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

Regulations are current to 2020-09-09

PART VAutomotive Goods (continued)

Automotive Parts Averaging

  •  (1) The regional value content of any or all goods that are of the same tariff provision listed in Schedule IV, produced in the same plant, may, where the producer of those goods elects to do so, be determined by

    • (a) calculating the sum of the net costs incurred and the sum of the values of non-originating materials used by the producer of the goods over the period set out in subsection (5) that is chosen by the producer with respect to any or all of those goods in any one of the categories set out in subsection (4) that is chosen by the producer; and

    • (b) using the sums referred to in paragraph (a) in the calculation referred to in subsection 6(3) as the net cost and the value of non-originating materials, respectively.

  • (2) The calculation of the regional value content made under subsection (1) shall apply with respect to each unit of the goods in the category set out in subsection (4) that is chosen by the producer and produced during the period chosen by the producer under subsection (5).

  • (3) The value of non-originating materials of each unit of the goods

    • (a) in the category set out in subsection (4) chosen by the producer, and

    • (b) produced during the period chosen by the producer under subsection (5),

    shall be the sum of the values of non-originating materials referred to in paragraph (1)(a) divided by the number of units of the goods in that category and produced during that period.

  • (4) The categories referred to in paragraph (1)(a) are the following:

    • (a) original equipment for use in the production of motor vehicles;

    • (b) after-market parts;

    • (c) any combination of goods referred to in paragraph (a) or (b);

    • (d) goods that are in a category set out in any of paragraphs (a) through (c) and are sold to one or more motor vehicle producers; and

    • (e) goods that are in a category set out in any of paragraphs (a) through (d) and are exported to the territory of a CCFTA country.

  • (5) The period referred to in paragraph (1)(a) is

    • (a) a month;

    • (b) any one of the four quarters that fall within the fiscal year of the producer of the good;

    • (c) the fiscal year of the producer of the good; or

    • (d) the fiscal year of the motor vehicle producer to whom the goods are sold.

  • (6) An election made under subsection (1) may not be rescinded or modified with respect to the goods or the period with respect to which the election is made.

  • (7) Where a producer of goods chooses a month or a quarter under subsection (5), that producer shall be considered to have chosen under that subsection a period or periods of the same duration for

    • (a) the remainder of the fiscal year of the motor vehicle producer to whom those goods are sold, where the producer chooses under subsection (8) the fiscal year of that motor vehicle producer; and

    • (b) the remainder of the fiscal year of the producer of those goods, where the producer does not choose under subsection (8) the fiscal year of the motor vehicle producer to whom the goods are sold.

  • (8) Where a producer of goods chooses a month or a quarter under subsection (5) with respect to the goods, the producer may, at the end of the producer’s fiscal year or the fiscal year of the motor vehicle producer to whom those goods are sold, as the case may be, choose the producer’s fiscal year or the fiscal year of that motor vehicle producer.

  • (9) The producer of a good may calculate the regional value content of the good over the period chosen under subsection (1) on the basis of estimated costs, including standard costs, budgeted forecasts or other similar estimating procedures.

  • (10) Where the producer calculates the regional value content of a good in accordance with subsection (9), the producer shall conduct an analysis at the end of the producer’s fiscal year of the actual costs incurred over the period with respect to the production of the good and, if the good does not satisfy the regional value-content requirement on the basis of the actual costs during that period, immediately inform any person to whom the producer has provided a Certificate of Origin for the good, or a written statement that the good is an originating good, that the good is a non-originating good.

PART VIOther Provisions

Accumulation

  •  (1) Subject to subsections (2) and (4), for purposes of determining whether a good is an originating good, an exporter or producer of a good may choose to accumulate the production, by one or more producers in the territory of one or both of the CCFTA countries, of materials that are incorporated into that good so that the production of the materials shall be considered to have been performed by that exporter or producer.

