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

Regulations are current to 2022-05-02 and last amended on 2020-07-01. Previous Versions

SCHEDULE 6(Paragraph 7(7)(b), subsections 7(22), 8(4) and (28) and Schedule 5)Value of Materials

  • 1 Unless otherwise stated, the following definitions apply in this Schedule.

    buying commissions

    buying commissions means fees paid by a producer to that producer’s agent or mandatary for the agent or mandatary’s services in representing the producer in the purchase of a material. (commission d’achat)

    materials of the same class or kind

    materials of the same class or kind means, with respect to materials being valued, materials that are within a group or range of materials that

    • (a) is produced by a particular industry or industry sector; and

    • (b) includes identical materials or similar materials. (matières de même nature ou de même espèce)

    producer

    producer refers to the producer who uses the material in the production of a good that is subject to a regional value content requirement. (producteur)

    seller

    seller refers to a person who sells the material being valued to the producer. (vendeur)

    • 2 (1) Except as otherwise provided in subsection (2), the transaction value of a material under paragraph 8(1)(b) of these Regulations is the price actually paid or payable for the material determined in accordance with section 3 and adjusted in accordance with section 4.

    • (2) There is no transaction value for a material if the material is not the subject of a sale.

    • (3) The transaction value of a material is unacceptable if

      • (a) there are restrictions on the disposal or use of the material by the producer, other than restrictions that

        • (i) are imposed or required by law or by the public authorities in the territory of the CUSMA country in which the producer of the good or the seller of the material is located,

        • (ii) limit the geographical area in which the material may be used, or

        • (iii) do not substantially affect the value of the material;

      • (b) the sale or price actually paid or payable is subject to a condition or consideration for which a value cannot be determined with respect to the material;

      • (c) part of the proceeds of any subsequent disposal or use of the material by the producer will accrue directly or indirectly to the seller and an appropriate addition to the price actually paid or payable cannot be made in accordance with paragraph 4(1)(d); or

      • (d) the producer and the seller are related persons and the relationship between them influenced the price actually paid or payable for the material.

    • (4) The conditions or considerations referred to in paragraph (3)(b) include the following circumstances:

      • (a) the seller establishes the price actually paid or payable for the material on condition that the producer will also buy other materials or goods in specified quantities;

      • (b) the price actually paid or payable for the material is dependent on the price or prices at which the producer sells other materials or goods to the seller of the material; and

      • (c) the price actually paid or payable is established on the basis of a form of payment extraneous to the material, such as if the material is a semi-finished material that is provided by the seller to the producer on condition that the seller will receive a specified quantity of the finished material from the producer.

    • (5) For the purposes of paragraph (3)(b), conditions or considerations relating to the use of the material must not render the transaction value unacceptable, such as if the producer undertakes on the producer’s own account, even though by agreement with the seller, activities relating to the warranty of the material used in the production of a good.

    • (6) If objective and quantifiable data do not exist with regard to the additions required to be made to the price actually paid or payable under subsection 4(1), the transaction value cannot be determined under the provisions of subsection 2(1). For an illustration of this, a royalty is paid on the basis of the price actually paid or payable in a sale of a litre of a particular good that is produced by using a material that was purchased by the kilogram and made up into a solution. If the royalty is based partially on the purchased material and partially on other factors that have nothing to do with that material, such as when the purchased material is mixed with other ingredients and is no longer separately identifiable, or when the royalty cannot be distinguished from special financial arrangements between the seller and the producer, it would be inappropriate to add the royalty and the transaction value of the material could not be determined. However, if the amount of the royalty is based only on the purchased material and can be readily quantified, an addition to the price actually paid or payable can be made and the transaction value can be determined.

    • 3 (1) The price actually paid or payable is the total payment made or to be made by the producer to or for the benefit of the seller of the material. The payment need not necessarily take the form of a transfer of money. It may be made by letters of credit or negotiable instruments. Payment may be made directly or indirectly to the seller. For an illustration of this, the settlement by the producer, whether in whole or in part, of a debt owed by the seller is an indirect payment.

    • (2) Activities undertaken by the producer on the producer’s own account, other than those for which an adjustment is provided in section 4, must not be considered to be an indirect payment, even though the activities might be regarded as being for the benefit of the seller.

