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

Regulations are current to 2021-11-17 and last amended on 2020-07-01. Previous Versions

CUSMA Rules of Origin Regulations

SOR/2020-155

CUSTOMS TARIFF

Registration 2020-06-30

CUSMA Rules of Origin Regulations

P.C. 2020-511 2020-06-29

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsections 16(2)Footnote a and (4)Footnote b of the Customs TariffFootnote c, makes the annexed CUSMA Rules of Origin Regulations.

PART 1Interpretation

Marginal note:Definitions

  •  (1) The following definitions apply in these Regulations.

    accessories, spare parts, tools, or instructional or other information materials

    accessories, spare parts, tools, or instructional or other information materials means goods that are delivered with a good, whether or not they are physically affixed to that good, and that are used for the transport, protection, maintenance or cleaning of the good, for instruction in assembly, repair or use of that good, or as replacements for consumable or interchangeable parts of that good. (accessoires, pièces de rechange, outils, modes d’emploi ou autres documents d’information)

    adjusted to exclude any costs incurred in the international shipment of the good

    adjusted to exclude any costs incurred in the international shipment of the good means, with respect to the transaction value of a good, adjusted by

    • (a) deducting the following costs if those costs are included in the transaction value of the good:

      • (i) the costs of transporting the good after it is shipped from the point of direct shipment,

      • (ii) the costs of unloading, loading, handling and insurance that are associated with that transportation, and

      • (iii) the cost of packing materials and containers; and

    • (b) if the following costs are not included in the transaction value of the good, adding

      • (i) the costs of transporting the good from the place of production to the point of direct shipment,

      • (ii) the costs of loading, unloading, handling and insurance that are associated with that transportation, and

      • (iii) the costs of loading the good for shipment at the point of direct shipment. (ajustée pour exclure tous autres frais engagés pour l’expédition internationale)

    Agreement

    Agreement means the Canada–United States–Mexico Agreement. (Accord)

    applicable change in tariff classification

    applicable change in tariff classification means, with respect to a non-originating material used in the production of a good, a change in tariff classification specified in a rule set out in Schedule 1 for the tariff provision under which the good is classified. (changement de classification tarifaire applicable)

    aquaculture

    aquaculture means the farming of aquatic organisms – including fish, molluscs, crustaceans, other aquatic invertebrates and aquatic plants – from seed stock such as eggs, fry, fingerlings or larvae, by intervention in the rearing or growth processes to enhance production, such as by regular stocking, feeding or protection from predators. (aquaculture)

    costs incurred in packing

    costs incurred in packing means, with respect to a good or material, the value of the packing materials and containers in which the good or material is packed for shipment and the labour costs incurred in packing it for shipment, but does not include the costs of preparing and packaging it for retail sale. (frais engagés pour emballer)

    CUSMA country

    CUSMA country means a Party to the Agreement. (pays ACEUM)

    Customs Valuation Agreement

    Customs Valuation Agreement means the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994, contained in Annex 1A to the Marrakech Agreement Establishing the World Trade Organization, done in Marrackech on 15 April 1994. (Accord sur l’évaluation en douane)

    customs value

    customs value means

    • (a) in the case of Canada, value for duty as defined in the Customs Act, except that for the purpose of determining that value the reference in section 55 of that Act to “in accordance with regulations made under the Currency Act” is to be read as a reference to “in accordance with subsection 2(1) of the CUSMA Rules of Origin Regulations”;

    • (b) in the case of Mexico, the valor en aduana as determined in accordance with the Ley Aduanera, converted, if that value is not expressed in Mexican currency, to Mexican currency at the rate of exchange determined in accordance with subsection 2(1); and

