NAFTA Rules of Origin Regulations

2 (1) For purposes of these Regulations,

accessories, spare parts or tools that are delivered with a good and form part of the good’s standard accessories, spare parts or tools

accessories, spare parts or tools that are delivered with a good and form part of the good’s standard accessories, spare parts or tools means goods that are delivered with a good, whether or not they are physically affixed to that good, and that are used for the transport, protection, maintenance or cleaning of the good, for instruction in the assembly, repair or use of that good, or as replacements for consumable or interchangeable parts of that good; (accessoires, pièces de rechange ou outils qui sont livrés avec le produit et qui en font normalement partie)

adjusted to an F.O.B. basis

adjusted to an F.O.B. basis means, with respect to a good, adjusted by

• (a) deducting

  • (i) the costs of transporting the good after it is shipped from the point of direct shipment,

  • (ii) the costs of unloading, loading, handling and insurance that are associated with that transportation, and

  • (iii) the cost of packing materials and containers,

where those costs are included in the transaction value of the good, and

• (b) adding

  • (i) the costs of transporting the good from the place of production to the point of direct shipment,

  • (ii) the costs of loading, unloading, handling and insurance that are associated with that transportation, and

  • (iii) the costs of loading the good for shipment at the point of direct shipment,

where those costs are not included in the transaction value of the good; (rajusté en fonction d’une base FAB)

Agreement

Agreement means the North American Free Trade Agreement; (Accord)

applicable change in tariff classification

applicable change in tariff classification means, with respect to a non-originating material used in the production of a good, a change in tariff classification specified in a rule set out in Schedule I for the tariff provision under which the good is classified; (changement de classification tarifaire applicable)

automotive component

automotive component means a good that is referred to in column I of an item of Schedule V; (composante d’automobile)

automotive component assembly

automotive component assembly means a good, other than a heavy-duty vehicle, that incorporates an automotive component; (montage de composantes d’automobile)

costs incurred in packing

costs incurred in packing means, with respect to a good or material, the value of the packing materials and containers in which the good or material is packed for shipment and the labour costs incurred in packing it for shipment, but does not include the costs of preparing and packaging it for retail sale; (frais engagés pour emballer)

customs value

customs value means

• (a) in the case of Canada, value for duty as defined in the Customs Act, except that for purposes of determining that value the reference in section 55 of that Act to “in accordance with the regulations made under the Currency Act” shall be read as a reference to “in accordance with subsection 3(1) of these Regulations”,

• (b) in the case of Mexico, the valor en aduana as determined in accordance with the Ley Aduanera, converted, in the event such value is not expressed in Mexican currency, to Mexican currency at the rate of exchange determined in accordance with subsection 3(1) of these Regulations, and

• (c) in the case of the United States, the value of imported merchandise as determined by the Customs Service in accordance with section 402 of the Tariff Act of 1930, as amended, converted, in the event such value is not expressed in United States currency, to United States currency at the rate of exchange determined in accordance with subsection 3(1) of these Regulations; (valeur en douane)

days

days means calendar days, and includes weekends and holidays; (jours)

direct labour costs

direct labour costs means costs, including fringe benefits, that are associated with employees who are directly involved in the production of a good; (coûts de la main-d’oeuvre directe)

direct material costs

direct material costs means the value of materials, other than indirect materials and packing materials and containers, that are used in the production of a good; (coûts des matières directes)

direct overhead

direct overhead means costs, other than direct material costs and direct labour costs, that are directly associated with the production of a good; (frais généraux directs)

enterprise

enterprise means any entity constituted or organized under applicable laws, whether or not for profit and whether privately owned or governmentally owned, including any corporation, trust, partnership, sole proprietorship, joint venture or other association; (entreprise)

excluded costs

excluded costs means sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs and non-allowable interest costs; (coûts exclus)

fungible goods

fungible goods means goods that are interchangeable for commercial purposes and the properties of which are essentially identical; (produits fongibles)

fungible materials

fungible materials means materials that are interchangeable for commercial purposes and the properties of which are essentially identical; (matières fongibles)

Harmonized System

Harmonized System means the Harmonized Commodity Description and Coding System, including its General Rules of Interpretation, Section Notes and Chapter Notes, as set out in

• (a) in the case of Canada, the Customs Tariff,

• (b) in the case of Mexico, the Tarifa de la Ley del Impuesto General de Importación, and