    • (3) The transaction value must not include charges for construction, erection, assembly, maintenance or technical assistance related to the use of the material by the producer, provided that they are distinguished from the price actually paid or payable.

    • (4) The flow of dividends or other payments from the producer to the seller that do not relate to the purchase of the material are not part of the transaction value.

    • 4 (1) In determining the transaction value of the material, the following must be added to the price actually paid or payable:

      • (a) to the extent that they are incurred by the producer with respect to the material being valued and are not included in the price actually paid or payable,

        • (i) commissions and brokerage fees, except buying commissions, and

        • (ii) the costs of containers which, for customs purposes, are classified with the material under the Harmonized System;

      • (b) the value, reasonably allocated in accordance with subsection (13), of the following elements if they are supplied directly or indirectly to the seller by the producer free of charge or at reduced cost for use in connection with the production and sale of the material, to the extent that the value is not included in the price actually paid or payable:

        • (i) materials, other than indirect materials, used in the production of the material being valued,

        • (ii) tools, dies, moulds and similar indirect materials used in the production of the material being valued,

        • (iii) indirect materials, other than those referred to in subparagraph (ii) or in paragraph (c), (e) or (f) of the definition indirect material in subsection 1(1) of these Regulations, used in the production of the material being valued, and

        • (iv) engineering, development, artwork, design work, plans and sketches made outside the territory of the CUSMA country in which the producer is located that are necessary for the production of the material being valued;

      • (c) the royalties related to the material, other than charges with respect to the right to reproduce the material in the territory of the CUSMA country in which the producer is located that the producer must pay directly or indirectly as a condition of sale of the material to the extent that such royalties are not included in the price actually paid or payable; and

      • (d) the value of any part of the proceeds of any subsequent disposal or use of the material that accrues directly or indirectly to the seller.

    • (2) The additions referred to in subsection (1) must be made under this section to the price actually paid or payable only on the basis of objective and quantifiable data.

    • (3) If objective and quantifiable data do not exist with regard to the additions required to be made under subsection (1) to the price actually paid or payable, the transaction value cannot be determined under subsection 2(1).

    • (4) Additions must not be made to the price actually paid or payable for the purpose of determining the transaction value except as provided in this section.

    • (5) The amounts to be added under paragraph (1)(a) must be those amounts that are recorded on the books of the producer.

    • (6) The value of the elements referred to in subparagraph (1)(b)(i) must be

      • (a) if the elements are imported from outside the territory of the CUSMA country in which the seller is located, the customs value of the elements;

      • (b) if the producer, or a related person on behalf of the producer, purchases the elements from a person who is not a related person in the territory of the CUSMA country in which the seller is located, the price actually paid or payable for the elements;

      • (c) if the producer, or a related person on behalf of the producer, acquires the elements other than through a purchase from a person who is not a related person in the territory of the CUSMA country in which the seller is located, the value of the consideration related to the acquisition of the elements, based on the cost of the consideration that is recorded on the books of the producer or the related person; or

      • (d) if the elements are produced by the producer, or by a related person, in the territory of the CUSMA country in which the seller is located, the total cost of the elements, determined in accordance with subsection (8).

    • (7) The value referred to in subsection (6), to the extent that such costs are not included under paragraphs (6)(a) to (d), must include the following costs that are recorded on the books of the producer or the related person supplying the elements on behalf of the producer:

      • (a) the costs of freight, insurance, packing and all other costs incurred in transporting the elements to the location of the seller;

      • (b) duties and taxes paid or payable with respect to the elements, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable;

      • (c) customs brokerage fees, including the cost of in-house customs brokerage services, incurred with respect to the elements; and

      • (d) the cost of waste and spoilage resulting from the use of the elements in the production of the material, less the value of reusable scrap or by-product.

