machines;

    • (d) operational manuals for vehicles;

    • (e) brackets to attach equipment to a wall;

    • (f) bicycle tool kits or car jacks;

    • (g) sets of wrenches to change the bit on a chuck;

    • (h) brushes or other tools to clean out machines; and

    • (i) electrical cords and power bars for use with electronic goods.

  • Example 8: Value of indirect materials that are assists
    The following provision is not in force.

    Producer A, located in a CUSMA country, produces a well-water pump that is subject to a regional value content requirement. The producer chooses to calculate the regional value content of that good using the net cost method. Producer A buys a mould-injected plastic water flow sensor from Producer B, located in the same CUSMA country, and uses it in the production of the pump. Producer A provides to Producer B, at no charge, moulds to be used in the production of the water flow sensor. The moulds have a value of $100 which is expensed in the current year by Producer A.

    The following provision is not in force.

    The water flow sensor is subject to a regional value content requirement which Producer B chooses to calculate using the net cost method. For the purpose of determining the value of non-originating materials in order to calculate the regional value content of the water flow sensor, the moulds are considered to be an originating material because they are an indirect material. However, under subsection (13) they have a value of nil because the cost of the moulds with respect to the water flow sensor is not recorded on the books of Producer B.

    The following provision is not in force.

    It is determined that the water flow sensor is a non-originating material. The cost of the moulds that is recorded on the books of Producer A is expensed in the current year. Under section 4 of Schedule 6, the value of the moulds (see subparagraph 4(1)(b)(ii) of Schedule 6) must be included in the value of the water flow sensor by Producer A when calculating the regional value content of the well-water pump. The cost of the moulds, although recorded on the books of producer A, cannot be included as a separate cost in the net cost of the well-water pump because it is already included in the value of the water flow sensor. The entire cost of the water flow sensor, which includes the cost of the moulds, is included in the value of non-originating materials for the purposes of calculating the regional value content of the well-water pump.

Marginal note:Accumulation

• The following provision is not in force.

  9 (1) Subject to subsections (2) to (5),

  • The following provision is not in force.

    (a) a good is originating if it is produced in the territory of one or more of the CUSMA countries by one or more producers and it satisfies the requirements of section 3 and all other applicable requirements of these Regulations;

  • The following provision is not in force.

    (b) an originating good or material of one or more of the CUSMA countries is considered as originating in the territory of another CUSMA country if it is used as a material in the production of a good in the territory of that other CUSMA country; and

  • The following provision is not in force.

    (c) production undertaken on a non-originating material in the territory of one or more of the CUSMA countries may contribute to the originating status of a good, regardless of whether that production was sufficient to confer originating status to the material itself.

• The following provision is not in force.

  Marginal note:Accumulation — net cost method

  (2) If a good is subject to a regional value content requirement based on the net cost method and an exporter or producer of the good has a statement signed by a producer of a material that is used in the production of the good that

  • The following provision is not in force.

    (a) states the net cost incurred and the value of non-originating materials used by the producer of the material in the production of that material,

    • (i) the net cost incurred by the producer of the good with respect to the material is to be the net cost incurred by the producer of the material plus, if not included in the net cost incurred by the producer of the material, the costs referred to in paragraphs 8(2)(a) to (c), and

    • (ii) the value of non-originating materials used by the producer of the good with respect to the material is the value of non-originating materials used by the producer of the material; or

  • The following provision is not in force.

    (b) states any amount, other than an amount that includes any of the value of non-originating materials, that is part of the net cost incurred by the producer of the material in the production of that material,

    • (i) the net cost incurred by the producer of the good with respect to the material is the value of the material, determined in accordance with subsection 8(1), and

    • (ii) the value of non-originating materials used by the producer of the good with respect to the material is the value of the material, determined in accordance with subsection 8(1), minus the amount stated in the statement.

• The following provision is not in force.

  Marginal note:Accumulation — transaction value method

  (3) If a good is subject to a regional value content requirement based on the transaction value method and an exporter or producer of the good has a statement signed by a producer of a material that is used in the production of the good that states the value of non-originating materials used by the producer of the material in the production of that material, the value of non-originating materials used by the producer of the good with respect to the material is the value of non-originating materials used by the producer of the material.

• The following provision is not in force.

  Marginal note:Averaging — net cost method

  (4) If a good is subject to a regional value content requirement based on the net cost method and an exporter or producer of the good does not have a statement described in subsection (2) but has a statement signed by a producer of a material that is used in the production of the good that

  • The following provision is not in force.

    (a) states the sum of the net costs incurred and the sum of the values of non-originating materials used by the producer of the material in the production of that material and identical materials or similar materials, or any combination thereof, produced in a single plant by the producer of the material over a month or any consecutive three-, six- or twelve-month period that falls within the fiscal year of the producer of the good, divided by the number of units of materials with respect to which the statement is made,

    • (i) the net cost incurred by the producer of the good with respect to the material is the sum of the net costs incurred by the producer of the material with respect to that material and the identical materials or similar materials, divided by the number of units of materials with respect to which the statement is made, plus, if not included in the net costs incurred by the producer of the material, the costs referred to in paragraphs 8(2)(a) to (c), and

    • (ii) the value of non-originating materials used by the producer of the good with respect to the material is the sum of the values of non-originating materials used by the producer of the material with respect to that material and the identical materials or similar materials divided by the number of units of materials with respect to which the statement is made; or

  • The following provision is not in force.

    (b) states any amount, other than an amount that includes any of the value of non-originating materials, that is part of the sum of the net costs incurred by the producer of the material in the production of that material and identical materials or similar materials, or any combination of them, produced in a single plant by the producer of the material over a month or any consecutive three-, six- or twelve-month period that falls within the fiscal year of the producer of the good, divided by the number of units of materials with respect to which the statement is made,

    • (i) the net cost incurred by the producer of the good with respect to the material is the value of the material, determined in accordance with subsection 8(1), and

    • (ii) the value of non-originating materials used by the producer of the good with respect to the material is the value of the material, determined in accordance with subsection 8(1), minus the amount stated in the statement.

• The following provision is not in force.

  Marginal note:Averaging — transaction value method

  (5) If a good is subject to a regional value content requirement based on the transaction value method and an exporter or producer of the good does not have a statement described in subsection (3) but has a statement signed by a producer of a material that is used in the production of the good that states the sum of the values of non-originating materials used by the producer of the material in the production of that material and identical materials or similar materials, or any combination thereof, produced in a single plant by the producer of the material over a month or any consecutive three-, six- or twelve-month period that falls within the fiscal year of the producer of the good, divided by the number of units of materials with respect to which the statement is made, the value of non-originating materials used by the producer of the good with respect to the material is the sum of the values of non-originating materials used by the producer of the material with respect to that material and the identical materials or similar materials divided by the number of units of materials with respect to which the statement is made.

• The following provision is not in force.

  Marginal note:Single producer

  (6) For the purposes of subsection 8(6), if a producer of the good chooses to accumulate the production of materials under subsection (1), that production is considered to be the production of the producer of the good.

• The following provision is not in force.

  Marginal note:Particulars

  (7) For the purposes of this section,

  • The following provision is not in force.

    (a) in order to accumulate the production of a material,

    • (i) if the good is subject to a regional value content requirement, the producer of the good must have a statement described in any of subsections (2) to (5) that is signed by the producer of the material, and

    • (ii) if an applicable change in tariff classification is applied to determine whether the good is an originating good, the producer of the good must have a statement signed by the producer of the material that states the tariff classification of all non-originating materials used by that producer in the production of that material and that the production of the material took place entirely in the territory of one or more of the CUSMA countries;

  • The following provision is not in force.

    (b) a producer of a good who chooses to accumulate is not required to accumulate the production of all materials that are incorporated into the good; and

  • The following provision is not in force.

    (c) any information set out in a statement referred to in any of subsections (2) to (5) that concerns the value of materials or costs must be in the same currency as the currency of the country in which the person who provided the statement is located.

• The following provision is not in force.

  Marginal note:Examples

  (8) Each of the following examples is an “Example” as referred to in subsection 1(4).

  • Example 1 (subsection (1)):
    The following provision is not in force.

    Producer A, located in CUSMA country A, imports unfinished bearing rings provided for in subheading 8482.99 into CUSMA country A from the territory of a non-CUSMA country. Producer A further processes the unfinished bearing rings into finished bearing rings, which are of the same subheading. The finished bearing rings of Producer A do not satisfy an applicable change in tariff classification and therefore do not qualify as originating goods.

    The following provision is not in force.