• (c) in the case of the United States, the Harmonized Tariff Schedule of the United States; (Système harmonisé)

heavy-duty vehicle

heavy-duty vehicle means a motor vehicle of any of heading 87.01, tariff item Nos. 8702.10.10 and 8702.90.10, subheadings 8704.10, 8704.22, 8704.23, 8704.32 and 8704.90 and headings 87.05 and 87.06; (véhicule de gamme lourde)

identical goods

identical goods means, with respect to a good, goods that

• (a) are the same in all respects as that good, including physical characteristics, quality and reputation but excluding minor differences in appearance,

• (b) were produced in the same country as that good, and

• (c) were produced

  • (i) by the producer of that good, or

  • (ii) by another producer, where no goods that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that good; (produits identiques)

identical materials

identical materials means, with respect to a material, materials that

• (a) are the same as that material in all respects, including physical characteristics, quality and reputation but excluding minor differences in appearance,

• (b) were produced in the same country as that material, and

• (c) were produced

  • (i) by the producer of that material, or

  • (ii) by another producer, where no materials that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that material; (matières identiques)

incorporated

incorporated means, with respect to the production of a good, a material that is physically incorporated into that good, and includes a material that is physically incorporated into another material before that material or any subsequently produced material is used in the production of the good; (incorporée)

indirect material

indirect material means a good used in the production, testing or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, and includes

• (a) fuel and energy,

• (b) tools, dies and moulds,

• (c) spare parts and materials used in the maintenance of equipment and buildings,

• (d) lubricants, greases, compounding materials and other materials used in production or used to operate equipment and buildings,

• (e) gloves, glasses, footwear, clothing, safety equipment and supplies,

• (f) equipment, devices and supplies used for testing or inspecting the other goods,

• (g) catalysts and solvents, and

• (h) any other goods that are not incorporated into the good but the use of which in the production of the good can reasonably be demonstrated to be part of that production; (matière indirecte)

interest costs

interest costs means all costs paid or payable by a person to whom credit is, or is to be advanced, for the advancement of credit or the obligation to advance credit; (frais d’intérêt)

intermediate material

intermediate material means a self-produced material that is used in the production of a good and is designated as an intermediate material under subsection 7(4); (matière intermédiaire)

light-duty automotive good

light-duty automotive good means a light-duty vehicle or a good of a tariff provision listed in Schedule IV that is subject to a regional value-content requirement and is for use as original equipment in the production of a light-duty vehicle; (produit automobile de gamme légère)

light-duty vehicle

light-duty vehicle means a motor vehicle of any of tariff item Nos. 8702.10.20 and 8702.90.20 and subheadings 8703.21 through 8703.90, 8704.21 and 8704.31; (véhicule de gamme légère)

listed material

listed material means a good that is referred to in column II of an item of Schedule V; (matière répertoriée)

location of the producer

location of the producer means,

• (a) where the warehouse or other receiving station at which a producer receives materials for use by the producer in the production of a good is located within a radius of 75 km (46.60 miles) from the place at which the producer produces the good, the location of that warehouse or other receiving station, and

• (b) in any other case, the place at which the producer produces the good in which a material is to be used; (emplacement du producteur)

material

material means a good that is used in the production of another good, and includes a part or ingredient; (matière)

month

month means a calendar month; (mois)

motor vehicle assembler

motor vehicle assembler means a producer of motor vehicles and any related person with whom, or joint venture in which, the producer participates with respect to the production of motor vehicles; (monteur de véhicules automobiles)

NAFTA country

NAFTA country means a Party to the Agreement; (pays ALÉNA)

national

national means a natural person who is a citizen or permanent resident of a NAFTA country, and includes

• (a) with respect to Mexico, a national or citizen according to Articles 30 and 34, respectively, of the Mexican Constitution, and

• (b) with respect to the United States, a “national of the United States” as defined in the Immigration and Nationality Act on the date of entry into force of the Agreement; (ressortissant)

net cost method

net cost method means the method of calculating the regional value content of a good that is set out in subsection 6(3); (méthode du coût net)

non-allowable interest costs

non-allowable interest costs means interest costs incurred by a producer on the producer’s debt obligations that are more than 700 basis points above the yield on debt obligations of comparable maturities issued by the federal government of the country in which the producer is located; (frais d’intérêt non admissibles)

non-originating good

non-originating good means a good that does not qualify as originating under these Regulations; (produit non originaire)

non-originating material

non-originating material means a material that does not qualify as originating under these Regulations; (matière non originaire)

original equipment

original equipment means a material that is incorporated into a motor vehicle before the first transfer of title or consignment of the motor vehicle to a person who is not a motor vehicle assembler, and that is

