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Version of document from 2006-03-22 to 2006-06-30:

NAFTA Rules of Origin Regulations

SOR/94-14

Registration 1993-12-29

Regulations Respecting the Uniform Interpretation, Application and Administration of the Rules of Origin Under the North American Free Trade Agreement

P.C. 1993-2186 1993-12-29

His Excellency the Governor General in Council, on the recommendation of the Minister of Finance and the Minister of National Revenue, pursuant to subsection 95(2)Footnote ^* of the Customs TariffFootnote ^** and subsection 164(1.1)Footnote ^*** of the Customs ActFootnote ^****, is pleased hereby to make the annexed Regulations respecting the uniform interpretation, application and administration of the rules of origin under the North American Free Trade Agreement, effective on the day on which subsection 108(1) and section 136 of An Act to implement the North American Free Trade Agreement, being chapter 44 of the Statutes of Canada, 1993, come into force.

Return to footnote ^*S.C. 1993, c. 44, s. 136
Return to footnote ^**R.S., c. 41 (3rd Supp.)
Return to footnote ^***S.C. 1993, c. 44, s. 108(1)
Return to footnote ^****R.S., c. 1 (2nd Supp.)

Short Title

1 These Regulations may be cited as the NAFTA Rules of Origin Regulations.

SOR/95-382, s. 1

PART IDefinitions and Interpretation

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.

SOR/95-382, s. 1
SOR/2000-86, s. 1
SOR/2001-108, s. 1
SOR/2002-27, ss. 1, 99

3 (1) Where the value of a good or a material is expressed in a currency other than the currency of the country in which the producer of the good is located, that value shall be converted to the currency of the country in which that producer is located on the basis of
- (a) in the case of the sale of that good or the purchase of that material, the rate of exchange used by the producer for purposes of recording that sale or purchase, as the case may be; and
- (b) in the case of a material that is acquired by the producer other than by a purchase,
  - (i) where the producer used a rate of exchange for purposes of recording another transaction in that other currency that occurred within 30 days of the date on which the producer acquired the material, that rate, and
  - (ii) in any other case,
    - (A) with respect to a producer located in Canada, the rate of exchange referred to in section 5 of the Currency Exchange for Customs Valuation Regulations for the date on which the material was shipped directly to the producer,
    - (B) with respect to a producer located in Mexico, the rate of exchange published by the Banco de Mexico in the Diario Oficial de la Federacion, under the title “TIPO de cambio para solventar obligaciones denominadas en moneda extranjera pagaderas en la Republica Mexicana”, for the date on which the material was shipped directly to the producer, and
    - (C) with respect to a producer located in the United States, the rate of exchange referred to in 31 U.S.C. 5151 for the date on which the material was shipped directly to the producer.
(2) Where a producer of a good has a statement referred to in section 9, 10 or 14 that includes information in a currency other than the currency of the country in which that producer is located, the currency shall be converted to the currency of the country in which the producer is located on the basis of
- (a) if the material was purchased by the producer in the same currency as the currency in which the information in the statement is provided, the rate of exchange used by the producer for purposes of recording the purchase;
- (b) if the material was purchased by the producer in a currency other than the currency in which the information in the statement is provided,
  - (i) where the producer used a rate of exchange for purposes of recording a transaction in that other currency that occurred within 30 days of the date on which the producer acquired the material, that rate, and
  - (ii) in any other case,
    - (A) with respect to a producer located in Canada, the rate of exchange referred to in section 5 of the Currency Exchange for Customs Valuation Regulations for the date on which the material was shipped directly to the producer,
    - (B) with respect to a producer located in Mexico, the rate of exchange published by the Banco de Mexico in the Diario Oficial de la Federacion, under the title “TIPO de cambio para solventar obligaciones denominadas en moneda extranjera pagaderas en la Republica Mexicana”, for the date on which the material was shipped directly to the producer, and
    - (C) with respect to a producer located in the United States, the rate of exchange referred to in 31 U.S.C. 5151 for the date on which the material was shipped directly to the producer; and
- (c) if the material was acquired by the producer other than by a purchase,
  - (i) where the producer used a rate of exchange for purposes of recording a transaction in that other currency that occurred within 30 days of the date on which the producer acquired the material, that rate, and
  - (ii) in any other case,
    - (A) with respect to a producer located in Canada, the rate of exchange referred to in section 5 of the Currency Exchange for Customs Valuation Regulations for the date on which the material was shipped directly to the producer,
    - (B) with respect to a producer located in Mexico, the rate of exchange published by the Banco de Mexico in the Diario Oficial de la Federacion, under the title “TIPO de cambio para solventar obligaciones denominadas en moneda extranjera pagaderas en la Republica Mexicana”, for the date on which the material was shipped directly to the producer, and
    - (C) with respect to a producer located in the United States, the rate of exchange referred to in 31 U.S.C. 5151 for the date on which the material was shipped directly to the producer.

SOR/95-382, s. 1

PART IIOriginating Goods

General

4 (1) A good originates in the territory of a NAFTA country where the good is
- (a) a mineral good extracted in the territory of one or more of the NAFTA countries;
- (b) a vegetable or other good harvested in the territory of one or more of the NAFTA countries;
- (c) a live animal born and raised in the territory of one or more of the NAFTA countries;
- (d) a good obtained from hunting, trapping or fishing in the territory of one or more of the NAFTA countries;
- (e) fish, shellfish or other marine life taken from the sea by a vessel registered or recorded with a NAFTA country and flying its flag;
- (f) a good produced on board a factory ship from a good referred to in paragraph (e), where the factory ship is registered or recorded with the same NAFTA country as the vessel that took that good and flies that country’s flag;
- (g) a good taken by a NAFTA country or a person of a NAFTA country from or beneath the seabed outside the territorial waters of that country, where a NAFTA country has the right to exploit that seabed;
- (h) a good taken from outer space, where the good is obtained by a NAFTA country or a person of a NAFTA country and is not processed outside the territories of the NAFTA countries;
- (i) waste and scrap derived from
  - (i) production in the territory of one or more of the NAFTA countries, or
  - (ii) used goods collected in the territory of one or more of the NAFTA countries, where those goods are fit only for the recovery of raw materials; or
- (j) a good produced in the territory of one or more of the NAFTA countries exclusively from a good referred to in any of paragraphs (a) through (i), or from the derivatives of such a good, at any stage of production.
(2) A good originates in the territory of a NAFTA country where
- (a) each of the non-originating materials used in the production of the good undergoes the applicable change in tariff classification as a result of production that occurs entirely in the territory of one or more of the NAFTA countries, where the applicable rule in Schedule I for the tariff provision under which the good is classified specifies only a change in tariff classification, and the good satisfies all other applicable requirements of these Regulations;
- (b) each of the non-originating materials used in the production of the good undergoes the applicable change in tariff classification as a result of production that occurs entirely in the territory of one or more of the NAFTA countries and the good satisfies the applicable regional value-content requirement, where the applicable rule in Schedule I for the tariff provision under which the good is classified specifies both a change in tariff classification and a regional value-content requirement, and the good satisfies all other applicable requirements of these Regulations; or
- (c) the good satisfies the applicable regional value-content requirement, where the applicable rule in Schedule I for the tariff provision under which the good is classified specifies only a regional value-content requirement, and the good satisfies all other applicable requirements of these Regulations.
(3) A good originates in the territory of a NAFTA country where the good is produced entirely in the territory of one or more of the NAFTA countries exclusively from originating materials.
(4) A good originates in the territory of a NAFTA country where
- (a) except in the case of a good of any of Chapters 61 through 63,
  - (i) the good is produced entirely in the territory of one or more of the NAFTA countries,
  - (ii) one or more of the non-originating materials used in the production of the good do not undergo an applicable change in tariff classification because the materials were imported together, whether or not with originating materials, into the territory of a NAFTA country as an unassembled or disassembled good, and were classified as an assembled good pursuant to Rule 2(a) of the General Rules for the Interpretation of the Harmonized System,
  - (iii) the regional value content of the good, calculated in accordance with section 6, is not less than 60 per cent where the transaction value method is used, or is not less than 50 per cent where the net cost method is used, and
  - (iv) the good satisfies all other applicable requirements of these Regulations, including any applicable, higher regional value-content requirement provided for in section 13 or Schedule I; or
- (b) except in the case of a good of any of Chapters 61 through 63,
  - (i) the good is produced entirely in the territory of one or more of the NAFTA countries,
  - (ii) one or more of the non-originating materials used in the production of the good do not undergo an applicable change in tariff classification because
    - (A) those materials are provided for under the Harmonized System as parts of the good, and
    - (B) the heading for the good provides for both the good and its parts and is not further subdivided into subheadings, or the subheading for the good provides for both the good and its parts,
  - (iii) the non-originating materials that do not undergo a change in tariff classification in the circumstances described in subparagraph (ii) and the good are not both classified as parts of goods under the heading or subheading referred to in clause (ii)(B),
  - (iv) each of the non-originating materials that is used in the production of the good and is not referred to in subparagraph (iii) undergoes an applicable change in tariff classification or satisfies any other applicable requirement set out in Schedule I,
  - (v) the regional value content of the good, calculated in accordance with section 6, is not less than 60 per cent where the transaction value method is used, or is not less than 50 per cent where the net cost method is used, and
  - (vi) the good satisfies all other applicable requirements of these Regulations, including any applicable, higher regional value-content requirement provided for in section 13 or Schedule I.
(5) For purposes of paragraph (4)(b),
- (a) the determination of whether a heading or subheading provides for a good and its parts shall be made on the basis of the nomenclature of the heading or subheading and the relevant Section or Chapter Notes, in accordance with the General Rules for the Interpretation of the Harmonized System; and
- (b) where, in accordance with the Harmonized System, a heading includes parts of goods by application of a Section Note or Chapter Note of the Harmonized System and the subheadings under that heading do not include a subheading designated “Parts”, a subheading designated “Other” under that heading shall be considered to cover only the goods and parts of the goods that are themselves classified under that subheading.
(6) For purposes of subsection (2), where Schedule I sets out two or more alternative rules for the tariff provision under which a good is classified, if the good satisfies the requirements of one of those rules, it need not satisfy the requirements of another of the rules in order to qualify as an originating good.
(7) A good originates in the territory of a NAFTA country if the good is referred to in Table 308.1.1 of Section B of Annex 308.1 to Chapter Three of the Agreement and is imported from the territory of a NAFTA country at a time when the NAFTA countries’ most-favoured-nation rate of duty for that good is in accordance with paragraph 1 of Section A of that Annex.
(8) For purposes of determining whether non-originating materials undergo an applicable change in tariff classification, a self-produced material may, at the choice of the producer of that material, be considered as a material used in the production of a good into which the self-produced material is incorporated.
(9) The following example is an “Example” as referred to in subsection 2(4).
Example: Self-produced Materials as Materials for Purposes of Determining Whether Non-originating Materials Undergo an Applicable Change in Tariff Classification
Producer A, located in a NAFTA country, produces Good A. In the production process, Producer A uses originating Material X and non-originating Material Y to produce Material Z. Material Z is a self-produced material that will be used to produce Good A.
The rule set out in Schedule I for the heading under which Good A is classified specifies a change in tariff classification from any other heading. In this case, both Good A and the non-originating Material Y are of the same heading. However, the self-produced Material Z is of a heading different than that of Good A.
For purposes of determining whether the non-originating materials that are used in the production of Good A undergo the applicable change in tariff classification, Producer A has the option to consider the self-produced Material Z as the material that must undergo a change in tariff classification. As Material Z is of a heading different than that of Good A, Material Z satisfies the applicable change in tariff classification and Good A would qualify as an originating good.

SOR/95-382, s. 1

De Minimis

5 (1) Except as otherwise provided in subsection (4), a good shall be considered to originate in the territory of a NAFTA 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 more of the NAFTA countries is not more than seven per cent
- (a) 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
- (b) 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,
- (c) 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
- (d) 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) For purposes of subsection (1), in the case of a good that is of heading 24.02, the percentage shall be nine per cent instead of seven per cent.
(4) Subsections (1) and (2) do not apply to
- (a) a non-originating material of Chapter 4 or of 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 of 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 any of heading 08.05 and subheadings 2009.11 through 2009.39 that is used in the production of a good of any of subheadings 2009.11 through 2009.39 and tariff item Nos. 2106.90.91 and 2202.90.31;
- (d) a non-originating material of Chapter 9 that is used in the production of a good of tariff item No. 2101.11.10;
- (e) a non-originating material of Chapter 15 that is used in the production of a good of any of headings 15.01 through 15.08, 15.12, 15.14 and 15.15;
- (f) a non-originating material of heading 17.01 that is used in the production of a good of any of headings 17.01 through 17.03;
- (g) a non-originating material of Chapter 17 or heading 18.05 that is used in the production of a good of subheading 1806.10;
- (h) a non-originating material of any of headings 22.03 through 22.08 that is used in the production of a good of any of headings 22.07 through 22.08;
- (i) 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 and tariff item Nos. 8479.89.41, 8479.89.49 and 8516.60.20;
- (j) 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 places restrictions on the use of that non-originating material, such as by prohibiting, or limiting the quantity of, that non-originating material;
- (k) 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 subheading 2009.90 and tariff item Nos. 2106.90.92 and 2202.90.32;
- (l) a non-originating material that is used in the production of a good of any of Chapters 1 through 27, unless the non-originating material is of a different subheading than the good for which origin is being determined under this section; or
- (m) a non-originating material that is used in the production of a good of any of Chapters 50 through 63.
(5) A good that is subject to a regional value-content requirement shall be considered to originate in the territory of a NAFTA 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 seven 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.
(6) A good of any of Chapters 50 through 63, that does not originate in the territory of a NAFTA 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 more of the NAFTA countries, shall be considered to originate in the territory of a NAFTA country if
- (a) the total weight of all those fibres or yarns is not more than seven per cent of the total weight of that component; and
- (b) the good satisfies all other applicable requirements of these Regulations.
(7) For purposes of subsection (6),
- (a) the component of a good that determines the tariff classification of that good shall be identified in accordance with the first of the following General Rules for the Interpretation of the Harmonized System under which the identification can be determined, namely, Rule 3(b), Rule 3(c) and Rule 4; 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.
(8) For purposes of subsections (1) and (5), the value of non-originating materials shall be determined in accordance with subsections 7(1) through (4).
(9) For purposes of paragraph (1)(b) and subparagraph (5)(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 VII; 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 VII.
(10) Total cost under subsection (9) consists of the costs referred to in subsection 2(6), and is calculated in accordance with that subsection and subsection 2(7).
(11) 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 X 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 IX 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 (5)(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), 11(1), (3) or (6), 12(1) or 13(4) 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 (5)(a) applies with respect to that good, and
  - (iii) the producer elects under paragraph 2(7)(b) that, for purposes of subsection 5(9), 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 IX.
(12) For purposes of subsection (5), 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 IX.
(13) 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 NAFTA 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 seven 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 NAFTA 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 seven 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 NAFTA 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 seven 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 seven 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)(c), in order to be considered an originating good, the plastic bag must also, except as otherwise provided in subsection 5(5), satisfy the regional value-content requirement specified in that rule. As provided in paragraph 5(1)(c), 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(5)
Producer A, located in a NAFTA 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 subheadings 6401.10 through 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(5), if the value of all of the non-originating materials used in the production of the shoes does not exceed seven 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(5)
Producer A, located in a NAFTA 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(5), if the value of the non-originating materials does not exceed seven 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(6) and (7)
Producer A, located in a NAFTA 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 more of the NAFTA 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(6), if the total weight of the non-originating combed wool yarn does not exceed seven 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/95-382, s. 1
SOR/2000-86, s. 2
SOR/2002-27, ss. 2, 99