    • (8) For the purposes of paragraph (6)(d), the total cost of the elements referred to in subparagraph (1)(b)(i) is

      • (a) if the elements are produced by the producer, at the choice of the producer,

        • (i) the total cost that was incurred with respect to all goods produced by the producer and calculated on the basis of the costs that are recorded on the books of the producer and that can be reasonably allocated to the elements in accordance with Schedule 5, or

        • (ii) the aggregate of each cost that was incurred by the producer and that forms part of the total cost incurred with respect to the elements, calculated on the basis of the costs that are recorded on the books of the producer and that can be reasonably allocated to the elements in accordance with Schedule 5; and

      • (b) if the elements are produced by a person who is related to the producer, at the choice of the producer,

        • (i) the total cost that was incurred with respect to all goods produced by that related person and calculated on the basis of the costs that are recorded on the books of that person and that can be reasonably allocated to the elements in accordance with Schedule 5, or

        • (ii) the aggregate of each cost that was incurred by that related person and that forms part of the total cost incurred with respect to the elements calculated on the basis of the costs that are recorded on the books of that person and that can be reasonably allocated to the elements in accordance with Schedule 5.

    • (9) Except as provided in subsections (11) and (12), the value of the elements referred to in subparagraphs (1)(b)(ii) to (iv) is

      • (a) the cost of those elements that is recorded on the books of the producer; or

      • (b) if such elements are provided by another person on behalf of the producer and the cost is not recorded on the books of the producer, the cost of those elements that is recorded on the books of that other person.

    • (10) If the elements referred to in subparagraphs (1)(b)(ii) to (iv) were previously used by or on behalf of the producer, the value of those elements must be adjusted downward to reflect that use.

    • (11) If the elements referred to in subparagraphs (1)(b)(ii) and (iii) were leased by the producer or a person related to the producer, the value of those elements is the cost of the lease that is recorded on the books of the producer or that related person.

    • (12) An addition must not be made to the price actually paid or payable for the elements referred to in subparagraph (1)(b)(iv) that are available in the public domain, other than the cost of obtaining copies of them.

    • (13) The producer must choose the method of allocating to the material the value of the elements referred to in subparagraphs (1)(b)(ii) to (iv), provided that the value is reasonably allocated. The methods the producer may choose to allocate the value include allocating the value over the number of units produced up to the time of the first shipment or allocating the value over the entire anticipated production if contracts or firm commitments exist for that production. For an illustration of this, a producer provides the seller with a mould to be used in the production of the material and contracts with the seller to buy 10,000 units of that material. By the time the first shipment of 1,000 units arrives, the seller has already produced 4,000 units. In these circumstances, the producer may choose to allocate the value of the mould over 4,000 units or 10,000 units but must not choose to allocate the value of the elements to the first shipment of 1,000 units. The producer may choose to allocate the entire value of the elements to a single shipment of material only if that single shipment comprises all of the units of the material acquired by the producer under the contract or commitment for that number of units of the material between the seller and the producer.

    • (14) The addition for the royalties referred to in paragraph (1)(c) is the payment for the royalties that is recorded on the books of the producer or if the payment for the royalties is recorded on the books of another person, the payment for the royalties that is recorded on the books of that other person.

    • (15) The value of the proceeds referred to in paragraph (1)(d) is the amount that is recorded for those proceeds on the books of the producer or the seller.

    • 5 (1) If there is no transaction value under subsection 2(2) or the transaction value is unacceptable under subsection 2(3), the value of the material, referred to in subparagraph 8(1)(b)(ii) of these Regulations, is the transaction value of identical materials sold, at or about the same time as the material being valued was shipped to the producer, to a buyer located in the same country as the producer.

    • (2) In applying this section, the transaction value of identical materials in a sale at the same commercial level and in substantially the same quantity of materials as the material being valued must be used to determine the value of the material. If no such sale is found, the transaction value of identical materials sold at a different commercial level or in different quantities, adjusted to take into account the differences attributable to the commercial level or quantity, must be used, provided that such adjustments can be made on the basis of evidence that clearly establishes that the adjustment is reasonable and accurate, whether the adjustment leads to an increase or a decrease in the value.

    • (3) A condition for an adjustment under subsection (2) to take into account different commercial levels or different quantities is that the adjustment be made only on the basis of evidence that clearly establishes that the adjustment is reasonable and accurate. For an illustration of this, a bona fide price list contains prices for different quantities. If the material being valued consists of a shipment of 10 units and the only identical materials for which a transaction value exists involved a sale of 500 units, and it is recognized that the seller grants quantity discounts, the required adjustment may be accomplished by resorting to the seller’s bona fide price list and using the price applicable to a sale of 10 units. This does not require that sales had to have been made in quantities of 10 as long as the price list has been established as being bona fide through sales at other quantities. In the absence of such an objective measure, however, the determination of a value under this section is not appropriate.

