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CCFTA Rules of Origin Regulations (SOR/97-340)

Regulations are current to 2020-09-09

SCHEDULE VIIValue of Materials

  • 1 For purposes of this Schedule, unless otherwise stated,

    buying commissions

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

    customs administration

    customs administration refers to the customs administration of the CCFTA country into whose territory the good, in the production of which the material being valued is used, is imported; (administration douanière)

    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 la même nature ou de la même espèce)

    producer

    producer refers to the producer who used 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 provided under subsections (2) and (3), the transaction value of a material under paragraph 7(1)(a) of these Regulations shall be the price actually paid or payable for the material determined in accordance with section 4 and adjusted in accordance with section 5.

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

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

      • (a) there are restrictions on the disposition 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 CCFTA 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 5(1)(d); or

      • (d) except as provided in section 3, 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 where the material is a semi-finished material that has been 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 purposes of paragraph (3)(b), conditions or considerations relating to the use of the material shall not render the transaction value unacceptable, such as where 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) Where 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 5(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) In determining whether the transaction value is unacceptable under paragraph 2(3)(d), the fact that the seller and the producer are related persons shall not in itself be grounds for the customs administration to render the transaction value unacceptable. In such cases, the circumstances surrounding the sale shall be examined and the transaction value shall be accepted provided that the relationship between the seller and the producer did not influence the price actually paid or payable. Where the customs administration has reasonable grounds for considering that the relationship between the seller and the producer influenced the price, the customs administration shall communicate the grounds to the producer, and that producer shall be given a reasonable opportunity to respond to the grounds communicated by the customs administration. If that producer so requests, the customs administration shall communicate in writing the grounds on which it considers that the relationship between the seller and the producer influenced the price actually paid or payable.

    • (2) Subsection (1) provides that, where the seller and the producer are related persons, the circumstances surrounding the sale shall be examined and the transaction value shall be accepted as the value provided that the relationship between the seller and the producer did not influence the price actually paid or payable. It is not intended under subsection (1) that there should be an examination of the circumstances in all cases where the seller and the producer are related persons. Such an examination will only be required where the customs administration has doubts that the price actually paid or payable is acceptable because of the relationship between the seller and the producer. Where the customs administration does not have doubts that the price actually paid or payable is acceptable, it shall accept that price without requesting further information. For an illustration of this, the customs administration may have previously examined the relationship between the seller and the producer, or it may already have detailed information concerning the relationship between the seller and the producer, and may already be satisfied from that examination or information that the relationship between them did not influence the price actually paid or payable.

    • (3) In applying subsection (1), where the seller and the producer are related persons and the customs administration has doubts that the transaction value is acceptable without further inquiry, the customs administration shall give the producer an opportunity to supply such further information as may be necessary to enable it to examine the circumstances surrounding the sale. In such a case, the customs administration shall examine the relevant aspects of the sale, including the way in which the seller and the producer organize their commercial relations and the way in which the price actually paid or payable by that producer for the material being valued was arrived at, in order to determine whether the relationship between the seller and the producer influenced that price actually paid or payable. Where it can be shown that the seller and the producer buy from and sell to each other as if they were not related persons, the price actually paid or payable shall be considered as not having been influenced by the relationship between them. For an illustration of this, if the price actually paid or payable for the material had been settled in a manner consistent with the normal pricing practices of the industry in question or with the way in which the seller settles prices for sales to unrelated buyers, the price actually paid or payable shall be considered as not having been influenced by the relationship between the producer and the seller. For another illustration of this, where it is shown that the price actually paid or payable for the material is adequate to ensure recovery of the total cost of producing the material plus a profit that is representative of the seller’s overall profit realized over a representative period of time, such as on an annual basis, in sales of materials of the same class or kind, the price actually paid or payable shall be considered as not having been influenced by the relationship between the seller and the producer.

    • (4) In a sale between a seller and a producer who are related persons, the transaction value shall be accepted and determined in accordance with subsection 2(1), wherever the seller or the producer demonstrates that the transaction value of the material in that sale closely approximates one of the following test values that occurs at or about the same time as the sale and is chosen by the seller or the producer:

      • (a) the transaction value in sales to unrelated buyers of identical materials or similar materials, as determined in accordance with subsection 2(1);

      • (b) the value of identical materials or similar materials, as determined in accordance with section 9; or

      • (c) the value of identical materials or similar materials, as determined in accordance with section 10.

    • (5) In applying a test value referred to in subsection (4), due account shall be taken of demonstrated differences in commercial levels, quantity levels, the value of the elements specified in paragraph 5(1)(b) and the costs incurred by the seller in sales to unrelated buyers that are not incurred by the seller in sales by the seller to a related person.