    • (c) in the case of the United States, the value of imported merchandise as determined by U.S. Customs and Border Protection in accordance with section 402 of the Tariff Act of 1930 of the United States, as amended, converted, if that value is not expressed in United States currency, to United States currency at the rate of exchange determined in accordance with subsection 2(1). (valeur en douane)

    days

    days means calendar days, and includes Saturdays, Sundays and holidays. (jours)

    direct labour costs

    direct labour costs means costs, including fringe benefits, that are associated with employees who are directly involved in the production of a good. (coûts de la main-d’oeuvre directe)

    direct material costs

    direct material costs means the value of materials, other than indirect materials and packing materials and containers, that are used in the production of a good. (coûts des matières directes)

    direct overhead

    direct overhead means costs, other than direct material costs and direct labour costs, that are directly associated with the production of a good. (frais généraux directs)

    enterprise

    enterprise means an entity constituted or organized under applicable law, whether or not for profit, and whether privately owned or governmentally owned or controlled, including a corporation, trust, partnership, sole proprietorship, joint venture, association or similar organization. (entreprise)

    excluded costs

    excluded costs means – with respect to net cost or total cost – sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs and non-allowable interest costs. (coûts exclus)

    fungible goods

    fungible goods means goods that are interchangeable with another good for commercial purposes and the properties of which are essentially identical. (produits fongibles)

    fungible materials

    fungible materials means materials that are interchangeable with another material for commercial purposes and the properties of which are essentially identical. (matières fongibles)

    Harmonized System

    Harmonized System means the Harmonized Commodity Description and Coding System, including its General Rules of Interpretation, Section Notes, Chapter Notes and Subheading Notes, as set out in

    • (a) in the case of Canada, the Customs Tariff;

    • (b) in the case of Mexico, the Tarifa de la Ley de los Impuestos Generales de Importacion y de Exportacion; and

    • (c) in the case of the United States, the Harmonized Tariff Schedule of the United States. (Système harmonisé)

    identical goods

    identical goods means, with respect to a good, including the valuation of a good, goods that

    • (a) are the same in all respects as that good, including physical characteristics, quality and reputation but excluding minor differences in appearance;

    • (b) were produced in the same country as that good; and

    • (c) were produced

      • (i) by the producer of that good, or

      • (ii) by another producer, if no goods that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that good. (produits identiques)

    identical materials

    identical materials means, with respect to a material, including the valuation of a material, materials that

    • (a) are the same as that material in all respects, including physical characteristics, quality and reputation but excluding minor differences in appearance;

    • (b) were produced in the same country as that material; and

    • (c) were produced

      • (i) by the producer of that material, or

      • (ii) by another producer, if no materials that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that material. (matières identiques)

    incorporated

    incorporated describes, with respect to the production of a good, a material that is physically incorporated into that good, including a material that is physically incorporated into another material before that material or any subsequently produced material is used in the production of the good. (incorporée)

    indirect material

    indirect material means a material used or consumed in the production, testing or inspection of a good but not physically incorporated into the good, or a material used or consumed in the maintenance of buildings or the operation of equipment associated with the production of a good, including

    • (a) fuel and energy;

    • (b) tools, dies and moulds;

    • (c) spare parts and materials used or consumed in the maintenance of equipment and buildings;

    • (d) lubricants, greases, compounding materials and other materials used or consumed in production or used to operate equipment and buildings;

    • (e) gloves, glasses, footwear, clothing, safety equipment and supplies;

    • (f) equipment, devices and supplies used or consumed for testing or inspecting the goods;

    • (g) catalysts and solvents; and

    • (h) any other material that is not incorporated into the good but for which the use in the production of the good can reasonably be demonstrated to be part of that production. (matière indirecte)

    interest costs

    interest costs means all costs paid or payable by a person to whom credit is or is to be advanced, for the advancement of credit or the obligation to advance credit. (frais d’intérêt)

    intermediate material

    intermediate material means a material that is self-produced and used in the production of a good and designated as an intermediate material under subsection 8(6). (matière intermédiaire)

    location of the producer

    location of the producer means

    • (a) the place where the producer uses a material in the production of the good; or