    The net cost of the finished bearing rings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials $0.15
      • Value of non-originating materials $0.75
      • Other product costs $0.35
    • Period costs (including $0.05 in excluded costs): $0.15
    • Other costs: $0.05
      • Total cost of the finished bearing rings, per unit: $1.45
      • Excluded costs (included in period costs): $0.05
      • Net cost of the finished bearing rings, per unit: $1.40
    The following provision is not in force.

    Producer A sells the finished bearing rings to Producer B, who is located in CUSMA country A, for $1.50 each. Producer B further processes them into bearings and intends to export the bearings to CUSMA country B. Although the bearings satisfy the applicable change in tariff classification, the bearings are subject to a regional value content requirement.

    The following provision is not in force.

    Situation A

    The following provision is not in force.

    Producer B does not choose to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. The net cost of the bearings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials $0.45
      • Value of non-originating materials (value, per unit, of the bearing rings purchased from Producer A)$1.50
      • Other product costs $0.75
    • Period costs (including $0.05 in excluded costs): $0.15
    • Other costs: $0.05
    • Total cost of the bearings, per unit: $2.90
    • Excluded costs (included in period costs): $0.05
    • Net cost of the bearings, per unit: $2.85

    The following provision is not in force.

    Under the net cost method, the regional value content of the bearings is

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($2.85 − $1.50) ÷ $2.85 × 100
    	=	47.4%

    The following provision is not in force.

    Therefore, the bearings are non-originating goods.

    The following provision is not in force.

    Situation B

    The following provision is not in force.

    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides a statement described in paragraph (2)(a) to Producer B. The net cost of the bearings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials ($0.45 + $0.15) $0.60
      • Value of non-originating materials (value, per unit, of the unfinished bearing rings imported by Producer A)$0.75
      • Other product costs ($0.75 + $0.35) $1.10
    • Period costs (($0.15 + $0.15), including $0.10 in excluded costs): $0.30
      • Other costs ($0.05 + $0.05): $0.10
      • Total cost of the bearings, per unit: $2.85
      • Excluded costs (included in period costs): $0.10
      • Net cost of the bearings, per unit: $2.75

    The following provision is not in force.

    Under the net cost method, the regional value content of the bearings is

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($2.75 − $0.75) ÷ $2.75 × 100
    	=	72.7%

    The following provision is not in force.

    Therefore, the bearings are originating goods.

    The following provision is not in force.

    Situation C

    The following provision is not in force.

    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides to Producer B a statement described in paragraph (2)(b) that specifies an amount equal to the net cost minus the value of non-originating materials used to produce the finished bearing rings ($1.40 - $0.75 = $0.65). The net cost of the bearings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials ($0.45 + $0.65) $1.10
      • Value of non-originating materials ($1.50 − $0.65) $0.85
      • Other product costs $0.75
    • Period costs (including $0.05 in excluded costs): $0.15
      • Other costs: $0.05
      • Total cost of the bearings, per unit: $2.90
      • Excluded costs (included in period costs): $0.05
      • Net cost of the bearings, per unit: $2.85

    The following provision is not in force.

    Under the net cost method, the regional value content of the bearings is

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($2.85 − $0.85) ÷ $2.85× 100
    	=	70.2%

    The following provision is not in force.

    Therefore, the bearings are originating goods.

    The following provision is not in force.

    Situation D

    The following provision is not in force.

    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides to Producer B a statement described in paragraph (2)(b) that specifies an amount equal to the value of other product costs used in the production of the finished bearing rings ($0.35). The net cost of the bearings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials $0.45
      • Value of non-originating materials ($1.50 − $0.35) $1.15
      • Other product costs ($0.75 + $0.35) $1.10
    • Period costs (including $0.05 in excluded costs): $0.15
    • Other costs: $0.05
    • Total cost of the bearings per unit: $2.90
    • Excluded costs (included in period costs): $0.05
    • Net cost of the bearings, per unit:$2.85

    The following provision is not in force.

    Under the net cost method, the regional value content of the bearing is

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($2.85 − $1.15) ÷ $2.85 × 100
    	=	59.6%

    The following provision is not in force.

    Therefore, the bearings are originating goods.

    The following provision is not in force.

    Situation E

    The following provision is not in force.

    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides to Producer B a signed statement described in subsection (3) that specifies the value of non-originating materials used in the production of the finished bearing rings ($0.75). Producer B chooses to calculate the regional value content of the bearings under the transaction value method. The regional value content of the bearings (per unit) is calculated as follow:

    • Product costs:
      • Transaction value of the bearings, per unit$3.15
      • Costs incurred, per unit, in the international shipment of the good (included in transaction value of the bearings) $0.15
      • Transaction value, per unit, adjusted to exclude any costs incurred in the international shipment of the good $3.00
    • Value of non-originating materials (value, per unit, of the unfinished bearing rings imported by Producer A)$0.75

    The following provision is not in force.

    Under the transaction value method, the regional value content of the bearing is

    RVC	=	(TV − VNM) ÷ TV × 100
    	=	($3.00 − $0.75) ÷ $3.00 × 100
    	=	75%

    The following provision is not in force.

    Therefore, because the bearings have a regional value content of at least 60% under transaction value method, the bearings are originating goods.

  • Example 2 (subsection (1)):
    The following provision is not in force.

    Producer A, located in CUSMA country A, imports non-originating cotton, carded or combed, provided for in heading 52.03 for use in the production of cotton yarn provided for in heading 52.05. Because the change from cotton, carded or combed, to cotton yarn is a change within the same Chapter, the cotton does not satisfy the applicable change in tariff classification for heading 52.05, which is a change from any other Chapter, with certain exceptions. Therefore, the cotton yarn that Producer A produces from non-originating cotton is a non-originating good.

    The following provision is not in force.

    Producer A then sells the non-originating cotton yarn to Producer B, also located in CUSMA country A, who uses the cotton yarn in the production of woven fabric of cotton provided for in heading 52.08. The change from non-originating cotton yarn to woven fabric of cotton is insufficient to satisfy the applicable change in tariff classification for heading 52.08, which is a change from any heading outside headings 52.08 through 52.12, except from certain headings, under which various yarns, including cotton yarn provided for in heading 52.05, are classified. Therefore, the woven fabric of cotton that Producer B produces from non-originating cotton yarn produced by Producer A is a non-originating good.

    The following provision is not in force.

    However, Producer B can choose to accumulate the production of Producer A. The rule for heading 52.08, under which the cotton fabric is classified, does not exclude a change from heading 52.03, under which carded or combed cotton is classified. Therefore, under subsection (1), the change from carded or combed cotton provided for in heading 52.03 to the woven fabric of cotton provided for in heading 52.08 satisfies the applicable change of tariff classification for heading 52.08. The woven fabric of cotton is considered as an originating good.

    The following provision is not in force.

    Producer B, in order to choose to accumulate Producer A’s production, must have a statement described in subparagraph (7)(a)(ii).

Marginal note:Transport requirements — retention of originating status

• The following provision is not in force.

  10 (1) If an originating good is transported outside the territories of the CUSMA countries, the good retains its originating status if

  • The following provision is not in force.

    (a) the good remains under customs control outside the territories of the CUSMA countries; and

  • The following provision is not in force.

    (b) the good does not undergo further production or any other operation outside the territories of the CUSMA countries, other than unloading, reloading, separation from a bulk shipment, storing, labelling or other marking required by the importing CUSMA country or any other operation necessary to transport the good to the territory of the importing CUSMA country or to preserve the good in good condition, including

    • (i) inspection,

    • (ii) removal of dust that accumulates during shipment,

    • (iii) ventilation,

    • (iv) spreading out or drying,

    • (v) chilling,

    • (vi) replacing salt, sulphur dioxide or other aqueous solutions, or

    • (vii) replacing damaged packing materials and containers and removing units of the good that are spoiled or damaged and present a danger to the remaining units of the good.

• The following provision is not in force.

  Marginal note:Good entirely non-originating

  (2) A good that is a non-originating good by application of subsection (1) is considered to be entirely non-originating for the purposes of these Regulations.

• The following provision is not in force.

  Marginal note:Exceptions for certain goods

  (3) Subsection (1) does not apply with respect to

  • The following provision is not in force.

    (a) a “smart card” of subheading 8523.52 containing a single integrated circuit, if any further production or other operation that that good undergoes outside the territories of the CUSMA countries does not result in a change in the tariff classification of the good to any other subheading;

  • The following provision is not in force.