    • (6) The application of a test value referred to in subsection (4) shall be used at the initiative of the seller, or at the initiative of the producer with the consent of the seller, and shall be used only for comparison purposes to determine whether the transaction value of the material is acceptable. The test value shall not be used as the transaction value of that material.

    • (7) Subsection (4) provides an opportunity for the seller or the producer to demonstrate that the transaction value closely approximates a test value previously accepted by the customs administration of the CCFTA country in which the producer is located, and is therefore acceptable under subsection (1). Where the application of a test value under subsection (4) demonstrates that the transaction value of the material being valued is acceptable, the customs administration shall not examine the question of influence in regard to the relationship between the seller and the producer under subsection (1). Where the customs administration already has sufficient information available, without further inquiries, that the transaction value closely approximates one of the test values determined under subsection (4), the seller or the producer is not required to apply a test value to demonstrate that the transaction value is acceptable under that subsection.

    • (8) A number of factors must be taken into consideration for the purpose of determining whether the transaction value of the identical materials or similar materials closely approximates the transaction value of the material being valued. These factors include the nature of the material, the nature of the industry itself, the season in which the material is sold, and whether the difference in values is commercially significant. Since these factors may vary from case to case, it would be impossible to apply an acceptable standardized difference such as a fixed amount or fixed percentage difference in each case. For an illustration of this, a small difference in value in a case involving one type of material could be unacceptable, while a large difference in a case involving another type of material might be acceptable for the purposes of determining whether the transaction value closely approximates a test value set out in subsection (4).

    • 4 (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 5, shall 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 shall 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.

    • 5 (1) In determining the transaction value of the material, the following shall 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 packaging materials and containers that, for customs purposes, are classified with the material under the Harmonized System;

      • (b) the value, reasonably allocated in accordance with subsection (12), of the following elements where 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) a material, other than an indirect material, 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) an indirect material, other than those referred to in subparagraph (ii) or in paragraphs (c), (e) or (f) of the definition indirect material in subsection 2(1) of these Regulations, used in the production of the material being valued, and

        • (iv) engineering, development, artwork, design work, and plans and sketches performed outside the territory of the CCFTA 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 CCFTA 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) shall be made to the price actually paid or payable under this section only on the basis of objective and quantifiable data.

    • (3) Where 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 (1), the transaction value cannot be determined under subsection 2(1).

    • (4) No additions shall 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) shall 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) shall be

      • (a) where the producer, or a related person on behalf of the producer, purchases the elements from an unrelated person, the price actually paid or payable for the elements,

      • (b) where the producer, or a related person on behalf of the producer, acquires the elements from an unrelated person other than through a purchase, 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

      • (c) where the elements are produced by the producer, or by a related person, the total cost of the elements, determined in accordance with subsection (7),

      and shall 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, to the extent that such costs are not included under paragraphs (a) through (c):

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

      • (e) 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,

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

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

    • (7) For the purposes of paragraph (6)(c), the total cost of the elements referred to in subparagraph (1)(b)(i) shall be

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

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

        • (ii) the aggregate of each cost incurred by the producer 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, that can be reasonably allocated to the elements in accordance with Schedule VI; and

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

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

        • (ii) the aggregate of each cost incurred by that related person 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, that can be reasonably allocated to the elements in accordance with Schedule VI.

    • (8) Except as provided in subsections (10) and (11), the value of the elements referred to in subparagraphs (1)(b)(ii) through (iv) shall be

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

      • (b) where 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.

    • (9) Where the elements referred to in subparagraphs (1)(b)(ii) through (iv) were previously used by or on behalf of the producer, the value of the elements shall be adjusted downward to reflect that use.

    • (10) Where 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 the elements shall be the cost of the lease that is recorded on the books of the producer or that related person.

    • (11) No addition shall 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.

    • (12) The producer shall choose the method of allocating to the material the value of the elements referred to in subparagraphs (1)(b)(ii) through (iv), provided that the value is reasonably allocated to the material in a manner appropriate to the circumstances. 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 where 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 shall 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 where 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.

    • (13) The addition for the royalties referred to in paragraph (1)(c) shall be the payment for the royalties that is recorded on the books of the producer, or where 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.

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

    • 6 (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 paragraph 7(1)(b) of these Regulations, shall be 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 shall be used to determine the value of the material. Where 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, shall 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 adjustment under subsection (2) because of different commercial levels or different quantities is that such adjustment be made only on the basis of evidence that clearly establishes that an 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 such value shall be used to determine the value of the material under this section.