    • (b) the warehouse or other receiving station where the producer receives materials for use in the production of the good, if it is located within a radius of 75 km (46.60 miles) from the production site. (emplacement du producteur)

    material

    material means a good that is used in the production of another good, and includes a part or ingredient. (matière)

    month

    month means a calendar month. (mois)

    national

    national means a natural person who is a citizen or permanent resident of a CUSMA country, and includes

    • (a) with respect to Mexico, a national or citizen according to Articles 30 and 34, respectively, of the Mexican Constitution; and

    • (b) with respect to the United States, a “national of the United States” as defined in the Immigration and Nationality Act of the United States on the date of entry into force of the Agreement. (ressortissant)

    net cost

    net cost means total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the total cost. (coût net)

    net cost method

    net cost method means the method of calculating the regional value content of a good that is set out in subsection 7(3). (méthode du coût net)

    net cost of a good

    net cost of a good means the net cost that can be reasonably allocated to a good using the method set out in subsection 7(3). (coût net d’un produit)

    non-allowable interest costs

    non-allowable interest costs means interest costs – incurred by a producer on the producer’s debt obligations that are more than 700 basis points above the interest rate issued by the federal government for comparable maturities of the country in which the producer is located. (frais d’intérêt non admissibles)

    non-originating good

    non-originating good means a good that does not qualify as originating under these Regulations. (produit non originaire)

    non-originating material

    non-originating material means a material that does not qualify as originating under these Regulations. (matière non originaire)

    originating good

    originating good means a good that qualifies as originating under these Regulations. (produit originaire)

    originating material

    originating material means a material that qualifies as originating under these Regulations. (matière originaire)

    packaging materials and containers

    packaging materials and containers means materials and containers in which a good is packaged for retail sale. (matières de conditionnement et contenants)

    packing materials and containers

    packing materials and containers means materials and containers that are used to protect a good during transportation, but does not include packaging materials and containers. (matières d’emballage et contenants)

    payments

    payments means – with respect to royalties and sales promotion, marketing and after-sales service costs – the costs expensed on the books of a producer, whether or not an actual payment is made. (paiements)

    person

    person means a natural person or an enterprise. (personne)

    person of a CUSMA country

    person of a CUSMA country means a national or an enterprise constituted or organized under the laws of a CUSMA country. (personne d’un pays ACEUM)

    point of direct shipment

    point of direct shipment means the location from which a producer of a good normally ships that good to the buyer of the good. (point d’expédition directe)

    producer

    producer means a person who engages in the production of a good. (producteur)

    production

    production means growing, cultivating, raising, mining, harvesting, fishing, trapping, hunting, capturing, breeding, extracting, manufacturing, processing or assembling a good, or aquaculture. (production)

    reasonably allocate

    reasonably allocate means to apportion in a manner appropriate to the circumstances. (attribuer de façon raisonnable)

    recovered material

    recovered material means a material in the form of one or more individual parts that results from 

    • (a) the disassembly of a used good into individual parts; and

    • (b) the cleaning, inspecting, testing or other processing of those parts as necessary for improvement to sound working condition. (matière récupérée)

    related person

    related person means a person related to another person on the basis that

    • (a) they are officers or directors of one another’s businesses;

    • (b) they are legally recognized partners in business;

    • (c) they are employer and employee;

    • (d) any person directly or indirectly owns, controls or holds 25% or more of the outstanding voting stock or shares of each of them;

    • (e) one of them directly or indirectly controls the other;

    • (f) both of them are directly or indirectly controlled by a third person; or

    • (g) they are members of the same family, meaning they are connected as determined under paragraph 45(3)(a) of the Customs Act. (personne liée)

    remanufactured good

    remanufactured good means a good that is classified in Chapters 84 through 90 or under heading 94.02, except for any good classified under heading 84.18, 85.09, 85.10, 85.16 or 87.03 or subheading 8414.51, 8450.11, 8450.12, 8508.11 or 8517.11 and that is entirely or partially composed of recovered materials and  

    • (a) has a similar life expectancy and performs the same as or similar to such a good when new; and