    (b) a good of any of subheadings 8541.10 through 8541.60 or 8542.31 through 8542.39, if any further production or other operation that that good undergoes outside the territories of the CUSMA countries does not result in a change in the tariff classification of the good to a subheading outside of that group;

  • The following provision is not in force.

    (c) an electronic microassembly of subheading 8543.90, if any further production or other operation that that good undergoes outside the territories of the CUSMA countries does not result in a change in the tariff classification of the good to any other subheading; or

  • The following provision is not in force.

    (d) an electronic microassembly of subheading 8548.90, if any further production or other operation that that good undergoes outside the territories of the CUSMA countries does not result in a change in the tariff classification of the good to any other subheading.

Marginal note:Exceptions

11 A good is not an originating good merely by reason of

• The following provision is not in force.

  (a) mere dilution with water or another substance that does not materially alter the characteristics of the good; or

• The following provision is not in force.

  (b) any production or pricing practice with respect to which it may be demonstrated, on the basis of a preponderance of evidence, that the object was to circumvent these Regulations.

Marginal note:Definitions

12 The following definitions apply in this Part.

aftermarket part

aftermarket part means a good that is not for use as original equipment in the production of passenger vehicles, light trucks or heavy trucks. (pièce destinée au marché du service après-vente)

all-terrain vehicle

all-terrain vehicle means a vehicle that does not meet United States federal safety and emissions standards permitting unrestricted on-road use or the equivalent Mexican or Canadian on-road standards. (véhicule tout-terrain)

annual purchase value

annual purchase value or APV means the sum of the values of high-wage materials purchased annually by a producer for use in the production of passenger vehicles, light trucks or heavy trucks in a plant located in the territory of a CUSMA country. (valeur annuelle des achats)

average base hourly wage rate

average base hourly wage rate means the average hourly rate of pay based on all the hours performed on direct production work at a plant or facility, even if the workers performing that work are paid on a salary, piece-rate, or day-rate basis. It includes all hours performed by full-time, part time, temporary and seasonal workers. The rate of pay does not include benefits, bonuses, shift-premiums or premium pay for overtime, holidays or weekends. If a worker is paid by a third party, such as a temporary employment agency, only the wages received by the worker are included in the average hourly base wage rate calculation.

For direct production workers, the average base hourly wage rate of pay is calculated based on all of their working hours. For other workers performing direct production work, the average base hourly rate is calculated based on the number of hours performing direct production work. The rate also does not include any hours worked by interns, trainees, students or any other worker who does not have an express or implied compensation agreement with the employer.

If any direct production worker or worker performing direct production work is compensated by a method other than hourly, such as a salary, piece-rate or day-rate basis, the worker’s hourly base wage rate is calculated by converting the salary, piece-rate or day-rate to an hourly equivalent. This hourly equivalent is then multiplied by the number of hours worked in direct production for purposes of calculating the average base hourly wage rate. (taux horaire moyen de la rémunération de base)

class of motor vehicles

class of motor vehicles means one of the following classes of motor vehicles:

• The following provision is not in force.

  (a) road tractors for semi-trailers of subheading 8701.20, vehicles for the transport of 16 or more persons of subheading 8702.10 or 8702.90, motor vehicles for the transport of goods of subheading 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, special purpose motor vehicles of heading 87.05 or chassis fitted with engines of heading 87.06;

• The following provision is not in force.

  (b) tractors of any of subheadings 8701.10 or 8701.30 through 8701.90;

• The following provision is not in force.

  (c) vehicles for the transport of 15 or fewer persons of subheading 8702.10 or 8702.90 or light trucks of subheading 8704.21 or 8704.31; or

• The following provision is not in force.

  (d) passenger vehicles of subheadings 8703.21 through 8703.90. (catégorie de véhicules automobiles)

complete motor vehicle assembly process

complete motor vehicle assembly process means the production of a motor vehicle from separate constituent parts, including

• The following provision is not in force.

  (a) a structural frame or unibody;

• The following provision is not in force.

  (b) body panels;

• The following provision is not in force.

  (c) an engine, a transmission and a drive train;

• The following provision is not in force.

  (d) brake components;

• The following provision is not in force.

  (e) steering and suspension components;

• The following provision is not in force.

  (f) seating and internal trim;

• The following provision is not in force.

  (g) bumpers and external trim;

• The following provision is not in force.

  (h) wheels; and

• The following provision is not in force.

  (i) electrical and lighting components. (chaîne de montage complète de véhicules automobiles)

direct production work

direct production work means work by any employee directly involved in the production of passenger vehicles, light trucks, heavy trucks, or parts used in the production of these vehicles in the territory of a CUSMA country. It includes work by an employee directly involved in the set-up, operation or maintenance of tools or equipment used in the production of those vehicles or parts. Direct production work may take place on a production line, at a workstation, on the shop floor or in another production area.

Direct production work also includes

• The following provision is not in force.

  (a) material handling of vehicles or parts;

• The following provision is not in force.

  (b) inspection of vehicles or parts, including inspections that are normally categorized as quality control and, for heavy trucks, pre-sale inspections carried out at the place where the vehicle is produced;

• The following provision is not in force.

  (c) work performed by skilled tradespeople, such as process or production engineers, mechanics, technicians and other employees responsible for maintaining and ensuring the operation of the production line or tools and equipment used in the production of vehicles or parts; and

• The following provision is not in force.

  (d) on-the-job training regarding the execution of a specific production task.

Direct production work does not include any work by executive or management staff that have the authority to make final decisions to hire, fire, promote, transfer and discipline employees or any workers engaged in research and development, or work by engineering or other personnel that are not responsible for maintaining and ensuring the operation of the production line or tools and equipment used in the production of vehicles or parts. It also does not include any work by interns, trainees, students, or any other worker that does not have an express or implied compensation agreement with the employer. (travailleur qui participe directement à la production)

direct production worker

direct production worker means any worker whose primary responsibilities are direct production work, meaning at least 85% of the worker’s time is spent performing direct production work. (travailleur affecté à la production directe)

first motor vehicle prototype

first motor vehicle prototype means the first motor vehicle that

• The following provision is not in force.

  (a) is produced using tooling and processes intended for the production of motor vehicles to be offered for sale; and

• The following provision is not in force.

  (b) follows the complete motor vehicle assembly process in a manner not specifically designed for testing purposes. (premier prototype de véhicule automobile)

heavy truck

heavy truck means a vehicle, other than a vehicle that is solely or principally for off-road use, of subheading 8701.20, 8704.22, 8704.23, 8704.32 or 8704.90, or a chassis fitted with an engine of heading 87.06 that is for use in such a vehicle. (camion lourd)

high-wage assembly plant for passenger vehicle or light truck parts

high-wage assembly plant for passenger vehicle or light truck parts means a qualifying wage rate production plant that is operated by a producer or by a supplier with whom the producer has a contract of at least three years for the materials listed in paragraphs (a) to (c), provided that the plant is located in the territory of a CUSMA country and that it has production capacity of

• The following provision is not in force.

  (a) 100,000 or more engines of heading 84.07 or 84.08;

• The following provision is not in force.

  (b) 100,000 or more transmissions of subheading 8708.40; or

• The following provision is not in force.

  (c) 25,000 or more advanced battery packs.

Such engines, transmissions or advanced battery packs are not required to qualify as originating. (usine de montage à rémunération élevée pour les pièces de véhicules de promenades ou de véhicules utilitaires légers)

high-wage assembly plant for heavy truck parts

high-wage assembly plant for heavy truck parts means a qualifying wage rate production plant that is operated by a corporate producer or by a supplier with whom the corporate producer has a contract of at least three years for the materials listed in paragraphs (a) to (c), provided that the plant is located in the territory of a CUSMA country and that it has a production capacity of

• The following provision is not in force.

  (a) 20,000 or more engines of heading 84.07 or 84.08;

• The following provision is not in force.

  (b) 20,000 or more transmissions of subheading 8708.40; or

• The following provision is not in force.

  (c) 20,000 or more advanced battery packs.

Such engines, transmissions or advanced battery packs are not required to qualify as originating. (usine de montage pour les pièces de camions lourds)

high-wage labour costs

high-wage labour costs means the sum of wage expenditures, not including benefits, for workers who perform direct production work at a qualifying wage-rate vehicle assembly plant. (coûts de main-d’oeuvre à rémunération élevée)

high-wage material

high-wage material means a material that is produced in a qualifying wage-rate production plant. (matières à rémunération élevée)

high-wage technology expenditures

high-wage technology expenditures means wage expenditures – expressed as a percentage of a passenger vehicle, light truck or heavy truck producer’s total production wage expenditures – at a corporate level in the territory of one or more of the CUSMA countries on

• The following provision is not in force.

