CUSMA Rules of Origin Regulations (SOR/2020-155)
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Regulations are current to 2024-11-26 and last amended on 2020-07-01. Previous Versions
APPENDIXExamples Illustrating the Application of the Methods for Determining the Value of Non-Originating Materials that are Identical Materials and that are Used in the Production of a Good
The following examples are based on the figures set out in the table below and on the following assumptions:
(a) Materials A are non-originating materials that are identical materials and are used in the production of Good A;
(b) one unit of Materials A is used to produce one unit of Good A;
(c) all other materials used in the production of Good A are originating materials; and
(d) Good A is produced in a single plant.
| Materials Inventory | Sales | ||
|---|---|---|---|
| (Receipts of Materials A) | (Shipments of Good A) | ||
| Date (m/d/y) | Quantity (units) | Unit CostFootnote for *($) | Quantity (units) |
| 01/01/21 | 200 | 1.05 | |
| 01/03/21 | 1,000 | 1.00 | |
| 01/05/21 | 1,000 | 1.10 | |
| 01/08/21 | 500 | ||
| 01/09/21 | 500 | ||
| 01/10/21 | 1,000 | 1.05 | |
| 01/14/21 | 1,500 | ||
| 01/16/21 | 2,000 | 1.10 | |
| 01/18/21 | 1,500 | ||
Return to footnote *Unit cost is determined in accordance with section 8 of these Regulations.
Example 1: FIFO method
By applying the FIFO method,
- (1)the 200 units of Materials A received on 01/01/21 and valued at $1.05 per unit and 300 units of the 1,000 units of Material A received on 01/03/21 and valued at $1.00 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/08/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $510 [(200 units × $1.05) + (300 units × $1.00)];
- (2)500 units of the remaining 700 units of Materials A received on 01/03/21 and valued at $1.00 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/09/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $500 (500 units × $1.00);
- (3)the remaining 200 units of the 1,000 units of Materials A received on 01/03/21 and valued at $1.00 per unit, the 1,000 units of Materials A received on 01/05/21 and valued at $1.10 per unit, and 300 units of the 1,000 units of Materials A received on 01/10/21 and valued at $1.05 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/14/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,615 [(200 units × $1.00) + (1,000 units × $1.10) + (300 units × $1.05)]; and
- (4)the remaining 700 units of the 1,000 units of Materials A received on 01/10/21 and valued at $1.05 per unit and 800 units of the 2,000 units of Materials A received on 01/16/21 and valued at $1.10 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/18/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,615 [(700 units × $1.05) + (800 units × $1.10)].
Example 2: LIFO method
By applying the LIFO method,
- (1)500 units of the 1,000 units of Materials A received on 01/05/21 and valued at $1.10 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/08/21; therefore, the value of the non-originating materials used in the production of those goods is considered to be $550 (500 units × $1.10);
- (2)the remaining 500 units of the 1,000 units of Materials A received on 01/05/21 and valued at $1.10 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/09/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $550 (500 units × $1.10);
- (3)the 1,000 units of Materials A received on 01/10/21 and valued at $1.05 per unit and 500 units of the 1,000 units of Material A received on 01/03/21 and valued at $1.00 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/14/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,550 [(1,000 units × $1.05) + (500 units × $1.00)]; and
- (4)1,500 units of the 2,000 units of Materials A received on 01/16/21 and valued at $1.10 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/18/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,650 (1,500 units × $1.10).
Example 3: Rolling average method
The following table identifies the average value of non-originating Materials A as determined under the rolling average method. For the purposes of this example, a new average value of non-originating Materials A is calculated after each receipt.
| Materials Inventory | ||||
|---|---|---|---|---|
| Date (m/d/y) | Quantity (units) | Unit Cost* ($) | Total Value ($) | |
| Beginning Inventory | 01/01/21 | 200 | 1.05 | 210 |
| Receipt | 01/03/21 | 1,000 | 1.00 | 1,000 |
| AVERAGE VALUE | 1,200 | 1.008 | 1,210 | |
| Receipt | 01/05/21 | 1,000 | 1.10 | 1,100 |
| AVERAGE VALUE | 2,200 | 1.05 | 2,310 | |
| Shipment | 01/08/21 | 500 | 1.05 | 525 |
| AVERAGE VALUE | 1,700 | 1.05 | 1,785 | |
| Shipment | 01/09/21 | 500 | 1.05 | 525 |
| AVERAGE VALUE | 1,200 | 1.05 | 1,260 | |
| Receipt | 01/16/21 | 2,000 | 1.10 | 2,200 |
| AVERAGE VALUE | 3,200 | 1.08 | 3,460 | |
Return to footnote *Unit cost is determined in accordance with section 8 of these Regulations.
By applying the rolling average method,
- (1)the value of non-originating materials used in the production of the 500 units of Good A shipped on 01/08/21 is considered to be $525 (500 units × $1.05); and
- (2)the value of non-originating materials used in the production of the 500 units of Good A shipped on 01/09/21 is considered to be $525 (500 units × $1.05).
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