    • (b) has a factory warranty similar to that applicable to such a good when new. (produit remanufacturé)

    reusable scrap or by-product

    reusable scrap or by-product means waste or spoilage that is generated by the producer of a good and that is used in the production of a good or sold by that producer. (déchets récupérables ou sous-produits)

    right to use

    right to use, for the purposes of the definition royalties, includes the right to sell or distribute a good. (droit d’utiliser)

    royalties

    royalties means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use of, or right to use, a copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, or secret formula or process, excluding those payments under technical assistance or similar agreements that can be related to specific services such as

    • (a) personnel training, without regard to where the training is performed; or

    • (b) if performed in the territory of one or more of the CUSMA countries, engineering, tooling, die-setting, software design and similar computer services, or other services. (redevances)

    sales promotion, marketing and after-sales service costs

    sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and after-sales service:

    • (a) sales and marketing promotion, media advertising, advertising and market research, promotional and demonstration materials, exhibits, sales conferences, trade shows and conventions, banners, marketing displays, free samples, sales, marketing and after-sales service literature (product brochures, catalogues, technical literature, price lists, service manuals, or sales aid information), establishment and protection of logos and trademarks, sponsorships, wholesale and retail restocking charges, or entertainment;

    • (b) sales and marketing incentives, consumer, retailer or wholesaler rebates, or merchandise incentives;

    • (c) salaries and wages, sales commissions, bonuses, benefits (for example, medical, insurance, pension), travelling and living expenses, or membership and professional fees, for sales promotion, marketing and after-sales service personnel;

    • (d) recruiting and training of sales promotion, marketing and after-sales service personnel, and after-sales training of customers’ employees, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

    • (e) product liability insurance;

    • (f) office supplies for sales promotion, marketing and after-sales service of goods, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

    • (g) telephone, mail and other communications, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

    • (h) rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centres;

    • (i) property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centres, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer; and

    • (j) payments by the producer to other persons for warranty repairs. (frais de promotion des ventes, de commercialisation et de service après-vente)

    self-produced material

    self-produced material means a material that is produced by the producer of a good and used in the production of that good. (matière autoproduite)

    shipping and packing costs

    shipping and packing costs means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding the costs of preparing and packaging the good for retail sale. (frais d’expédition et d’emballage)

    similar goods

    similar goods means, with respect to a good, goods that

    • (a) although not alike in all respects to that good, have similar characteristics and component materials that enable the goods to perform the same functions and to be commercially interchangeable with that good;

    • (b) were produced in the same country as that good; and

    • (c) were produced

      • (i) by the producer of that good, or

      • (ii) by another producer, if no goods that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that good. (produits similaires)

    similar materials

    similar materials means, with respect to a material, materials that

    • (a) although not alike in all respects to that material, have similar characteristics and component materials that enable the materials to perform the same functions and to be commercially interchangeable with that material;

    • (b) were produced in the same country as that material; and

    • (c) were produced

      • (i) by the producer of that material, or

      • (ii) by another producer, if no materials that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that material. (matières similaires)

    subject to a regional value content requirement

    subject to a regional value content requirement means, with respect to a good, that the provisions of these Regulations that are applied to determine whether the good is an originating good include a regional value content requirement. (assujetti à une prescription de teneur en valeur régionale)

    tariff provision

    tariff provision means a heading, subheading or tariff item. (poste tarifaire)

    territory

    territory means,

    • (a) for Canada, the following zones or waters as determined by its domestic law and consistent with international law:

      • (i) the land territory, air space, internal waters and territorial sea of Canada,

      • (ii) the exclusive economic zone of Canada, and

      • (iii) the continental shelf of Canada;

    • (b) for Mexico,

      • (i) the land territory, including the states of the Federation and Mexico City,