  (a) research and development including prototype development, design, engineering, or testing operations and any work undertaken by a producer for the purpose of creating new, or improving existing, materials, parts, vehicles or processes, including incremental improvements thereto; and

• The following provision is not in force.

  (b) information technology, including software development, technology integration, vehicle communications or information technology support operations.

Expenditures on capital or other non-wage costs for research and development or information technology are not included. For greater certainty, there is no minimum wage rate associated with high-wage technology expenditures. (dépenses liées à la technologie à rémunération élevée)

high-wage transportation or related costs for shipping

high-wage transportation or related costs for shipping means costs incurred by a producer for transportation, logistics or material handling associated with the movement of high-wage parts or materials within the territories of the CUSMA countries, provided that the transportation, logistics or material handling provider pays an average base hourly wage rate to direct production employees performing these services of at least

• The following provision is not in force.

  (a) US$16 in the United States;

• The following provision is not in force.

  (b) CA$20.88 in Canada; and

• The following provision is not in force.

  (c) MXN$294.22 in Mexico.

High-wage transportation or related costs for shipping may be included in high wage material and manufacturing expenses if those costs are not otherwise included. (frais de transport ou connexes d’expédition à rémunération élevée)

LVC

LVC means labour value content. (TVT)

light truck

light truck means a vehicle of subheading 8704.21 or 8704.31, except for a vehicle that is solely or principally for off-road use. (véhicule utilitaire léger)

marque

marque means the trade name used by a separate marketing division of a motor vehicle assembler. (marque)

model line

model line means a group of motor vehicles having the same platform or model name. (modèle)

model name

model name means the word, group of words, letter, number or similar designation assigned to a motor vehicle by a marketing division of a motor vehicle assembler to

• The following provision is not in force.

  (a) differentiate the motor vehicle from other motor vehicles that use the same platform design;

• The following provision is not in force.

  (b) associate the motor vehicle with other motor vehicles that use different platform designs; or

• The following provision is not in force.

  (c) denote a platform design. (nom de modèle)

motorhome or entertainer coach

motorhome or entertainer coach means a vehicle of heading 87.02 or 87.03 built on a self-propelled motor vehicle chassis that is solely or principally designed as temporary living quarters for recreational, camping, entertainment, corporate or seasonal use. (caravane motorisée ou véhicule récréatif)

motor vehicle assembler

motor vehicle assembler means a producer of motor vehicles and any related persons or joint ventures in which the producer participates. (monteur de véhicules automobiles)

new building

new building means a new construction, including at least the pouring or construction of a new foundation and floor, the erection of a new structure and roof and installation of new plumbing, electrical and other utilities to house a complete vehicle assembly process. (nouvel édifice)

passenger vehicle

passenger vehicle means a vehicle of subheadings 8703.21 through 8703.90, except for

• The following provision is not in force.

  (a) a vehicle with a compression-ignition engine of subheadings 8703.31 through 8703.33 or a vehicle of subheading 8703.90 with both a compression-ignition engine and an electric motor for propulsion;

• The following provision is not in force.

  (b) a three- or four-wheeled motorcycle;

• The following provision is not in force.

  (c) an all-terrain vehicle;

• The following provision is not in force.

  (d) a motorhome or entertainer coach; and

• The following provision is not in force.

  (e) an ambulance, hearse or prison van. (véhicule de promenade)

plant

plant means a building, or buildings in close proximity but not necessarily contiguous, machinery, apparatus and fixtures or movables incorporated with an immovable or permanently attached or joined to an immovable, that are under the control of a producer and that are used in the production of

• The following provision is not in force.

  (a) passenger vehicles, light trucks or heavy trucks; or

• The following provision is not in force.

  (b) a good listed in any of Tables A.1 to G. (usine)

platform

platform means the primary load-bearing structural assembly of a motor vehicle that determines the basic size of the motor vehicle and is the structural base that supports the driveline and links the suspension components of the motor vehicle for various types of frames, such as the body-on-frame, space-frame and monocoques. (plate-forme)

qualifying wage-rate production plant

qualifying wage-rate production plant means a plant that produces materials for passenger vehicles, light trucks or heavy trucks located in the territory of a CUSMA country at which the average base hourly wage rate for direct production workers is at least

• The following provision is not in force.

  (a) US$16 in the United States;

• The following provision is not in force.

  (b) CA$20.88 in Canada; and

• The following provision is not in force.

  (c) MXN$294.22 in Mexico. (usine de production à taux de rémunération admissible)

qualifying wage-rate vehicle assembly plant

qualifying wage-rate vehicle assembly plant means a passenger vehicle, light truck or heavy truck assembly plant located in the territory of a CUSMA country at which the average base hourly wage rate is at least

• The following provision is not in force.

  (a) US$16 in the United States;

• The following provision is not in force.

  (b) CA$20.88 in Canada; and

• The following provision is not in force.

  (c) MXN$294.22 in Mexico. (usine de montage de véhicules à taux de rémunération admissible)

RVC

RVC means regional value content. (TVR)

refit

refit means a plant closure, for purposes of plant conversion or retooling, for at least three months. (réaménagement)

size category

size category, with respect to a light-duty vehicle, means that the total of the interior volume for passengers and the interior volume for luggage is

• The following provision is not in force.

  (a) 2.38 m³ (85 ft³) or less;

• The following provision is not in force.

  (b) more than 2.38 m³ (85 ft³) but less than 2.80 m³ (100 ft³);

• The following provision is not in force.

  (c) 2.80 m³ (100 ft³) or more but not more than 3.08 m³ (110 ft³);

• The following provision is not in force.

  (d) more than 3.08 m³ (110 ft³ but less than 3.36 m³ (120 ft³); or

• The following provision is not in force.

  (e) 3.36 m³ (120 ft³) or more. (catégorie de taille)

super-core

super-core means the parts listed in column 1 of Table A.2, which are considered as a single part for the purposes of performing an RVC calculation in accordance with subsections 14(10), (11) and (13) and 16(10). (ensemble de pièces essentielles)

total vehicle plant assembly annual purchase value

total vehicle plant assembly annual purchase value means the sum of the values of all parts or materials purchased, on an annual basis, for use in the production of passenger vehicles, light trucks or heavy trucks in a plant located in the territory of a CUSMA country. (valeur totale annuelle des achats d’usine de montage de véhicules)

underbody

underbody means a component, comprising a single part or two or more parts joined together, with or without additional stiffening members, that forms the base of a motor vehicle, beginning at the fire-wall or bulkhead of the motor vehicle and ending

• The following provision is not in force.

  (a) if there is a luggage floor panel in the motor vehicle, at the place where that luggage floor panel begins; or

• The following provision is not in force.

  (b) if there is no luggage floor panel in the motor vehicle, at the place where the passenger compartment of the motor vehicle ends. (soubassement)

VNM

VNM means the value of non-originating materials. (Version anglaise seulement)

vehicle that is solely or principally for off-road use

vehicle that is solely or principally for off-road use means a vehicle that does not meet U.S. federal safety and emissions standards permitting unrestricted on-road use or the equivalent Mexican or Canadian on-road standards. (véhicule uniquement ou principalement utilisé hors route)

Marginal note:Product-specific rules of origin

13 Except as provided for in section 19, the product-specific rule of origin for a good of headings 87.01 through 87.08 is set out in the following table:

Marginal note:Roll-up of originating materials

• The following provision is not in force.

  14 (1) The VNM used by the producer in the production of a passenger vehicle, light truck and parts thereof must not, for the purposes of calculating the RVC of the good, include the VNM used to produce originating materials that are subsequently used in the production of the good. For greater certainty, if the production undertaken on non-originating materials results in the production of a good that qualifies as originating, no account shall be taken of the non-originating material contained therein if that good is used in the subsequent production of another good.

• The following provision is not in force.

  Marginal note:Core parts listed in Table A.1

  (2) A part listed in Table A.1 that is for use as original equipment in the production of a passenger vehicle or light truck, except for batteries of subheading 8507.60 that are used as the primary source of electrical power for the propulsion of an electric passenger vehicle or an electric light truck, is originating only if it satisfies the RVC requirement in this section, section 13 or Schedule 1.

• The following provision is not in force.

  Marginal note:Batteries

  (3) A battery of subheading 8507.60 that is used as the primary source of electrical power for the propulsion of an electric passenger vehicle or an electric light truck is originating if it meets the applicable requirements set out in this section or Schedule 1.

