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

Marginal note:De minimis rule — non-originating materials

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

  • (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;

  • (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

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

• 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.

• Marginal note:Exceptions

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

  • (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;

  • (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;

  • (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;

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

  • (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;

  • (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;

  • (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;

  • (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;

  • (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;

  • (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;

  • (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

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

• 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

  • (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

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

• 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).

• 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

  • (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

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

• 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

  • (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

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

• Marginal note:Component

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

  • (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

  • (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.

• 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.

• 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.

• 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,

  • (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

  • (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.

• 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).

• 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:

  • (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;

  • (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;

  • (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

  • (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.

• 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.

• 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)):

    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.

    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)):

    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.

    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)):

    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.

    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.

    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)):

    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.

    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.

    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)):

    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.

    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.

    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)):

    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)):

    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 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.

    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.

    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)):

    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 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.

    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.

    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)):

    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)):

    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.

    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)):

    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 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.

    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.

    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.

    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)):

    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.