      • (ii) the air space, and

      • (iii) the internal waters, territorial sea and any areas beyond the territorial seas of Mexico within which Mexico may exercise sovereign rights and jurisdiction, as determined by its domestic law, consistent with the United Nations Convention on the Law of the Sea, done at Montego Bay on December 10, 1982; and

    • (c) for the United States,

      • (i) the customs territory of the United States, which includes the 50 states, the District of Columbia and Puerto Rico,

      • (ii) the foreign trade zones located in the United States and Puerto Rico, and

      • (iii) the territorial sea and air space of the United States and any area beyond the territorial sea within which, in accordance with customary international law as reflected in the United Nations Convention on the Law of the Sea, the United States may exercise sovereign rights or jurisdiction. (territoire)

    total cost

    total cost means all product costs, period costs and other costs incurred in the territory of one or more of the CUSMA countries where

    • (a) product costs are costs that are associated with the production of a good and include the value of materials, direct labor costs and direct overheads;

    • (b) period costs are costs, other than product costs, that are expensed in the period in which they are incurred, such as selling expenses and general and administrative expenses; and

    • (c) other costs are all costs recorded on the books of the producer that are not product costs or period costs, such as interest.

    Total cost does not include profits that are earned by the producer, regardless of whether they are retained by the producer or paid out to other persons as dividends, or taxes paid on those profits, including capital gains taxes. (coût total)

    transaction value

    transaction value means the customs value as determined in accordance with the Customs Valuation Agreement, that is, the price actually paid or payable for a good or material with respect to a transaction of the producer of the good, adjusted in accordance with the principles of Articles 8(1), 8(3) and 8(4) of the Customs Valuation Agreement, regardless of whether the good or material is sold for export. (valeur transactionnelle)

    transaction value method

    transaction value method means the method of calculating the regional value content of a good that is set out in subsection 7(2). (méthode de la valeur transactionnelle)

    used

    used means used or consumed in the production of a good. (utilisé)

    value

    value means the value of a good or material for the purpose of calculating customs duties or for the purpose of applying these Regulations. (valeur)

    verification of origin

    verification of origin means a verification of origin of goods under

    • (a) in the case of Canada, paragraph 42.1(1)(a) of the Customs Act;

    • (b) in the case of Mexico, Article 5.9 of the Agreement; and

    • (c) in the case of the United States, section 509 of the Tariff Act of 1930 of the United States, as amended. (vérification de l’origine)

  • Marginal note:Interpretation — similar goods and similar materials

    (2) For the purposes of the definitions similar goods and similar materials, the quality of the goods or materials, their reputation and the existence of a trademark are among the factors to be considered for the purpose of determining whether goods or materials are similar.

  • Marginal note:Other definitions

    (3) For the purposes of these Regulations,

    • (a) Chapter, unless otherwise indicated, refers to a Chapter of the Harmonized System;

    • (b) heading refers to any four-digit number or the first four digits of any tariff provision set out in the “Tariff Item” column in the Harmonized System;

    • (c) subheading refers to any six-digit number or the first six digits of any tariff provision set out in the “Tariff Item” column in the Harmonized System;

    • (d) tariff item refers to the first eight digits in the tariff classification number under the Harmonized System;

    • (e) any reference to a tariff item in Chapter 4 of the Agreement or in these Regulations that includes letters is to be read as the appropriate eight-digit number in the Harmonized System as implemented in each CUSMA country; and

    • (f) books refers to,

      • (i) with respect to the books of a person that is located in a CUSMA country,

        • (A) books and other documents that support the recording of revenues, expenses, costs, assets and liabilities and that are maintained in accordance with the Generally Accepted Accounting Principles set out in the publications listed in Schedule 10 with respect to the territory of the CUSMA country in which the person is located, and

        • (B) financial statements, including note disclosures, that are prepared in accordance with the Generally Accepted Accounting Principles set out in the publications listed in Schedule 10 with respect to the territory of the CUSMA country in which the person is located, and

      • (ii) with respect to the books of a person that is located outside the territories of the CUSMA countries,

        • (A) books and other documents that support the recording of revenues, expenses, costs, assets and liabilities and that are maintained in accordance with the Generally Accepted Accounting Principles applied in that location or, if there are no such principles, in accordance with the International Financial Reporting Standards, published by the IFRS Foundation, as amended from time to time, and

        • (B) financial statements, including note disclosures, that are prepared in accordance with the Generally Accepted Accounting Principles applied in that location or, if there are no such principles, in accordance with the International Financial Reporting Standards, published by the IFRS Foundation, as amended from time to time.