• The following provision is not in force.

  Marginal note:Passenger vehicle or light truck — parts

  (4) In addition to other applicable requirements set out in these Regulations, a passenger vehicle or light truck is only originating if the parts listed in column 1 of Table A.2 used in its production are originating. The VNM for such parts must be calculated in accordance with subsections (7) and (8), or, at the choice of the vehicle producer or exporter, subsections (9) to (11). The net cost of a part must be calculated in accordance with section 7 without regard to the VNM calculation method chosen.

• The following provision is not in force.

  Marginal note:RVC requirement — passenger vehicle or light truck

  (5) Except for an advanced battery of subheading 8507.60, a part listed in column 1 of Table A.2 that is for use in a passenger vehicle or light truck must meet the RVC requirement of section 13 or Schedule 1 to be considered originating.

• The following provision is not in force.

  Marginal note:Advanced batteries

  (6) An advanced battery of subheading 8507.60 that is for use in a passenger vehicle or light truck is originating if it meets the applicable change in tariff classification or RVC requirements set out in Schedule 1.

• The following provision is not in force.

  Marginal note:VNM determination

  (7) For the purpose of subsections (4) to (6), when calculating the RVC of a part listed in column 1 of Table A.2, the VNM must be determined, at the choice of the vehicle producer or exporter, by taking into consideration

  • The following provision is not in force.

    (a) the VNM used in the production of the part; or

  • The following provision is not in force.

    (b) the value of non-originating components that are listed in column 2 of Table A.2 that are used in the production of the part.

• The following provision is not in force.

  Marginal note:Materials not listed in column 2

  (8) For the purposes of an RVC calculation for a good listed in column 1 of Table A.2, based on paragraph (7)(b), any non-originating materials used in the production of the good that are not listed in column 2 of Table A.2 may be disregarded. For greater certainty, any non-originating parts listed in column 2 of Table A.2 must be included in the VNM calculation and any parts not listed in column 2 of Table A.2 — or materials or components used to produce such parts — are not to be part of the VNM calculation.

• The following provision is not in force.

  Marginal note:Non-application

  (9) Subsections (7) and (8) do not apply when calculating the RVC of a part listed in column 1 of Table A.2 traded on its own. The rules for such parts are listed in section 13 or Schedule 1.

• The following provision is not in force.

  Marginal note:Super-core part

  (10) For the purpose of subsections (4) to (6) and as an alternative to determining the VNM based on the method in subsection (7), the RVC of the parts listed in column 1 of Table A.2 may be determined, at the choice of the vehicle producer or exporter, by treating these parts as a single part, which may be referred to as a super-core part, using the sum of the net cost of each part listed under column 1 of Table A.2 , and, when calculating the VNM, by taking into consideration

  • The following provision is not in force.

    (a) the sum of the value of all non-originating materials used in the production of the parts listed under column 1 of table A.2; or

  • The following provision is not in force.

    (b) the sum of the value of the non-originating components that are listed in column 2 of Table A.2 that are used in the production of the parts listed in column 1 of Table A.2.

• The following provision is not in force.

  Marginal note:Further production

  (11) If a non-originating material used in the production of a component listed in column 2 of Table A.2 undergoes further production such that it satisfies the requirements of these Regulations, the component is treated as originating when determining the originating status of the subsequently produced part listed in column 1 of Table A.2, regardless of whether that component was produced by the producer of the part.

• The following provision is not in force.

  Marginal note:Averaging

  (12) The RVC requirements for the parts listed in the left hand column 1 of Table A.2 may be averaged in accordance with section 16. Such an average may be calculated using the average RVC for each individual parts category in column 1 of Table A.2, or by calculating the average RVC for all parts in column 1 of Table A.2 by treating them as a single part, defined as a super-core. Once this average, by either methodology, exceeds the thresholds set out in subsection (13), all parts used to calculate this average are considered originating.

• The following provision is not in force.

  Marginal note:RVC thresholds — Tables A.1 and A.2

  (13) For the purposes of subsections (2), (7) and (10), the following RVC thresholds apply to parts for use as original equipment listed under Table A.1 and column 1 of Table A.2:

  • The following provision is not in force.

    (a) 66% under the net cost method or 76% under the transaction value method, beginning on July 1, 2020 and ending on June 30, 2021;

  • The following provision is not in force.

    (b) 69% under the net cost method or 79% under the transaction value method, beginning on July 1, 2021 and ending on June 30, 2022;

  • The following provision is not in force.

    (c) 72% under the net cost method or 82% under the transaction value method, beginning on July 1, 2022 and ending on June 30, 2023; and

  • The following provision is not in force.

    (d) 75% under the net cost method or 85% under the transaction value method, beginning on July 1, 2023.

• The following provision is not in force.

  Marginal note:Requirements — parts listed in Table B

  (14) Despite the RVC requirements set out in Schedule 1, a material listed in Table B is considered originating if it satisfies the applicable change in tariff classification requirement or the applicable RVC requirement provided in Schedule 1.

• The following provision is not in force.

  Marginal note:RVC thresholds — Table B

  (15) For the purposes of subsection (14), the following RVC thresholds apply to parts for use as original equipment listed under Table B:

  • The following provision is not in force.

    (a) 62.5% under the net cost method or 72.5% under the transaction value method, beginning on July 1, 2020 and ending on June 30, 2021;

  • The following provision is not in force.

    (b) 65% under the net cost method or 75% under the transaction value method, beginning on July 1, 2021 and ending on June 30, 2022;

  • The following provision is not in force.

    (c) 67.5% under the net cost method or 77.5% under the transaction value method, beginning on July 1, 2022 and ending on June 30, 2023; and

  • The following provision is not in force.

    (d) 70% under the net cost method or 80% under the transaction value method, beginning on July 1, 2023.

• The following provision is not in force.

  Marginal note:Requirements — parts listed in Table C

  (16) Despite the RVC requirements set out in Schedule 1, a material listed in Table C is originating if it meets the applicable change in tariff classification requirement or the applicable RVC requirement provided in Schedule 1.

• The following provision is not in force.

  Marginal note:RVC thresholds — Table C

  (17) For the purposes of subsection (16), the following RVC thresholds apply to parts for use as original equipment listed under Table C:

  • The following provision is not in force.

    (a) 62% under the net cost method or 72% under the transaction value method, beginning on July 1, 2020 and ending on June 30, 2021;

  • The following provision is not in force.

    (b) 63% under the net cost method or 73% under the transaction value method, beginning on July 1, 2021 and ending on June 30, 2022;

  • The following provision is not in force.

    (c) 64% under the net cost method or 74% under the transaction value method, beginning on July 1, 2022 and ending on June 30, 2023; and

  • The following provision is not in force.

    (d) 65% under the net cost method or 75% under the transaction value method, beginning on July 1, 2023.

• The following provision is not in force.

  Marginal note:Non-application

  (18) For greater certainty, subsections (13), (15) and (17) do not apply to aftermarket parts.

Marginal note:RVC — VNM

• The following provision is not in force.

  15 (1) The VNM used by the producer in the production of a heavy truck and parts thereof must not, for the purposes of calculating the RVC of the good, include the VNM used to produce originating materials that are subsequently used in the production of the good.

• The following provision is not in force.

  Marginal note:RVC thresholds

  (2) Despite the Product Specific Rules of Origin in Schedule 1, the following RVC thresholds apply to parts listed in Table D that are for use in a heavy truck:

  • The following provision is not in force.

    (a) 60% under the net cost method or 70% under the transaction value method if the corresponding rule includes a transaction value method, beginning on July 1, 2020 and ending on June 30, 2024;

  • The following provision is not in force.

    (b) 64% under the net cost method or 74% under the transaction value method if the corresponding rule includes a transaction value method, beginning on July 1, 2024 and ending on June 30, 2027; and

  • The following provision is not in force.

    (c) 70% under the net cost method or 80% under the transaction value method if the corresponding rule includes a transaction value method, beginning on July 1, 2027.

• The following provision is not in force.

  Marginal note:RVC thresholds

  (3) Despite the Product Specific Rules of Origin in Schedule 1, the following RVC thresholds apply to parts listed in Table E that are for use in a heavy truck:

  • The following provision is not in force.

    (a) 50% under the net cost method or 60% under the transaction value method if the corresponding rule includes a transaction value method, beginning on July 1, 2020 and ending on June 30, 2024;

  • The following provision is not in force.

    (b) 54% under the net cost method or 64% under the transaction value method if the corresponding rule includes a transaction value method, beginning on July 1, 2024 and ending on June 30, 2027; and

  • The following provision is not in force.

