NAFTA Rules of Origin Regulations (SOR/94-14)

10. (1) Except as otherwise provided in subsections (3) through (8) and paragraph 12(10)(a), for purposes of calculating the regional value content of a heavy-duty automotive good under the net cost method, the value of non-originating materials used by the producer of the good in the production of the good shall be the sum of

• (a) for each listed material that is a non-originating material, is a self-produced material and is used by the producer in the production of the good, at the choice of the producer, either

  • (i) the total cost incurred with respect to all goods produced by the producer that can be reasonably allocated to that listed material in accordance with Schedule VII,

  • (ii) the aggregate of each cost that forms part of the total cost incurred with respect to that listed material that can be reasonably allocated to that listed material in accordance with Schedule VII, or

  • (iii) the sum of

    • (A) the customs value of each non-originating material imported by the producer of the listed material and used in the production of the listed material, and, where not included in that customs value, the costs referred to in paragraphs (2)(c) through (f), and

    • (B) the value of each non-originating material that is not imported by the producer of the listed material and is used in the production of the listed material, determined in accordance with subsection (2) with respect to the transaction in which the producer of the listed material acquired it;

• (b) for each listed material that is a non-originating material, is produced in the territory of a NAFTA country and is acquired and used by the producer in the production of the good, at the choice of the producer, either

  • (i) the value of that non-originating listed material, determined in accordance with subsection (2), with respect to the transaction in which the producer acquired the listed material, or

  • (ii) where the producer of the good has a statement described in clause (A) or (B) with respect to each material that is a non-originating material used in the production of that listed material, the sum of

    • (A) the customs value of each non-originating material imported by the producer of the listed material and used in the production of that listed material, and, where not included in that customs value, the costs referred to in paragraphs (2)(c) through (f), if the producer of the good has a statement signed by the producer of the listed material that states the customs value of that non-originating material and the costs referred to in paragraphs (2)(c) through (f) that the producer of the listed material incurred with respect to the non-originating material, and

    • (B) the value of each non-originating material that is not imported by the producer of the listed material, and is acquired and used in the production of the listed material, determined in accordance with subsection (2) with respect to the transaction in which the producer of the listed material acquired that non-originating material, if the producer of the good has a statement signed by the producer of the listed material that states the value of the acquired material, determined in accordance with subsection (2) with respect to the transaction in which the producer of the listed material acquired the non-originating material;

• (c) for each listed material, automotive component assembly, automotive component or sub-component that is imported from outside the territories of the NAFTA countries, and is used by the producer in the production of the good,

  • (i) where it is imported by the producer, the customs value of that non-originating listed material, automotive component assembly, automotive component or sub-component, and, where not included in that customs value, the costs referred to in paragraphs (2)(c) through (f), and

  • (ii) where it is not imported by the producer, the value of that non-originating listed material, automotive component assembly, automotive component or sub-component, determined in accordance with subsection (2) with respect to the transaction in which the producer acquired it;

• (d) for each automotive component assembly, automotive component or sub-component that is an originating material and is acquired and used by the producer in the production of the good, at the choice of the producer,

  • (i) the sum of

    • (A) the value of each non-originating listed material used in the production of the originating material, determined under paragraphs (a) and (b),

    • (B) the value of each non-originating material incorporated into the originating material, determined under paragraph (c),

    • (C) the value of each non-originating listed material used in the production of a material referred to in paragraph (e) that is used in the production of the originating material, determined under paragraphs (a) and (b), and

    • (D) where the value of a non-originating listed material referred to in clause (C), and used in the production of a non-originating automotive component assembly, automotive component or sub-component that is used in the production of the originating material, is not included under clause (C), the value of that automotive component assembly, automotive component or sub-component, determined under subparagraph (e)(ii),

    if the producer has a statement, signed by the person from whom the originating material was acquired, that states the sum of the values, as determined by the producer of the originating material under paragraphs (a), (b), (c) and (e), of each non-originating material referred to in any of clauses (A) through (D) that is incorporated into that originating material,

  • (ii) an amount equal to the number resulting from applying the following formula:

    VM × (1 - RVC)

    where

    VM 

    is the value of the acquired material, determined in accordance with subsection (2), with respect to the transaction in which the producer of the good acquired that material, and

    RVC 

    is the regional value content of the acquired material, expressed as a decimal,

    if the material is subject to a regional value-content requirement and the producer has a statement, signed by the person from whom the producer acquired that material, that states that the acquired material is an originating material and states the regional value content of the material,

  • (iii) an amount equal to the number resulting from applying the following formula:

    VM × (1 - RVCR)

    where

    VM 

    is the value of the acquired material, determined in accordance with subsection (2), with respect to the transaction in which the producer of the good acquired that material, and

    RVCR 

    is the regional value-content requirement for the acquired material, expressed as a decimal,

    if the material is subject to a regional value-content requirement and the producer has a statement, signed by the person from whom the producer acquired that material, that states that the acquired material is an originating material but does not state the value of non-originating materials with respect to that acquired material, or

  • (iv) the value of that automotive component assembly, automotive component or sub-component determined in accordance with subsection (2) with respect to the transaction in which the producer acquired the material;

• (e) for each automotive component assembly, automotive component or sub-component that is a non-originating material produced in the territory of a NAFTA country and that is acquired by the producer and used by the producer in the production of the good, at the choice of the producer, either

  • (i) the sum of the values of the non-originating materials incorporated into that non-originating material that is acquired by the producer, determined under paragraphs (a), (b), (c), (d) and (f), if the producer has a statement, signed by the person from whom the non-originating material was acquired, that states the sum of the values of the non-originating materials incorporated into that non-originating material, determined by the producer of the non-originating material in accordance with paragraphs (a), (b), (c), (d) and (f), or

  • (ii) the value of that non-originating automotive component assembly, automotive component or sub-component, determined in accordance with subsection (2) with respect to the transaction in which the producer acquired the material; and

• (f) for each non-originating material that is not referred to in paragraph (a), (b), (c) or (e) and that is used by the producer in the production of the good,

  • (i) where it is imported by the producer, the customs value of that non-originating material, and, where not included in that customs value, the costs referred to in paragraphs (2)(c) through (f), and

  • (ii) where it is not imported by the producer, the value of that non-originating material, determined in accordance with subsection (2) with respect to the transaction in which the producer acquired the material.

(2) For purposes of clause (1)(a)(ii)(B), subparagraph (1)(b)(i), clause (1)(b)(ii)(B), subparagraphs (1)(c)(ii), (1)(d)(ii) through (iv), (1)(e)(ii) and (1)(f)(ii), the value of a material

• (a) shall be the transaction value of the material, determined in accordance with subsection 2(1) of Schedule VIII with respect to the transaction referred to in that clause or subparagraph, or

• (b) where, with respect to the transaction referred to in that clause or subparagraph, there is no transaction value for the material under subsection 2(2) of Schedule VIII or the transaction value of the material is unacceptable under subsection 2(3) of that Schedule, shall be determined in accordance with sections 6 through 11 of that Schedule,

and shall include the following costs where they are not included under paragraph (a) or (b):

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

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

• (e) customs brokerage fees, including the cost of in-house customs brokerage and customs clearance services, incurred with respect to the material in the territory of one or more of the NAFTA countries, and

• (f) 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.

(3) For purposes of clauses (1)(a)(ii)(A) and (b)(ii)(A) and subparagraphs (1)(c)(i) and (f)(i), where the customs value of an imported material referred to in those clauses or paragraphs was not determined in a manner consistent with Schedule VIII, the value of the material shall be determined in accordance with Schedule VIII with respect to the importation for which that customs value was determined and, where the costs referred to in paragraphs (2)(c) through (f) are not included in that value, those costs shall be added to the value of the material.

(4) For purposes of calculating the regional value content of a heavy-duty component, where

• (a) a heavy-duty component is produced in the same plant as an automotive component assembly or automotive component that is of the same heading or subheading as that heavy-duty component and is for use as original equipment in a light-duty vehicle, and

• (b) it is not reasonable for the producer to know which of the production will constitute a heavy-duty component for use in a heavy-duty vehicle,

the value of the non-originating materials used in the production of the heavy-duty component in that plant may, at the choice of the producer, be determined in the manner set out in section 9.

