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

Regulations are current to 2020-09-09

PART IIOriginating Goods (continued)

De Minimis

  •  (1) A good shall be considered to originate in the territory of a CCFTA country where the value of all non-originating materials that are used in the production of the good and that do not undergo an applicable change in tariff classification as a result of production occurring entirely in the territory of one or both of the CCFTA countries is not more than nine per cent of the transaction value of the good determined in accordance with Schedule II with respect to the transaction in which the producer of the good sold the good, adjusted to an F.O.B. basis, or of the total cost of the good, where there is no transaction value for the good under subsection 2(1) of Schedule III or the transaction value of the good is unacceptable under subsection 2(2) of that Schedule, provided that,

    • (a) if, under the rule in which the applicable change in tariff classification is specified, the good is also subject to a regional value-content requirement, the value of those non-originating materials shall be taken into account in calculating the regional value content of the good in accordance with the method set out for that good, and

    • (b) the good satisfies all other applicable requirements of these Regulations.

  • (2) For purposes of subsection (1), where

    • (a) Schedule I sets out two or more alternative rules for the tariff provision under which the good is classified, and

    • (b) the good, in accordance with subsection (1), is considered to originate under one of those rules,

    the good is not required to satisfy the requirements specified in any alternative rule referred to in paragraph (a).

  • (3) Subsections (1) and (2) do not apply to

    • (a) a non-originating material of Chapter 4 or any of tariff item Nos. 1901.90.31, 1901.90.32, 1901.90.33, 1901.90.34, 1901.90.39, 1901.90.51, 1901.90.52, 1901.90.53, 1901.90.54 and 1901.90.59 that is used in the production of a good of Chapter 4;

    • (b) a non-originating material of Chapter 4 or any of tariff item Nos. 1901.90.31, 1901.90.32, 1901.90.33, 1901.90.34, 1901.90.39, 1901.90.51, 1901.90.52, 1901.90.53, 1901.90.54 and 1901.90.59 that is used in the production of a good of any of tariff item Nos. 1901.10.20, 1901.20.11, 1901.20.12, 1901.20.21, 1901.20.22, 1901.90.31, 1901.90.32, 1901.90.33, 1901.90.34, 1901.90.39, 1901.90.51, 1901.90.52, 1901.90.53, 1901.90.54 and 1901.90.59, heading 21.05 and tariff item Nos. 2106.90.31, 2106.90.32, 2106.90.33, 2106.90.34, 2106.90.35, 2106.90.93, 2106.90.94, 2106.90.95, 2202.90.41, 2202.90.42, 2202.90.43, 2202.90.49, 2309.90.31, 2309.90.32, 2309.90.33, 2309.90.35 and 2309.90.36;

    • (c) a non-originating material of Chapter 15 that is used in the production of a good of any of heading 15.01 through 15.08, 15.12, 15.14 and 15.15;

    • (d) a non-originating material of heading 17.01 that is used in the production of a good of any of heading 17.01 through 17.03;

    • (e) a non-originating material of Chapter 17 or heading 18.05 that is used in the production of a good of subheading 1806.10;

    • (f) a non-originating material of any of heading 22.03 through 22.07 that is used in the production of a good of any of heading 22.03 through 22.07 and subheading 2208.20;

    • (g) a non-originating material that is used in the production of a good of any of tariff item No. 7321.11.10, subheadings 8415.10, 8415.20 through 8415.83, 8418.10 through 8418.21, 8418.29 through 8418.40, 8421.12, 8422.11, 8450.11 through 8450.20 and 8451.21 through 8451.29, headings 84.56 through 84.63 and 84.77, tariff item No. 8516.60.20 and subheading 8526.10;

    • (h) a non-originating material of tariff item No. 8548.10.10 that is used in the production of a good of any of heading 85.06 and 85.07;

    • (i) a printed circuit assembly, including a part that incorporates a printed circuit assembly, that is a non-originating material used in the production of a good where the applicable change in tariff classification for the good, as set out in Schedule I, places restrictions on the use of such non-originating material;

    • (j) a non-originating material that is a single juice ingredient of heading 20.09 that is used in the production of a good of any of tariff item 2106.90.92 and 2202.90.32; or

    • (k) a non-originating material that is used in the production of a good of any of Chapters 1 through 21, unless the non-originating material is of a different subheading than the good for which origin is being determined under this section.

  • (4) A good that is subject to a regional value-content requirement shall be considered to originate in the territory of a CCFTA country and shall not be required to satisfy that requirement where

    • (a) the value of all non-originating materials used in the production of the good is not more than nine per cent

      • (i) of the transaction value of the good determined in accordance with Schedule II with respect to the transaction in which the producer of the good sold the good, adjusted to an F.O.B. basis, or

      • (ii) of the total cost of the good, where there is no transaction value for the good under subsection 2(1) of Schedule III or the transaction value of the good is unacceptable under subsection 2(2) of that Schedule; and

    • (b) the good satisfies all other applicable requirements of these Regulations.