PART IIIRegional Value Content

6 (1) Except as otherwise provided in subsection (6), the regional value content of a good shall be calculated, at the choice of the exporter or producer of the good, on the basis of either the transaction value method or the net cost method.
(2) The transaction value method for calculating the regional value content of a good is as follows:
RVC = (TV - VNM) ÷ TV × 100
where
RVC
is the regional value content of the good, expressed as a percentage;
TV
is 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; and
VNM
is the value of non-originating materials used by the producer in the production of the good, determined in accordance with section 7.
(3) The net cost method for calculating the regional value content of a good is as follows:
RVC = (NC - VNM) ÷ NC × 100
where
RVC
is the regional value content of the good, expressed as a percentage;
NC
is the net cost of the good, calculated in accordance with subsection (11); and
VNM
is the value of non-originating materials used by the producer in the production of the good, determined, except as otherwise provided in sections 9 and 10, in accordance with section 7.
(4) Except as otherwise provided in section 9 and paragraph 10(1)(d), for purposes of calculating the regional value content of a good under subsection (2) or (3), the value of non-originating materials used by a producer in the production of the good shall not include
- (a) the value of any non-originating materials used by another producer in the production of originating materials that are subsequently acquired and used by the producer of the good in the production of that good; or
- (b) the value of any non-originating materials used by the producer in the production of a self-produced material that is an originating material and is designated as an intermediate material.
(5) For purposes of subsection (4),
- (a) in the case of any self-produced material that is not designated as an intermediate material, only the value of any non-originating materials used in the production of the self-produced material shall be included in the value of non-originating materials used in the production of the good; and
- (b) where a self-produced material that is designated as an intermediate material and is an originating material is used by the producer of the good with non-originating materials (whether or not those non-originating materials are produced by that producer) in the production of the good, the value of those non-originating materials shall be included in the value of non-originating materials.
(6) The regional value content of a good shall be calculated only on the basis of the net cost method where
- (a) there is no transaction value for the good under subsection 2(1) of Schedule III;
- (b) the transaction value of the good is unacceptable under subsection 2(2) of Schedule III;
- (c) the good is sold by the producer to a related person and the volume, by units of quantity, of sales by that producer of identical goods or similar goods, or any combination thereof, to related persons during the six month period immediately preceding the month in which the good is sold exceeds 85 per cent of the producer’s total sales to all persons, whether or not related and regardless of location, of identical goods or similar goods, or any combination thereof, during that period;
- (d) the good is
  - (i) a motor vehicle of any of headings 87.01 and 87.02, subheadings 8703.21 through 8703.90 and headings 87.04, 87.05 and 87.06,
  - (ii) a good of a tariff provision listed in Schedule IV or an automotive component assembly, automotive component, sub-component or listed material, and is for use in a motor vehicle referred to in subparagraph (i), either as original equipment or as an after-market part,
  - (iii) a good of any of subheadings 6401.10 through 6406.10, or
  - (iv) a good of tariff item No. 8469.11.00;
- (e) the exporter or producer chooses to accumulate with respect to the good in accordance with section 14; or
- (f) the good is an intermediate material and is subject to a regional value-content requirement.
(7) If the exporter or producer of a good calculates the regional value content of the good on the basis of the transaction value method and the customs administration of a NAFTA country subsequently notifies that exporter or producer in writing, during the course of a verification of origin, that
- (a) the transaction value of the good, as determined by the exporter or producer, is required to be adjusted under section 4 of Schedule II or is unacceptable under subsection 2(2) of Schedule III, there is no transaction value for the good under subsection 2(1) of Schedule III or the transaction value method may not be used because of the application of paragraph (6)(c), or
- (b) the value of any material used in the production of the good, as determined by the exporter or producer, is required to be adjusted under section 5 of Schedule VIII or is unacceptable under subsection 2(3) of Schedule VIII, or there is no transaction value for the material under subsection 2(2) of Schedule VIII or the transaction value method may not be used to calculate the regional value content of the material because of the application of paragraph (6)(c),
the exporter or producer may choose that the regional value content of the good be calculated on the basis of the net cost method, in which case the calculation must be made within 60 days after the producer receives the notification, or such longer period as that customs administration specifies.
(8) If the exporter or producer of a good chooses that the regional value content of the good be calculated on the basis of the net cost method and the customs administration of a NAFTA country subsequently notifies that exporter or producer in writing, during the course of a verification of origin, that the good does not satisfy the applicable regional value-content requirement, the exporter or producer of the good may not recalculate the regional value content on the basis of the transaction value method.
(9) Nothing in subsection (7) shall be construed as preventing any review and appeal under sections 57.1 through 70 of the Customs Act, of an adjustment to or a rejection of
- (a) the transaction value of the good; or
- (b) the value of any material used in the production of the good.
(10) For purposes of the transaction value method, where non-originating materials that are the same as one another in all respects, including physical characteristics, quality and reputation but excluding minor differences in appearance, are used in the production of a good, the value of those non-originating materials may, at the choice of the producer of the good, be determined in accordance with one of the methods set out in Schedule IX.
(11) For purposes of subsection (3), the net cost of a good may be calculated, at the choice of the producer of the good, by
- (a) calculating the total cost incurred with respect to all goods produced by that producer, subtracting any excluded costs that are included in that total cost, and reasonably allocating, in accordance with Schedule VII, the remainder to the good;
- (b) calculating the total cost incurred with respect to all goods produced by that producer, reasonably allocating, in accordance with Schedule VII, that total cost to the good, and subtracting any excluded costs that are included in the amount allocated to that good; or
- (c) reasonably allocating, in accordance with Schedule VII, each cost that forms part of the total cost incurred with respect to the good so that the aggregate of those costs does not include any excluded costs.
(12) Total cost under subsection (11) consists of the costs referred to in subsection 2(6), and is calculated in accordance with that subsection.
(13) For purposes of calculating net cost under subsection(11),
- (a) excluded costs shall be the excluded costs that are recorded on the books of the producer of the good;
- (b) excluded costs that are included in the value of a material that is used in the production of the good shall not be subtracted from or otherwise excluded from the total cost; and
- (c) excluded costs do not include any amount paid for research and development services performed in the territory of a NAFTA country.
(14) For purposes of calculating non-allowable interest costs, the determination of whether interest costs incurred by a producer 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 shall be made in accordance with Schedule XI.
(15) For purposes of the net cost method, the regional value content of the good, other than a good with respect to which an election to average may be made under subsection 11(1), (3) or (6), 12(1) or 13(4), may be calculated, where the producer elects to do so, 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 good with respect to the good and identical goods or similar goods, or any combination thereof, produced in a single plant by the producer 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; and
- (b) using the sums referred to in paragraph (a) as the net cost and the value of non-originating materials, respectively.
(16) The calculation made under subsection (15) shall apply with respect to all units of the good produced during the period chosen by the producer under paragraph (15)(a).
(17) An election made under subsection (15) may not be rescinded or modified with respect to the goods or the period with respect to which the election is made.
(18) Where a producer chooses a one, three or six month period under subsection (15) with respect to goods, 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 those goods.
(19) Where the net cost method is required to be used or has been chosen and an election has been made under subsection (15), the regional value content of the good shall be calculated on the basis of the net cost method over the period chosen under that subsection and for the remainder of the producer’s fiscal year.
(20) Except as otherwise provided in subsections 11(10), 12(11) and 13(10), where the producer of a good has calculated the regional value content of the good under the net cost method on the basis of estimated costs, including standard costs, budgeted forecasts or other similar estimating procedures, before or during the period chosen under paragraph (15)(a), 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.
(21) For purposes of calculating the regional value content of a good, the producer of that good may choose to treat any material used in the production of that good as a non-originating material.

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

Example 1: example of point of direct shipment (with respect to adjusted to an F.O.B. Basis)

A producer has only one factory, at which the producer manufactures finished office chairs. Because the factory is located close to transportation facilities, all units of the finished good are stored in a factory warehouse 200 metres from the end of the production line. Goods are shipped worldwide from this warehouse. The point of direct shipment is the warehouse.

Example 2: examples of point of direct shipment (with respect to adjusted to an F.O.B. Basis)

A producer has six factories, all located within the territory of one of the NAFTA countries, at which the producer produces garden tools of various types. These tools are shipped worldwide, and orders usually consist of bulk orders of various types of tools. Because different tools are manufactured at different factories, the producer decided to consolidate storage and shipping facilities and ships all finished products to a large warehouse located near the seaport, from which all orders are shipped. The distance from the factories to the warehouse varies from 3 km to 130 km. The point of direct shipment for each of the goods is the warehouse.

Example 3: examples of point of direct shipment (with respect to adjusted to an F.O.B. Basis)

A producer has only one factory, located near the centre of one of the NAFTA countries, at which the producer manufactures finished office chairs. The office chairs are shipped from that factory to three warehouses leased by the producer, one on the west coast, one near the factory and one on the east coast. The office chairs are shipped to buyers from these warehouses, the shipping location depending on the shipping distance from the buyer. Buyers closest to the west coast warehouse are normally supplied by the west coast warehouse, buyers closest to the east coast are normally supplied by the warehouse located on the east coast and buyers closest to the warehouse near the factory are normally supplied by that warehouse. In this case, the point of direct shipment is the location of the warehouse from which the office chairs are normally shipped to customers in the location in which the buyer is located.

Example 4: subsection 6(3), net cost method

A producer located in NAFTA country A sells Good A that is subject to a regional value-content requirement to a buyer located in NAFTA country B. The producer of Good A chooses that the regional value content of that good be calculated using the net cost method. All applicable requirements of these Regulations, other than the regional value-content requirement, have been met. The applicable regional value-content requirement is 50 per cent.

In order to calculate the regional value-content of Good A, the producer first calculates the net cost of Good A. Under paragraph 6(11)(a), the net cost is the total cost of Good A (the aggregate of the product costs, period costs and other costs) per unit, minus the excluded costs (the aggregate of the sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs and non-allowable interest costs) per unit. The producer uses the following figures to calculate the net cost:

Product costs:
	Value of originating materials	$ 30.00
	Value of non-originating materials	40.00
	Other product costs	20.00
Period costs:		10.00
Other costs:		0.00
Total cost of Good A, per unit:		$100.00

Excluded costs:
	Sales promotion, marketing and after-sales service costs	$ 5.00
	Royalties	2.50
	Shipping and packing costs	3.00
	Non-allowable interest costs	1.50
Total excluded costs:		$12.00

The net cost is the total cost of Good A, per unit, minus the excluded costs.

	Total cost of Good A, per unit:	$100.00
	Excluded costs:	- 12.00
	Net cost of Good A, per unit:	$ 88.00

The value for net cost ($88) and the value of non-originating materials ($40) are needed in order to calculate the regional value content. The producer calculates the regional value content of Good A under the net cost method in the following manner:

RVC	=	NC - VNM × 100
		NC
	=	88 - 40 × 100
		88
	=	54.5%

Therefore, under the net cost method, Good A qualifies as an originating good, with a regional value-content of 54.5 per cent.

Example 5: paragraph 6(6)(c), net cost method required for certain sales to related persons

On January 15, 1994, a producer located in NAFTA country A sells 1,000 units of Good A to a related person, located in NAFTA country B. During the six month period beginning on July 1, 1993 and ending on December 31, 1993, the producer sold 90,000 units of identical goods and similar goods to related persons from various countries, including that buyer. The producer’s total sales of those identical goods and similar goods to all persons from all countries during that six month period were 100,000 units.

The total quantity of identical goods and similar goods sold by the producer to related persons during that six month period was 90 per cent of the producer’s total sales of those identical goods and similar goods to all persons. Under paragraph 6(6)(c), the producer must use the net cost method to calculate the regional value content of Good A sold in January 1994, because the 85 per cent limit was exceeded.

Example 6: paragraph 6(11)(a)

A producer in a NAFTA country produces Good A and Good B during the producer’s fiscal year.

The producer uses the following figures, which are recorded on the producer’s books and represent all of the costs incurred with respect to both Good A and Good B, to calculate the net cost of those goods:

Product costs:
	Value of originating materials	$2,000
	Value of non-originating materials	1,000
	Other product costs	2,400
Period costs: (including $1,200 in excluded costs)		3,200
Other costs:		400
Total cost of Good A and Good B:		$9,000

The net cost is the total cost of Good A and Good B, minus the excluded costs incurred with respect to those goods.

	Total cost of Good A and Good B:	$9,000
	Excluded costs:	- 1,200
	Net cost of Good A and Good B:	$7,800

The net cost must then be reasonably allocated, in accordance with Schedule VII, to Good A and Good B.