(5) For purposes of calculating the regional value content of a heavy-duty vehicle, where a producer of such a vehicle acquires, for use by that producer in the production of the vehicle, a heavy-duty component with respect to which the value of non-originating materials has been determined in accordance with subsection (4), the value of the non-originating materials used by the producer with respect to that heavy-duty component is the value of non-originating materials determined under that subsection.

(6) Where it is determined, during the course of a verification of origin of a heavy-duty automotive good with respect to which the producer of that good has a statement referred to in subparagraph (1)(d)(ii) or (iii) that the acquired material referred to in that statement is not an originating material, the value of the acquired material shall, for purposes of subsection (1), be determined in accordance with subsection (2) with respect to the transaction in which that producer acquired it.

(7) Where any person who has information with respect to a statement referred to in subparagraph (1)(b)(ii), (d)(i) or (e)(i) does not allow a customs administration to verify that information during a verification of origin, the value of any material with respect to which that person did not allow the customs administration to verify the information may be determined by that customs administration in accordance with subsection (2) with respect to the transaction in which that person sells, or otherwise transfers to another person, that material or a material that incorporates that material.

(8) Where a heavy-duty component, sub-component or listed material is incorporated into a material produced in the territory of a NAFTA country and that material is incorporated into a heavy-duty automotive good, the statement referred to in subparagraph (1)(b)(ii), (d)(i) or (e)(i) may state the value of non-originating materials, determined in accordance with subsection 12(3), with respect to the material that incorporates the heavy-duty component, sub-component or listed material.

(9) For purposes of this section,

• (a) for purposes of calculating the regional value content of a heavy-duty automotive good, sub-component or listed material, a producer of such a good may, in accordance with subsection 7(4), designate as an intermediate material any self-produced material, other than a heavy-duty component or sub-component, that is used in the production of that good;

• (b) except as otherwise provided in subsection 12(10), this section does not apply with respect to after-market parts;

• (c) this section does not apply to a sub-component for purposes of calculating its regional value content before it is incorporated into a heavy-duty automotive good;

• (d) for purposes of calculating the regional value content of a heavy-duty automotive good, the producer of that good may choose to treat any material used in the production of that good as a non-originating material, and the value of that material shall be determined in accordance with subsection (2) with respect to the transaction in which the producer acquired it;

• (e) any information set out in a statement referred to in subparagraph (1)(b)(ii), (d)(i) through (iii) or (e)(i) that concerns the value of materials or costs shall be in the same currency as the currency of the country in which the person who provided the statement is located; and

• (f) total cost under subparagraphs (1)(a)(i) and (ii) consists of the costs referred to in subsection 2(6), and is calculated in accordance with that subsection and subsection 2(7).

(10) Each of the following examples is an “Example” as referred to in subsection 2(4).

• Example 1

  A listed material is imported from outside the territories of the NAFTA countries

  A cast head, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country in the production of an engine that will be used as original equipment in the production of a heavy-duty vehicle. No other non-originating materials are used in the production of the engine. The cast head is a listed material; the engine is an automotive component.

  Use of the listed material in an automotive component

  For purposes of calculating the regional value content of the engine, the value of listed materials imported from outside the territories of the NAFTA countries is included in the value of non-originating materials used in the production of the engine. Because the cast head was produced outside the territories of the NAFTA countries, its value, under paragraph 10(1)(c), is included in the value of non-originating materials used in the production of the engine.