  • (5) A good of any of Chapters 50 through 63 that does not originate in the territory of a CCFTA country because certain fibres or yarns that are used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification as a result of production occurring entirely in the territory of one or both of the CCFTA countries shall be considered to originate in the territory of a CCFTA country if

    • (a) the total weight of all those fibres or yarns is not more than nine per cent of the total weight of that component; and

    • (b) the good satisfies all other applicable requirements of these Regulations.

  • (6) For purposes of subsection (5),

    • (a) the component of a good that determines the tariff classification of that good shall be identified in accordance with the General Rules for the Interpretation of the Harmonized System; and

    • (b) where the component of the good that determines the tariff classification of the good is a blend of two or more yarns or fibres, all yarns and fibres used in the production of the component shall be taken into account in determining the weight of fibres and yarns in that component.

  • (7) For purposes of subsections (1) and (4), the value of non-originating materials shall be determined in accordance with subsections 7(1) through (3), (6) and (7).

  • (8) For purposes of subsection (1) and subparagraph (4)(a)(ii), the total cost of a good shall be, at the choice of the producer of the good,

    • (a) the total cost incurred with respect to all goods produced by the producer that can be reasonably allocated to that good in accordance with Schedule VI; or

    • (b) the aggregate of each cost that forms part of the total cost incurred with respect to that good that can be reasonably allocated to that good in accordance with Schedule VI.

  • (9) Total cost under subsection (8) consists of the costs referred to in subsection 2(6), and is calculated in accordance with that subsection and subsection 2(7).

  • (10) For purposes of determining the value under subsection (1) of non-originating materials that do not undergo an applicable change in tariff classification, where Schedule IX is not being used to determine the value of those non-originating materials,

    • (a) if the value of those non-originating materials is being determined as a percentage of the transaction value of the good and the producer chooses under subsection 6(10) that one of the methods set out in Schedule VIII be used to determine the value of those non-originating materials for purposes of calculating the regional value content of the good, the value of those non-originating materials shall be determined in accordance with that method;

    • (b) if

      • (i) the value of those non-originating materials is being determined as a percentage of the total cost of the good,

      • (ii) under the rule in which the applicable change in tariff classification is specified, the good is also subject to a regional value-content requirement and paragraph (4)(a) does not apply with respect to that good,

      • (iii) the regional value content of the good is calculated on the basis of the net cost method, and

      • (iv) the producer elects under subsection 6(15), 10(1), (3) or (6) or 11(1) that the regional value content of the good be calculated over a period,

      the value of those non-originating materials shall be the sum of the values of non-originating materials determined in accordance with that election, divided by the number of units of the goods with respect to which the election is made;

    • (c) if

      • (i) the value of those non-originating materials is being determined as a percentage of the total cost of the good,

      • (ii) under the rule in which the applicable change in tariff classification is specified, the good is not also subject to a regional value-content requirement or paragraph (4)(a) applies with respect to that good, and

      • (iii) the producer elects under paragraph 2(7)(b) that, for purposes of subsection (8), the total cost of the good be calculated over a period,

      the value of those non-originating materials shall be the sum of the values of non-originating materials divided by the number of units produced during that period; and

    • (d) in any other case, the value of those non-originating materials may, at the choice of the producer, be determined in accordance with one of the methods set out in Schedule VIII.

  • (11) For purposes of subsection (4), the value of the non-originating materials used in the production of the good may, at the choice of the producer, be determined in accordance with one of the methods set out in Schedule VIII.

  • (12) Each of the following examples is an “Example” as referred to in subsection 2(4).

    Example 1: Subsection 5(1)

    Producer A, located in a CCFTA country, uses originating materials and non-originating materials in the production of copper anodes of heading 74.02. The rule set out in Schedule I for heading 74.02 specifies a change in tariff classification from any other chapter. There is no applicable regional value-content requirement for this heading. Therefore, in order for the copper anode to qualify as an originating good under the rule set out in Schedule I, Producer A may not use in the production of the copper anode any non-originating material of Chapter 74.

    All of the materials used in the production of the copper anode are originating materials, with the exception of a small amount of copper scrap of heading 74.04, that is in the same chapter as the copper anode. Under subsection 5(1), if the value of the non-originating copper scrap does not exceed nine per cent of the transaction value of the copper anode or the total cost of the copper anode, whichever is applicable, the copper anode would be considered an originating good.

    Example 2: Subsection 5(2)

    Producer A, located in a CCFTA country, uses originating materials and non-originating materials in the production of ceiling fans of subheading 8414.51. There are two alternative rules set out in Schedule I for subheading 8414.51, one of which specifies a change in tariff classification from any other heading. The other rule specifies both a change in tariff classification from the subheading under which parts of the ceiling fans are classified and a regional value-content requirement. Therefore, in order for the ceiling fan to qualify as an originating good under the first of the alternative rules, all of the materials that are classified under the subheading for parts of ceiling fans and used in the production of the completed ceiling fan must be originating materials.

