CUSMA Rules of Origin Regulations (SOR/2020-155)

1 Unless otherwise stated, the following definitions apply in this Schedule.

buyer

buyer refers to a person who purchases a good from the producer. (acheteur)

buying commissions

buying commissions means fees paid by a buyer to that buyer’s agent or mandatary for the agent or mandatary’s services in representing the buyer in the purchase of a good. (commission d’achat)

producer

producer refers to the producer of the good being valued. (producteur)

2 For the purposes of subsection 7(2) of these Regulations, the transaction value of a good is the price actually paid or payable for the good, determined in accordance with section 3 and adjusted in accordance with section 4.

• 3 (1) The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the producer. The payment need not necessarily take the form of a transfer of money; it may be made by letters of credit or negotiable instruments. The payment may be made directly or indirectly to the producer. For an illustration of this, the settlement by the buyer, whether in whole or in part, of a debt owed by the producer is an indirect payment.

• (2) Activities undertaken by the buyer on the buyer’s own account, other than those for which an adjustment is provided in section 4, are not considered to be an indirect payment, even though the activities may be regarded as being for the benefit of the producer. For an illustration of this, if the buyer, by agreement with the producer, undertakes activities relating to the marketing of the good, the costs of such activities are not to be added to the price actually paid or payable.

• (3) The transaction value is not to include the following charges or costs, if they are distinguished from the price actually paid or payable:

  • (a) charges for construction, erection, assembly, maintenance or technical assistance related to the good undertaken after the good is sold to the buyer; or

  • (b) duties and taxes paid in the country in which the buyer is located with respect to the good.

• (4) The flow of dividends or other payments from the buyer to the producer that do not relate to the purchase of the good are not part of the transaction value.

• 4 (1) In determining the transaction value of a good, the following must be added to the price actually paid or payable:

  • (a) to the extent that they are incurred by the buyer, or by a related person on behalf of the buyer, with respect to the good being valued and are not included in the price actually paid or payable

    • (i) commissions and brokerage fees, except buying commissions,

    • (ii) the costs of transporting the good to the producer’s point of direct shipment and the costs of loading, unloading, handling and insurance that are associated with that transportation, and

    • (iii) if the packaging materials and containers are classified with the good under the Harmonized System, the value of the packaging materials and containers;

  • (b) the value, reasonably allocated in accordance with subsection (13), of the following elements if they are supplied directly or indirectly to the producer by the buyer, free of charge or at reduced cost for use in connection with the production and sale of the good, to the extent that the value is not included in the price actually paid or payable:

    • (i) materials, other than indirect materials, used in the production of the good,

    • (ii) tools, dies, moulds and similar indirect materials used in the production of the good,

    • (iii) indirect materials, other than any of the indirect materials referred to in subparagraph (ii) or in paragraph (c), (e) or (f) of the definition indirect material in subsection 1(1) of these Regulations, used in the production of the good, and

    • (iv) engineering, development, artwork, design work, and plans and sketches necessary for the production of the good, regardless of where performed;

  • (c) the royalties related to the good, other than charges with respect to the right to reproduce the good in the territory of one or more of the CUSMA countries, that the buyer must pay directly or indirectly as a condition of sale of the good, to the extent that such royalties are not included in the price actually paid or payable; and

  • (d) the value of any part of the proceeds of any subsequent resale, disposal or use of the good that accrues directly or indirectly to the producer.

• (2) The additions referred to in subsection (1) must be made to the price actually paid or payable under this section only on the basis of objective and quantifiable data.

• (3) If objective and quantifiable data do not exist with regard to the additions required to be made to the price actually paid or payable under subsection (1), the transaction value cannot be determined under section 2.

• (4) Additions must not be made to the price actually paid or payable for the purpose of determining the transaction value except as provided in this section.

• (5) The amounts to be added under subparagraphs (1)(a)(i) and (ii) are

  • (a) those amounts that are recorded on the books of the buyer; or

  • (b) if those amounts are costs incurred by a related person on behalf of the buyer and are not recorded on the books of the buyer, those amounts that are recorded on the books of that related person.

• (6) The value of the packaging materials and containers referred to in subparagraph (1)(a)(iii) and the value of the elements referred to in subparagraph (1)(b)(i) are

  • (a) if the packaging materials and containers or the elements are imported from outside the territory of the CUSMA country in which the producer is located, the customs value of the packaging materials and containers or the elements;

  • (b) if the buyer, or a related person on behalf of the buyer, purchases the packaging materials and containers or the elements from a person in the territory of the CUSMA country in which the producer is located who is not a related person, the price actually paid or payable for the packaging materials and containers or the elements;

  • (c) if the buyer, or a related person on behalf of the buyer, acquires the packaging materials and containers or the elements from a person in the territory of the CUSMA country in which the producer is located who is not a related person other than through a purchase, the value of the consideration related to the acquisition of the packaging materials and containers or the elements, based on the cost of the consideration that is recorded on the books of the buyer or the related person; or

  • (d) if the packaging materials and containers or the elements are produced by the buyer, or by a related person, in the territory of the CUSMA country in which the producer is located, the total cost of the packaging materials and containers or the elements, determined in accordance with subsection (8).