Example 7: paragraph 6(11)(b)

A producer located in a NAFTA country produces Good A and Good B during the producer’s fiscal year. In order to calculate the regional value content of Good A and Good B, the producer uses the following figures that are recorded on the producer’s books and incurred with respect to those goods:

Product costs:
	Value of originating materials	$2,000
	Value of non-originating materials	1,000
	Other product costs	2,400
Period costs: (including $1,200 in excluded costs)		3,200
Other costs:		400
Total cost of Good A and Good B:		$9,000

Under paragraph 6(11)(b), the total cost of Good A and Good B is then reasonably allocated, in accordance with Schedule VII, to those goods. The costs are allocated in the following manner:

	Allocated to Good A	Allocated to Good B
Total cost ($9,000 for both Good A and Good B)	$5,220	$3,780

The excluded costs ($1,200) that are included in total cost allocated to Good A and Good B, in accordance with Schedule VII, are subtracted from that amount.

Total Excluded costs:		Excluded Cost Allocated to Good A	Excluded Cost Allocated to Good B
Sales promotion, marketing and after-sale service costs	500	290	210
Royalties	200	116	84
Shipping and packing costs	500	290	210
Net cost (total cost minus excluded costs):		$4,524	$3,276
The net cost of Good A is thus $4,524, and the net cost of Good B is $3,276.

Example 8: paragraph 6(11)(c)

A producer located in a NAFTA country produces Good C and Good D. The following costs are recorded on the producer’s books for the months of January, February and March, and each cost that forms part of the total cost are reasonably allocated, in accordance with Schedule VII, to Good C and Good D.

		Total cost: Good C and Good D (in thousands of dollars)	Allocated to Good C (in thousands of dollars)	Allocated to Good D (in thousands of dollars)
Product costs:
	Value of originating materials	100	0	100
	Value of non-originating materials	900	800	100
	Other product costs	500	300	200
Period costs: (including $420 in excluded costs)		5,679	3,036	2,643
Minus Excluded costs		420	300	120
Other costs:		0	0	0
Total cost (aggregate of product costs, period costs and other costs):		6,759	3,836	2,923

Example 9: subsection 6(12)

Producer A, located in a NAFTA country, produces Good A that is subject to a regional value-content requirement. The producer chooses that the regional value content of that good be calculated using the net cost method. Producer A buys Material X from Producer B, located in a NAFTA country. Material X is a non-originating material and is used in the production of Good A. Producer A provides Producer B, at no charge, with tools to be used in the production of Material X. The cost of the tools that is recorded on the books of Producer A has been expensed in the current year. Pursuant to subparagraph 5(1)(b)(ii) of Schedule VIII, the value of the tools is included in the value of Material X. Therefore, the cost of the tools that is recorded on the books of Producer A and that has been expensed in the current year cannot be included as a separate cost in the net cost of Good A because it has already been included in the value of Material X.

Example 10: subsection 6(12)

Producer A, located in a NAFTA country, produces Good A that is subject to a regional value-content requirement. The producer chooses that the regional value-content of that good be calculated using the net cost method and averages the calculation over the producer’s fiscal year under subsection 6(15). Producer A determines that during that fiscal year Producer A incurred a gain on foreign currency conversion of $10,000 and a loss on foreign currency conversion of $8,000, resulting in a net gain of $2,000. Producer A also determines that $7,000 of the gain on foreign currency conversion and $6,000 of the loss on foreign currency conversion is related to the purchase of non-originating materials used in the production of Good A, and $3,000 of the gain on foreign currency conversion and $2,000 of the loss on foreign currency conversion is not related to the production of Good A. The producer determines that the total cost of Good A is $45,000 before deducting the $1,000 net gain on foreign currency conversion related to the production of Good A. The total cost of Good A is therefore $44,000. That $1,000 net gain is not included in the value of non-originating materials under subsection 7(1).

Example 11: subsection 6(12)

Given the same facts as in example 10, except that Producer A determines that $6,000 of the gain on foreign currency conversion and $7,000 of the loss on foreign currency conversion is related to the purchase of non-originating materials used in the production of Good A. The total cost of Good A is $45,000, which includes the $1,000 net loss on foreign currency conversion related to the production of Good A. That $1,000 net loss is not included in the value of non-originating materials under subsection 7(1).

SOR/95-382, s. 1
SOR/2000-86, s. 3
SOR/2002-27, s. 99

PART IVMaterials

General

7 (1) Except as otherwise provided for non-originating materials used in the production of a good referred to in subsection 9(1) or 10(1), and except in the case of indirect materials, intermediate materials and packing materials and containers, for purposes of calculating the regional value content of a good and for purposes of subsection 5(1) and (5), the value of a material that is used in the production of the good shall be
- (a) except as otherwise provided in subsection (2), where the material is imported by the producer of the good into the territory of the NAFTA country in which the good is produced, the customs value of the material with respect to that importation, or
- (b) where the material is acquired by the producer of the good from another person located in the territory of the NAFTA country in which the good is produced
  - (i) the transaction value, determined in accordance with subsection 2(1) of Schedule VIII, with respect to the transaction in which the producer acquired the material, or
  - (ii) the value determined in accordance with sections 6 through 11 of Schedule VIII, where, with respect to the transaction in which the producer acquired the material, there is no transaction value under subsection 2(2) of that Schedule or the transaction value is unacceptable under subsection 2(3) of that Schedule,
and shall include the following costs if they are not included under paragraph (a) or (b):
- (c) the costs of freight, insurance and packing and all other costs incurred in transporting the material to the location of the producer,
- (d) duties and taxes paid or payable with respect to the material in the territory of one or more of the NAFTA countries, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable,
- (e) customs brokerage fees, including the cost of in-house customs brokerage services, incurred with respect to the material in the territory of one or more of the NAFTA countries, and
- (f) the cost of waste and spoilage resulting from the use of the material in the production of the good, minus the value of any reusable scrap or by-product.
(2) For purposes of paragraph (1)(a), where the customs value of the material referred to in that paragraph was not determined in a manner consistent with Schedule VIII, the value of the material shall be determined in accordance with Schedule VIII with respect to the importation of that material and, where the costs referred to in paragraphs (1)(c) through (f) are not included in that value, those costs shall be added to that value.
(3) For purposes of subsection (1), the costs referred to in paragraphs (1)(c) through (f) shall be the costs referred to in those paragraphs that are recorded on the books of the producer of the good.

Intermediate Materials

(4) Except for purposes of determining the value of non-originating materials used in the production of a light-duty automotive good and except in the case of an automotive component assembly, automotive component or sub-component for use as original equipment in the production of a heavy-duty vehicle, for purposes of calculating the regional value content of a good the producer of the good may designate as an intermediate material any self-produced material that is used in the production of the good, provided that where an intermediate material is subject to a regional value-content requirement, no other self-produced material that is subject to a regional value-content requirement and is incorporated into that intermediate material is also designated by the producer as an intermediate material.
(5) For purposes of subsection (4),
- (a) in order to qualify as an originating material, a self-produced material that is designated as an intermediate material must qualify as an originating material under these Regulations;
- (b) the designation of a self-produced material as an intermediate material shall be made solely at the choice of the producer of that self-produced material; and
- (c) except as otherwise provided in subsection 14(4), the proviso set out in subsection (4) does not apply with respect to an intermediate material used by another producer in the production of a material that is subsequently acquired and used in the production of a good by the producer referred to in subsection (4).
(6) The value of an intermediate material 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 intermediate material in accordance with Schedule VII; or
- (b) the aggregate of each cost that forms part of the total cost incurred with respect to that intermediate material that can be reasonably allocated to that intermediate material in accordance with Schedule VII.
(7) Total cost under subsection (6) consists of the costs referred to in subsection 2(6), and is calculated in accordance with that subsection and subsection 2(7).
(8) Where a producer of a good designates a self-produced material as an intermediate material under subsection (4) and the customs administration of a NAFTA country into which the good is imported determines during a verification of origin of the good that the intermediate material is a non-originating material and notifies the producer of this in writing before the written determination of whether the good qualifies as an originating good, the producer may rescind the designation, and the regional value content of the good shall be calculated as though the self-produced material were not so designated.
(9) A producer of a good who rescinds a designation under subsection (8)
- (a) shall retain any rights of review and appeal under sections 57.1 through 70 of the Customs Act with respect to the determination of the origin of the intermediate material as though the producer did not rescind the designation; and
- (b) may, not later than 30 days after the customs administration referred to in subsection (8) notifies the producer in writing that the self-produced material referred to in paragraph (a) is a non-originating material, designate as an intermediate material another self-produced material that is incorporated into the good, subject to the proviso set out in subsection (4).
(10) Where a producer of a good designates another self-produced material as an intermediate material under paragraph (9)(b) and the customs administration referred to in subsection (8) determines during the verification of origin of the good that that self-produced material is a non-originating material,
- (a) the producer may rescind the designation, and the regional value content of the good shall be calculated as though the self-produced material were not so designated;
- (b) the producer shall retain any rights of review and appeal under sections 57.1 through 70 of the Customs Act with respect to the determination of the origin of the intermediate material as though the producer did not rescind the designation; and
- (c) the producer may not designate another self-produced material that is incorporated into the good as an intermediate material.

Indirect Materials

(11) For purposes of determining whether a good is an originating good, an indirect material that is used in the production of the good
- (a) shall be considered to be an originating material, regardless of where that indirect material is produced; and
- (b) if the good is subject to a regional value-content requirement, for purposes of calculating the net cost under the net cost method, the value of the indirect material shall be the costs of that material that are recorded on the books of the producer of the good.

Packaging Materials and Containers

(12) Packaging materials and containers, if classified under the Harmonized System with the good that is packaged therein, shall be disregarded for purposes of
- (a) determining whether all of the non-originating materials used in the production of the good undergo an applicable change in tariff classification; and
- (b) determining under subsection 5(1) the value of non-originating materials that do not undergo an applicable change in tariff classification.
(13) Where packaging materials and containers are classified under the Harmonized System with the good that is packaged therein and that good is subject to a regional value-content requirement, the value of those packaging materials and containers shall be taken into account as originating materials or non-originating materials, as the case may be, for purposes of calculating the regional value content of the good.
(14) For purposes of subsection (13), where packaging materials and containers are self-produced materials, the producer may choose to designate those materials as intermediate materials under subsection (4).

Packing Materials and Containers

(15) For purposes of determining whether a good is an originating good, packing materials and containers in which the good is packed
- (a) shall be disregarded for purposes of determining whether
  - (i) the non-originating materials used in the production of the good undergo an applicable change in tariff classification, and
  - (ii) the good satisfies a regional value-content requirement; and
- (b) if the good is subject to a regional value-content requirement, the value of the packing materials and containers shall be the costs thereof that are recorded on the books of the producer of the good.

Fungible Goods and Fungible Materials

(16) Subject to subsection (16.1), for purposes of determining whether a good is an originating good,
- (a) where originating materials and non-originating materials that are fungible materials
  - (i) are withdrawn from an inventory in one location and used in the production of the good, or
  - (ii) are withdrawn from inventories in more than one location in the territory of one or more of the NAFTA countries and used in the production of the good at the same production facility,
  the determination of whether the materials are originating materials may be made on the basis of any of the applicable inventory management methods set out in Schedule X; and
- (b) where originating goods and non-originating goods that are fungible goods are physically combined or mixed in inventory and prior to exportation do not undergo production or any other operation in the territory of the NAFTA country in which they were physically combined or mixed in inventory, other than unloading, reloading or any other operation necessary to preserve the goods in good condition or to transport the goods for exportation to the territory of another NAFTA country, the determination of whether the good is an originating good may be made on the basis of any of the applicable inventory management methods set out in Schedule X.
(16.1) Where fungible materials referred to in paragraph (16)(a) and fungible goods referred to in paragraph (16)(b) are withdrawn from the same inventory, the inventory management method used for the materials must be the same as the inventory management method used for the goods, and where the averaging method is used, the respective averaging periods for fungible materials and fungible goods are to be used.
(16.2) A choice of inventory management methods under subsection (16) shall be considered to have been made when the customs administration of the NAFTA country into which the good is imported is informed in writing of the choice during the course of a verification of the origin of the good.

Accessories, Spare Parts and Tools

(17) Accessories, spare parts or tools that are delivered with a good and form part of the good’s standard accessories, spare parts or tools are originating materials if the good is an originating good, and shall be disregarded for purposes of determining whether all the non-originating materials used in the production of the good undergo an applicable change in tariff classification or determining under subsection 5(1) the value of non-originating materials that do not undergo an applicable change in tariff classification, provided that
- (a) the accessories, spare parts or tools are not invoiced separately from the good; and
- (b) the quantities and value of the accessories, spare parts or tools are customary for the good, within the industry that produces the good.
(18) Where a good is subject to a regional value-content requirement, the value of accessories, spare parts and tools that are delivered with that good and form part of the good’s standard accessories, spare parts or tools shall be taken into account as originating materials or non-originating materials, as the case may be, in calculating the regional value content of the good.
(19) For purposes of subsection (18), where accessories, spare parts and tools are self-produced materials, the producer may choose to designate those materials as intermediate materials under subsection (4).

