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

Regulations are current to 2020-09-09

SCHEDULE VIIIMethods for Determining the Value of Non-Originating Materials That Are Identical Materials and That Are Used in the Production of a Good for Purposes of Subsections 5(10), 5(11) and 6(10) of These Regulations

Definitions and Interpretation

  • 1 For purposes of this Schedule,

    FIFO method

    FIFO method means the method by which the value of non-originating materials first received in materials inventory, determined in accordance with section 7 of these Regulations, is considered to be the value of non-originating materials used in the production of the good first shipped to the buyer of the good; (méthode PEPS)

    identical materials

    identical materials means, with respect to a material, materials that are the same as that material in all respects, including physical characteristics, quality and reputation but excluding minor differences in appearance; (matières identiques)

    LIFO method

    LIFO method means the method by which the value of non-originating materials last received in materials inventory, determined in accordance with section 7 of these Regulations, is considered to be the value of non-originating materials used in the production of the good first shipped to the buyer of the good; (méthode DEPS)

    materials inventory

    materials inventory means, with respect to a single plant of the producer of a good, an inventory of non-originating materials that are identical materials and that are used in the production of the good; (stock de matière)

    rolling average method

    rolling average method means the method by which the value of non-originating materials used in the production of a good that is shipped to the buyer of the good is based on the average value, calculated in accordance with section 4, of the non-originating materials in materials inventory. (méthode de la moyenne mobile)

General

  • 2 For purposes of subsections 5(10) and (11) and 6(10) of these Regulations, the following are the methods for determining the value of non-originating materials that are identical materials and are used in the production of a good:

    • (a) FIFO method;

    • (b) LIFO method; and

    • (c) rolling average method.

    • 3 (1) Where a producer of a good chooses, with respect to non-originating materials that are identical materials, any of the methods referred to in section 2, the producer may not use another of those methods with respect to any other non-originating materials that are identical materials and that are used in the production of that good or in the production of any other good.

    • (2) Where a producer of a good produces the good in more than one plant, the method chosen by the producer shall be used with respect to all plants of the producer in which the good is produced.

    • (3) The method chosen by the producer to determine the value of non-originating materials may be chosen at any time during the producer’s fiscal year and may not be changed during that fiscal year.

Average Value for Rolling Average Method

    • 4 (1) The average value of non-originating materials that are identical materials and that are used in the production of a good that is shipped to the buyer of the good is calculated by dividing

      • (a) the total value of non-originating materials that are identical materials in materials inventory prior to the shipment of the good, determined in accordance with section 7 of these Regulations,

      by

      • (b) the total units of those non-originating materials in materials inventory prior to the shipment of the good.

    • (2) The average value calculated under subsection (1) is applied to the remaining units of non-originating materials in materials inventory.

APPENDIX“Examples” Illustrating the Application of the Methods for Determining the Value of Non-Originating Materials That Are Identical Materials and That Are Used in the Production of a Good

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

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

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

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

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

MATERIALS INVENTORYSALES
(RECEIPTS OF MATERIALS A)(SHIPMENTS OF GOOD A)
DATEblank line (M/D/Y)QUANTITY (UNITS)UNIT COSTFootnote for *QUANTITY (UNITS)
01/01/98   200$1.05
01/03/981,000 1.00
01/05/981,000 1.10
01/08/98   500
01/09/98   500
01/10/981,000 1.05
01/14/981,500
01/16/982,000 1.10
01/18/981,500

Example 1: FIFO method

By applying the FIFO method:

  • (1) 
    the 200 units of Materials A received on 01/01/98 and valued at $1.05 per unit and 300 units of the 1,000 units of Material A received on 01/03/98 and valued at $1.00 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/08/98; therefore, the value of the non-originating materials used in the production of those goods is considered to be $510 [(200 units × $1.05) + (300 units × $1.00)];
  • (2) 
    500 units of the remaining 700 units of Materials A received on 01/03/98 and valued at $1.00 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/09/98; therefore, the value of the non-originating materials used in the production of those goods is considered to be $500 (500 units × $1.00);
  • (3) 
    the remaining 200 units of the 1,000 units of Materials A received on 01/03/98 and valued at $1.00 per unit, the 1,000 units of Materials A received on 01/05/98 and valued at $1.10 per unit, and 300 units of the 1,000 units of Materials A received on 01/10/98 and valued at $1.05 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/14/98; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,615 [(200 units × $1.00) + (1,000 units x $1.10) + (300 units × $1.05)]; and
  • (4) 
    the remaining 700 units of the 1,000 units of Materials A received on 01/10/98 and valued at $1.05 per unit and 800 units of the 2,000 units of Materials A received on 01/16/98 and valued at $1.10 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/18/98; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,615 [(700 units × $1.05) + (800 units x $1.10)].

Example 2: LIFO method

By applying the LIFO method:

  • (1) 
    500 units of the 1,000 units of Materials A received on 01/05/98 and valued at $1.10 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/08/98; therefore, the value of the non-originating materials used in the production of those goods is considered to be $550 (500 units x $1.10);
  • (2) 
    the remaining 500 units of the 1,000 units of Materials A received on 01/05/98 and valued at $1.10 per unit are considered to have been used in the production of the 500 units of Good A shipped on 01/09/98; therefore, the value of non-originating materials used in the production of those goods is considered to be $550 (500 units x $1.10);
  • (3) 
    the 1,000 units of Materials A received on 01/10/98 and valued at $1.05 per unit and 500 units of the 1,000 units of Material A received on 01/03/98 and valued at $1.00 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/14/98; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,550 [(1,000 units x $1.05) + (500 units x $1.00)]; and
  • (4) 
    1,500 units of the 2,000 units of Materials A received on 01/16/98 and valued at $1.10 per unit are considered to have been used in the production of the 1,500 units of Good A shipped on 01/18/98; therefore, the value of non-originating materials used in the production of those goods is considered to be $1,650 (1,500 units x $1.10).

Example 3: Rolling average method

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

MATERIALS INVENTORY
DATEblank line (M/D/Y)QUANTITY (UNITS)UNIT COSTFootnote for *TOTAL VALUE
Beginning Inventory01/01/98   200$1.05$  210
Receipt01/03/981,000 1.00 1,000
AVERAGE VALUE1,200 1.008 1,210
Receipt01/05/981,000 1.10 1,100
AVERAGE VALUE2,200 1.05 2,310
Shipment01/08/98   500 1.05    525
AVERAGE VALUE1,700 1.05 1,785
Shipment01/09/98   500 1.05    525
AVERAGE VALUE1,200 1.05 1,260
Receipt01/16/982,000 1.10 2,200
AVERAGE VALUE3,200 1.08 3,460

By applying the rolling average method:

  • (1) 
    the value of non-originating materials used in the production of the 500 units of Good A shipped on 01/08/98 is considered to be $525 (500 units x $1.05); and
  • (2) 
    the value of non-originating materials used in the production of the 500 units of Good A shipped on 01/09/98 is considered to be $525 (500 units x $1.05).
  • SOR/2004-298, s. 222(E)
 
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