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

PART 5General Provisions

Marginal note:Accumulation

• 9 (1) Subject to subsections (2) to (5),

  • (a) a good is originating if it is produced in the territory of one or more of the CUSMA countries by one or more producers and it satisfies the requirements of section 3 and all other applicable requirements of these Regulations;

  • (b) an originating good or material of one or more of the CUSMA countries is considered as originating in the territory of another CUSMA country if it is used as a material in the production of a good in the territory of that other CUSMA country; and

  • (c) production undertaken on a non-originating material in the territory of one or more of the CUSMA countries may contribute to the originating status of a good, regardless of whether that production was sufficient to confer originating status to the material itself.

• Marginal note:Accumulation — net cost method

  (2) If a good is subject to a regional value content requirement based on the net cost method and an exporter or producer of the good has a statement signed by a producer of a material that is used in the production of the good that

  • (a) states the net cost incurred and the value of non-originating materials used by the producer of the material in the production of that material,

    • (i) the net cost incurred by the producer of the good with respect to the material is to be the net cost incurred by the producer of the material plus, if not included in the net cost incurred by the producer of the material, the costs referred to in paragraphs 8(2)(a) to (c), and

    • (ii) the value of non-originating materials used by the producer of the good with respect to the material is the value of non-originating materials used by the producer of the material; or

  • (b) states any amount, other than an amount that includes any of the value of non-originating materials, that is part of the net cost incurred by the producer of the material in the production of that material,

    • (i) the net cost incurred by the producer of the good with respect to the material is the value of the material, determined in accordance with subsection 8(1), and

    • (ii) the value of non-originating materials used by the producer of the good with respect to the material is the value of the material, determined in accordance with subsection 8(1), minus the amount stated in the statement.

• Marginal note:Accumulation — transaction value method

  (3) If a good is subject to a regional value content requirement based on the transaction value method and an exporter or producer of the good has a statement signed by a producer of a material that is used in the production of the good that states the value of non-originating materials used by the producer of the material in the production of that material, the value of non-originating materials used by the producer of the good with respect to the material is the value of non-originating materials used by the producer of the material.

• Marginal note:Averaging — net cost method

  (4) If a good is subject to a regional value content requirement based on the net cost method and an exporter or producer of the good does not have a statement described in subsection (2) but has a statement signed by a producer of a material that is used in the production of the good that

  • (a) states the sum of the net costs incurred and the sum of the values of non-originating materials used by the producer of the material in the production of that material and identical materials or similar materials, or any combination thereof, produced in a single plant by the producer of the material over a month or any consecutive three-, six- or twelve-month period that falls within the fiscal year of the producer of the good, divided by the number of units of materials with respect to which the statement is made,

    • (i) the net cost incurred by the producer of the good with respect to the material is the sum of the net costs incurred by the producer of the material with respect to that material and the identical materials or similar materials, divided by the number of units of materials with respect to which the statement is made, plus, if not included in the net costs incurred by the producer of the material, the costs referred to in paragraphs 8(2)(a) to (c), and

    • (ii) the value of non-originating materials used by the producer of the good with respect to the material is the sum of the values of non-originating materials used by the producer of the material with respect to that material and the identical materials or similar materials divided by the number of units of materials with respect to which the statement is made; or

  • (b) states any amount, other than an amount that includes any of the value of non-originating materials, that is part of the sum of the net costs incurred by the producer of the material in the production of that material and identical materials or similar materials, or any combination of them, produced in a single plant by the producer of the material over a month or any consecutive three-, six- or twelve-month period that falls within the fiscal year of the producer of the good, divided by the number of units of materials with respect to which the statement is made,

    • (i) the net cost incurred by the producer of the good with respect to the material is the value of the material, determined in accordance with subsection 8(1), and

    • (ii) the value of non-originating materials used by the producer of the good with respect to the material is the value of the material, determined in accordance with subsection 8(1), minus the amount stated in the statement.