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

Example 1: subsection 7(2), Customs Value not Determined in a Manner Consistent with Schedule VIII
Producer A, located in NAFTA country A, imports material A into NAFTA country A. Producer A purchased material A from a middleman located in country B. The middleman purchased the material from a manufacturer located in country B. Under the laws in NAFTA country A that implement the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade, the customs value of material A was based on the price actually paid or payable by the middleman to the manufacturer. Producer A uses material A to produce Good C, and exports Good C to NAFTA country D. Good C is subject to a regional value-content requirement.
Under subsection 4(1) of Schedule VIII, 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. Section 1 of that Schedule defines producer and seller for purposes of the Schedule. A producer is the person who uses the material in the production of a good that is subject to a regional value-content requirement. A seller is the person who sells the material being valued to the producer.
The customs value of material A was not determined in a manner consistent with Schedule VIII because it was based on the price actually paid or payable by the middleman to the manufacturer, rather than on the price actually paid or payable by Producer A to the middleman. Thus, subsection 7(2) applies and material A is valued in accordance with Schedule VIII.
Example 2: subsection 7(5), Value of Intermediate Materials
A producer located in a NAFTA country produces Good B, which is subject to a regional value-content requirement under paragraph 4(2)(b). The producer also produces Material A, which is used in the production of Good B. Both originating materials and non-originating materials are used in the production of Material A. Material A is subject to a change in tariff classification requirement under paragraph 4(2)(a). The costs to produce Material A are the following:
- Product costs:
  - Value of originating materials$ 1.00
  - Value of non-originating materials7.50
  - Other product costs1.50
- Period costs (including $0.30 in royalties):0.50
- Other costs:0.10
- Total cost of Material A:$10.60
The producer designates Material A as an intermediate material and determines that, because all of the non-originating materials that are used in the production of Material A undergo an applicable change in tariff classification set out in Schedule I, Material A would, under paragraph 4(2)(a) qualify as an originating material. The cost of the non-originating materials used in the production of Material A is therefore not included in the value of non-originating materials that are used in the production of Good B for the purpose of determining the regional value content of Good B. Because Material A has been designated as an intermediate material, the total cost of Material A, which is $10.60, is treated as the cost of originating materials for the purpose of calculating the regional value content of Good B. The total cost of Good B is determined in accordance with the following figures:
- Product costs:
  - Value of originating materials
    - - intermediate materials$10.60
    - - other materials3.00
  - Value of non-originating materials5.50
- Other product costs6.50
- Period costs:2.50
- Other costs:0.10
- Total cost of Good B:$28.20

Example 3: subsection 7(5), Effects of the Designation of Self-produced Materials on Net Cost

The ability to designate intermediate materials helps to put the vertically integrated producer who is self-producing materials that are used in the production of a good on par with a producer who is purchasing materials and valuing those materials in accordance with subsection 7(1). The following situations demonstrate how this is achieved:

Situation 1

A producer located in a NAFTA country produces Good B, which is subject to a regional value-content requirement of 50 per cent under the net cost method. Good B satisfies all other applicable requirements of these Regulations. The producer purchases Material A, which is used in the production of Good B, from a supplier located in a NAFTA country. The value of Material A determined in accordance with subsection 7(1) is $11.00. Material A is an originating material. All other materials used in the production of Good B are non-originating materials. The net cost of Good B is determined as follows:

Product costs:
- Value of originating materials (Material A)$11.00
- Value of non-originating materials5.50
- Other product costs6.50
Period costs: (including $0.20 in excluded costs)0.50
Other costs:0.10
Total cost of Good B:$23.60
Excluded costs: (included in period costs)0.20
Net cost of Good B:$23.40

The regional value content of Good B is calculated as follows:

RVC	=	(NC - VNM) ÷ NC × 100
	=	($23.40 - $5.50) ÷ $23.40 × 100
	=	76.5%

The regional value content of Good B is 76.5 per cent, and Good B, therefore, qualifies as an originating good.

Situation 2

Product costs:
- Value of originating materials$ 1.00
- Value of non-originating materials7.50
- Other product costs1.50
Period costs: (including $0.20 in excluded costs)0.50
Other costs:0.10
Total cost of Material A:$10.60

Additional costs to produce Good B are the following:

Product costs:
- Value of originating materials$ 0.00
- Value of non-originating materials5.50
- Other product costs6.50
Period costs: (including $0.20 in excluded costs)0.50
Other costs:0.10
Total additional costs:$12.60

The producer does not designate Material A as an intermediate material under subsection 7(4). The net cost of Good B is calculated as follows:

		Costs of Material A (not designated as an intermediate material)	Additional Costs to Produce Good B	Total
Product costs:
	Value of originating materials	$ 1.00	$ 0.00	$ 1.00
	Value of non-originating materials	7.50	5.50	13.00
	Other product costs	1.50	6.50	8.00
Period costs (including $0.20 in excluded costs):		0.50	0.50	1.00
Other costs:		0.10	0.10	0.20
Total cost of Good B:		$10.60	$12.60	$23.20
Excluded costs (in period costs)		0.20	0.20	0.40
Net cost of Good B (total cost minus excluded costs):				$22.80

The regional value content of Good B is calculated as follows:

RVC	=	(NC - VNM) ÷ NC × 100
	=	($22.80 - $13.00) ÷ $22.80 × 100
	=	42.9%

The regional value content of Good B is 42.9 per cent, and Good B, therefore, does not qualify as an originating good.

Situation 3

Product costs:
- Value of originating materials$ 1.00
- Value of non-originating materials7.50
- Other product costs1.50
Period costs: (including $0.20 in excluded costs)0.50
Other costs:0.10
Total cost of Material A:$10.60

Additional costs to produce Good B are the following:

Product costs:
- Value of originating materials$ 0.00
- Value of non-originating materials5.50
- Other product costs6.50
Period costs: (including $0.20 in excluded costs)0.50
Other costs:0.10
Total additional costs:$12.60

The producer designates Material A as an intermediate material under subsection 7(4). Material A qualifies as an originating material under paragraph 4(2)(a). Therefore, the value of non-originating materials used in the production of Material A is not included in the value of non-originating materials for the purposes of calculating the regional value content of Good B. The net cost of Good B is calculated as follows:

		Costs of Material A (designated as an intermediate material	Additional Costs to Produce Good B	Total
Product costs:
	Value of originating materials	$10.60	$ 0.00	$10.60
	Value of non-originating materials		5.50	5.50
	Other product costs		6.50	6.50
Period costs (including $0.20 in excluded costs):			0.50	0.50
Other costs:			0.10	0.10
Total cost of Good B:		$10.60	$12.60	$23.20
Excluded costs (in period costs)			0.20	0.20
Net cost of Good B (total cost minus excluded costs):				$23.00

The regional value content of Good B is calculated as follows:

RVC	=	(NC - VNM) ÷ NC × 100
	=	($23.00 - $5.50) ÷ $23.00 × 100
	=	76.1%

The regional value content of Good B is 76.1 per cent, and Good B, therefore, qualifies as an originating good.

Example 4: Originating Materials Acquired from a Producer Who Produced Them Using Intermediate Materials
Producer A, located in NAFTA country A, produces switches. In order for the switches to qualify as originating goods, Producer A designates subassemblies of the switches as intermediate materials. The subassemblies are subject to a regional value-content requirement. They satisfy that requirement, and qualify as originating materials. The switches are also subject to a regional value-content requirement, and, with the subassemblies designated as intermediate materials, are determined to have a regional value content of 65 per cent.
Producer A sells the switches to Producer B, located in NAFTA country B, who uses them to produce switch assemblies that are used in the production of Good B. The switch assemblies are subject to a regional value-content requirement. Producers A and B are not accumulating their production within the meaning of section 14. Producer B is therefore able, under subsection 7(4), to designate the switch assemblies as intermediate materials.
If Producers A and B were accumulating their production within the meaning of section 14, Producer B would be unable to designate the switch assemblies as intermediate materials, because the production of both producers would be considered to be the production of one producer.
Example 5: Single Producer and Successive Designations of Materials Subject to a Regional Value-Content Requirement as Intermediate Materials
Producer A, located in NAFTA country, produces Material X and uses Material X in the production of Good B. Material X qualifies as an originating material because it satisfies the applicable regional value-content requirement. Producer A designates Material X as an intermediate material.
Producer A uses Material X in the production of Material Y, which is also used in the production of Good B. Material Y is also subject to a regional value-content requirement. Under the proviso set out in subsection 7(4), Producer A cannot designate Material Y as an intermediate material, even if Material Y satisfies the applicable regional value-content requirement, because Material X was already designated by Producer A as an intermediate material.
Example 6: Single Producer and Multiple Designations of Materials as Intermediate Materials
Producer X, who is located in NAFTA country X, uses non-originating materials in the production of self-produced materials A, B and C. None of the self-produced materials are used in the production of any of the other self-produced materials.
Producer X uses the self-produced materials in the production of Good O, which is exported to NAFTA country Y. Materials A, B and C qualify as originating materials because they satisfy the applicable regional value-content requirements.
Because none of the self-produced materials are used in the production of any of the other self-produced materials, then even though each self-produced material is subject to a regional value-content requirement, Producer X may, under subsection 7(4), designate all of the self-produced materials as intermediate materials. The proviso set out in subsection 7(4) only applies where self-produced materials are used in the production of other self-produced materials and both are subject to a regional value-content requirement.
Example 7: subsection 7(17)
The following are examples of accessories, spare parts or tools that are delivered with a good and form part of the good’s standard accessories, spare parts or tools:
- (a) consumables that must be replaced at regular intervals, such as dust collectors for an air-conditioning system,
- (b) a carrying case for equipment,
- (c) a dust cover for a machine,
- (d) an operational manual for a vehicle,
- (e) brackets to attach equipment to a wall,
- (f) a bicycle tool kit or a car jack,
- (g) a set of wrenches to change the bit on a chuck,
- (h) a brush or other tool to clean out a machine, and
- (i) electrical cords and power bars for use with electronic goods.
Example 8: Value of Indirect Materials that are Assists
Producer A, located in a NAFTA country, produces Good A that is subject to a regional value-content requirement. The producer chooses that the regional value content of that good be calculated using the net cost method. Producer A buys Material X from Producer B, located in a NAFTA country, and uses it in the production of Good A. Producer A provides to Producer B, at no charge, tools to be used in the production of Material X. The tools have a value of $100 which is expensed in the current year by Producer A.
Material X is subject to a regional value-content requirement which Producer B chooses to calculate using the net cost method. For purposes of determining the value of non-originating materials in order to calculate the regional value content of Material X, the tools are considered to be an originating material because they are an indirect material. However, pursuant to subsection 7(11) they have a value of nil because the cost of the tools with respect to Material X is not recorded on the books of Producer B.
It is determined that Material X is a non-originating material. The cost of the tools that is recorded on the books of producer A is expensed in the current year. Pursuant to section 5 of Schedule VIII, the value of the tools (see subparagraph 5(1)(b)(ii) of Schedule VIII) must be included in the value of Material X by Producer A when calculating the regional value content of Good A. The cost of the tools, although recorded on the books of producer A, cannot be included as a separate cost in the net cost of Good A because it is already included in the value of Material X. The entire cost of Material X, which includes the cost of the tools, is included in the value of non-originating materials for purposes of the regional value content of Good A.

SOR/95-382, s. 1
SOR/2001-108, s. 2
SOR/2002-27, s. 3

PART VAutomotive Goods

Definitions and Interpretation

8 For purposes of this Part,

after-market parts

after-market parts means goods that are not for use as original equipment in the production of light-duty vehicles or heavy-duty vehicles and that are

(a) goods of a tariff provision listed in Schedule IV, or
(b) automotive component assemblies, automotive components, sub-components or listed materials; (pièces destinées au marché du service après-vente)

class of motor vehicles

class of motor vehicles means any one of the following categories of motor vehicles:

(a) motor vehicles of any of subheading 8701.20, 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,
(b) motor vehicles of any of subheadings 8701.10 and 8701.30 through 8701.90,
(c) motor vehicles of any of tariff item Nos. 8702.10.20 and 8702.90.20 and subheadings 8704.21 and 8704.31, and
(d) motor vehicles of any of subheadings 8703.21 through 8703.90; (catégorie de véhicules automobiles)

complete motor vehicle assembly process

complete motor vehicle assembly process means the production of a motor vehicle from separate constituent parts, which parts include the following:

(a) a structural frame or unibody,
(b) body panels,
(c) an engine, a transmission and a drive train,
(d) brake components,
(e) steering and suspension components,
(f) seating and internal trim,
(g) bumpers and external trim,
(h) wheels, and
- (i) electrical and lighting components; (chaîne de montage complète de véhicules automobiles)

first prototype

first prototype means the first motor vehicle that

(a) is produced using tooling and processes intended for the production of motor vehicles to be offered for sale, and
(b) follows the complete motor vehicle assembly process in a manner not specifically designed for testing purposes; (premier prototype)

floor pan of a motor vehicle

floor pan of a motor vehicle means a component, comprising a single part or two or more parts joined together, with or without additional stiffening members, that forms the base of a motor vehicle, beginning at the firewall or bulkhead of the motor vehicle and ending

(a) where there is a luggage floor panel in the motor vehicle, at the place where that luggage floor panel begins, and
(b) where there is no luggage floor panel in the motor vehicle, at the place where the passenger compartment of the motor vehicle ends; (dessous de caisse d’un véhicule automobile)

heavy-duty automotive good

heavy-duty automotive good means a heavy-duty vehicle or a heavy-duty component; (produit automobile de gamme lourde)

heavy-duty component

heavy-duty component means an automotive component or automotive component assembly that is for use as original equipment in the production of a heavy-duty vehicle; (composante de gamme lourde)

marque

marque means a trade name used by a marketing division of a motor vehicle assembler that is separate from any other marketing division of that motor vehicle assembler; (marque)

model line

model line means a group of motor vehicles having the same platform or model name; (modèle)

model name

model name means the word, group of words, letter, number or similar designation assigned to a motor vehicle by a marketing division of a motor vehicle assembler

(a) to differentiate the motor vehicle from other motor vehicles that use the same platform design,
(b) to associate the motor vehicle with other motor vehicles that use different platform designs, or
(c) to denote a platform design; (nom de modèle)

new building

new building means a new construction to house a complete motor vehicle assembly process, where that construction includes the pouring or construction of a new foundation and floor, the erection of a new frame and roof, and the installation of new plumbing and electrical and other utilities; (nouvel édifice)

plant

plant means a building, or buildings in close proximity but not necessarily contiguous, machinery, apparatus and fixtures that are under the control of a producer and are used in the production of any of the following:

(a) light-duty vehicles and heavy-duty vehicles,
(b) goods of a tariff provision listed in Schedule IV, and
(c) automotive component assemblies, automotive components, sub-components and listed materials; (usine)

platform

platform means the primary load-bearing structural assembly of a motor vehicle that determines the basic size of the motor vehicle, and is the structural base that supports the driveline and links the suspension components of the motor vehicle for various types of frames, such as the body-on-frame or space-frame, and monocoques; (plate-forme)

received in the territory of a NAFTA country

received in the territory of a NAFTA country means, with respect to subsection 9(2), the location at which a traced material arrives in the territory of a NAFTA country and is documented for any customs purpose, which in the case of a traced material imported into

