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

Marginal note:Conversion of currency

• 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:

  • (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

  • (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.

• 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:

  • (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;

  • (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

  • (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.

PART 2Originating Goods

Marginal note:Wholly obtained or produced goods

• 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

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

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

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

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

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

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

  • (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;

  • (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;

  • (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;

  • (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

  • (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.

• 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.

• 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.

• 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

  • (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

  • (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.

• Marginal note:Interpretation — goods and parts of goods

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

  • (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

  • (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.

• 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.

• 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.

• 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.

• 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

    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.

    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 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.

    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.

    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)):

    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.

    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.

    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)

    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.

    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.

    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.

    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 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.

    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.

    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)):

    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.

    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 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

    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 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.

    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.