• Marginal note:Averaging — transaction value method

  (5) If a good is subject to a regional value content requirement based on the transaction value method and an exporter or producer of the good does not have a statement described in subsection (3) but has a statement signed by a producer of a material that is used in the production of the good that states the sum of the values of non-originating materials used by the producer of the material in the production of that material and identical materials or similar materials, or any combination thereof, produced in a single plant by the producer of the material over a month or any consecutive three-, six- or twelve-month period that falls within the fiscal year of the producer of the good, divided by the number of units of materials with respect to which the statement is made, the value of non-originating materials used by the producer of the good with respect to the material is the sum of the values of non-originating materials used by the producer of the material with respect to that material and the identical materials or similar materials divided by the number of units of materials with respect to which the statement is made.

• Marginal note:Single producer

  (6) For the purposes of subsection 8(6), if a producer of the good chooses to accumulate the production of materials under subsection (1), that production is considered to be the production of the producer of the good.

• Marginal note:Particulars

  (7) For the purposes of this section,

  • (a) in order to accumulate the production of a material,

    • (i) if the good is subject to a regional value content requirement, the producer of the good must have a statement described in any of subsections (2) to (5) that is signed by the producer of the material, and

    • (ii) if an applicable change in tariff classification is applied to determine whether the good is an originating good, the producer of the good must have a statement signed by the producer of the material that states the tariff classification of all non-originating materials used by that producer in the production of that material and that the production of the material took place entirely in the territory of one or more of the CUSMA countries;

  • (b) a producer of a good who chooses to accumulate is not required to accumulate the production of all materials that are incorporated into the good; and

  • (c) any information set out in a statement referred to in any of subsections (2) to (5) that concerns the value of materials or costs must be in the same currency as the currency of the country in which the person who provided the statement is located.

• Marginal note:Examples

  (8) Each of the following examples is an “Example” as referred to in subsection 1(4).

  • Example 1 (subsection (1)):

    Producer A, located in CUSMA country A, imports unfinished bearing rings provided for in subheading 8482.99 into CUSMA country A from the territory of a non-CUSMA country. Producer A further processes the unfinished bearing rings into finished bearing rings, which are of the same subheading. The finished bearing rings of Producer A do not satisfy an applicable change in tariff classification and therefore do not qualify as originating goods.

    The net cost of the finished bearing rings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials $0.15
      • Value of non-originating materials $0.75
      • Other product costs $0.35
    • Period costs (including $0.05 in excluded costs): $0.15
    • Other costs: $0.05
      • Total cost of the finished bearing rings, per unit: $1.45
      • Excluded costs (included in period costs): $0.05
      • Net cost of the finished bearing rings, per unit: $1.40

    Producer A sells the finished bearing rings to Producer B, who is located in CUSMA country A, for $1.50 each. Producer B further processes them into bearings and intends to export the bearings to CUSMA country B. Although the bearings satisfy the applicable change in tariff classification, the bearings are subject to a regional value content requirement.

    Situation A

    Producer B does not choose to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. The net cost of the bearings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials $0.45
      • Value of non-originating materials (value, per unit, of the bearing rings purchased from Producer A)$1.50
      • Other product costs $0.75
    • Period costs (including $0.05 in excluded costs): $0.15
    • Other costs: $0.05
    • Total cost of the bearings, per unit: $2.90
    • Excluded costs (included in period costs): $0.05
    • Net cost of the bearings, per unit: $2.85

    Under the net cost method, the regional value content of the bearings is

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($2.85 − $1.50) ÷ $2.85 × 100
    	=	47.4%

    Therefore, the bearings are non-originating goods.

    Situation B

    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides a statement described in paragraph (2)(a) to Producer B. The net cost of the bearings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials ($0.45 + $0.15) $0.60
      • Value of non-originating materials (value, per unit, of the unfinished bearing rings imported by Producer A)$0.75
      • Other product costs ($0.75 + $0.35) $1.10
    • Period costs (($0.15 + $0.15), including $0.10 in excluded costs): $0.30
      • Other costs ($0.05 + $0.05): $0.10
      • Total cost of the bearings, per unit: $2.85
      • Excluded costs (included in period costs): $0.10
      • Net cost of the bearings, per unit: $2.75

    Under the net cost method, the regional value content of the bearings is

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($2.75 − $0.75) ÷ $2.75 × 100
    	=	72.7%

    Therefore, the bearings are originating goods.