(a) Canada,
- (i) where the traced material is imported on a vessel, as defined in section 2 of the Reporting of Imported Goods Regulations, is the location at which the traced material is last unloaded from the vessel and reported, under section 12 of the Customs Act, to a customs office, including reported for transportation under bond by a conveyance other than that vessel, and
- (ii) in any other case, is the location at which the traced material is reported, under section 12 of the Customs Act, to a customs office, including reported for transportation under bond,
(b) Mexico,
- (i) where the traced material is imported on a vessel, the location at which the traced material is last unloaded from the vessel and reported for any customs purpose, and
- (ii) in any other case, the location at which the traced material is reported for any customs purpose, and
(c) the United States, is the location at which the traced material is entered for any customs purpose, including entered for consumption, entered for warehouse or entered for transportation under bond, or admitted into a foreign trade zone; (reçu sur le territoire d’un pays ALÉNA)

refit

refit means a closure of a plant for a period of at least three consecutive months that is for purposes of plant conversion or retooling; (réaménagement)

size category

size category, with respect to a light-duty vehicle, means that the total of the interior volume for passengers and the interior volume for luggage is

(a) 85 cubic feet (2.38 m³) or less,
(b) more than 85 cubic feet (2.38 m³) but less than 100 cubic feet (2.80 m³),
(c) 100 cubic feet (2.80 m³) or more but not more than 110 cubic feet (3.08 m³),
(d) more than 110 cubic feet (3.08 m³) but less than 120 cubic feet (3.36 m³), or
(e) 120 cubic feet (3.36 m³) or more; (catégorie de taille)

traced material

traced material means a material, produced outside the territories of the NAFTA countries, that is imported from outside the territories of the NAFTA countries and is, when imported, of a tariff provision listed in Schedule IV; (matière retracée)

underbody

underbody means the floor pan of a motor vehicle. (soubassement)