    (c) 60% under the net cost method or 70% under the transaction value method if the corresponding rule includes a transaction value method, beginning on July 1, 2027.

• The following provision is not in force.

  Marginal note:RVC requirement — engines, gear box, chassis

  (4) Despite section 13 or Schedule 1, an engine of heading 84.07 or 84.08, a gear box (transmission) of subheading 8708.40 or a chassis classified in 8708.99,that is for use in a heavy truck, is originating only if it satisfies the applicable RVC requirement in subsection (2).

Marginal note:Categories

• The following provision is not in force.

  16 (1) For the purposes of calculating the RVC of a passenger vehicle, light truck or heavy truck, the calculation may be averaged over the producer’s fiscal year, using any one of the following categories, on the basis of either all motor vehicles in the category or only those motor vehicles in the category that are exported to the territory of one or more of the other CUSMA countries:

  • The following provision is not in force.

    (a) the same model line of motor vehicles in the same class of vehicles produced in the same plant in the territory of a CUSMA country;

  • The following provision is not in force.

    (b) the same class of motor vehicles produced in the same plant in the territory of a CUSMA country;

  • The following provision is not in force.

    (c) the same model line or same class of motor vehicles produced in the territory of a CUSMA country; and

  • The following provision is not in force.

    (d) any other category as the CUSMA countries may decide.

• The following provision is not in force.

  Marginal note:Vehicles — same model line or class

  (2) For the purposes of paragraph (1)(c), vehicles within the same model line or class may be averaged separately if such vehicles are subject to different RVC requirements.

• The following provision is not in force.

  Marginal note:Information requirements

  (3) If a producer chooses to use averaging for the purposes of calculating RVC, the producer must state the category it has chosen and

  • The following provision is not in force.

    (a) if the category referred to in paragraph (1)(a) is chosen, state the model line, model name, class of passenger vehicle, light truck or heavy truck and tariff classification of the motor vehicles in that category and the location of the plant at which the motor vehicles are produced;

  • The following provision is not in force.

    (b) if the category referred to in paragraph (1)(b) is chosen, state the model name, class of passenger vehicle, light truck or heavy truck and tariff classification of the motor vehicles in that category and the location of the plant at which the motor vehicles are produced;

  • The following provision is not in force.

    (c) if the category referred to in paragraph (1)(c) is chosen, state the model line, model name, class of motor vehicle and tariff classification of the passenger vehicle, light truck or heavy truck in that category and the locations of the plants at which the motor vehicles are produced; and

  • The following provision is not in force.

    (d) if the category referred to in paragraph (1)(d) is chosen, state the model lines, model names, classes of motor vehicles and tariff classifications of the passenger vehicles, light trucks or heavy trucks and the location of the plants at which the motor vehicles are produced and the CUSMA country or countries to which the vehicles are exported.

• The following provision is not in force.

  Marginal note:Averaging period

  (4) If the fiscal year of a producer begins after July 1, 2020, but before July 1, 2021, the producer may calculate its RVC for passenger vehicles, light trucks, heavy trucks, other vehicles, core parts listed in Table A.2 used in the production of passenger vehicles, light trucks or heavy trucks, an automotive good listed in Tables A.1, B, C, D or E, steel and aluminum purchasing requirement and LVC, for the period beginning on July 1, 2020 and ending at the end of the following fiscal year.

• The following provision is not in force.

  Marginal note:Optional transitional period

  (5) A producer may calculate its RVC

  • The following provision is not in force.

    (a) for passenger vehicles, light trucks, other vehicles, core parts listed in Table A2 that are used in the production of passenger vehicles, or light trucks, an automotive good listed in Tables A.1, B, and C and the steel and aluminum purchasing and labour value content requirements for passenger vehicles and light trucks for the following periods:

    • (i) beginning on July 1, 2020 and ending on June 30, 2021,

    • (ii) beginning on July 1, 2021 and ending on June 30, 2022,

    • (iii) beginning on July 1, 2022 and ending on June 30, 2023

    • (iv) beginning on July 1, 2023 until the end of the producer’s fiscal year; and

  • The following provision is not in force.

    (b) for heavy trucks, an automotive good listed in Tables D or E and the steel and aluminum purchasing and labour value content requirements for heavy trucks,

    • (i) beginning on July 1, 2023 and ending on June 30, 2024,

    • (ii) beginning on July 1, 2024 and ending on June 30, 2025,

    • (iii) beginning on July 1, 2025 and ending on June 30, 2026,

    • (iv) beginning on July 1, 2026 and ending on June 30, 2027, and

    • (v) beginning on July 1, 2027 until the end of the producer’s fiscal year.

• The following provision is not in force.

  Marginal note:Timely filing of choice to average

  (6) If a producer chooses to average its RVC calculations the producer must notify the customs administration of the CUSMA country to which passenger vehicles, light trucks, heavy trucks or other vehicles are to be exported by July 31, 2020 and subsequently at least 10 days before the first day of the producer’s fiscal year during which the vehicles will be exported or such shorter period as the customs administration may accept.

• The following provision is not in force.

  Marginal note:No modification or rescission

  (7) The producer may not modify or rescind the category of passenger vehicles, light trucks, heavy trucks or other vehicle or the period that they have notified the customs authority they intend to use for their averaged RVC calculation.

• The following provision is not in force.

  Marginal note:Net costs and VNM included — RVC

  (8) For purposes of sections 13 to 15, if a producer chooses to average its net cost calculation, the net costs incurred and the VNM used by the producer, with respect to

  • The following provision is not in force.

    (a) all passenger vehicles, light trucks or heavy trucks that fall within the category chosen by the producer and that are produced during the fiscal year, or partial fiscal year if the producer’s fiscal year begins after July 1, 2020, and

  • The following provision is not in force.

    (b) those passenger vehicles, light trucks or heavy trucks to be exported to the territory of one or more of the CUSMA countries that fall within the category chosen by the producer and that are produced during the fiscal year or, or partial fiscal year if the producer’s fiscal year begins after July 1, 2020

  must be included in the calculation of the RVC under any of the categories set out in subsection (1).

• The following provision is not in force.

  Marginal note:Averaging based on estimated costs

  (9) If the producer of a passenger vehicle, light truck, heavy truck or other vehicle has calculated the RVC of the motor vehicle on the basis of estimated costs, including standard costs, budgeted forecasts or other similar estimating procedures, before or during the producer’s fiscal year, the producer must conduct an analysis at the end of the producer’s fiscal year of the actual costs incurred over the period with respect to the production of the motor vehicle. If the motor vehicle does not satisfy the RVC requirement on the basis of the actual costs, the producer must immediately inform any person to whom the producer has provided a Certificate of Origin for the motor vehicle, or a written statement that the motor vehicle is an originating good, that the motor vehicle is a non-originating good.

• The following provision is not in force.

  Marginal note:Averaging period

  (10) Subject to subsection (11), for the purpose of calculating the RVC for an automotive good listed in Tables A.1, B, C, D or E, produced in the same plant, a core part listed in Table A.2, or when treating the parts listed in column 1 of Table A.2 as a super-core, for use in a passenger vehicle or light truck, the calculation may be averaged

  • The following provision is not in force.

    (a) over the fiscal year of the motor vehicle producer to whom the good is sold;

  • The following provision is not in force.

    (b) over any quarter or month;

  • The following provision is not in force.

    (c) over the fiscal year of the producer of the automotive material; or

  • The following provision is not in force.

    (d) over any of the categories in paragraph (1)(a) to (d).

• The following provision is not in force.

  Marginal note:Condition

  (11) The calculation may be averaged under subsection (10) provided that the good was produced during the fiscal year, quarter or month forming the basis for the calculation in which

  • The following provision is not in force.

    (a) the average in paragraph (10)(a) is calculated separately for those goods sold to one or more passenger vehicle, light truck or heavy truck producer; or

  • The following provision is not in force.

    (b) the average in paragraph (10)(a) or (b) is calculated separately for those goods that are exported to the territory of another CUSMA country.

• The following provision is not in force.

  Marginal note:Example

  (12) The following example is an “example” as referred to in subsection 1(4):

  • Subsection 16(4)
    The following provision is not in force.

    The agreement enters into force on July 1, 2020. A producer’s fiscal year begins on January 1, 2021. The producer may calculate their RVC over the 18-month period beginning on July 1, 2020 and ending on December 31, 2021.

Marginal note:Passenger vehicle, light truck or heavy truck

• The following provision is not in force.

