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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 9(Subsection 7(14))Method for Calculating Non-allowable Interest Costs

Definitions

  • 1 The following definitions apply in this Schedule.

    fixed-rate contract

    fixed-rate contract means a loan contract, installment purchase contract or other financing agreement in which the interest rate remains constant throughout the life of the contract or agreement. (contrat à taux fixe)

    interest rate issued by the federal government

    interest rate issued by the federal government means

    • (a) in the case of a producer located in Canada, the weekly average of the yield for federal government debt obligations set out in the Bank of Canada’s Daily Digest,

      • (i) if the interest rate is adjusted at intervals of less than one year, under the title “Treasury Bills – 1 Month”, and

      • (ii) in any other case, under the title “Government of Canada benchmark bond yields – 3 Year”

      for the week that the producer entered into the contract or the week of the most recent interest rate adjustment date, if any, under the contract;

    • (b) in the case of a producer located in Mexico, the yield for federal government debt obligations published by the Banco de Mexico under the title “Certificados de la Tesoreria de la Federacion” for the week that the producer entered into the contract or the week of the most recent interest rate adjustment date, if any, under the contract; and

    • (c) in the case of a producer located in the United States, the yield for federal government debt obligations set out in the Federal Reserve statistical release (H.15) Selected Interest Rates

      • (i) if the interest rate is adjusted at intervals of less than one year, under the title “U.S. government securities, Treasury bills, secondary market”, and

      • (ii) in any other case, under the title “U.S. Government Securities, Treasury constant maturities”

      for the week that the producer entered into the contract or the week of the most recent interest rate adjustment date, if any, under the contract. (taux d’intérêt fixé par le gouvernement fédéral)

    linear interpolation

    linear interpolation means, with respect to the interest rate issued by the federal government, the application of the following formula:

    A + [((B - A) × (E - D)) ÷ (C - D)]

    where

    A
    is the interest rate issued by the federal government on debt obligations that are nearest in maturity but of shorter maturity than the weighted average principal maturity of the payment schedule under the fixed-rate contract or variable-rate contract to which they are being compared;
    B
    is the interest rate issued by the federal government on debt obligations that are nearest in maturity but of greater maturity than the weighted average principal maturity of that payment schedule;
    C
    is the maturity of federal government debt obligations that are nearest in maturity but of greater maturity than the weighted average principal maturity of that payment schedule;
    D
    is the maturity of federal government debt obligations that are nearest in maturity but of shorter maturity than the weighted average principal maturity of that payment schedule; and
    E
    is the weighted average principal maturity of that payment schedule. (interpolation linéaire)
    payment schedule

    payment schedule means the schedule of payments, whether on a weekly, bi-weekly, monthly, yearly or other basis, of principal and interest, or any combination thereof, made by a producer to a lender in accordance with the terms of a fixed-rate contract or variable-rate contract. (échéancier)

    variable-rate contract

    variable-rate contract means a loan contract, installment purchase contract or other financing agreement in which the interest rate is adjusted at intervals during the life of the contract or agreement in accordance with its terms. (contrat à taux variable)

    weighted average principal maturity

    weighted average principal maturity means, with respect to fixed-rate contracts or variable-rate contracts, the numbers of years, or portion thereof, that is equal to the number obtained by

    • (a) dividing the sum of the weighted principal payments,

      • (i) in the case of a fixed-rate contract, by the original amount of the loan, or

      • (ii) in the case of a variable-rate contract, by the principal balance at the beginning of the interest rate period for which the weighted principal payments were calculated, and

    • (b) rounding the amount determined under paragraph (a) to the nearest single decimal place and, where that amount is the midpoint between two such numbers, to the greater of those two numbers. (échéance moyenne pondérée applicable au principal)

    weighted principal payment

    weighted principal payment means,

    • (a) with respect to fixed-rate contracts, the amount determined by multiplying each principal payment under the contract by the number of years, or portion of years, between the date the producer entered into the contract and the date of that principal payment; and

    • (b) with respect to variable-rate contracts

      • (i) the amount determined by multiplying each principal payment made during the current interest rate period by the number of years, or portion of years, between the beginning of that interest rate period and the date of that payment, and

      • (ii) the amount equal to the outstanding principal owing, but not necessarily due, at the end of the current interest rate period, multiplied by the number of years, or portion of years, between the beginning and the end of that interest rate period. (paiement de principal pondéré)

General

  • 2 For the purpose of calculating non-allowable interest costs

    • (a) with respect to a fixed-rate contract, the interest rate under that contract must be compared with the interest rate issued by the federal government on debt obligations that have maturities of the same length as the weighted average principal maturity of the payment schedule under the contract (that interest rate issued by the federal government determined by linear interpolation, if necessary);

    • (b) with respect to a variable-rate contract

      • (i) in which the interest rate is adjusted at intervals of less than or equal to one year, the interest rate under that contract must be compared with the interest rate issued by the federal government on debt obligations that have maturities closest in length to the interest rate adjustment period of the contract, and

      • (ii) in which the interest rate is adjusted at intervals of greater than one year, the interest rate under the contract must be compared with the interest rate issued by the federal government on debt obligations that have maturities of the same length as the weighted average principal maturity of the payment schedule under the contract (that interest rate issued by the federal government determined by linear interpolation, if necessary); and

    • (c) with respect to a fixed-rate or variable-rate contract in which the weighted average principal maturity of the payment schedule under the contract is greater than the maturities offered on federal government debt obligations, the interest rate under the contract must be compared to the interest rate issued by the federal government on debt obligations that have maturities closest in length to the weighted average principal maturity of the payment schedule under the contract.

 
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