• (a) a good of a tariff provision listed in Schedule IV, or

• (b) an automotive component assembly, automotive component, sub-component or listed material; (élément d’origine)

originating good

originating good means a good that qualifies as originating under these Regulations; (produit originaire)

originating material

originating material means a material that qualifies as originating under these Regulations; (matière originaire)

other costs

other costs, with respect to total cost, means all costs that are not product costs or period costs; (autres coûts)

packaging materials and containers

packaging materials and containers means materials and containers in which a good is packaged for retail sale; (matières de conditionnement et contenants)

packing materials and containers

packing materials and containers means materials and containers that are used to protect a good during transportation, but does not include packaging materials and containers; (matières d’emballage et contenants)

payments

payments means, with respect to royalties and sales promotion, marketing and after-sales service costs, the costs expensed on the books of a producer, whether or not an actual payment is made; (paiements)

period costs

period costs means costs, other than product costs, that are expensed in the period in which they are incurred; (coûts non incorporables)

person

person means a natural person or an enterprise; (personne)

person of a NAFTA country

person of a NAFTA country means a national, or an enterprise constituted or organized under the laws of a NAFTA country; (personne d’un pays ALÉNA)

point of direct shipment

point of direct shipment means the location from which a producer of a good normally ships that good to the buyer of the good; (point d’expédition directe)

producer

producer means a person who grows, mines, harvests, fishes, traps, hunts, manufactures, processes or assembles a good; (producteur)

product costs

product costs means costs that are associated with the production of a good, and includes the value of materials, direct labour costs and direct overhead; (coûts incorporables)

production

production means growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good; (production)

related person

related person means a person related to another person on the basis that

• (a) they are officers or directors of one another’s businesses,

• (b) they are legally recognized partners in business,

• (c) they are employer and employee,

• (d) any person directly or indirectly owns, controls or holds 25 per cent or more of the outstanding voting stock or shares of each of them,

• (e) one of them directly or indirectly controls the other,

• (f) both of them are directly or indirectly controlled by a third person, or

• (g) they are members of the same family (members of the same family are natural or adopted children, brothers, sisters, parents, grandparents, or spouses); (personne liée)

reusable scrap or by-product

reusable scrap or by-product means waste and spoilage that is generated by the producer of a good and that is used in the production of a good or sold by that producer; (déchets récupérables ou sous-produits)

right to use

right to use, for purposes of the definition of royalties, includes the right to sell or distribute a good; (droit d’utiliser)

royalties

royalties means payments of any kind, including payments under technical assistance agreements or similar agreements, made as consideration for the use of, or right to use, any copyright, literary, artistic, or scientific work, patent, trade-mark, design, model, plan, secret formula or process, excluding those payments under technical assistance agreements or similar agreements that can be related to specific services such as

• (a) personnel training, without regard to where performed, and

• (b) if performed in the territory of one or more of the NAFTA countries, engineering, tooling, die-setting, software design and similar computer services, or other services; (redevances)

sales promotion, marketing and after-sales service costs

sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and after-sales service:

• (a) sales and marketing promotion; media advertising; advertising and market research; promotional and demonstration materials; exhibits; sales conferences, trade shows and conventions; banners; marketing displays; free samples; sales, marketing and after-sales service literature (product brochures, catalogues, technical literature, price lists, service manuals, sales aid information); establishment and protection of logos and trademarks; sponsorships; wholesale and retail restocking charges; entertainment;

• (b) sales and marketing incentives; consumer, retailer or wholesaler rebates; merchandise incentives;

• (c) salaries and wages, sales commissions, bonuses, benefits (for example, medical, insurance, pension), travelling and living expenses, membership and professional fees, for sales promotion, marketing and after-sales service personnel;

• (d) recruiting and training of sales promotion, marketing and after-sales service personnel, and after-sales training of customers’ employees, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

• (e) product liability insurance;

• (f) office supplies for sales promotion, marketing and after-sales service of goods, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

• (g) telephone, mail and other communications, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

• (h) rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centres;

  • (i) property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centres, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer; and

