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

Regulations are current to 2022-01-12 and last amended on 2020-07-01. Previous Versions

SCHEDULE 5(Subsections 5(11), 7(11) and (22) and 8(8) and Schedules 3 and 6)Reasonable Allocation of Costs

Interpretation

  • 1 The following definitions apply in this Schedule.

    costs

    costs means any costs that are included in total cost and that can or must be allocated in a reasonable manner under subsections 5(11), 7(11) and 8(8) of these Regulations, subsection 4(8) of Schedule 3 and subsections 4(8) and 9(3) of Schedule 6. (coûts)

    discontinued operation

    discontinued operation, in the case of a producer located in a CUSMA country, has the meaning set out in that CUSMA country’s Generally Accepted Accounting Principles. (activité abandonnée)

    indirect overhead

    indirect overhead means period costs and other costs. (frais généraux indirects)

    internal management purpose

    internal management purpose means any purpose relating to tax reporting, financial reporting, financial planning, decision making, pricing, cost recovery, cost control management or performance measurement. (fins de gestion interne)

    overhead

    overhead means costs, other than direct material costs and direct labour costs. (frais généraux)

    • 2 (1) In this Schedule, a reference to “producer”, for the purposes of subsection 4(8) of Schedule 3, is to be read as a reference to “buyer”.

    • (2) In this Schedule, a reference to “good”

      • (a) for the purposes of subsection 7(15) of these Regulations, is to be read as a reference to “identical goods or similar goods, or any combination thereof”;

      • (b) for the purposes of subsection 8(8) of these Regulations, is to be read as a reference to “intermediate material”;

      • (c) for the purposes of section 16 of these Regulations, is to be read as a reference to “category of vehicles that is chosen pursuant to subsection 16(1) of these Regulations”;

      • (d) for the purposes of subsection 4(8) of Schedule 3, is to be read as a reference to “packaging materials and containers or the elements”; and

      • (e) for the purposes of subsection 4(8) of Schedule 6, is to be read as a reference to “elements”.

Methods to Reasonably Allocate Costs

    • 3 (1) If a producer of a good is using, for an internal management purpose, a cost allocation method to allocate to the good direct material costs, or part thereof, and that method reasonably reflects the direct material used in the production of the good based on the criterion of benefit, cause or ability to bear, that method must be used to reasonably allocate the costs to the good.

    • (2) If a producer of a good is using, for an internal management purpose, a cost allocation method to allocate to the good direct labour costs, or part thereof, and that method reasonably reflects the direct labour used in the production of the good based on the criterion of benefit, cause or ability to bear, that method must be used to reasonably allocate the costs to the good.

    • (3) If a producer of a good is using, for an internal management purpose, a cost allocation method to allocate to the good overhead, or part thereof, and that method is based on the criterion of benefit, cause or ability to bear, that method must be used to reasonably allocate the costs to the good.

  • 4 If costs are not reasonably allocated to a good under section 3, those costs are reasonably allocated to the good if they are allocated

    • (a) with respect to direct material costs, on the basis of any method that reasonably reflects the direct material used in the production of the good based on the criterion of benefit, cause or ability to bear;

    • (b) with respect to direct labour costs, on the basis of any method that reasonably reflects the direct labour used in the production of the good based on the criterion of benefit, cause or ability to bear; and

    • (c) with respect to overhead, on the basis of any of the following methods:

      • (i) the method set out in Appendix A, B or C,

      • (ii) a method based on a combination of the methods set out in Appendices A and B or Appendices A and C, and

      • (iii) a cost allocation method based on the criterion of benefit, cause or ability to bear.

  • 5 Notwithstanding sections 3 and 8, if a producer allocates, for an internal management purpose, costs to a good that is not produced in the period in which the costs are expensed on the books of the producer (such as costs with respect to research and development and obsolete materials), those costs are considered reasonably allocated if

    • (a) for the purposes of subsection 7(11) of these Regulations, they are allocated to a good that is produced in the period in which the costs are expensed; and

    • (b) the good produced in that period is within a group or range of goods, including identical goods or similar goods, that is produced by the same industry or industry sector as the goods to which the costs are expensed.

  • 6 Any cost allocation method referred to in section 3, 4 or 5 that is used by a producer for the purposes of these Regulations must be used throughout the producer’s fiscal year.

Costs Not Reasonably Allocated

  • 7 The allocation to a good of any of the following is considered not to be reasonably allocated to the good:

    • (a) costs of a service provided by a producer of a good to another person if the service is not related to the good;

    • (b) gains or losses resulting from the disposal of a discontinued operation, except gains or losses related to the production of the good;

    • (c) cumulative effects of accounting changes reported in accordance with a specific requirement of the applicable Generally Accepted Accounting Principles; and

    • (d) gains or losses resulting from the sale of a capital asset of the producer.

  • 8 Any costs allocated under section 3 on the basis of a cost allocation method that is used for an internal management purpose solely to qualify a good as an originating good are considered not to be reasonably allocated.

 
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