  • (2) Where a good is subject to a regional value-content requirement and an exporter or producer of the good has a statement signed by a producer of a material that is used in the production of the good that

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

      • (i) the net cost incurred by the producer of the good with respect to the material shall be the net cost incurred by the producer of the material plus, where not included in the net cost incurred by the producer of the material, the costs referred to in paragraphs 7(2)(a) through (c), and

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

    • (b) states any amount that is part of the net cost incurred by the producer of the material in the production of that material, but that does not include any of the value of non-originating materials,

      • (i) the net cost incurred by the producer of the good with respect to the material shall be the value of the material, determined in accordance with subsections 7(1) and (2), and

      • (ii) the value of non-originating materials used by the producer of the good with respect to the material shall be the value of the material, determined in accordance with subsections 7(1) and (2), minus the amount stated in the statement.

  • (3) For purposes of the statement referred to in subsection (2), the net cost incurred and the value of non-originating materials used by the producer of the material in the production of that material may be calculated by the producer of the material by dividing

    • (a) the sum of the net costs incurred and the sum of the values of non-originating materials used by the producer of the material in the production of that material and identical materials or similar materials, or any combination thereof, produced in a single plant by the producer of the material over

      • (i) a month,

      • (ii) any one of the four quarters that fall within the fiscal year of the producer of the good,

      • (iii) either of the two periods of six consecutive months that fall within the fiscal year of the producer of the good, or

      • (iv) the fiscal year of the producer of the good, by

    • (b) the number of units of those materials produced in that plant over that period.

  • (4) For purposes of subsection 7(4), where a producer of the good chooses to accumulate the production of materials under subsection (1), that production shall be considered to be the production of the producer of the good.

  • (5) For purposes of this section,

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

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

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

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

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

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

    Example 1: Subsection 12(1)

    Producer A, located in CCFTA country A, imports unfinished bearing rings of subheading 8482.99 into CCFTA country A from outside the territories of the CCFTA countries. Producer A further processes the unfinished bearing rings into finished bearing rings of the same subheading. The finished bearing rings of Producer A do not satisfy an applicable change in tariff classification and therefore do not qualify as originating goods. The net cost of the finished bearing rings is $1.40 per unit and the value of non-originating materials used in their production is $0.75 per unit.

    Producer A then sells the finished bearing rings to Producer B who is located in CCFTA country A for $2.25 per unit.

    Producer B further processes the finished bearing rings into bearings of subheading 8482.10, and intends to export the bearings to CCFTA country B. Although the bearings satisfy the applicable change in tariff classification, the bearings are subject to a regional value-content requirement of 35 per cent under the transaction value method and 25 per cent under the net cost method.

    Situation A — Without Accumulation:

    Producer B does not choose to accumulate costs incurred by Producer A with respect to the finished bearing rings used in the production of the bearings and therefore receives no statement from Producer A.

    Based on its production and the costs recorded on its books, Producer B determines that the net cost of the bearings is $2.85 per unit and the value of non-originating materials is $2.25 per unit (i.e. the transaction value of the finished bearing rings purchased from Producer A).

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

    RVC=NC - VNM × 100
    blank lineNC
    =$2.85 - $2.25 × 100
    blank line$2.85
    =21.1%

    Therefore, the bearings are non-originating goods.

    Situation B — Accumulation with Statement Referred to in Paragraph 12(2)(a):

    Producer B chooses to accumulate costs incurred by Producer A with respect to the finished bearing rings used in the production of the bearings. Producer A provides a statement described in paragraph 12(2)(a) to Producer B which states that the net cost of the finished bearing rings is $1.40 per unit and the value of non-originating materials used in their production is $0.75 per unit.

    Producer B recalculates the regional value content of the bearings by adjusting the value of non-originating materials and the net cost based on the information provided in the statement from Producer A.

    Because Producer B has been provided by Producer A with the statement referred to above, the value of non-originating materials is no longer the transaction value of the finished bearing rings acquired from Producer A ($2.25), but rather is the value of non-originating materials set out in the statement provided by Producer A ($0.75).