    • (4) If more than one transaction value of identical materials is found, the lowest of those values must be used to determine the value of the material under this section.

    • 6 (1) If there is no transaction value under subsection 2(2) or the transaction value is unacceptable under subsection 2(3), and the value of the material cannot be determined under section 5, the value of the material, referred to in subparagraph 8(1)(b)(ii) of these Regulations is the transaction value of similar materials sold, at or about the same time as the material being valued was shipped to the producer, to a buyer located in the same country as the producer.

    • (2) In applying this section, the transaction value of similar materials in a sale at the same commercial level and in substantially the same quantity of materials as the material being valued must be used to determine the value of the material. If no such sale is found, the transaction value of similar materials sold at a different commercial level or in different quantities, adjusted to take into account the differences attributable to the commercial level or quantity, must be used, provided that such adjustments can be made on the basis of evidence that clearly establishes that the adjustment is reasonable and accurate, whether the adjustment leads to an increase or a decrease in the value.

    • (3) A condition for an adjustment under subsection (2) to take into account different commercial levels or different quantities is that the adjustment be made only on the basis of evidence that clearly establishes that the adjustment is reasonable and accurate. For an illustration of this, a bona fide price list contains prices for different quantities. If the material being valued consists of a shipment of 10 units and the only similar materials for which a transaction value exists involved a sale of 500 units, and it is recognized that the seller grants quantity discounts, the required adjustment may be accomplished by resorting to the seller’s bona fide price list and using the price applicable to a sale of 10 units. This does not require that sales had to have been made in quantities of 10 as long as the price list has been established as being bona fide through sales at other quantities. In the absence of such an objective measure, however, the determination of a value under this section is not appropriate.

    • (4) If more than one transaction value of similar materials is found, the lowest of those values must be used to determine the value of the material under this section.

  • 7 If there is no transaction value under subsection 2(2) or the transaction value is unacceptable under subsection 2(3), and the value of the material cannot be determined under section 5 or 6, the value of the material, referred to in subparagraph 8(1)(b)(ii) of these Regulations must be determined under section 8 or, if the value cannot be determined under that section, under section 10 unless, at the request of the producer, the order of application of sections 8 and 9 must be reversed.

    • 8 (1) Under this section, if identical materials or similar materials are sold in the territory of the CUSMA country in which the producer is located, in the same condition as the material was in when received by the producer, the value of the material, referred to in subparagraph 8(1)(b)(ii) of these Regulations must be based on the unit price at which those identical materials or similar materials are sold, in the greatest aggregate quantity by the producer or, if the producer does not sell those identical materials or similar materials, by a person at the same commercial level as the producer, at or about the same time as the material being valued is received by the producer, to persons located in that territory who are not related persons to the seller, subject to deductions for the following:

      • (a) either the amount of commissions usually earned or the amount generally reflected for profit and general expenses, in connection with sales, in the territory of that CUSMA country, of materials of the same class or kind as the material being valued; and

      • (b) taxes, if included in the unit price, payable in the territory of that CUSMA country, which are either waived, refunded or recoverable by way of credit against taxes actually paid or payable.

    • (2) If neither identical materials nor similar materials are sold at or about the same time the material being valued is received by the producer, the value must, subject to the deductions provided for under subsection (1), be based on the unit price at which identical materials or similar materials are sold in the territory of the CUSMA country in which the producer is located, in the same condition as the material was in when received by the producer, at the earliest date within 90 days after the day on which the material being valued was received by the producer.

    • (3) For the purposes of subsection (1) unit price at which those identical materials or similar materials are sold, in the greatest aggregate quantity means the price at which the greatest number of units is sold in sales between persons who are not related persons. For an illustration of this, materials are sold from a price list which grants favourable unit prices for purchases made in larger quantities.