  • Marginal note:Examples

    (4) If an example, referred to as an “Example”, is set out in these Regulations, the example is for the purpose of illustrating the application of a provision and, if there is any inconsistency between the example and the provision, the provision prevails to the extent of the inconsistency.

  • Marginal note:References to domestic laws

    (5) Except as otherwise provided, references in these Regulations to domestic laws of the CUSMA countries apply to those laws as they are currently in effect and as they may be amended or superseded.

  • Marginal note:Calculation of total cost

    (6) For the purposes of subsections 5(11), 7(11) and 8(8),

    • (a) total cost consists of all product costs, period costs and other costs that are recorded, except as otherwise provided in subparagraphs (b)(i) and (ii), on the books of the producer without regard to the location of the persons to whom payments with respect to those costs are made;

    • (b) in calculating total cost,

      • (i) the value of materials, other than intermediate materials, indirect materials and packing materials and containers, is determined in accordance with subsections 8(1) and (2),

      • (ii) the value of intermediate materials used in the production of the good or material with respect to which total cost is being calculated in accordance with subsection 8(8),

      • (iii) the value of indirect materials and the value of packing materials and containers is the costs that are recorded on the books of the producer for those materials, and

      • (iv) product costs, period costs and other costs, other than costs referred to in subparagraphs (i) and (ii), are the costs that are recorded on the books of the producer for those costs;

    • (c) total cost does not include profits that are earned by the producer, regardless of whether they are retained by the producer or paid out to other persons as dividends, or taxes paid on those profits, including capital gains taxes;

    • (d) gains related to currency conversion that are related to the production of the good must be deducted from total cost and losses related to currency conversion that are related to the production of the good are to be included in total cost;

    • (e) the value of materials with respect to which production is accumulated under section 9 must be determined in accordance with that section; and

    • (f) total cost includes the impact of inflation as recorded on the books of the producer, if recorded in accordance with the Generally Accepted Accounting Principles of the producer’s country.

  • Marginal note:Period for calculation of total cost

    (7) For the purpose of calculating total cost under subsections 5(11), 7(11) and 8(8),

    • (a) if the regional value content of the good is calculated on the basis of the net cost method and the producer has elected under subsection 7(15) or 16(1) to calculate the regional value content over a period, the total cost is to be calculated over that period; and

    • (b) in any other case, the producer may elect that the total cost be calculated over

      • (i) a one-month period,

      • (ii) any consecutive three- or six-month period that falls within and is evenly divisible into the number of months of the producer’s fiscal year remaining at the beginning of that period, or

      • (iii) the producer’s fiscal year.

  • Marginal note:Election not modifiable

    (8) An election made under subsection (7) may not be rescinded or modified with respect to the good or material, or the period, with respect to which the election is made.

  • Marginal note:Election considered made — period

    (9) If a producer chooses a one-, three- or six-month period under subsection (7) with respect to a good or material, the producer is considered to have chosen under that subsection a period or periods of the same duration for the remainder of the producer’s fiscal year with respect to that good or material.

  • Marginal note:Election considered made — cost

    (10) With respect to a good exported to a CUSMA country, an election to average is considered to have been made

    • (a) in the case of an election referred to in subsection 16(1), if the election is received by the customs administration of that CUSMA country; and

    • (b) in the case of an election referred to in subsection (7), 7(15) or 16(10), if the customs administration of that CUSMA country is informed in writing during the course of a verification of origin of the good that the election has been made.

 
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