  17 (1) In addition to meeting the requirements of sections 13 to 16 or Schedule 1, a passenger vehicle, light truck or heavy truck is originating only if, during a time period under subsection (7) , at least 70 percent by value of the vehicle producer’s purchases at the corporate level in the territories of one or more of the CUSMA countries of steel and aluminum listed in Table S are of originating goods.

• The following provision is not in force.

  Marginal note:Automotive parts

  (2) For the purposes of subsection (1), only the value of the steel or aluminum listed in Table S that is used in the production of the part will be taken into consideration for a part of subheading 8708.29 or 8708.99 listed in Table S.

• The following provision is not in force.

  Marginal note:Application

  (3) Subsection (1) applies to steel and aluminum purchases made by the producer of passenger vehicles, light trucks or heavy trucks, including purchases made directly by the vehicle producer from a steel producer and purchases by the vehicle producer from a steel service centre or a steel distributor. It also applies to steel or aluminum covered by a contractual arrangement in which a producer of passenger vehicles, light trucks or heavy trucks negotiates the terms under which steel or aluminum will be supplied to a parts producer by a steel producer or supplier selected by the vehicle producer, for use in the production of parts that are supplied by the parts producer to a producer of passenger vehicles, light trucks or heavy trucks. Such purchases must also include steel and aluminum purchases for major stampings that form the “body in white” or chassis frame, regardless of whether the vehicle producer or parts producer makes such purchases.

• The following provision is not in force.

  Marginal note:Other uses

  (4) Subsection (1) applies to steel and aluminum purchased for use in the production of passenger vehicles, light trucks or heavy trucks. Subsection (1) does not apply to steel and aluminum purchased by a producer for other uses, such as the production of other vehicles, tools, dies or moulds.

• The following provision is not in force.

  Marginal note:Steel — originating

  (5) For the purpose subsection (1), as it applies to a steel good set out in Table S, a good is originating if

  • The following provision is not in force.

    (a) beginning on July 1, 2020 and ending on June 30, 2027, the good satisfies the applicable requirements established in section 13 or Schedule 1 and all other applicable requirements of these Regulations; and

  • The following provision is not in force.

    (b) beginning on July 1, 2027 the good satisfies all other applicable requirements of these Regulations, and provided that all steel manufacturing processes occur in one or more of the CUSMA countries, except for metallurgical processes involving the refinement of steel additives.

  Such steel manufacturing processes include the initial melting and mixing and continues through the coating stage. This requirement does not apply to raw materials of used in the steel manufacturing process, including iron ore or reduced, processed, or pelletized iron ore of heading 26.01, pig iron of heading 72.01, raw alloys of heading 72.02 or steel scrap of heading 72.04.

• The following provision is not in force.

  Marginal note:Value of steel and aluminum

  (6) A vehicle producer must calculate the value of steel and aluminum purchases in subsection (1) using

  • The following provision is not in force.

    (a) for steel or aluminum imported or acquired in the territory of a CUSMA country,

    • (i) the price paid or payable by the producer in the CUSMA country where the producer is located,

    • (ii) the net cost of the material at the time of importation, or

    • (iii) the transaction value of the material at the time of importation; and

  • The following provision is not in force.

    (b) for steel or aluminum that is self-produced,

    • (i) all costs incurred in the production of materials, which includes general expenses, and

    • (ii) an amount equivalent to the profit added in the normal course of trade or equal to the profit that is usually reflected in the sale of goods of the same class or kind as the self-produced material that is being valued.

• The following provision is not in force.

  Marginal note:Calculation period

  (7) For the purposes of subsection (1), the producer may calculate the purchases made

  • The following provision is not in force.

    (a) over the previous fiscal year of the producer;

  • The following provision is not in force.

    (b) over the previous calendar year;

  • The following provision is not in force.

    (c) over the quarter or month to date in which the vehicle is exported;

  • The following provision is not in force.

    (d) over the producer’s fiscal year to date in which the vehicle is exported; or

  • The following provision is not in force.

    (e) over the calendar year to date in which the vehicle is exported.

• The following provision is not in force.

  Marginal note:Estimates

  (8) If the producer chooses to base a steel or aluminium calculation on paragraph (7)(c), (d) or (e), that calculation may be based on the producer’s estimated purchases for the applicable period.

• The following provision is not in force.

  Marginal note:Option for calculation

  (9) For the purposes of subsection (1), the producer may calculate the purchases on the basis of

  • The following provision is not in force.

    (a) all motor vehicles produced in one or more plants in the territory of one or more CUSMA countries;

  • The following provision is not in force.

    (b) all motor vehicles exported to the territory of one or more CUSMA countries;

  • The following provision is not in force.

    (c) all motor vehicles in a category set out in subsection 16(1) that are produced in one or more plants in the territory of one or more CUSMA countries; or,

  • The following provision is not in force.

    (d) all motor vehicles in a category set out in subsection 16(1) exported to the territory of one or more CUSMA countries.

• The following provision is not in force.

  Marginal note:Different periods

  (10) The producer may choose different periods for the purposes of its steel and aluminium calculations.

• The following provision is not in force.

  Marginal note:Year end analysis

  (11) If the producer of a passenger vehicle, light truck, or heavy truck has calculated steel or aluminum purchases on the basis of estimates before or during the applicable period, the producer must conduct an analysis at the end of the producer’s fiscal year of the actual purchases made over the period with respect to the production of the vehicle. If the passenger vehicle, light truck, or heavy truck does not satisfy the steel or aluminum requirement on the basis of the actual purchases, the purchaser must immediately inform any person to whom the producer has provided a certification of origin for the vehicle or a written statement that the vehicle is an originating good that the vehicle is a non-originating good.

Marginal note:LVC requirements — passenger vehicles

• The following provision is not in force.

  18 (1) In addition to the requirements in sections 13 to 17 and Schedule 1, a passenger vehicle is originating only if the vehicle producer certifies that the passenger vehicle meets an LVC requirement of

  • The following provision is not in force.

    (a) 30%, consisting of at least 15 percentage points of high-wage material and labour expenditures, no more than 10 percentage points of technology expenditures and no more than 5 percentage points of high-wage assembly expenditures, beginning on July 1, 2020 and ending on June 30, 2021;

  • The following provision is not in force.

    (b) 33%, consisting of at least 18 percentage points of high-wage material and labour expenditures, no more than 10 percentage points of technology expenditures and no more than 5 percentage points of high-wage assembly expenditures, beginning on July 1, 2021 and ending on June 30, 2022;

  • The following provision is not in force.

    (c) 36%, consisting of at least 21 percentage points of high-wage material and labour expenditures, no more than 10 percentage points of technology expenditures and no more than 5 percentage points of high-wage assembly expenditures, beginning on July 1, 2022 and ending on June 30, 2023; and

  • The following provision is not in force.

    (d) 40%, consisting of at least 25 percentage points of high-wage material and labour expenditures, no more than 10 percentage points of technology expenditures and no more than 5 percentage points of high-wage assembly expenditures, beginning on July 1, 2023.

• The following provision is not in force.

  Marginal note:LVC requirement — light trucks or heavy trucks

  (2) In addition to the requirements set out in sections 13 through 17 and Schedule 1, a light truck or heavy truck is originating only if the vehicle producer certifies that the truck meets an LVC requirement of 45%, consisting of at least 30 percentage points based on high-wage material and labour expenditures, no more than 10 percentage points based on technology expenditures and no more than 5 percentage points based on high-wage assembly expenditures.

• The following provision is not in force.

  Marginal note:Calculation of LVC requirement

  (3) For purposes of an LVC calculation for a passenger vehicle, light truck or heavy truck, a producer must include

  • The following provision is not in force.

    (a) an amount for high-wage materials used in production;

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    (b) an amount for high-wage labour costs incurred in the assembly of the vehicle;

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    (c) an amount for high-wage transportation or related costs for shipping materials to the location of the vehicle producer, if not included in the amount for high-wage materials;

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    (d) a credit for technology expenditures; or

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    (e) a credit for high-wage assembly expenditures.

• The following provision is not in force.

  Marginal note:High wage materials

  (4) The amount that may be included for high-wage materials used in production is the net cost or the annual purchase value of materials that undergo production in a qualifying-wage-rate production plant and that are used in the production of passenger vehicles, light trucks or heavy trucks in a plant located in the territory of a CUSMA country.

• The following provision is not in force.