      Sale QuantityUnit Price ($)Number of SalesTotal Quantity Sold at Each Price
      1-10 units10010 sales of 5 units65
      5 sales of 3 units
      11-25 units955 sales of 11 units55
      over 25 units901 sale of 30 units80
      1 sale of 50 units

      The greatest number of units sold at a particular price is 80; therefore, the unit price in the greatest aggregate quantity is 90.

      As another illustration of this, two sales occur. In the first sale 500 units are sold at a price of 95 currency units each. In the second sale 400 units are sold at a price of 90 currency units each. In this illustration, the greatest number of units sold at a particular price is 500; therefore, the unit price in the greatest aggregate quantity is 95.

    • (4) Any sale to a person who supplies, directly or indirectly, free of charge or at reduced cost for use in connection with the production of the material, any of the elements specified in paragraph 4(1)(b) must not be taken into account in establishing the unit price for the purposes of this section.

    • (5) The amount generally reflected for profit and general expenses referred to in paragraph (1)(a) must be taken as a whole. The figure for the purpose of deducting an amount for profit and general expenses must be determined on the basis of information supplied by or on behalf of the producer unless the figures provided by the producer are inconsistent with those usually reflected in sales, in the country in which the producer is located, of materials of the same class or kind as the material being valued. If the figures provided by the producer are inconsistent with those figures, the amount for profit and general expenses must be based on relevant information other than that supplied by or on behalf of the producer.

    • (6) For the purposes of this section, general expenses are the direct and indirect costs of marketing the material in question.

    • (7) In determining either the commissions usually earned or the amount generally reflected for profit and general expenses under this section, the question as to whether certain materials are materials of the same class or kind as the material being valued must be determined on a case-by-case basis with reference to the circumstances involved. Sales in the country in which the producer is located of the narrowest group or range of materials of the same class or kind as the material being valued, for which the necessary information can be provided, must be examined. For the purposes of this section, materials of the same class or kind includes materials imported from the same country as the material being valued as well as materials imported from other countries or acquired within the territory of the CUSMA country in which the producer is located.

    • (8) For the purposes of subsection (2), the earliest date is the date by which sales of identical materials or similar materials are made, in sufficient quantity to establish the unit price, to other persons in the territory of the CUSMA country in which the producer is located.

    • 9 (1) Under this section, the value of a material, referred to in subparagraph 8(1)(b)(ii) of these Regulations, is the sum of

      • (a) the cost or value of the materials used in the production of the material being valued as determined on the basis of the costs that are recorded on the books of the producer of the material,

      • (b) the cost of producing the material being valued as determined on the basis of the costs that are recorded on the books of the producer of the material, and

      • (c) an amount for profit and general expenses equal to that usually reflected in sales

        • (i) if the material being valued is imported by the producer into the territory of the CUSMA country in which the producer is located, to persons located in the territory of the CUSMA country in which the producer is located by producers of materials of the same class or kind as the material being valued who are located in the country in which the material is produced, and

        • (ii) if the material being valued is acquired by the producer from another person located in the territory of the CUSMA country in which the producer is located, to persons located in the territory of the CUSMA country in which the producer is located by producers of materials of the same class or kind as the material being valued who are located in the country in which the producer is located.

    • (2) The value referred to in subsection (1) must include the following costs, to the extent they are not already included under paragraph (1)(a) or (b) and, provided that the elements are supplied directly or indirectly to the producer of the material being valued free of charge or at a reduced cost for use in the production of that material:

      • (a) the value of the elements referred to in subparagraph 4(1)(b)(i) as determined in accordance with subsections 4(6) and (7); and

      • (b) the value of the elements referred to in subparagraphs 4(1)(b)(ii) to (iv) as determined in accordance with subsection 4(9) and reasonably allocated to the material in accordance with subsection 4(13).

    • (3) For the purposes of paragraphs (1)(a) and (b), if the costs recorded on the books of the producer of the material relate to the production of other goods and materials as well as to the production of the material being valued, the costs referred to in paragraphs (1)(a) and (b) with respect to the material being valued must be those costs recorded on the books of the producer of the material that can be reasonably allocated to that material in accordance with Schedule 5.