  Use of an originating automotive component incorporating the listed material

  The engine is an originating material acquired by the producer of the heavy-duty vehicle. For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates that engine (and incorporates the cast head), the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(d) with respect to that engine. The producer may choose to include in the value of non-originating materials of the heavy-duty vehicle

  • (a) the value, determined under subparagraph 10(1)(d)(i), of the non-originating materials that are incorporated into the engine, which is the value, determined under paragraphs 10(1)(a) through (c) and subparagraph (e)(ii), of the non-originating materials;

  • (b) the value, determined under subparagraph 10(1)(d)(ii), which is an amount equal to the amount determined under subparagraph 10(1)(d)(iv) multiplied by the remainder of one minus the regional value content, expressed as a decimal, of the engine;

  • (c) the value, determined under subparagraph 10(1)(d)(iii), which is an amount equal to the amount determined under subparagraph 10(1)(d)(iv) multiplied by the remainder of one minus the regional value-content requirement, expressed as a decimal, for the engine; or

  • (d) the value, determined under subparagraph 10(1)(d)(iv), of the engine.

  The heavy-duty vehicle producer may only choose the first option if that producer has a statement, referred to in subparagraph 10(1)(d)(i), from the person from whom the engine was acquired. In this situation, the value, determined under paragraph 10(1)(c), of the cast head, is included in the value of non-originating materials of the heavy-duty vehicle, with respect to the engine that is used in the production of the heavy-duty vehicle.

  The heavy-duty vehicle producer may only choose the second option if that producer has a statement, referred to in subparagraph 10(1)(d)(ii), from the person from whom the engine was acquired. In this situation, because of the application of the equation, the value of the cast head will be included in the amount determined under subparagraph 10(1)(d)(ii) and is, consequently, included in the value of non-originating materials used in the production of the heavy-duty vehicle.

  The heavy-duty vehicle producer may only choose the third option if that producer has a statement, referred to in subparagraph 10(1)(d)(iii), from the person from whom the engine was acquired. In this situation, because of the application of the equation, the value of the cast head will be included in the amount determined under subparagraph 10(1)(d)(iii) and is, consequently, included in the value of non-originating materials used in the production of the heavy-duty vehicle.

  Use of a non-originating automotive component incorporating the listed material

  The engine is a non-originating material acquired by the producer of the heavy-duty vehicle. For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates that engine (and incorporates the cast head), the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(e) with respect to that engine. The producer of the heavy-duty vehicle may choose to include in the value of non-originating materials either

  • (a) the value, as determined under subparagraph 10(1)(e)(i), of the non-originating materials that are incorporated into the engine, which is the value of the non-originating materials as determined under paragraphs 10(1)(a) through (d) and (f), or

  • (b) the value of the engine, determined under subparagraph 10(1)(e)(ii).

  The heavy-duty vehicle producer may only choose the first option if that producer has a statement, referred to in subparagraph 10(1)(e)(i), from the person from whom the engine was acquired. In this situation, the value of the cast head, as determined under paragraph 10(1)(c), is included in the value of non-originating materials used in the production of the heavy-duty vehicle, with respect to the engine that is used in the production of the heavy-duty vehicle.

• Example 2

  A material is imported from outside the territories of the NAFTA countries

  A rocker arm assembly, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country in the production of an engine that will be used as original equipment in the production of a heavy-duty vehicle. No other non-originating materials are used in the production of the engine. The rocker arm assembly is neither a listed material nor a sub-component; the engine is an automotive component.

  Use of the material in an automotive component

  For purposes of calculating the regional value content of the engine, the value of non-originating materials that are not listed materials is included in the value of non-originating materials used in the production of the engine. Because the rocker arm assembly was produced outside the territories of the NAFTA countries, it is a non-originating material and its value, under paragraph 10(1)(f), is included in the value of non-originating materials used in the production of the engine.

  Use of an originating automotive component incorporating the material

  The engine is an originating material acquired by the producer of the heavy-duty vehicle. For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates that engine (and incorporates the rocker arm assembly), the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(d) with respect to that engine. The producer may choose to include in the value of non-originating materials used in the production of the heavy-duty vehicle

  • (a) the value, determined under subparagraph 10(1)(d)(i), of the non-originating materials that are incorporated into the engine, which is the value, determined under paragraphs 10(1)(a) through (c) and subparagraph (e)(ii), of the non-originating materials;

  • (b) the value, determined under subparagraph 10(1)(d)(ii), which is an amount equal to the amount determined under subparagraph 10(1)(d)(iv) multiplied by the remainder of one minus the regional value content, expressed as a decimal, of the engine;

  • (c) the value, determined under subparagraph 10(1)(d)(iii), which is an amount equal to the amount determined under paragraph 10(1)(d)(iv) multiplied by the remainder of one minus the regional value-content requirement, expressed as a decimal, for the engine; or

  • (d) the value, determined under subparagraph 10(1)(d)(iv), of the engine.