    In this case, all of the non-originating materials used in the production of the ceiling fan satisfy the change in tariff classification set out in the rule that specifies a change in tariff classification from any other heading, with the exception of one non-originating material that is classified under the subheading for parts of ceiling fans. Under subsection 5(1), if the value of the non-originating material that does not satisfy the change in tariff classification specified in the first rule does not exceed nine per cent of the transaction value of the ceiling fan or the total cost of the ceiling fan, whichever is applicable, the ceiling fan would be considered an originating good. Therefore, under subsection 5(2), the ceiling fan would not be required to satisfy the alternative rule that specifies both a change in tariff classification and a regional value-content requirement.

    Example 3: Subsection 5(2)

    Producer A, located in a CCFTA country, uses originating materials and non-originating materials in the production of plastic bags of subheading 3923.29. The rule set out in Schedule I for subheading 3923.29 specifies both a change in tariff classification from any other heading, except from subheading 3920.20 or 3920.71, under which certain plastic materials are classified, and a regional value-content requirement. Therefore, with respect to that part of the rule that specifies a change in tariff classification, in order for the plastic bag to qualify as an originating good, any plastic materials that are classified under subheading 3920.20 or 3920.71 and that are used in the production of the plastic bag must be originating materials.

    In this case, all of the non-originating materials used in the production of the plastic bag satisfy the specified change in tariff classification, with the exception of a small amount of plastic materials classified under subheading 3920.71. Subsection 5(1) provides that the plastic bag can be considered an originating good if the value of the non-originating plastic materials that do not satisfy the specified change in tariff classification does not exceed nine per cent of the transaction value of the plastic bag or the total cost of the plastic bag, whichever is applicable. In this case, the value of those non-originating materials that do not satisfy the specified change in tariff classification does not exceed the nine per cent limit.

    However, the rule set out in Schedule I for subheading 3923.29 specifies both a change in tariff classification and a regional value-content requirement. Therefore, under paragraph 5(1)(a), in order to be considered an originating good, the plastic bag must also, except as otherwise provided in subsection 5(4), satisfy the regional value-content requirement specified in that rule. As provided in paragraph 5(1)(a), the value of the non-originating materials that do not satisfy the specified change in tariff classification, together with the value of all other non-originating materials used in the production of the plastic bag, will be taken into account in calculating the regional value content of the plastic bag.

    Example 4: Subsection 5(4)

    Producer A, located in a CCFTA country, primarily uses originating materials in the production of shoes of heading 64.05. The rule set out in Schedule I for heading 64.05 specifies both a change in tariff classification from any subheading other than subheading 6406.10 and a regional value-content requirement.

    With the exception of a small amount of materials of Chapter 39, all of the materials used in the production of the shoes are originating materials.

    Under subsection 5(4), if the value of all of the non-originating materials used in the production of the shoes does not exceed nine per cent of the transaction value of the shoes or the total cost of the shoes, whichever is applicable, the shoes are not required to satisfy the regional value-content requirement specified in the rule set out in Schedule I in order to be considered originating goods.

    Example 5: Subsection 5(4)

    Producer A, located in a CCFTA country, produces barbers’ chairs of subheading 9402.10. The rule set out in Schedule I for goods of heading 94.02 specifies a change in tariff classification from any other chapter. All of the materials used in the production of these chairs are originating materials, with the exception of a small quantity of non-originating materials that are classified as parts of barbers’ chairs. These parts undergo no change in tariff classification because subheading 9402.10 provides for both barbers’ chairs and their parts.

    Although Producer A’s barbers’ chairs do not qualify as originating goods under the rule set out in Schedule I, paragraph 4(4)(b) provides, among other things, that, where there is no change in tariff classification from the non-originating materials to the goods because the subheading under which the goods are classified provides for both the goods and their parts, the goods shall qualify as originating goods if they satisfy a specified regional value-content requirement.

    However, under subsection 5(4), if the value of the non-originating materials does not exceed nine per cent of the transaction value of the barbers’ chairs or the total cost of the barbers’ chairs, whichever is applicable, the barbers’ chairs will be considered originating goods and are not required to satisfy the regional value-content requirement set out in subparagraph 4(4)(b)(v).

    Example 6: Subsections 5(5) and (6)

    Producer A, located in a CCFTA country, produces women’s dresses of subheading 6204.41 from fine wool fabric of heading 51.12. This fine wool fabric, also produced by Producer A, is the component of the dress that determines its tariff classification under subheading 6204.41.

    The rule set out in Schedule I for subheading 6204.41, under which the dress is classified, specifies both a change in tariff classification from any other chapter, except from those headings and chapters under which certain yarns and fabrics, including combed wool yarn and wool fabric, are classified, and a requirement that the good be cut and sewn or otherwise assembled in the territory of one or both of the CCFTA countries.

    Therefore, with respect to that part of the rule that specifies a change in tariff classification, in order for the dress to qualify as an originating good, the combed wool yarn and the fine wool fabric made therefrom that are used by Producer A in the production of the dress must be originating materials.

    At one point Producer A uses a small quantity of non-originating combed wool yarn in the production of the fine wool fabric. Under subsection 5(5), if the total weight of the non-originating combed wool yarn does not exceed nine per cent of the total weight of all the yarn used in the production of the component of the dress that determines its tariff classification, that is, the wool fabric, the dress would be considered an originating good.

  • SOR/2004-298, ss. 1, 222(E)
 
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