SOR/95-382, s. 1
SOR/2000-86, s. 4
SOR/2002-27, s. 99

Light-duty Automotive Goods

9 (1) For purposes of calculating the regional value content of a light-duty automotive good under the net cost method, the value of non-originating materials used by the producer in the production of the good shall be the sum of the values of the non-originating materials that are traced materials and are incorporated into the good.
(2) Except as otherwise provided in subsections (3) and (6) through (8), the value of each of the traced materials that is incorporated into a good shall be
- (a) where the producer imports the traced material from outside the territories of the NAFTA countries and has or takes title to it at the time of importation, the sum of
  - (i) the customs value of the traced material,
  - (ii) where not included in that customs value, any freight, insurance, packing and other costs that were incurred in transporting the traced material to the first place at which it was received in the territory of a NAFTA country, and
  - (iii) where not included in that customs value, the costs referred to in subsection (4);
- (b) where the producer imports the traced material from outside the territories of the NAFTA countries and does not have or take title to it at the time of importation, the sum of
  - (i) the customs value of the traced material,
  - (ii) where not included in that customs value, any freight, insurance, packing and other costs that were incurred in transporting the traced material to the place at which it was when the producer takes title in the territory of a NAFTA country, and
  - (iii) where not included in that customs value, the costs referred to in subsection (4);
- (c) where a person other than the producer imports the traced material from outside the territories of the NAFTA countries and that person has or takes title to the material at the time of importation, if the producer has a statement that
  - (i) is signed by the person from whom the producer acquired the traced material, whether in the form in which it was imported into the territory of a NAFTA country or incorporated into another material, and
  - (ii) states
    - (A) the customs value of the traced material,
    - (B) where not included in that customs value, any freight, insurance, packing and other costs that were incurred in transporting the traced material to the first place at which it was received in the territory of a NAFTA country, and
    - (C) where not included in that customs value, the costs referred to in subsection (4),
  the sum of the customs value of the traced material, the freight, insurance, packing and other costs referred to in clause (ii)(B) and the costs referred to in clause (ii)(C);
- (d) where a person other than the producer imports the traced material from outside the territories of the NAFTA countries and that person does not have or take title to the material at the time of importation, if the producer has a statement that
  - (i) is signed by the person from whom the producer acquired the traced material, whether in the form in which it was imported into the territory of a NAFTA country or incorporated into another material, and
  - (ii) states
    - (A) the customs value of the traced material,
    - (B) where not included in that customs value, any freight, insurance, packing and other costs that were incurred in transporting the traced material to the place at which it was located when the first person in the territory of a NAFTA country takes title, and
    - (C) where not included in that customs value, the costs referred to in subsection (4),
  the sum of the customs value of the traced material, the freight, insurance, packing and other costs referred to in clause (ii)(B) and the costs referred to in clause (ii)(C);
- (e) where a person other than the producer imports the traced material from outside the territories of the NAFTA countries and the producer acquires the traced material or a material that incorporates the traced material from a person in the territory of a NAFTA country who has title to it, if the producer has a statement that
  - (i) is signed by the person from whom the producer acquired the traced material or the material that incorporates it, and
  - (ii) states the value of the traced material or a material that incorporates the traced material, determined in accordance with subsection (5), with respect to a transaction that occurs after the customs value of the traced material was determined,
  the value of the traced material or the material that incorporates the traced material, determined in accordance with subsection (5), with respect to the transaction referred to in that statement;
- (f) where a person other than the producer imports the traced material from outside the territories of the NAFTA countries, and the producer acquires a material that incorporates that traced material and the acquired material was produced in the territory of a NAFTA country and is subject to a regional value-content requirement, if the producer has a statement that
  - (i) is signed by the person from whom the producer acquired that material, and
  - (ii) states that the acquired material is an originating material and states the regional value content of the material,
an amount equal to VM × (1 - RVC)
where
VM
is the value of the acquired material, determined in accordance with subsection (5), with respect to the transaction in which the producer acquired that material, and
RVC
is the regional value content of the acquired material, expressed as a decimal;
- (g) where a person other than the producer imports the traced material from outside the territories of the NAFTA countries, and the producer acquires a material that incorporates that traced material and the acquired material was produced in the territory of a NAFTA country and is subject to a regional value-content requirement, if the producer has a statement that
  - (i) is signed by the person from whom the producer acquired that material, and
  - (ii) states that the acquired material is an originating material but does not state any value with respect to the traced material,
an amount equal to VM x (1 - RVCR)
where
VM
is the value of the acquired material, determined in accordance with subsection (5), with respect to the transaction in which the producer acquired that material, and
RVCR
is the regional value-content requirement for the acquired material, expressed as a decimal;
- (h) where a person other than the producer imports the traced material from outside the territories of the NAFTA countries and the producer acquires a material that
  - (i) incorporates that traced material,
  - (ii) was produced in the territory of a NAFTA country, and
  - (iii) with respect to which an amount was determined in accordance with paragraph (f) or (g),
  if the producer of the good has a statement signed by the person from whom the producer acquired that material that states that amount, the amount as determined in accordance with paragraph (f) or (g), as the case may be; and
- (i) where a person other than the producer imports the traced material from outside the territories of the NAFTA countries and the producer does not have a statement described in any of paragraphs (c) through (h), the value of the traced material or any material that incorporates it, determined in accordance with subsection (5) with respect to the transaction in which the producer acquires the traced material or any material that incorporates it.
(3) For purposes of paragraphs (2)(a) through (d), where the customs value of the traced material referred to in those paragraphs was not determined in a manner consistent with Schedule VIII, the value of the material shall be the sum of
- (a) the value of the material determined in accordance with Schedule VIII with respect to the transaction in which the person who imported the material from outside the territories of the NAFTA countries acquired it; and
- (b) where not included in that value, the costs referred to in subparagraphs (2)(a)(ii) and (iii), subparagraphs (2)(b)(ii) and (iii), clauses (2)(c)(ii)(B) and (C) or clauses (2)(d)(ii)(B) and (C), as the case may be.
(4) The costs referred to in paragraphs (2)(a) through (d) and subsection (3) are the following:
- (a) duties and taxes paid or payable with respect to the material in the territory of one or more of the NAFTA countries, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable; and
- (b) customs brokerage fees, including the cost of in-house customs brokerage services, incurred with respect to the material in the territory of one or more of the NAFTA countries.
(5) For purposes of paragraphs (2)(e) through (g) and (i) and subsections (6) and (7), the value of a material
- (a) shall be the transaction value of the material, determined in accordance with subsection 2(1) of Schedule VIII with respect to the transaction referred to in that paragraph or subsection, or
- (b) shall be determined in accordance with sections 6 through 11 of Schedule VIII, where, with respect to the transaction referred to in that paragraph or subsection, there is no transaction value for the material under subsection 2(2) of that Schedule, or the transaction value of the material is unacceptable under subsection 2(3) of that Schedule, and, where not included under paragraph (a) or (b), shall include taxes, other than duties paid on an importation of a material from a NAFTA country, paid or payable with respect to the material in the territory of one or more of the NAFTA countries, other than taxes that are waived, refunded, refundable or otherwise recoverable, including credit against tax paid or payable.
(6) Where it is determined, during the course of a verification of origin of a light-duty automotive good with respect to which the producer of that good has a statement referred to in paragraph (2)(f) or (g), that the acquired material referred to in that statement is not an originating material, the value of the acquired material shall, for purposes of subsection (2), be determined in accordance with subsection (5) with respect to the transaction in which that producer acquired it.
(7) Where any person who has information with respect to a statement referred to in any of paragraphs (2)(c) through (h) does not allow a customs administration to verify that information during a verification of origin, the value of the material with respect to which that person did not allow the customs administration to verify the information may be determined by that customs administration in accordance with subsection (5) with respect to the transaction in which that person sells, or otherwise transfers to another person, that material or a material that incorporates that material.
(8) Where a traced material is incorporated into a material produced in the territory of a NAFTA country and that material is incorporated into a light-duty automotive good, the statement referred to in paragraph (2)(c), (d) or (e) may state the value of non-originating materials, determined in accordance with subsection 12(3), with respect to the material that incorporates the traced material.
(9) For purposes of this section,
- (a) where a producer, in accordance with subsection 7(4), designates as an intermediate material any self-produced material used in the production of a light-duty automotive good,
  - (i) the designation applies solely to the calculation of the net cost of that good, and
  - (ii) the value of a traced material that is incorporated into that good shall be determined as though the designation had not been made;
- (b) the value of a material not listed in Schedule IV, when imported from outside the territories of the NAFTA countries,
  - (i) shall not be included in the value of non-originating materials that are used in the production of a light-duty automotive good, and
  - (ii) shall be included in calculating the net cost of a light-duty automotive good that incorporates that material;
- (c) except as otherwise provided in subsection 12(10), this section does not apply with respect to after-market parts;
- (d) the costs referred to in subparagraphs (2)(a)(ii) and (b)(ii), clauses (2)(c)(ii)(B) and (d)(ii)(B) and subsections (4) and (5) shall be the costs referred to in those paragraphs that are recorded on the books of the producer of the light-duty automotive good;
- (e) for purposes of calculating the regional value content of a light-duty automotive good, the producer of that good may choose to treat any material used in the production of that good as a non-originating material, and the value of that material shall be determined in accordance with subsection (5) with respect to the transaction in which the producer acquired it; and
- (f) 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.
(10) Each of the following examples is an “Example” as referred to in subsection 2(4).
Example 1
Nuts and bolts of heading 73.18 are imported from outside the territories of the NAFTA countries and are used in the territory of a NAFTA country in the production of a light-duty automotive good referred to in subsection 9(1). Heading 73.18 is not listed in Schedule IV so the nuts and bolts are not traced materials.
Because the nuts and bolts are not traced materials the value, under subsection 9(1), of the nuts and bolts is not included in the value of non-originating materials used in the light-duty automotive good even though the nuts and bolts are imported from outside the territories of the NAFTA countries.
The value, under paragraph 9(9)(b), of the nuts and bolts is included in the net cost of the light-duty automotive good for the purposes of calculating, under subsection 9(1), regional value content of the motor vehicle.
Example 2
A rear view mirror of subheading 7009.10 is imported from outside the territories of the NAFTA countries and is used in the territory of a NAFTA country as original equipment in the production of a light-duty vehicle.
Subheading 7009.10 is listed in Schedule IV. The rear view mirror is a traced material. For purposes of calculating, under subsection 9(1), regional value content of the light-duty vehicle, the value of the mirror is included in the value of non-originating materials in accordance with subsections 9(2) through (9).
Example 3
Glass of heading 70.05 is imported from outside the territories of the NAFTA countries and is used in the territory of NAFTA country A in the production of a rear view mirror. The rear view mirror is a non-originating good because it fails to satisfy the applicable change in tariff classification.
That rear view mirror is exported to NAFTA country B where it is used as original equipment in the production of a light-duty vehicle. Even though the rear view mirror is a non-originating material and is of a tariff item listed in Schedule IV, it is not a traced material because it was not imported from outside the territories of the NAFTA countries.
For purposes of calculating, under subsection 9(1), the regional value content of a light-duty vehicle in which the rear view mirror is incorporated, the value of the rear view mirror, under subsection 9(1), is not included in the value of non-originating materials used in the production of the light-duty vehicle.
Even though the glass of heading 70.05 that was used in the production of the rear view mirror and incorporated into the light-duty vehicle was imported from outside the territories of the NAFTA countries, the glass is not a traced material because heading 70.05 is not listed in Schedule IV. For purposes of calculating, under subsection 9(1), the regional value content of the light-duty vehicle that incorporates the glass, the value of the glass is not included in the value of non-originating materials used in the production of the light-duty vehicle. The value of the rear view mirror would be included in the net cost of the light-duty vehicle, but the value of the imported glass would not be separately included in the value of non-originating materials of the light-duty vehicle.
Example 4
An electric motor of subheading 8501.10 is imported from outside the territories of the NAFTA countries and is used in the territory of a NAFTA country in the production of a seat frame of subheading 9401.90. The seat frame, with the electric motor attached, is sold to a producer of seats of subheading 9401.20. The seat producer sells the seat to a producer of light-duty vehicles. The seat is to be used as original equipment in the production of that light-duty vehicle.
Subheadings 8501.10 and 9401.20 are listed in Schedule IV; subheading 9401.90 is not. The electric motor is a traced material; the seat is not a traced material because it was not imported from outside the territories of the NAFTA countries.
The seat is a light-duty automotive good referred to in subsection 9(1). For purposes of calculating, under subsection 9(1), the regional value content of the seat, the value of traced materials incorporated into it is included in the value of non-originating materials used in the production of the seat. The value of the electric motor is included in that value. (However, the value of the motor would not be included separately in the net cost of the seat because the value of the motor is included as part of the cost of the seat frame.)
For purposes of calculating, under subsection 9(1), the regional value content of the light-duty vehicle, the value of the electric motor is included in the value of non-originating materials used in the production of the light-duty vehicle, even if the seat is an originating material.
Example 5
Cast blocks, cast heads and connecting rod assemblies of heading 84.09 are imported from outside the territories of the NAFTA countries by an engine producer, who has title to them at the time of importation, and are used by the producer in the territory of NAFTA country A in the production of an engine of heading 84.07. After the regional value content of the engine is calculated, the engine is an originating good. It is not a traced material because it was not imported from outside the territories of the NAFTA countries. The engine is exported to NAFTA country B, to be used as original equipment by a producer of light-duty vehicles.
For purposes of calculating, under subsection 9(1), the regional value content of the light-duty vehicle that incorporates the engine, because heading 84.09 is listed in Schedule IV and because the cast blocks, cast heads and connecting rod assemblies were imported into the territory of a NAFTA country and are incorporated into the light-duty vehicle, the value of those materials, which are traced materials, is included in the value of non-originating materials used in the production of the light-duty vehicle, even though the engine is an originating material.
The producer of the light-duty vehicle did not import the traced materials. However, because that producer has a statement referred to in paragraph 9(2)(c) and that statement states the value of non-originating materials of the traced materials in accordance with subsection 12(2), the producer of the light-duty vehicle may, in accordance with subsection 9(8), use that value as the value of non-originating materials of the light-duty vehicle with respect to that engine.
Example 6
Aluminum ingots of subheading 7601.10 and piston assemblies of heading 84.09 are imported from outside the territories of the NAFTA countries by an engine producer and are used by that producer in the territory of NAFTA country A in the production of an engine of heading 84.07. The aluminum ingots are used by the producer to produce an engine block; the piston assembly is then incorporated into the engine block and the producer designates, in accordance with subsection 7(4), a short block of heading 84.09 as an intermediate material. The intermediate material qualifies as an originating material. The engine that incorporates the short block is exported to NAFTA country B and used as original equipment in the production of a light-duty vehicle. The piston assemblies of heading 84.09 are traced materials; neither the engine nor the short block are traced materials because they were not imported from outside the territories of the NAFTA countries.
For purposes of calculating, under subsection 9(1), the regional value content of the engine, the value of the piston assemblies is included, under subparagraph 9(9)(a)(ii), in the value of non-originating materials, even though the intermediate material is an originating material. However, the value of the aluminum ingots is not included in the value of non-originating materials because subheading 7601.10 is not listed in Schedule IV. The value of the aluminum ingots does not need to be included separately in the net cost of the engine because that value is included in the value of the intermediate material, and the total cost of the intermediate material is included in the net cost of the engine.
For purposes of calculating, under subsection 9(1), the regional value content of the light-duty vehicle that incorporates the engine (and the piston assemblies), the value of the piston assemblies incorporated into that light-duty vehicle is included in the value of non-originating materials of the light-duty vehicle.
Example 7
An engine of heading 84.07 is imported from outside the territories of the NAFTA countries. The producer of the engine, located in the country from which the engine is imported, used in the production of the engine a piston assembly of heading 84.09 that was produced in a NAFTA country and is an originating good. The engine is used in the territory of a NAFTA country as original equipment in the production of a light-duty vehicle. The engine is a traced material.
For purposes of calculating, under subsection 9(1), the regional value content of a light-duty vehicle that incorporates that engine, the value of the engine is included in the value of non-originating materials of that light-duty vehicle. The value of the piston assembly, which was, before its exportation to outside the territories of the NAFTA countries, an originating good, shall not be deducted from the value of non-originating materials used in the production of the light-duty vehicle. Under section 16 (transshipment), the piston assembly is no longer considered to be an originating good because it was used in the production of a good outside the territories of the NAFTA countries.
Example 8
A wholesaler, located in City A in the territory of a NAFTA country, imports from outside the territories of the NAFTA countries rubber hoses of heading 40.09, which is listed in Schedule IV. The wholesaler takes title to the goods at the wholesaler’s place of business in City A. The customs value of the imported goods is $500. All freight, taxes and duties associated with the transportation of the good to the wholesaler’s place of business total $100; the cost of the freight, included in that $100, from the place where it was received in the territory of a NAFTA country to the location of the wholesaler’s place of business in City A is $25. The wholesaler sells the rubber hoses for $650 to a producer of light-duty vehicles who uses the goods in the territory of a NAFTA country as original equipment in the production of a light-duty vehicle. The light-duty vehicle producer pays $50 to have the goods shipped from the location of the wholesaler’s place of business in City A to the location at which the light-duty vehicle is produced.
The rubber hoses are traced materials and they are incorporated into a light-duty automotive good. For purposes of calculating, under subsection 9(1), the regional value content of the light-duty vehicle,
- (1) if the wholesaler takes title to the goods before the first place at which they were received in the territory of a NAFTA country, then the value of non-originating materials, where the light-duty vehicle producer has a statement referred to in paragraph 9(2)(c), would not include the cost of freight from the place where they were received in the territory of a NAFTA country to the location of the wholesaler’s place of business: in this situation, the value of non-originating materials would be $575;
- (2) if the producer has a statement referred to in paragraph 9(2)(d) that states the customs value of the traced material and, where not included in that customs value, the cost of taxes, duties, fees and transporting the goods to the place where title is taken, the light-duty vehicle producer may use those values as the value of non-originating materials with respect to the goods: in this situation, the value of non-originating materials would be $600; or
- (3) if the wholesaler is unwilling to provide the light-duty vehicle producer with such a statement, the value of non-originating materials with respect to the traced materials will be the value of the materials with respect to the transaction in which the producer acquired them, as provided for in paragraph 9(2)(i), in this instance $650; the costs of transporting the goods from the location of the wholesaler’s place of business to the location of the producer will be included in the net cost of the goods, but not in the value of non-originating materials.
Example 9
A wholesaler, located in City A in the territory of a NAFTA country, imports from outside the territories of the NAFTA countries rubber hose of heading 40.09, which is listed in Schedule IV. The wholesaler sells the good to a producer located in the territory of the NAFTA country who uses the hose to produce a power steering hose assembly, also of heading 40.09. The power steering hose assembly is then sold to a producer of light-duty vehicles who uses that good in the production of a light-duty vehicle. The rubber hose is a traced material; the power steering hose assembly is not a traced material because it was not imported from outside the territories of the NAFTA countries.
The wholesaler who imported the rubber hose from outside the territories of the NAFTA countries has title to it at the time of importation. The customs value of the good is $3, including freight and insurance and all other costs incurred in transporting the good to the first place at which it was received in the territory of the NAFTA country. Duties and fees and all other costs referred to in subsection 9(4), paid by the wholesaler with respect to the good, total an additional $1. The wholesaler sells the good to the producer of the power steering hose assemblies for $5, not including freight to the location of that producer. The power steering hose producer pays $2 to have the good delivered to the location of production. The value of the power steering hose assembly sold to the light-duty vehicle producer is $10, including freight for delivery of the good to the location of the light-duty vehicle producer.
For purposes of calculating, under subsection 9(1), the regional value content of the light-duty vehicle:
- (1) if the motor vehicle producer has a statement referred to in paragraph 9(2)(c) from the producer of the power steering hose assembly that states the customs value of the imported rubber hose incorporated in the power steering hose assembly, and the value of the duties, fees and other costs referred to in subsection 9(4), the producer may use those values as the value of non-originating materials with respect to that traced good: in this situation, that value would be the customs value of $3 and the cost of duties and fees of $1, provided that the wholesaler has provided the producer of the power steering hose assembly with the information regarding the customs value of the imported good and the other costs;
- (2) if the light-duty vehicle producer has a statement from the producer of the power steering hose assembly that states the value of the imported hose, with respect to the transaction in which the power steering hose assembly producer acquires the imported hose from the wholesaler, the light-duty vehicle producer may include that value as the value of non-originating materials, in accordance with paragraph 9(2)(e): in this situation, that value is $5; and the $2 cost of transporting the good from the location of the wholesaler to the location of the producer, because that cost is separately identified, would not be included in the value of non-originating materials of the light-duty vehicle;
- (3) if the light-duty vehicle producer has a statement referred to in paragraph 9(2)(f) signed by the producer of the power steering hose assembly, the light-duty vehicle producer may use the formula set out in paragraph 9(2)(f) to calculate the value of non-originating materials with respect to that acquired material: in this situation, assuming the regional value content is 55 per cent, the value of non-originating materials would be $4.50; and because the cost of transportation from the location of the producer of the power steering hose assembly to the location of the light-duty vehicle producer is included in the purchase price and not separately identified, it may not be deducted from the purchase price, because the formula referred to in paragraph 9(2)(f) does not allow for the deduction of transportation costs that would otherwise not be non-originating;
- (4) if the light-duty vehicle producer has a statement referred to in paragraph 9(2)(g) signed by the producer of the power steering hose assembly, the light-duty vehicle producer may use the formula set out in paragraph 9(2)(g) to calculate the value of non-originating materials with respect to that acquired material: in this situation, assuming the regional value-content requirement is 50 per cent, the value of non-originating materials would be $5; and because the cost of transportation from the location of the producer of the power steering hose assembly to the location of the light-duty vehicle producer is included in the purchase price and not separately identified, it may not be deducted from the purchase price, because the formula referred to in paragraph 9(2)(g) does not allow for the deduction of transportation costs that would otherwise not be non-originating; or
- (5) if the light-duty vehicle producer does not have a statement referred to in any of paragraphs 9(2)(c) through (h) from the producer of the power steering hose assembly, the light-duty vehicle producer includes in the value of non-originating materials of the vehicles the value, determined in accordance with paragraph 9(2)(i), of the power steering hose assembly: in this situation, that amount would be $10, the cost to the producer of acquiring that material.
Example 10
A producer of light-duty vehicles located in City C in the territory of a NAFTA country imports from outside the territories of the NAFTA countries rubber hose of heading 40.09, which is listed in Schedule IV, and uses that good as original equipment in the production of a light-duty vehicle.
The rubber hose arrives at City A in the NAFTA country, but the producer of the light-duty vehicle does not have title to the good; it is transported under bond to City B, and on its arrival in City B, the producer of the light-duty vehicle takes title to it and the good is received in the territory of a NAFTA country. The good is then transported to the location of the light-duty vehicle producer in City C.
The customs value of the imported good is $4, the transportation and other costs referred to in subparagraph 9(2)(b)(ii) to City A are $3 and to City B are $2, and the cost of duties, taxes and other fees referred to in subsection 9(4) is $1. The cost of transporting the good from City B to the location of the producer in City C is $1. The rubber hose is traced material.
For purposes of calculating, under subsection 9(1), the regional value content of the light-duty vehicle, the value, under paragraph 9(2)(b), of non-originating materials of that vehicle is the customs value of the traced material and, where not included in that value, the cost of taxes, duties, fees and the cost of transporting the traced material to the place where title is taken. In this situation, the value of non-originating materials would be the customs value of the traced material, $4, the cost of duties, taxes and other fees, $1, the cost of transporting the material to City A, $3, and the cost of transporting that material from City A to City B, $2, for a total of $10. The $1 cost of transporting the good from City B to the location of the producer in City C would not be included in the value of non-originating materials of the light-duty vehicle because a person of a NAFTA country has taken title to the traced material.
Example 11
A radiator of subheading 8708.91 is imported from outside the territories of the NAFTA countries by a producer of light-duty vehicles and is used in the territory of a NAFTA country as original equipment in the production of a light-duty vehicle.
The radiator is transported by ship from outside the territories of the NAFTA countries and arrives in the territory of the NAFTA country at City A. The radiator is not, however, unloaded at City A and although the radiator is physically present in the territory of the NAFTA country, it has not been received in the territory of a NAFTA country.
The ship sails in territorial waters from City A to City B and the radiator is unloaded there. The light-duty vehicle producer files, from City C in the same country, the entry for the radiator; the radiator enters the territory of the NAFTA country at City B.
Subheading 8708.91 is listed in Schedule IV. The radiator is a traced material.
For purposes of calculating, under subsection 9(1), the regional value content of the light-duty vehicle, the value of the radiator is included in the value of non-originating materials of the light-duty vehicle. The costs of any freight, insurance, packing and other costs incurred in transporting the radiator to City B are included in the value of non-originating materials of the light-duty vehicle, including the cost of transporting the radiator from City A to City B. The costs of any freight, insurance, packing and other costs that were incurred in transporting the radiator from City B to the location of the producer are not included in the value of non-originating materials of the light-duty vehicle.
Example 12
Producer X, located in NAFTA country A, produces a car seat of subheading 9401.20 that is used in the production of a light-duty vehicle. The only non-originating material used in the production of the car seat is an electric motor of subheading 8501.20 that was imported by Producer X from outside the territories of the NAFTA countries. The electric motor is a material of a tariff provision listed in Schedule IV and thus is a traced material.
Producer X sells the car seat as original equipment to Producer Y, a light-duty vehicle producer, located in NAFTA country B. The car seat is an originating good because the non-originating material in the car seat (the electric motor) undergoes the applicable change in tariff classification set out in a rule that specifies only a change in tariff classification. Consequently, Producer X does not elect to calculate the regional value content of the car seat in accordance with subsection 12(1).
For purposes of determining, under subsection 9(1), the value of non-originating materials used in the production of the light-duty vehicle that incorporates the car seat, the value of the electric motor is included even though the car seat qualifies as an originating material.
Producer X provides Producer Y with a statement described in paragraph 9(2)(c), with the value of non-originating material used in the production of the car seat determined in accordance with subsection 12(3), as is permitted by subsection 9(8). Producer Y uses that value as the value of non-originating materials used in the production of the light-duty vehicle with respect to the car seat.
Example 13
This example has the same facts as in Example 12, except that the car seat does not qualify as an originating good under the rule that specifies only a change in tariff classification. Instead, it qualifies as an originating good under a rule that specifies a regional value-content requirement and a change in tariff classification. For purposes of that rule, Producer X elected to calculate the regional value content of the car seat in accordance with subsection 12(1) over a period set out in paragraph 12(5)(a) and using a category set out in paragraph 12(4)(a).
For purposes of the statement described in paragraph 9(2)(c), Producer X determined, as is permitted under subsection 9(8), the value of non-originating material used in the production of the car seat in accordance with subsection 12(3) over a period set out in paragraph 12(5)(a) and using a category set out in paragraph 12(4)(e).