  The heavy-duty vehicle producer may only choose the first option if that producer has a statement, referred to in subparagraph 10(1)(d)(i), from the person from whom the engine was acquired. In this situation, the value of the rocker arm assembly, as determined under paragraph 10(1)(f), is not included in the value of non-originating materials of the heavy-duty vehicle, with respect to the engine that is used in the production of the heavy-duty vehicle.

  The heavy-duty vehicle producer may only choose the second option if that producer has a statement, referred to in subparagraph 10(1)(d)(ii), from the person from whom the engine was acquired. In this situation, because of the application of the equation, the value of the rocker arm assembly will be included in the amount determined under subparagraph 10(1)(d)(ii) and will, consequently, be included in the value of non-originating materials used in the production of the heavy-duty vehicle.

  The heavy-duty vehicle producer may only choose the third option if that producer has a statement, referred to in subparagraph 10(1)(d)(iii), from the person from whom the engine was acquired. In this situation, because of the application of the equation, the value of the rocker arm assembly will be included in the amount determined under subparagraph 10(1)(d)(iii) and will, consequently, be included in the value of non-originating materials used in the production of the heavy-duty vehicle.

  Use of a non-originating automotive component incorporating the material

  The engine is a non-originating material acquired by the producer of the heavy-duty vehicle. For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates that engine (and incorporates the rocker arm assembly), the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(e) with respect to that engine. The producer of the heavy-duty vehicle may choose to include in the value of non-originating materials either

  • (a) the value, as determined under subparagraph 10(1)(e)(i), of the non-originating materials that are incorporated into the engine, which is the value of the non-originating materials as determined under paragraphs 10(1)(a) through (d) and (f), or

  • (b) the value of the engine, determined under subparagraph 10(1)(e)(ii).

  The heavy-duty vehicle producer may only choose the first option if that producer has a statement, referred to in subparagraph 10(1)(e)(i), from the person from whom the engine was acquired. In this situation, the value of the rocker arm assembly, as determined under paragraph 10(1)(f), is included in the value of non-originating materials used in the production of the heavy-duty vehicle, with respect to the engine that is used in the production of the heavy-duty vehicle.

  Use of the material in a self-produced automotive component

  If the engine is a self-produced material rather than an acquired material, the heavy-duty vehicle producer is using the rocker arm assembly in the production of the heavy-duty vehicle rather than in the production of the engine, because, under subsection 7(4), the engine cannot be designated as an intermediate material. For purposes of calculating the regional value content of the heavy-duty vehicle, the value, under paragraph 10(1)(f), of the rocker arm assembly is included in the value of non-originating materials used in the production of the heavy-duty vehicle.

• Example 3

  An automotive component is imported from outside the territories of the NAFTA countries

  A transmission, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country as original equipment in the production of a heavy-duty vehicle. The transmission is an automotive component.

  Use of the automotive component

  For purposes of calculating the regional value content of the heavy-duty vehicle in which the transmission is used, the value of the transmission is included in the value of the non-originating materials under paragraph 10(1)(c), regardless of whether the producer imported the transmission or acquired it from someone else in the territory of a NAFTA country.

• Example 4

  An automotive component is imported from outside the territories of the NAFTA countries

  A transmission, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and combined with an engine to produce an engine-transmission assembly that will be used as original equipment in the production of a heavy-duty vehicle. The transmission is an automotive component; the engine-transmission assembly is an automotive component assembly.

