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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

APPENDIXExamples Illustrating the Application of the Methods for Determining the Value of Non-Originating Materials that are Identical Materials and that are Used in the Production of a Good

The following examples are based on the figures set out in the table below and on the following assumptions:

  • (a) Materials A are non-originating materials that are identical materials and are used in the production of Good A;

  • (b) one unit of Materials A is used to produce one unit of Good A;

  • (c) all other materials used in the production of Good A are originating materials; and

  • (d) Good A is produced in a single plant.

Materials InventorySales
(Receipts of Materials A)(Shipments of Good A)
Date (m/d/y)Quantity (units)Unit CostFootnote for *($)Quantity (units)
01/01/212001.05
01/03/211,0001.00
01/05/211,0001.10
01/08/21500
01/09/21500
01/10/211,0001.05
01/14/211,500
01/16/212,0001.10
01/18/211,500

Example 1: FIFO method

By applying the FIFO method,

  • (1) 
    the 200 units of Materials A received on 01/01/21 and valued at $1.05 per unit and 300 units of the 1,000 units of Material A received on 01/03/21 and valued at $1.00 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/08/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $510 [(200 units × $1.05) + (300 units × $1.00)];
  • (2) 
    500 units of the remaining 700 units of Materials A received on 01/03/21 and valued at $1.00 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/09/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $500 (500 units × $1.00);
  • (3) 
    the remaining 200 units of the 1,000 units of Materials A received on 01/03/21 and valued at $1.00 per unit, the 1,000 units of Materials A received on 01/05/21 and valued at $1.10 per unit, and 300 units of the 1,000 units of Materials A received on 01/10/21 and valued at $1.05 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/14/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,615 [(200 units × $1.00) + (1,000 units × $1.10) + (300 units × $1.05)]; and
  • (4) 
    the remaining 700 units of the 1,000 units of Materials A received on 01/10/21 and valued at $1.05 per unit and 800 units of the 2,000 units of Materials A received on 01/16/21 and valued at $1.10 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/18/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,615 [(700 units × $1.05) + (800 units × $1.10)].

Example 2: LIFO method

By applying the LIFO method,

  • (1) 
    500 units of the 1,000 units of Materials A received on 01/05/21 and valued at $1.10 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/08/21; therefore, the value of the non-originating materials used in the production of those goods is considered to be $550 (500 units × $1.10);
  • (2) 
    the remaining 500 units of the 1,000 units of Materials A received on 01/05/21 and valued at $1.10 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/09/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $550 (500 units × $1.10);
  • (3) 
    the 1,000 units of Materials A received on 01/10/21 and valued at $1.05 per unit and 500 units of the 1,000 units of Material A received on 01/03/21 and valued at $1.00 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/14/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,550 [(1,000 units × $1.05) + (500 units × $1.00)]; and
  • (4) 
    1,500 units of the 2,000 units of Materials A received on 01/16/21 and valued at $1.10 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/18/21; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,650 (1,500 units × $1.10).

Example 3: Rolling average method

The following table identifies the average value of non-originating Materials A as determined under the rolling average method. For the purposes of this example, a new average value of non-originating Materials A is calculated after each receipt.

Materials Inventory
Date (m/d/y)Quantity (units)Unit Cost* ($)Total Value ($)
Beginning Inventory01/01/212001.05210
Receipt01/03/211,0001.001,000
AVERAGE VALUE1,2001.0081,210
Receipt01/05/211,0001.101,100
AVERAGE VALUE2,2001.052,310
Shipment01/08/215001.05525
AVERAGE VALUE1,7001.051,785
Shipment01/09/215001.05525
AVERAGE VALUE1,2001.051,260
Receipt01/16/212,0001.102,200
AVERAGE VALUE3,2001.083,460

By applying the rolling average method,

  • (1) 
    the value of non-originating materials used in the production of the 500 units of Good A shipped on 01/08/21 is considered to be $525 (500 units × $1.05); and
  • (2) 
    the value of non-originating materials used in the production of the 500 units of Good A shipped on 01/09/21 is considered to be $525 (500 units × $1.05).
 
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