SOR/95-382, s. 1
SOR/2002-27, s. 99

Heavy-duty Automotive Goods

10 (1) Except as otherwise provided in subsections (3) through (8) and paragraph 12(10)(a), for purposes of calculating the regional value content of a heavy-duty automotive good under the net cost method, the value of non-originating materials used by the producer of the good in the production of the good shall be the sum of
- (a) for each listed material that is a non-originating material, is a self-produced material and is used by the producer in the production of the good, at the choice of the producer, either
  - (i) the total cost incurred with respect to all goods produced by the producer that can be reasonably allocated to that listed material in accordance with Schedule VII,
  - (ii) the aggregate of each cost that forms part of the total cost incurred with respect to that listed material that can be reasonably allocated to that listed material in accordance with Schedule VII, or
  - (iii) the sum of
    - (A) the customs value of each non-originating material imported by the producer of the listed material and used in the production of the listed material, and, where not included in that customs value, the costs referred to in paragraphs (2)(c) through (f), and
    - (B) the value of each non-originating material that is not imported by the producer of the listed material and is used in the production of the listed material, determined in accordance with subsection (2) with respect to the transaction in which the producer of the listed material acquired it;
- (b) for each listed material that is a non-originating material, is produced in the territory of a NAFTA country and is acquired and used by the producer in the production of the good, at the choice of the producer, either
  - (i) the value of that non-originating listed material, determined in accordance with subsection (2), with respect to the transaction in which the producer acquired the listed material, or
  - (ii) where the producer of the good has a statement described in clause (A) or (B) with respect to each material that is a non-originating material used in the production of that listed material, the sum of
    - (A) the customs value of each non-originating material imported by the producer of the listed material and used in the production of that listed material, and, where not included in that customs value, the costs referred to in paragraphs (2)(c) through (f), if the producer of the good has a statement signed by the producer of the listed material that states the customs value of that non-originating material and the costs referred to in paragraphs (2)(c) through (f) that the producer of the listed material incurred with respect to the non-originating material, and
    - (B) the value of each non-originating material that is not imported by the producer of the listed material, and is acquired and used in the production of the listed material, determined in accordance with subsection (2) with respect to the transaction in which the producer of the listed material acquired that non-originating material, if the producer of the good has a statement signed by the producer of the listed material that states the value of the acquired material, determined in accordance with subsection (2) with respect to the transaction in which the producer of the listed material acquired the non-originating material;
- (c) for each listed material, automotive component assembly, automotive component or sub-component that is imported from outside the territories of the NAFTA countries, and is used by the producer in the production of the good,
  - (i) where it is imported by the producer, the customs value of that non-originating listed material, automotive component assembly, automotive component or sub-component, and, where not included in that customs value, the costs referred to in paragraphs (2)(c) through (f), and
  - (ii) where it is not imported by the producer, the value of that non-originating listed material, automotive component assembly, automotive component or sub-component, determined in accordance with subsection (2) with respect to the transaction in which the producer acquired it;
- (d) for each automotive component assembly, automotive component or sub-component that is an originating material and is acquired and used by the producer in the production of the good, at the choice of the producer,
  - (i) the sum of
    - (A) the value of each non-originating listed material used in the production of the originating material, determined under paragraphs (a) and (b),
    - (B) the value of each non-originating material incorporated into the originating material, determined under paragraph (c),
    - (C) the value of each non-originating listed material used in the production of a material referred to in paragraph (e) that is used in the production of the originating material, determined under paragraphs (a) and (b), and
    - (D) where the value of a non-originating listed material referred to in clause (C), and used in the production of a non-originating automotive component assembly, automotive component or sub-component that is used in the production of the originating material, is not included under clause (C), the value of that automotive component assembly, automotive component or sub-component, determined under subparagraph (e)(ii),
    if the producer has a statement, signed by the person from whom the originating material was acquired, that states the sum of the values, as determined by the producer of the originating material under paragraphs (a), (b), (c) and (e), of each non-originating material referred to in any of clauses (A) through (D) that is incorporated into that originating material,
  - (ii) an amount equal to the number resulting from applying the following formula:
    VM × (1 - RVC)
    where
    VM
    is the value of the acquired material, determined in accordance with subsection (2), with respect to the transaction in which the producer of the good acquired that material, and
    RVC
    is the regional value content of the acquired material, expressed as a decimal,
    if the material is subject to a regional value-content requirement and the producer has a statement, signed by the person from whom the producer acquired that material, that states that the acquired material is an originating material and states the regional value content of the material,
  - (iii) an amount equal to the number resulting from applying the following formula:
    VM × (1 - RVCR)
    where
    VM
    is the value of the acquired material, determined in accordance with subsection (2), with respect to the transaction in which the producer of the good acquired that material, and
    RVCR
    is the regional value-content requirement for the acquired material, expressed as a decimal,
    if the material is subject to a regional value-content requirement and the producer has a statement, signed by the person from whom the producer acquired that material, that states that the acquired material is an originating material but does not state the value of non-originating materials with respect to that acquired material, or
  - (iv) the value of that automotive component assembly, automotive component or sub-component determined in accordance with subsection (2) with respect to the transaction in which the producer acquired the material;
- (e) for each automotive component assembly, automotive component or sub-component that is a non-originating material produced in the territory of a NAFTA country and that is acquired by the producer and used by the producer in the production of the good, at the choice of the producer, either
  - (i) the sum of the values of the non-originating materials incorporated into that non-originating material that is acquired by the producer, determined under paragraphs (a), (b), (c), (d) and (f), if the producer has a statement, signed by the person from whom the non-originating material was acquired, that states the sum of the values of the non-originating materials incorporated into that non-originating material, determined by the producer of the non-originating material in accordance with paragraphs (a), (b), (c), (d) and (f), or
  - (ii) the value of that non-originating automotive component assembly, automotive component or sub-component, determined in accordance with subsection (2) with respect to the transaction in which the producer acquired the material; and
- (f) for each non-originating material that is not referred to in paragraph (a), (b), (c) or (e) and that is used by the producer in the production of the good,
  - (i) where it is imported by the producer, the customs value of that non-originating material, and, where not included in that customs value, the costs referred to in paragraphs (2)(c) through (f), and
  - (ii) where it is not imported by the producer, the value of that non-originating material, determined in accordance with subsection (2) with respect to the transaction in which the producer acquired the material.
(2) For purposes of clause (1)(a)(ii)(B), subparagraph (1)(b)(i), clause (1)(b)(ii)(B), subparagraphs (1)(c)(ii), (1)(d)(ii) through (iv), (1)(e)(ii) and (1)(f)(ii), the value of a material
- (a) shall be the transaction value of the material, determined in accordance with subsection 2(1) of Schedule VIII with respect to the transaction referred to in that clause or subparagraph, or
- (b) where, with respect to the transaction referred to in that clause or subparagraph, there is no transaction value for the material under subsection 2(2) of Schedule VIII or the transaction value of the material is unacceptable under subsection 2(3) of that Schedule, shall be determined in accordance with sections 6 through 11 of that Schedule,
and shall include the following costs where they are not included under paragraph (a) or (b):
- (c) the costs of freight, insurance and packing, and all other costs incurred in transporting the material to the location of the producer,
- (d) duties and taxes paid or payable with respect to the material in the territory of one or more of the NAFTA countries, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable,
- (e) customs brokerage fees, including the cost of in-house customs brokerage and customs clearance services, incurred with respect to the material in the territory of one or more of the NAFTA countries, and
- (f) the cost of waste and spoilage resulting from the use of the material in the production of the good, minus the value of any reusable scrap or by-product.
(3) For purposes of clauses (1)(a)(ii)(A) and (b)(ii)(A) and subparagraphs (1)(c)(i) and (f)(i), where the customs value of an imported material referred to in those clauses or paragraphs was not determined in a manner consistent with Schedule VIII, the value of the material shall be determined in accordance with Schedule VIII with respect to the importation for which that customs value was determined and, where the costs referred to in paragraphs (2)(c) through (f) are not included in that value, those costs shall be added to the value of the material.
(4) For purposes of calculating the regional value content of a heavy-duty component, where
- (a) a heavy-duty component is produced in the same plant as an automotive component assembly or automotive component that is of the same heading or subheading as that heavy-duty component and is for use as original equipment in a light-duty vehicle, and
- (b) it is not reasonable for the producer to know which of the production will constitute a heavy-duty component for use in a heavy-duty vehicle,
the value of the non-originating materials used in the production of the heavy-duty component in that plant may, at the choice of the producer, be determined in the manner set out in section 9.
(5) For purposes of calculating the regional value content of a heavy-duty vehicle, where a producer of such a vehicle acquires, for use by that producer in the production of the vehicle, a heavy-duty component with respect to which the value of non-originating materials has been determined in accordance with subsection (4), the value of the non-originating materials used by the producer with respect to that heavy-duty component is the value of non-originating materials determined under that subsection.
(6) Where it is determined, during the course of a verification of origin of a heavy-duty automotive good with respect to which the producer of that good has a statement referred to in subparagraph (1)(d)(ii) or (iii) that the acquired material referred to in that statement is not an originating material, the value of the acquired material shall, for purposes of subsection (1), be determined in accordance with subsection (2) with respect to the transaction in which that producer acquired it.
(7) Where any person who has information with respect to a statement referred to in subparagraph (1)(b)(ii), (d)(i) or (e)(i) does not allow a customs administration to verify that information during a verification of origin, the value of any material with respect to which that person did not allow the customs administration to verify the information may be determined by that customs administration in accordance with subsection (2) with respect to the transaction in which that person sells, or otherwise transfers to another person, that material or a material that incorporates that material.
(8) Where a heavy-duty component, sub-component or listed material is incorporated into a material produced in the territory of a NAFTA country and that material is incorporated into a heavy-duty automotive good, the statement referred to in subparagraph (1)(b)(ii), (d)(i) or (e)(i) may state the value of non-originating materials, determined in accordance with subsection 12(3), with respect to the material that incorporates the heavy-duty component, sub-component or listed material.
(9) For purposes of this section,
- (a) for purposes of calculating the regional value content of a heavy-duty automotive good, sub-component or listed material, a producer of such a good may, in accordance with subsection 7(4), designate as an intermediate material any self-produced material, other than a heavy-duty component or sub-component, that is used in the production of that good;
- (b) except as otherwise provided in subsection 12(10), this section does not apply with respect to after-market parts;
- (c) this section does not apply to a sub-component for purposes of calculating its regional value content before it is incorporated into a heavy-duty automotive good;
- (d) for purposes of calculating the regional value content of a heavy-duty automotive good, the producer of that good may choose to treat any material used in the production of that good as a non-originating material, and the value of that material shall be determined in accordance with subsection (2) with respect to the transaction in which the producer acquired it;
- (e) any information set out in a statement referred to in subparagraph (1)(b)(ii), (d)(i) through (iii) or (e)(i) 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; and
- (f) total cost under subparagraphs (1)(a)(i) and (ii) consists of the costs referred to in subsection 2(6), and is calculated in accordance with that subsection and subsection 2(7).
(10) Each of the following examples is an “Example” as referred to in subsection 2(4).
- Example 1
  A listed material is imported from outside the territories of the NAFTA countries
  A cast head, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country in the production of an engine that will be used as original equipment in the production of a heavy-duty vehicle. No other non-originating materials are used in the production of the engine. The cast head is a listed material; the engine is an automotive component.
  Use of the listed material in an automotive component
  For purposes of calculating the regional value content of the engine, the value of listed materials imported from outside the territories of the NAFTA countries is included in the value of non-originating materials used in the production of the engine. Because the cast head was produced outside the territories of the NAFTA countries, its value, under paragraph 10(1)(c), is included in the value of non-originating materials used in the production of the engine.
  Use of an originating automotive component incorporating the listed material
  The engine is an originating material acquired by the producer of the heavy-duty vehicle. For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates that engine (and incorporates the cast head), the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(d) with respect to that engine. The producer may choose to include in the value of non-originating materials of the heavy-duty vehicle
  - (a) the value, determined under subparagraph 10(1)(d)(i), of the non-originating materials that are incorporated into the engine, which is the value, determined under paragraphs 10(1)(a) through (c) and subparagraph (e)(ii), of the non-originating materials;
  - (b) the value, determined under subparagraph 10(1)(d)(ii), which is an amount equal to the amount determined under subparagraph 10(1)(d)(iv) multiplied by the remainder of one minus the regional value content, expressed as a decimal, of the engine;
  - (c) the value, determined under subparagraph 10(1)(d)(iii), which is an amount equal to the amount determined under subparagraph 10(1)(d)(iv) multiplied by the remainder of one minus the regional value-content requirement, expressed as a decimal, for the engine; or
  - (d) the value, determined under subparagraph 10(1)(d)(iv), of the engine.
  The heavy-duty vehicle producer may only choose the first option if that producer has a statement, referred to in subparagraph 10(1)(d)(i), from the person from whom the engine was acquired. In this situation, the value, determined under paragraph 10(1)(c), of the cast head, is included in the value of non-originating materials of the heavy-duty vehicle, with respect to the engine that is used in the production of the heavy-duty vehicle.
  The heavy-duty vehicle producer may only choose the second option if that producer has a statement, referred to in subparagraph 10(1)(d)(ii), from the person from whom the engine was acquired. In this situation, because of the application of the equation, the value of the cast head will be included in the amount determined under subparagraph 10(1)(d)(ii) and is, consequently, included in the value of non-originating materials used in the production of the heavy-duty vehicle.
  The heavy-duty vehicle producer may only choose the third option if that producer has a statement, referred to in subparagraph 10(1)(d)(iii), from the person from whom the engine was acquired. In this situation, because of the application of the equation, the value of the cast head will be included in the amount determined under subparagraph 10(1)(d)(iii) and is, consequently, included in the value of non-originating materials used in the production of the heavy-duty vehicle.
  Use of a non-originating automotive component incorporating the listed material
  The engine is a non-originating material acquired by the producer of the heavy-duty vehicle. For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates that engine (and incorporates the cast head), the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(e) with respect to that engine. The producer of the heavy-duty vehicle may choose to include in the value of non-originating materials either
  - (a) the value, as determined under subparagraph 10(1)(e)(i), of the non-originating materials that are incorporated into the engine, which is the value of the non-originating materials as determined under paragraphs 10(1)(a) through (d) and (f), or