    • (4) The amount for profit and general expenses referred to in paragraph (1)(c) must be determined on the basis of information supplied by or on behalf of the producer of the material being valued unless the profit and general expenses figures that are supplied with that information are inconsistent with those usually reflected in sales by producers of materials of the same class or kind as the material being valued who are located in the country in which the material is produced or the producer is located, as the case may be. The information supplied must be prepared in a manner consistent with Generally Accepted Accounting Principles of the country in which the material being valued is produced. If the material is produced in the territory of a CUSMA country, the information must be prepared in accordance with the Generally Accepted Accounting Principles set out in the publications listed for that territory in Schedule 10.

    • (5) For the purposes of paragraph (1)(c) and subsection (4), general expenses means the direct and indirect costs of producing and selling the material that are not included under paragraphs (1)(a) and (b).

    • (6) For the purposes of subsection (4), the amount for profit and general expenses must be taken as a whole. If, in the information supplied by or on behalf of the producer of a material, the profit figure is low and the general expenses figure is high, the profit and general expense figures taken together may nevertheless be consistent with those usually reflected in sales of materials of the same class or kind as the material being valued. If the producer of a material can demonstrate that it is taking a nil or low profit on its sales of the material because of particular commercial circumstances, its actual profit and general expense figures must be taken into account, provided that the producer of the material has valid commercial reasons to justify them and its pricing policy reflects usual pricing policies in the branch of industry concerned. Such a situation might occur if producers have been forced to lower prices temporarily because of an unforeseeable drop in demand or if the producers sell the material to complement a range of materials and goods being produced in the country in which the material is sold and accept a low profit to maintain competitiveness. This is also the case where a material is being launched and the producer accepts a nil or low profit to offset high general expenses associated with the launch.

    • (7) If the figures for the profit and general expenses supplied by or on behalf of the producer of the material are inconsistent with those usually reflected in sales of materials of the same class or kind as the material being valued that are made by other producers in the country in which that material is sold, the amount for profit and general expenses may be based on relevant information other than that supplied by or on behalf of the producer of the material.

    • (8) The question as to whether certain materials are of the same class or kind as the material being valued is determined on a case-by-case basis with reference to the circumstances involved. For the purpose of determining the amount for profit and general expenses usually reflected under the provisions of this section, sales of the narrowest group or range of materials of the same class or kind as the material being valued, for which the necessary information can be provided, must be examined. For the purposes of this section, the materials of the same class or kind must be from the same country as the material being valued.

    • 10 (1) If there is no transaction value under subsection 2(2) or the transaction value is unacceptable under subsection 2(3), and the value of the material cannot be determined under sections 5 to 9, the value of the material, referred to in subparagraph 8(1)(b)(ii) of these Regulations, must be determined under this section using reasonable means consistent with the principles and general provisions of this Schedule and on the basis of data available in the country in which the producer is located.

    • (2) The value of the material determined under this section must not be determined on the basis of

      • (a) a valuation system which provides for the acceptance of the higher of two alternative values;

      • (b) a cost of production other than the value determined in accordance with section 9;

      • (c) minimum values;

      • (d) arbitrary or fictitious values;

      • (e) if the material is produced in the territory of the CUSMA country in which the producer is located, the price of the material for export from that territory; or

      • (f) if the material is imported, the price of the material for export to a country other than to the territory of the CUSMA country in which the producer is located.

    • (3) To the greatest extent possible, the value of the material determined under this section must be based on the methods of valuation set out in sections 2 to 9, but a reasonable flexibility in the application of such methods would be in conformity with the aims and provisions of this section. For an illustration of this, under section 5, the requirement that the identical materials should be sold at or about the same time as the material being valued is shipped to the producer could be flexibly interpreted. Similarly, identical materials produced in a country other than the country in which the material is produced could be the basis for determining the value of the material or the value of identical materials already determined under section 8 could be used. For another illustration, under section 6, the requirement that the similar materials should be sold at or about the same time as the material being valued is shipped to the producer could be flexibly interpreted. Likewise, similar materials produced in a country other than the country in which the material is produced could be the basis for determining the value of the material or the value of similar materials already determined under the provisions of section 8 could be used. For a further illustration, under section 8, the 90-day requirement could be administered flexibly.

 
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