• (7) The value referred to in subsection (6), to the extent that such costs are not included under paragraphs (6)(a) to (d), must include the following costs that are recorded on the books of the buyer or the related person supplying the packaging materials and containers or the elements on behalf of the buyer:

  • (a) the costs of freight, insurance and packing, and all other costs incurred in transporting the packaging materials and containers or the elements to the location of the producer;

  • (b) duties and taxes paid or payable with respect to the packaging materials and containers or the elements, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable;

  • (c) customs brokerage fees, including the cost of in-house customs brokerage services, incurred with respect to the packaging materials and containers or the elements; and

  • (d) the cost of waste and spoilage resulting from the use of the packaging materials and containers or the elements in the production of the good, less the value of renewable scrap or by-product.

• (8) For the purposes of paragraph (6)(d), the total cost of the packaging materials and containers referred to in subparagraph (1)(a)(iii) or the elements referred to in subparagraph (1)(b)(i) is

  • (a) if the packaging materials and containers or the elements are produced by the buyer, at the choice of the buyer,

    • (i) the total cost incurred with respect to all goods produced by the buyer, calculated on the basis of the costs that are recorded on the books of the buyer, that can be reasonably allocated to the packaging materials and containers or the elements in accordance with Schedule 5, or

    • (ii) the aggregate of each cost incurred by the buyer that forms part of the total cost incurred with respect to the packaging materials and containers or the elements, calculated on the basis of the costs that are recorded on the books of the buyer, that can be reasonably allocated to the packaging materials and containers or the elements in accordance with Schedule 5; and

  • (b) if the packaging materials and containers or the elements are produced by a person who is related to the buyer, at the choice of the buyer,

    • (i) the total cost incurred with respect to all goods produced by that related person, calculated on the basis of the costs that are recorded on the books of that person, that can be reasonably allocated to the packaging materials and containers or the elements in accordance with Schedule 5, or

    • (ii) the aggregate of each cost incurred by that related person that forms part of the total cost incurred with respect to the packaging materials and containers or the elements, calculated on the basis of the costs that are recorded on the books of that person, that can be reasonably allocated to the packaging materials and containers or the elements in accordance with Schedule 5.

• (9) Except as otherwise provided in subsections (11) and (12), the value of the elements referred to in subparagraphs (1)(b)(ii) to (iv) is

  • (a) the cost of those elements that is recorded on the books of the buyer; or

  • (b) if such elements are provided by another person on behalf of the buyer and the cost is not recorded on the books of the buyer, the cost of those elements that is recorded on the books of that other person.

• (10) If the elements referred to in subparagraphs (1)(b)(ii) to (iv) were previously used by or on behalf of the buyer, the value of those elements must be adjusted downward to reflect that use.

• (11) If the elements referred to in subparagraphs (1)(b)(ii) and (iii) were leased by the buyer or a person related to the buyer, the value of those elements are the cost of the lease as recorded on the books of the buyer or that related person.

• (12) An addition must not be made to the price actually paid or payable for the elements referred to in subparagraph (1)(b)(iv) that are available in the public domain, other than the cost of obtaining copies of them.

• (13) The producer must choose the method of allocating to the good the value of the elements referred to in subparagraphs (1)(b)(ii) to (iv), if the value is reasonably allocated to the good. The methods the producer may choose to allocate the value include allocating the value over the number of units produced up to the time of the first shipment or allocating the value over the entire anticipated production if contracts or firm commitments exist for that production. For an illustration of this, a buyer provides the producer with a mould to be used in the production of the good and contracts with the producer to buy 10,000 units of that good. By the time the first shipment of 1,000 units arrives, the producer has already produced 4,000 units. In these circumstances, the producer may choose to allocate the value of the mould over 4,000 units or 10,000 units but must not choose to allocate the value of the elements to the first shipment of 1,000 units. The producer may choose to allocate the entire value of the elements to a single shipment of a good only if that single shipment comprises all of the units of the good acquired by the buyer under the contract or commitment for that number of units of the good between the producer and the buyer.

• (14) The addition for the royalties referred to in paragraph (1)(c) is the payment for the royalties that is recorded on the books of the buyer or, if the payment for the royalties is recorded on the books of another person, the payment for the royalties that is recorded on the books of that other person.

• (15) The value of the proceeds referred to in paragraph (1)(d) is the amount that is recorded for such proceeds on the books of the buyer or the producer.