• (j) payments by the producer to other persons for warranty repairs; (frais de promotion des ventes, de commercialisation et de service après-vente)

self-produced material

self-produced material means a material that is produced by the producer of a good and used in the production of that good; (matière auto-produite)

shipping and packing costs

shipping and packing costs means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding the costs of preparing and packaging the good for retail sale; (frais d’expédition et d’emballage)

similar goods

similar goods means, with respect to a good, goods that

• (a) although not alike in all respects to that good, have similar characteristics and component materials, that enable the goods to perform the same functions and to be commercially interchangeable with that good,

• (b) were produced in the same country as that good, and

• (c) were produced

  • (i) by the producer of that good, or

  • (ii) by another producer, where no goods that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that good; (produits similaires)

similar materials

similar materials means, with respect to a material, materials that

• (a) although not alike in all respects to that material, have similar characteristics and component materials, that enable the materials to perform the same functions and to be commercially interchangeable with that material,

• (b) were produced in the same country as that material, and

• (c) were produced

  • (i) by the producer of that material, or

  • (ii) by another producer, where no materials that satisfy the requirements of paragraphs (a) and (b) were produced by the producer of that material; (matières similaires)

subject to a regional value-content requirement

subject to a regional value-content requirement means, with respect to a good, that the provisions of these Regulations that are applied to determine whether the good is an originating good include a regional value-content requirement; (assujetti à une prescription de teneur en valeur régionale)

sub-component

sub-component means a good, other than a listed material, that comprises a listed material and one or more other materials or listed materials; (sous-composante)

tariff provision

tariff provision means a heading, subheading or tariff item; (poste tarifaire)

territory

territory means, with respect to

• (a) Canada, the territory to which its customs laws apply, including any areas beyond the territorial seas of Canada within which, in accordance with international law and its domestic law, Canada may exercise rights with respect to the seabed and subsoil and their natural resources,

• (b) Mexico,

  • (i) the states of the Federation and the Federal District,

  • (ii) the islands, including the reefs and keys, in adjacent seas,

  • (iii) the islands of Guadalupe and Revillagigedo situated in the Pacific Ocean,

  • (iv) the continental shelf and the submarine shelf of such islands, keys and reefs,

  • (v) the waters of the territorial seas, in accordance with international law, and its interior maritime waters,

  • (vi) the space located above the national territory, in accordance with international law, and

  • (vii) any areas beyond the territorial seas of Mexico within which, in accordance with international law, including the United Nations Convention on the Law of the Sea, and its domestic law, Mexico may exercise rights with respect to the seabed and subsoil and their natural resources, and

• (c) the United States,

  • (i) the customs territory of the United States, which includes the 50 states, the District of Columbia and Puerto Rico,

  • (ii) the foreign trade zones located in the United States and Puerto Rico, and

  • (iii) any areas beyond the territorial seas of the United States within which, in accordance with international law and its domestic law, the United States may exercise rights with respect to the seabed and subsoil and their natural resources; (territoire)

total cost

total cost means the total of all product costs, period costs and other costs incurred in the territory of one or more of the NAFTA countries; (coût total)

transaction value method

transaction value method means the method of calculating the regional value content of a good that is set out in subsection 6(2); (méthode de la valeur transactionnelle)

used

used means used or consumed in the production of a good; (utilisé)

verification of origin

verification of origin means a verification of origin of goods under

• (a) in the case of Canada, paragraph 42.1(1)(a) of the Customs Act,

• (b) in the case of Mexico, Article 506 of the Agreement, and

• (c) in the case of the United States, section 509 of the Tariff Act of 1930, as amended. (vérification de l’origine)

(2) For purposes of the definitions of similar goods and similar materials, the quality of the goods or materials, their reputation and the existence of a trademark are among the factors to be considered for purposes of determining whether goods or materials are similar.