    • 7 (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 6, the value of the material, referred to in paragraph 7(1)(b) of these Regulations, shall be 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 shall be used to determine the value of the material. Where 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, shall 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 adjustment under subsection (2) because of different commercial levels or different quantities is that such adjustment be made only on the basis of evidence that clearly establishes that an 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 such value shall be used to determine the value of the material under this section.

  • 8 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 6 or 7, the value of the material, referred to in paragraph 7(1)(b) of these Regulations, shall be determined under section 9 or, when the value cannot be determined under that section, under section 10 except that, at the request of the producer, the order of application of sections 9 and 10 shall be reversed.

    • 9 (1) Under this section, if identical materials or similar materials are sold in the territory of the CCFTA 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 paragraph 7(1)(b) of these Regulations, shall 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, where the producer does not sell those identical materials or similar materials, by a person at the same trade 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 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 CCFTA 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 CCFTA 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 shall, 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 CCFTA 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 date the material being valued was received by the producer.

    • (3) The expression “unit price at which those identical materials or similar materials are sold, in the greatest aggregate quantity” in subsection (1) means the price at which the greatest number of units is sold in sales between unrelated 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 PriceNumber 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 5(1)(b), shall 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) shall be taken as a whole. The figure for the purposes of deducting an amount for profit and general expenses shall 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. Where the figures provided by the producer are inconsistent with those figures, the amount for profit and general expenses shall 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 shall 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, shall 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 CCFTA country in which the producer is located.

    • (8) For the purposes of subsection (2), the earliest date shall be 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 CCFTA country in which the producer is located.

    • 10 (1) Under this section, the value of a material, referred to in paragraph 7(1)(b) of these Regulations, shall be 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) where the material being valued is imported by the producer into the territory of the CCFTA country in which the producer is located, to persons located in the territory of the CCFTA 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) where the material being valued is acquired by the producer from another person located in the territory of the CCFTA country in which the producer is located, to persons located in the territory of the CCFTA 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,

      and shall include, to the extent they are not already included under paragraph (a) or (b) and where the elements are supplied directly or indirectly to the producer of the material being valued by the producer free of charge or at a reduced cost for use in the production of that material,

      • (d) the value of elements referred to in subparagraph 5(1)(b)(i), determined in accordance with subsection 5(6), and

      • (e) the value of elements referred to in subparagraphs 5(1)(b)(ii) through (iv), determined in accordance with subsection 5(8) and reasonably allocated to the material in accordance with subsection 5(12).

    • (2) For purposes of paragraphs (1)(a) and (b), where 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 shall 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 VI.

    • (3) The amount for profit and general expenses referred to in paragraph (1)(c) shall 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 shall be prepared in a manner consistent with generally accepted accounting principles of the country in which the material being valued is produced. Where the material is produced in the territory of a CCFTA country, the information shall be prepared in accordance with the Generally Accepted Accounting Principles set out in the authorities listed for that CCFTA country in Schedule XI.

    • (4) For purposes of paragraph (1)(c) and subsection (3), general expenses means the direct and indirect costs of producing and selling the material that are not included under paragraphs (1)(a) and (b).

    • (5) For purposes of subsection (3), the amount for profit and general expenses shall be taken as a whole. Where, 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. Where 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 shall 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. For an illustration of this, such a situation might occur where producers have been forced to lower prices temporarily because of an unforeseeable drop in demand, or where 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. A further illustration is where a material was being launched and the producer accepted a nil or low profit to offset high general expenses associated with the launch.

    • (6) Where the figures for the profit and general expenses supplied by or on behalf of the producer of the material are not consistent 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.

    • (7) Where a customs administration uses information other than that supplied by or on behalf of the producer of the material for the purposes of determining the value of a material under this section, the customs administration shall communicate to the producer, if that producer so requests, the source of such information, the data used and the calculations based on such data, subject to the provisions on confidentiality under sections 107 and 108 of the Customs Act.

    • (8) Whether certain materials are of the same class or kind as the material being valued shall be determined on a case-by-case basis with reference to the circumstances involved. For purposes 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, which includes the material being valued, for which the necessary information can be provided, shall 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.

    • 11 (1) Where 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 6 through 10, the value of the material, referred to in paragraph 7(1)(b) of these Regulations, shall 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 shall 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 10;

      • (c) minimum values;

      • (d) arbitrary or fictitious values;

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

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

    • (3) To the greatest extent possible, the value of the material determined under this section shall be based on the methods of valuation set out in sections 2 through 10, 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 6, the requirement that the identical materials should be sold at or about the same time as the time 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 9 could be used. For another illustration, under section 7, the requirement that the similar materials should be sold at or about the same time as the material being valued are 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 9 could be used. For a further illustration, under section 9, the 90 days requirement could be administered flexibly.

  • SOR/2004-298, ss. 220, 222(E)
 
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