    Situation C

    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides to Producer B a statement described in paragraph (2)(b) that specifies an amount equal to the net cost minus the value of non-originating materials used to produce the finished bearing rings ($1.40 - $0.75 = $0.65). The net cost of the bearings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials ($0.45 + $0.65) $1.10
      • Value of non-originating materials ($1.50 − $0.65) $0.85
      • Other product costs $0.75
    • Period costs (including $0.05 in excluded costs): $0.15
      • Other costs: $0.05
      • Total cost of the bearings, per unit: $2.90
      • Excluded costs (included in period costs): $0.05
      • Net cost of the bearings, per unit: $2.85

    Under the net cost method, the regional value content of the bearings is

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($2.85 − $0.85) ÷ $2.85× 100
    	=	70.2%

    Therefore, the bearings are originating goods.

    Situation D

    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides to Producer B a statement described in paragraph (2)(b) that specifies an amount equal to the value of other product costs used in the production of the finished bearing rings ($0.35). The net cost of the bearings (per unit) is calculated as follows:

    • Product costs:
      • Value of originating materials $0.45
      • Value of non-originating materials ($1.50 − $0.35) $1.15
      • Other product costs ($0.75 + $0.35) $1.10
    • Period costs (including $0.05 in excluded costs): $0.15
    • Other costs: $0.05
    • Total cost of the bearings per unit: $2.90
    • Excluded costs (included in period costs): $0.05
    • Net cost of the bearings, per unit:$2.85

    Under the net cost method, the regional value content of the bearing is

    RVC	=	(NC − VNM) ÷ NC × 100
    	=	($2.85 − $1.15) ÷ $2.85 × 100
    	=	59.6%

    Therefore, the bearings are originating goods.

    Situation E

    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides to Producer B a signed statement described in subsection (3) that specifies the value of non-originating materials used in the production of the finished bearing rings ($0.75). Producer B chooses to calculate the regional value content of the bearings under the transaction value method. The regional value content of the bearings (per unit) is calculated as follow:

    • Product costs:
      • Transaction value of the bearings, per unit$3.15
      • Costs incurred, per unit, in the international shipment of the good (included in transaction value of the bearings) $0.15
      • Transaction value, per unit, adjusted to exclude any costs incurred in the international shipment of the good $3.00
    • Value of non-originating materials (value, per unit, of the unfinished bearing rings imported by Producer A)$0.75

    Under the transaction value method, the regional value content of the bearing is

    RVC	=	(TV − VNM) ÷ TV × 100
    	=	($3.00 − $0.75) ÷ $3.00 × 100
    	=	75%

    Therefore, because the bearings have a regional value content of at least 60% under transaction value method, the bearings are originating goods.

  • Example 2 (subsection (1)):

    Producer A, located in CUSMA country A, imports non-originating cotton, carded or combed, provided for in heading 52.03 for use in the production of cotton yarn provided for in heading 52.05. Because the change from cotton, carded or combed, to cotton yarn is a change within the same Chapter, the cotton does not satisfy the applicable change in tariff classification for heading 52.05, which is a change from any other Chapter, with certain exceptions. Therefore, the cotton yarn that Producer A produces from non-originating cotton is a non-originating good.

    Producer A then sells the non-originating cotton yarn to Producer B, also located in CUSMA country A, who uses the cotton yarn in the production of woven fabric of cotton provided for in heading 52.08. The change from non-originating cotton yarn to woven fabric of cotton is insufficient to satisfy the applicable change in tariff classification for heading 52.08, which is a change from any heading outside headings 52.08 through 52.12, except from certain headings, under which various yarns, including cotton yarn provided for in heading 52.05, are classified. Therefore, the woven fabric of cotton that Producer B produces from non-originating cotton yarn produced by Producer A is a non-originating good.

    However, Producer B can choose to accumulate the production of Producer A. The rule for heading 52.08, under which the cotton fabric is classified, does not exclude a change from heading 52.03, under which carded or combed cotton is classified. Therefore, under subsection (1), the change from carded or combed cotton provided for in heading 52.03 to the woven fabric of cotton provided for in heading 52.08 satisfies the applicable change of tariff classification for heading 52.08. The woven fabric of cotton is considered as an originating good.

    Producer B, in order to choose to accumulate Producer A’s production, must have a statement described in subparagraph (7)(a)(ii).