(3) For purposes of these Regulations,

• (a) chapter, unless otherwise indicated, refers to a chapter of the Harmonized System;

• (b) heading refers to any four-digit number, or the first four digits of any number, set out in the column “Tariff Item” in the Harmonized System;

• (c) subheading refers to any six-digit number, or the first six digits of any number, set out in the column “Tariff Item” in the Harmonized System;

• (d) tariff item refers to any eight-digit number set out in the column “Tariff Item” in the Harmonized System;

• (e) any reference to a tariff item in Chapter Four of the Agreement or these Regulations that includes letters shall be reflected as the appropriate eight-digit number in the Harmonized System as implemented in each NAFTA country; and

• (f) books refers to,

  • (i) with respect to the books of a person who is located in a NAFTA country,

    • (A) books and other documents that support the recording of revenues, expenses, costs, assets and liabilities and that are maintained in accordance with Generally Accepted Accounting Principles set out in the publications listed in Schedule XII with respect to the territory of the NAFTA country in which the person is located, and

    • (B) financial statements, including note disclosures, that are prepared in accordance with Generally Accepted Accounting Principles set out in the publications listed in Schedule XII with respect to the territory of the NAFTA country in which the person is located, and

  • (ii) with respect to the books of a person who is located outside the territories of the NAFTA countries,

    • (A) books and other documents that support the recording of revenues, expenses, costs, assets and liabilities and that are maintained in accordance with generally accepted accounting principles applied in that location or, where there are no such principles, in accordance with the International Accounting Standards, and

    • (B) financial statements, including note disclosures, that are prepared in accordance with generally accepted accounting principles applied in that location or, where there are no such principles, in accordance with the International Accounting Standards.

(4) Where an example, referred to as an “Example”, is set out in these Regulations, the example is for purposes of illustrating the application of a provision, and where there is any inconsistency between the example and the provision, the provision prevails to the extent of the inconsistency.

(5) Except as otherwise provided, references in these Regulations to domestic laws of the NAFTA countries apply to those laws as they are currently in effect and as they may be amended or superseded.

(6) For purposes of subsections 5(9), 6(11) and 7(6) and subparagraphs 10(1)(a)(i) and (ii),

• (a) total cost consists of all product costs, period costs and other costs that are recorded, except as otherwise provided in subparagraphs (b)(i) and (ii), on the books of the producer without regard to the location of the persons to whom payments with respect to those costs are made;

• (b) in calculating total cost,

  • (i) the value of materials, other than intermediate materials, indirect materials and packing materials and containers, shall be the value determined in accordance with subsection 7(1),

  • (ii) the value of intermediate materials used in the production of the good or material with respect to which total cost is being calculated shall be calculated in accordance with subsection 7(6),

  • (iii) the value of indirect materials and the value of packing materials and containers shall be the costs that are recorded on the books of the producer for those materials, and

  • (iv) product costs, period costs and other costs, other than costs referred to in subparagraphs (i) and (ii), shall be the costs thereof that are recorded on the books of the producer for those costs;

• (c) total cost does not include profits that are earned by the producer, regardless of whether they are retained by the producer or paid out to other persons as dividends, or taxes paid on those profits, including capital gains taxes;

• (d) gains related to currency conversion that are related to the production of the good shall be deducted from total cost, and losses related to currency conversion that are related to the production of the good shall be included in total cost;

• (e) the value of materials with respect to which production is accumulated under section 14 shall be determined in accordance with that section; and

• (f) total cost includes the impact of inflation as recorded on the books of the producer, if recorded in accordance with the Generally Accepted Accounting Principles of the producer’s country.

(7) For purposes of calculating total cost under subsections 5(9) and 7(6) and subparagraphs 10(1)(a)(i) and (ii),

• (a) where the regional value content of the good is calculated on the basis of the net cost method and the producer has elected under subsection 6(15), 11(1), (3) or (6), 12(5) or 13(4) to calculate the regional value content over a period, the total cost shall be calculated over that period; and

• (b) in any other case, the producer may elect that the total cost be calculated over

  • (i) a month,

  • (ii) any consecutive three month or six month period that falls within and is evenly divisible into the number of months of the producer’s fiscal year remaining at the beginning of that period, or

  • (iii) the producer’s fiscal year.

(8) An election made under subsection (7) may not be rescinded or modified with respect to the good or material, or the period, with respect to which the election is made.

(9) Where a producer chooses a one, three or six month period under subsection (7) with respect to a good or material, the producer shall be considered to have chosen under that subsection a period or periods of the same duration for the remainder of the producer’s fiscal year with respect to that good or material.

(10) With respect to a good exported to a NAFTA country, an election to average is considered to have been made

• (a) in the case of an election referred to in subsection 11(1), (3) or (6) or 13(4), if the election is received by the customs administration of that NAFTA country; and

• (b) in the case of an election referred to in subsection 2(7), 6(15) or 12(1), if the customs administration of that NAFTA country is informed in writing during the course of a verification of the origin of the good that the election has been made.