  Marginal note:Certification periods

  (5) A plant engaged in the production of vehicles or parts may be certified as a qualifying wage-rate vehicle assembly plant or a qualifying-wage-rate production plant based on the average wage paid to direct production workers at the plant from July 1, 2020 until December 31, 2020 or from July 1, 2020 until June 30, 2021. In subsequent periods, the certification of a qualifying-wage-rate production plant based on a period less than 12 months is valid for the following period of the same length. The certification of a qualifying-wage-rate production plant based on a 12-month period is valid for the following 12 months.

• The following provision is not in force.

  Marginal note:LVC calculation

  (6) For the purpose of meeting the LVC requirement a producer must use one of the following formulas:

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    (a) the requirement based on net cost is determined by the formula

    LVC = (((HWLC + HWM) ) ÷ NC X 100) + HWTC + HWAC

    where

    HWLC

    is the sum of the high-wage labour costs incurred in the assembly of the vehicle;

    HWM

    is the sum or the high-wage material expenditures used in production;

    NC

    is the net cost of the vehicle;

    HWTC

    is the credit for high-wage technology expenditures; and

    HWAC

    is the credit for high-wage assembly expenditures.

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    (b) the requirement based on total annual purchase value is determined by the formula

    LVC = (((APV + HWLC) ) ÷ ((TAPV + HWLC)) X 100) + HWTC + HWAC

    where

    APV

    is the annual purchase value of high-wage material expenditures;

    HWLC

    is the sum of the high-wage labour costs incurred in the assembly of the vehicle which may be included in the numerator at the choice of the producer and, if included, must also be included in the denominator;

    TAPV

    is the total vehicle plant assembly annual purchase value of parts and materials for use in the production of the vehicle;

    HWTC

    is the credit for high-wage technology expenditures; and

    HWAC

    is the credit for high-wage assembly expenditures.

• The following provision is not in force.

  Marginal note:High-wage material expenditures

  (7) The high wage material expenditures is calculated by adding the APV or net cost, depending on the formula used, of

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    (a) a self-produced high-wage material used in the production of a vehicle;

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    (b) an imported or acquired high-wage material used in the production of a vehicle;

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    (c) a high-wage material used in the production of a part or material that is used in the production of an intermediate or self-produced part that is subsequently used in the production of a vehicle; and

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    (d) a high wage material used in the production of a part or material that is subsequently used in the production of a vehicle.

• The following provision is not in force.

  Marginal note:Recommendation

  (8) It is suggested, but not required, that the vehicle producer calculate the high-wage material and labour expenditures in the order described in subsection (7). A vehicle producer need not calculate the elements in paragraph (7)(b) to (d) if the previous element or elements is sufficient to meet the LVC requirement.

• The following provision is not in force.

  Marginal note:High-wage technology expenditures credit

  (9) The HWTC is based on annual vehicle producer expenditures at the corporate level in one or more CUSMA countries on wages paid by the producer for research and development or information technology, calculated as a percentage of total annual vehicle producer expenditures on wages paid to direct production workers in one or more CUSMA countries. Expenditures on capital or other non-wage costs for research and development or information technology are not included.

• The following provision is not in force.

  Marginal note:HWTC calculation

  (10) The HWTC is determined by the formula

  

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  Marginal note:Wages for research and development

  (11) For the purposes of subsection (10), expenditures on wages for research and development include wage expenditures on prototype development, design, engineering, testing and certifying operations.

• The following provision is not in force.

  Marginal note:HWAC — passenger vehicles or light trucks

  (12) A high-wage assembly credit of five percentage points may be included in the LVC for passenger vehicles or light trucks produced by a producer that operates a high-wage assembly plant for passenger vehicle or light truck parts or has a long-term supply contract for those parts — a contract of a minimum of three years — with such a plant.

• The following provision is not in force.

  Marginal note:HWAC — heavy trucks

  (13) A high-wage assembly credit of five percentage points may be included in the LVC for heavy trucks produced by a producer that operates a high-wage assembly plant for heavy truck parts or has a long-term supply contract — a contract with a minimum of three years — for those parts with such a plant.

• The following provision is not in force.

  Marginal note:Minimum number of parts

  (14) A high-wage assembly plant for passenger vehicle or light truck parts or for heavy truck parts need only have the capacity to produce the minimum amount of parts specified in the definitions of those terms in section 12. There is no need to maintain or provide records or other documents that certify such parts are originating, as long as information demonstrating the capacity to produce these minimum amounts is maintained and can be provided.

• The following provision is not in force.

  Marginal note:Averaging for LVC requirements

  (15) For the purposes of calculating the LVC of a passenger vehicle, light truck or heavy truck, the producer may elect to average the calculation using any one of the following categories, on the basis of either all vehicles in the category or only those vehicles in the category that are exported to the territory of one or more of the other CUSMA countries:

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    (a) the same model line of vehicles in the same class of vehicles produced in the same plant in the territory of a CUSMA country;

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    (b) the same class of vehicles produced in the same plant in the territory of a CUSMA country;

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    (c) the same model line of vehicles or same class of vehicles produced in the territory of a CUSMA country; or

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    (d) any other category as the CUSMA countries may decide.

• The following provision is not in force.

  Marginal note:Election requirements

  (16) An election made under subsection (15) must

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    (a) state the category chosen by the producer and

    • (i) if the category referred to in paragraph (15)(a) is chosen, state the model line, model name, class of vehicle and tariff classification of the vehicles in that category and the location of the plant at which the vehicles are produced,

    • (ii) if the category referred to in paragraph (15)(b) is chosen, state the model name, class of vehicle and tariff classification of the vehicles in that category and the location of the plant at which the vehicles are produced, or

    • (iii) if the category referred to in paragraph (15)(c) is chosen, state the model line, model name, class of vehicle and tariff classification of the vehicles in that category and the locations of the plants at which the vehicles are produced;

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    (b) state whether the basis of the calculation is all vehicles in the category or only those vehicles in the category that are exported to the territory of one or more of the other CUSMA countries;

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    (c) state the producer’s name and address;

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    (d) state the period with respect to which the election is made, including the starting and ending dates;

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    (e) state the estimated LVC of vehicles in the category on the basis stated under paragraph (b);

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    (f) be dated and signed by an authorized officer of the producer; and

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    (g) be filed with the customs administration of each CUSMA country to which vehicles in that category are to be exported during the period covered by the election, at least 10 days before the day on which the producer’s fiscal year begins or such shorter period as that customs administration may accept.

• The following provision is not in force.

  Marginal note:No recisions or modifications

  (17) An election filed for the vehicles referred to in subsection (15) may not be rescinded or modified with respect to the category or basis of calculation.

• The following provision is not in force.

  Marginal note:LVC and net cost

  (18) If a producer files an election under paragraph (16)(a), it must include the LVC and the net cost of the producer’s passenger vehicles, light trucks or heavy trucks, calculated under one of the categories set out in subsection (15), with respect to

  • The following provision is not in force.

    (a) all vehicles that fall within the category chosen by the producer; or

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    (b) those vehicles to be exported to the territory of one or more of the CUSMA countries that fall within the category chosen by the producer.

• The following provision is not in force.

  Marginal note:LVC periods

  (19) For the purposes of determining the LVC in this section, the producer may base the calculation on

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    (a) the previous fiscal year of the producer;

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    (b) the previous calendar year;

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    (c) the quarter or month to date in which the vehicle is produced or exported;

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    (d) the producer’s fiscal year to date in which the vehicle is produced or exported; or

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    (e) the calendar year to date in which the vehicle is produced or exported.

• The following provision is not in force.

  Marginal note:Transportation and related costs

  (20) High-wage transportation or related costs for shipping may be included in a producer’s LVC calculation if not included in the amount for high-wage materials. Alternatively, a producer may aggregate such costs within the territories of one or more of the CUSMA countries. Based on this aggregate amount, the producer may attribute an amount for transportation or related costs for shipping for the purposes of the LVC calculation. Transportation or related costs for shipping incurred in transporting a material from outside the territories of the CUSMA countries to the territory of a CUSMA country are not included in this calculation.

• The following provision is not in force.

  Marginal note:Value of materials

  (21) The value of both originating and non-originating materials must be taken into account for the purpose of calculating the LVC of a good. For greater certainty, the full value of a non-originating material that has undergone production in a qualifying-wage-rate production plant may be included in the HWM described in subsection (6).

• The following provision is not in force.

  Marginal note:Excess LVC

  (22) For the period ending July 1, 2027, if a producer certifies an LVC for a heavy truck that is higher than 45% by increasing the amount of high wage material and manufacturing expenditures above 30 percentage points, the producer may use the points above 30 percentage points as a credit towards the RVC percentages under section 13, provided that the RVC percentage is not below 60%.