  Use of the automotive component assembly

  The automotive component assembly is acquired by a producer who uses it in the production of a heavy-duty vehicle. If the automotive component assembly that incorporates the imported transmission is an originating material, the value of non-originating materials used in the production of the automotive component assembly is determined, at the choice of the producer, under any of subparagraphs 10(1)(d)(i), (ii), (iii) and (iv). (See example 1 for more detailed explanations of these provisions.) If the automotive component assembly that incorporates the imported transmission is a non-originating material, the value of non-originating materials used in the production of the automotive component assembly is determined, at the choice of the producer, under subparagraph 10(1)(e)(i) or (ii). (See example 1 for more detailed explanations of these provisions.)

  Regardless of whether the automotive component assembly is an originating material or a non-originating material, the value of the automotive component that was imported from outside the territories of the NAFTA countries is included in the value of non-originating materials used in the production of the heavy-duty vehicle. The transmission is a non-originating material, and, for purposes of calculating the regional value content of an automotive component assembly or heavy-duty vehicle that incorporates that transmission, the value of the transmission is included in the value of non-originating materials used in the production of the automotive component assembly or heavy-duty vehicle that incorporates it.

• Example 5

  A material is imported from outside the territories of the NAFTA countries

  An aluminum ingot, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country in the production of cast block that will be used in an engine that will be used as original equipment in the production of a heavy-duty vehicle. The aluminum ingot is not a listed material; the cast block is a listed material; the engine is an automotive component.

  Use of the material in an intermediate material that is a listed material

  The engine producer designates the cast block as an intermediate material under subsection 7(4). For purposes of determining the origin of that cast block, because the aluminum ingot is classified under a different heading than the cast block, the cast block satisfies the applicable change in tariff classification and is an originating material.

  Use of the listed material incorporating the material

  For purposes of calculating the regional value content of the engine that incorporates that cast block (and thus incorporates the aluminum ingot), the value of non-originating materials is determined under subsection 10(1). Because none of paragraphs 10(1)(a) through (f) require that a listed material that is an originating material be included in the value of non-originating materials used in the production of a good, the value of the cast block is not included in the value of non-originating materials used in the production of the engine or in the value of non-originating materials used in the production of an automotive component assembly or heavy-duty vehicle that incorporates the engine.

  Because paragraph 10(1)(d) does not refer to a listed material that is an originating material, the value of the non-originating aluminum ingot used in the production of the originating cast block is not included in the value of non-originating materials used in the production of any good or material that incorporates the originating cast block.

• Example 6

  A non-originating listed material is used to produce a sub-component that is used to produce another sub-component

  A crankshaft, produced in the territory of NAFTA country A from a forging imported from outside the territories of the NAFTA countries, is a non-originating material. The crankshaft is sold to another producer, located in the same country, who uses it to produce an originating block assembly. That block assembly is sold to another producer, also located in the same country, who uses it to produce a finished block. The finished block is sold to a producer of engines, who is located in NAFTA country B, for use in the production of a heavy-duty vehicle. The crankshaft is a listed material; the block assembly is a sub-component, as is the finished block.

  Calculating the regional value content of the finished block

  A sub-component is not a heavy-duty automotive good. As referred to in paragraph 10(9)(c), for purposes of calculating the regional value content of the sub-component before it is incorporated into a heavy-duty automotive good, such as when the sub-component is exported from the territory of one NAFTA country to the territory of another NAFTA country, the value of non-originating materials of the sub-component includes only the value of non-originating materials used in the production of that sub-component. Because the block assembly is an originating material, its value is not included in the value of non-originating materials of the finished block, nor is the value of the non-originating crankshaft included in the value of non-originating materials used in the production of the finished block because the crankshaft was used in the production of the block assembly and was not used in the production of the finished block.

  Calculating the regional value content of the component that incorporates the finished block

  For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates a sub-component, the value of non-originating materials used in the production of the sub-component is determined under paragraph 10(1)(d) or (e) with respect to that sub-component. In this situation, the value, under paragraph 10(1)(b), of the non-originating crankshaft is included in the value of non-originating materials used in the production of the engine. (See examples 1 and 2 for more detailed explanations of paragraphs 10(1)(d) and (e).)