    Similarly, in adjusting the net cost of the bearings, Producer B no longer uses the transaction value of the finished bearing rings as acquired from Producer A, but rather uses the net cost as set out in the statement provided by Producer A ($1.40). Producer B adjusts the net cost of the bearings as follows:

    Net cost of the bearings, per unit, (from Situation A - without accumulation)$2.85
    Less:
    Transaction value, per unit, of finished bearing rings purchased from Producer A  2.25
    Add:
    Net cost of finished bearing rings, per unit, as set out in the statement of Producer A  1.40
    Net cost of the bearings, per unit$2.00

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

    RVC=NC - VNM × 100
    blank lineNC
    =$2.00 - $0.75 × 100
    blank line$2.00
    =62.5%

    Therefore, the bearings are originating goods.

    Situation C — Accumulation with Statement Referred to in Paragraph 12(2)(b)

    Producer B chooses to accumulate costs incurred by Producer A with respect to the finished bearing rings used in the production of the bearings. Because of commercial sensitivities associated with disclosing the net cost of the finished bearing rings, Producer A chooses to provide Producer B with a statement described in paragraph 12(2)(b) that specifies an amount of $0.65 per unit. Producer A calculates this amount by subtracting from the net cost of the finished bearing rings the value of non-originating materials used to produce the finished bearing rings ($1.40 - $0.75 = $0.65).

    Producer B may consider the $0.65 as originating costs and therefore recalculates the regional value content of the bearings by adjusting the value of non-originating materials accordingly. Because Producer B has been provided by Producer A with the statement referred to above, the value of non-originating materials is no longer the transaction value of the finished bearing rings acquired from Producer A ($2.25), but rather is reduced by the amount set out in the statement ($2.25 - $0.65 = $1.60).

    Because Producer A does not specify the net cost of the finished bearing rings in the statement, the cost of the finished bearing rings supplied to Producer B continues to be their transaction value ($2.25). As a result, the net cost of the bearings remains unchanged at $2.85 as calculated without accumulation.

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

    RVC=NC - VNM × 100
    blank lineNC
    =$2.85 - $1.60 × 100
    blank line$2.85
    =43.9%

    Therefore, the bearings are originating goods.

    Situation D — Accumulation with Statement Referred to in Paragraph 12(2)(b)

    In reviewing the regional value content of the bearings as calculated without accumulation, Producer B realizes that an additional $0.1125 per unit of originating costs is needed to satisfy the 25 per cent regional value-content requirement under the net cost method. Producer B requests from Producer A a statement described in paragraph 12(2)(b) with respect to the finished bearing rings used in the production of the bearings that states an amount of at least $0.1125 per unit. In response to Producer B’s request, Producer A reviews the costs of producing the finished bearing rings and decides that it is possible to provide Producer B with a statement that specifies an amount of $0.1125 per unit, which represents a portion of Producer A’s originating costs. Producer A provides that statement to Producer B.

    Producer B may consider the $0.1125 as an originating cost and therefore recalculates the regional value content of the bearings by adjusting the value of non-originating materials accordingly. Because Producer B has been provided by Producer A with the statement referred to above, the value of non-originating materials is no longer the transaction value of the finished bearing rings acquired from Producer A ($2.25), but rather is reduced by the amount set out in the statement ($2.25 - $0.1125 = $2.1375).

    Because Producer A does not specify the net cost of the finished bearing rings in the statement, the cost of the finished bearing rings supplied to Producer B continues to be their transaction value as acquired from Producer A ($2.25). As a result, the net cost of the bearings remains unchanged at $2.85 as calculated without accumulation.

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

    RVC=NC - VNM × 100
    blank lineNC
    =$2.85 - $2.1375 × 100
    blank line$2.85
    =25%

    Therefore, the bearings are originating goods.

    Example 2: Subsection 12(1)

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

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

    However, under subsection 12(1), if Producer B chooses to accumulate the production of Producer A, the production of Producer A would be considered to have been performed by Producer B. The rule for heading 52.08, under which the cotton fabric is classified, does not exclude a change from heading 52.03, under which carded or combed cotton is classified. Therefore, under subsection 12(1), the change from carded or combed cotton of heading 52.03 to the woven fabric of cotton of heading 52.08 would satisfy the applicable change of tariff classification for heading 52.08. The woven fabric of cotton would be considered as an originating good.

    Producer B, in order to choose to accumulate Producer A’s production, must have a statement described in subparagraph 12(5)(a)(ii).

 
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