• Example 7

  A non-listed material is imported from outside the territories of the NAFTA countries and is used in the production of another non-listed material

  A bumper part, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and is used in the production of a bumper. The bumper is used in the territory of a NAFTA country as original equipment in the production of a heavy-duty vehicle. Neither a bumper part nor a bumper is a listed material, sub-component, automotive component or automotive component assembly.

  The non-listed material is an originating material

  The bumper is an originating material. For purposes of calculating the regional value content of the heavy-duty vehicle, neither the value of the imported bumper part nor the value of the bumper is included in the value of the non-originating materials.

  The non-listed material is a non-originating material

  The bumper is a non-originating material. For purposes of calculating the regional value content of the heavy-duty vehicle, the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(f) with respect to the bumper. In this situation, the value of the bumper is included in the value of non-originating materials of the heavy-duty vehicle. Because a bumper is not a listed material, the producer of the heavy-duty vehicle does not have the option, under subparagraph 10(1)(b)(ii), to include only the value of the imported bumper part in the value of non-originating materials used in the production of the heavy-duty vehicle.

• Example 8

  Transshipment of a listed material

  A producer, located in the territory of a NAFTA country, produces, in that country, a cast head that is an originating good. The producer exports the cast head to outside the territories of the NAFTA territories, where valves, springs, valve lifters, a camshaft and gears are added to it to create a cast head assembly. An engine producer, located in the territory of a NAFTA country, imports the cast head assembly into that country and uses it in the production of an engine that will be used as original equipment in the production of a heavy-duty vehicle. A cast head is a listed material; a cast head assembly is a sub-component.

  For purposes of calculating the regional value content of the engine, the value of the imported cast head assembly is included in the value of non-originating materials under paragraph 10(1)(c). The value of the cast head cannot be deducted from the value determined under paragraph 10(1)(c). Although the cast head was once an originating good, under section 16 when further production was performed with respect to the cast head outside the territories of the NAFTA countries, it was no longer an originating good.

• Example 9

  A material is imported from outside the territories of the NAFTA countries and a heavy-duty vehicle producer self-produces a non-originating listed material

  A material, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country in the production of a water pump that will be used as original equipment by the same producer in the production of a heavy-duty vehicle. Although the producer, under subsection 7(4), designates the water pump as an intermediate material, it is a non-originating material because it fails to satisfy the regional value-content requirement. A water pump is a listed material.

  For purposes of calculating the regional value content of the heavy-duty vehicle, the value of non-originating materials includes, at the choice of the producer, either the total cost, determined under subparagraph 10(1)(a)(i), of the water pump or the value, determined under clause 10(1)(a)(iii)(A), of the material imported from outside the territories of the NAFTA countries.

• Example 10

  A material is acquired and used to produce a non-originating listed material

  A material, produced outside the territories of the NAFTA countries, is acquired in the territory of a NAFTA country and is used in that country in the production of a water pump that will be used as original equipment in the production of a heavy-duty vehicle. The producer of the water pump and the producer of the heavy-duty vehicle are separate, unrelated producers, located in the same country. A water pump is a listed material. The producer of the water pump elected to calculate the regional value content of the water pump in accordance with subsection 12(1) over a period set out in paragraph 12(5)(a) and using a category set out in paragraph 12(4)(b). The water pump is a non-originating material because it fails to satisfy the regional value-content requirement.

  For purposes of calculating the regional value content of the heavy-duty vehicle, the value of non-originating materials includes, at the choice of the producer, either the value, determined under subparagraph 10(1)(b)(i), of the water pump or, if the producer has a statement referred to in clause 10(1)(b)(ii)(B), the value, determined under that clause, of the material imported from outside the territories of the NAFTA countries.

  The producer has a statement referred to in clause 10(1)(b)(ii)(B) and chooses to use the value of non-originating material determined under that clause. The statement states, as is permitted under subsection 10(8), the value of non-originating material used in the production of the water pump in accordance with subsection 12(3) over a period set out in paragraph 12(5)(a) and using a category set out in paragraph 12(4)(e).