  - (b) the value of the engine, determined under subparagraph 10(1)(e)(ii).
  The heavy-duty vehicle producer may only choose the first option if that producer has a statement, referred to in subparagraph 10(1)(e)(i), from the person from whom the engine was acquired. In this situation, the value of the cast head, as determined under paragraph 10(1)(c), is included in the value of non-originating materials used in the production of the heavy-duty vehicle, with respect to the engine that is used in the production of the heavy-duty vehicle.
- Example 2
  A material is imported from outside the territories of the NAFTA countries
  A rocker arm assembly, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country in the production of an engine that will be used as original equipment in the production of a heavy-duty vehicle. No other non-originating materials are used in the production of the engine. The rocker arm assembly is neither a listed material nor a sub-component; the engine is an automotive component.
  Use of the material in an automotive component
  For purposes of calculating the regional value content of the engine, the value of non-originating materials that are not listed materials is included in the value of non-originating materials used in the production of the engine. Because the rocker arm assembly was produced outside the territories of the NAFTA countries, it is a non-originating material and its value, under paragraph 10(1)(f), is included in the value of non-originating materials used in the production of the engine.
  Use of an originating automotive component incorporating the material
  The engine is an originating material acquired by the producer of the heavy-duty vehicle. For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates that engine (and incorporates the rocker arm assembly), the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(d) with respect to that engine. The producer may choose to include in the value of non-originating materials used in the production of the heavy-duty vehicle
  - (a) the value, determined under subparagraph 10(1)(d)(i), of the non-originating materials that are incorporated into the engine, which is the value, determined under paragraphs 10(1)(a) through (c) and subparagraph (e)(ii), of the non-originating materials;
  - (b) the value, determined under subparagraph 10(1)(d)(ii), which is an amount equal to the amount determined under subparagraph 10(1)(d)(iv) multiplied by the remainder of one minus the regional value content, expressed as a decimal, of the engine;
  - (c) the value, determined under subparagraph 10(1)(d)(iii), which is an amount equal to the amount determined under paragraph 10(1)(d)(iv) multiplied by the remainder of one minus the regional value-content requirement, expressed as a decimal, for the engine; or
  - (d) the value, determined under subparagraph 10(1)(d)(iv), of the engine.
  The heavy-duty vehicle producer may only choose the first option if that producer has a statement, referred to in subparagraph 10(1)(d)(i), from the person from whom the engine was acquired. In this situation, the value of the rocker arm assembly, as determined under paragraph 10(1)(f), is not included in the value of non-originating materials of the heavy-duty vehicle, with respect to the engine that is used in the production of the heavy-duty vehicle.
  The heavy-duty vehicle producer may only choose the second option if that producer has a statement, referred to in subparagraph 10(1)(d)(ii), from the person from whom the engine was acquired. In this situation, because of the application of the equation, the value of the rocker arm assembly will be included in the amount determined under subparagraph 10(1)(d)(ii) and will, consequently, be included in the value of non-originating materials used in the production of the heavy-duty vehicle.
  The heavy-duty vehicle producer may only choose the third option if that producer has a statement, referred to in subparagraph 10(1)(d)(iii), from the person from whom the engine was acquired. In this situation, because of the application of the equation, the value of the rocker arm assembly will be included in the amount determined under subparagraph 10(1)(d)(iii) and will, consequently, be included in the value of non-originating materials used in the production of the heavy-duty vehicle.
  Use of a non-originating automotive component incorporating the material
  The engine is a non-originating material acquired by the producer of the heavy-duty vehicle. For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates that engine (and incorporates the rocker arm assembly), the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(e) with respect to that engine. The producer of the heavy-duty vehicle may choose to include in the value of non-originating materials either
  - (a) the value, as determined under subparagraph 10(1)(e)(i), of the non-originating materials that are incorporated into the engine, which is the value of the non-originating materials as determined under paragraphs 10(1)(a) through (d) and (f), or
  - (b) the value of the engine, determined under subparagraph 10(1)(e)(ii).
  The heavy-duty vehicle producer may only choose the first option if that producer has a statement, referred to in subparagraph 10(1)(e)(i), from the person from whom the engine was acquired. In this situation, the value of the rocker arm assembly, as determined under paragraph 10(1)(f), is included in the value of non-originating materials used in the production of the heavy-duty vehicle, with respect to the engine that is used in the production of the heavy-duty vehicle.
  Use of the material in a self-produced automotive component
  If the engine is a self-produced material rather than an acquired material, the heavy-duty vehicle producer is using the rocker arm assembly in the production of the heavy-duty vehicle rather than in the production of the engine, because, under subsection 7(4), the engine cannot be designated as an intermediate material. For purposes of calculating the regional value content of the heavy-duty vehicle, the value, under paragraph 10(1)(f), of the rocker arm assembly is included in the value of non-originating materials used in the production of the heavy-duty vehicle.
- Example 3
  An automotive component is imported from outside the territories of the NAFTA countries
  A transmission, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country as original equipment in the production of a heavy-duty vehicle. The transmission is an automotive component.
  Use of the automotive component
  For purposes of calculating the regional value content of the heavy-duty vehicle in which the transmission is used, the value of the transmission is included in the value of the non-originating materials under paragraph 10(1)(c), regardless of whether the producer imported the transmission or acquired it from someone else in the territory of a NAFTA country.
- Example 4
  An automotive component is imported from outside the territories of the NAFTA countries
  A transmission, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and combined with an engine to produce an engine-transmission assembly that will be used as original equipment in the production of a heavy-duty vehicle. The transmission is an automotive component; the engine-transmission assembly is an automotive component assembly.
  Use of the automotive component assembly
  The automotive component assembly is acquired by a producer who uses it in the production of a heavy-duty vehicle. If the automotive component assembly that incorporates the imported transmission is an originating material, the value of non-originating materials used in the production of the automotive component assembly is determined, at the choice of the producer, under any of subparagraphs 10(1)(d)(i), (ii), (iii) and (iv). (See example 1 for more detailed explanations of these provisions.) If the automotive component assembly that incorporates the imported transmission is a non-originating material, the value of non-originating materials used in the production of the automotive component assembly is determined, at the choice of the producer, under subparagraph 10(1)(e)(i) or (ii). (See example 1 for more detailed explanations of these provisions.)
  Regardless of whether the automotive component assembly is an originating material or a non-originating material, the value of the automotive component that was imported from outside the territories of the NAFTA countries is included in the value of non-originating materials used in the production of the heavy-duty vehicle. The transmission is a non-originating material, and, for purposes of calculating the regional value content of an automotive component assembly or heavy-duty vehicle that incorporates that transmission, the value of the transmission is included in the value of non-originating materials used in the production of the automotive component assembly or heavy-duty vehicle that incorporates it.
- Example 5
  A material is imported from outside the territories of the NAFTA countries
  An aluminum ingot, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country in the production of cast block that will be used in an engine that will be used as original equipment in the production of a heavy-duty vehicle. The aluminum ingot is not a listed material; the cast block is a listed material; the engine is an automotive component.
  Use of the material in an intermediate material that is a listed material
  The engine producer designates the cast block as an intermediate material under subsection 7(4). For purposes of determining the origin of that cast block, because the aluminum ingot is classified under a different heading than the cast block, the cast block satisfies the applicable change in tariff classification and is an originating material.
  Use of the listed material incorporating the material
  For purposes of calculating the regional value content of the engine that incorporates that cast block (and thus incorporates the aluminum ingot), the value of non-originating materials is determined under subsection 10(1). Because none of paragraphs 10(1)(a) through (f) require that a listed material that is an originating material be included in the value of non-originating materials used in the production of a good, the value of the cast block is not included in the value of non-originating materials used in the production of the engine or in the value of non-originating materials used in the production of an automotive component assembly or heavy-duty vehicle that incorporates the engine.
  Because paragraph 10(1)(d) does not refer to a listed material that is an originating material, the value of the non-originating aluminum ingot used in the production of the originating cast block is not included in the value of non-originating materials used in the production of any good or material that incorporates the originating cast block.
- Example 6
  A non-originating listed material is used to produce a sub-component that is used to produce another sub-component
  A crankshaft, produced in the territory of NAFTA country A from a forging imported from outside the territories of the NAFTA countries, is a non-originating material. The crankshaft is sold to another producer, located in the same country, who uses it to produce an originating block assembly. That block assembly is sold to another producer, also located in the same country, who uses it to produce a finished block. The finished block is sold to a producer of engines, who is located in NAFTA country B, for use in the production of a heavy-duty vehicle. The crankshaft is a listed material; the block assembly is a sub-component, as is the finished block.
  Calculating the regional value content of the finished block
  A sub-component is not a heavy-duty automotive good. As referred to in paragraph 10(9)(c), for purposes of calculating the regional value content of the sub-component before it is incorporated into a heavy-duty automotive good, such as when the sub-component is exported from the territory of one NAFTA country to the territory of another NAFTA country, the value of non-originating materials of the sub-component includes only the value of non-originating materials used in the production of that sub-component. Because the block assembly is an originating material, its value is not included in the value of non-originating materials of the finished block, nor is the value of the non-originating crankshaft included in the value of non-originating materials used in the production of the finished block because the crankshaft was used in the production of the block assembly and was not used in the production of the finished block.
  Calculating the regional value content of the component that incorporates the finished block
  For purposes of calculating the regional value content of the heavy-duty vehicle that incorporates a sub-component, the value of non-originating materials used in the production of the sub-component is determined under paragraph 10(1)(d) or (e) with respect to that sub-component. In this situation, the value, under paragraph 10(1)(b), of the non-originating crankshaft is included in the value of non-originating materials used in the production of the engine. (See examples 1 and 2 for more detailed explanations of paragraphs 10(1)(d) and (e).)
- Example 7
  A non-listed material is imported from outside the territories of the NAFTA countries and is used in the production of another non-listed material
  A bumper part, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and is used in the production of a bumper. The bumper is used in the territory of a NAFTA country as original equipment in the production of a heavy-duty vehicle. Neither a bumper part nor a bumper is a listed material, sub-component, automotive component or automotive component assembly.
  The non-listed material is an originating material
  The bumper is an originating material. For purposes of calculating the regional value content of the heavy-duty vehicle, neither the value of the imported bumper part nor the value of the bumper is included in the value of the non-originating materials.
  The non-listed material is a non-originating material
  The bumper is a non-originating material. For purposes of calculating the regional value content of the heavy-duty vehicle, the value of non-originating materials used in the production of the heavy-duty vehicle is determined under paragraph 10(1)(f) with respect to the bumper. In this situation, the value of the bumper is included in the value of non-originating materials of the heavy-duty vehicle. Because a bumper is not a listed material, the producer of the heavy-duty vehicle does not have the option, under subparagraph 10(1)(b)(ii), to include only the value of the imported bumper part in the value of non-originating materials used in the production of the heavy-duty vehicle.
- Example 8
  Transshipment of a listed material
  A producer, located in the territory of a NAFTA country, produces, in that country, a cast head that is an originating good. The producer exports the cast head to outside the territories of the NAFTA territories, where valves, springs, valve lifters, a camshaft and gears are added to it to create a cast head assembly. An engine producer, located in the territory of a NAFTA country, imports the cast head assembly into that country and uses it in the production of an engine that will be used as original equipment in the production of a heavy-duty vehicle. A cast head is a listed material; a cast head assembly is a sub-component.
  For purposes of calculating the regional value content of the engine, the value of the imported cast head assembly is included in the value of non-originating materials under paragraph 10(1)(c). The value of the cast head cannot be deducted from the value determined under paragraph 10(1)(c). Although the cast head was once an originating good, under section 16 when further production was performed with respect to the cast head outside the territories of the NAFTA countries, it was no longer an originating good.
- Example 9
  A material is imported from outside the territories of the NAFTA countries and a heavy-duty vehicle producer self-produces a non-originating listed material
  A material, produced outside the territories of the NAFTA countries, is imported into the territory of a NAFTA country and used in that country in the production of a water pump that will be used as original equipment by the same producer in the production of a heavy-duty vehicle. Although the producer, under subsection 7(4), designates the water pump as an intermediate material, it is a non-originating material because it fails to satisfy the regional value-content requirement. A water pump is a listed material.
  For purposes of calculating the regional value content of the heavy-duty vehicle, the value of non-originating materials includes, at the choice of the producer, either the total cost, determined under subparagraph 10(1)(a)(i), of the water pump or the value, determined under clause 10(1)(a)(iii)(A), of the material imported from outside the territories of the NAFTA countries.
- Example 10
  A material is acquired and used to produce a non-originating listed material
  A material, produced outside the territories of the NAFTA countries, is acquired in the territory of a NAFTA country and is used in that country in the production of a water pump that will be used as original equipment in the production of a heavy-duty vehicle. The producer of the water pump and the producer of the heavy-duty vehicle are separate, unrelated producers, located in the same country. A water pump is a listed material. The producer of the water pump elected to calculate the regional value content of the water pump in accordance with subsection 12(1) over a period set out in paragraph 12(5)(a) and using a category set out in paragraph 12(4)(b). The water pump is a non-originating material because it fails to satisfy the regional value-content requirement.
  For purposes of calculating the regional value content of the heavy-duty vehicle, the value of non-originating materials includes, at the choice of the producer, either the value, determined under subparagraph 10(1)(b)(i), of the water pump or, if the producer has a statement referred to in clause 10(1)(b)(ii)(B), the value, determined under that clause, of the material imported from outside the territories of the NAFTA countries.
  The producer has a statement referred to in clause 10(1)(b)(ii)(B) and chooses to use the value of non-originating material determined under that clause. The statement states, as is permitted under subsection 10(8), the value of non-originating material used in the production of the water pump in accordance with subsection 12(3) over a period set out in paragraph 12(5)(a) and using a category set out in paragraph 12(4)(e).

SOR/95-382, s. 1

Motor Vehicle Averaging

11 (1) For purposes of calculating the regional value content of light-duty vehicles or heavy-duty vehicles, the producer of those motor vehicles may elect that
- (a) the sum of the net costs incurred and the sum of the values of non-originating materials used by the producer be calculated over the producer’s fiscal year with respect to the motor vehicles that are in any one of the categories set out in subsection (5) that is chosen by the producer; and
- (b) the sums referred to in paragraph (a) be used in the calculation referred to in subsection 6(3) as the net cost and the value of non-originating materials, respectively.
(2) An election made under subsection (1) shall
- (a) state the category chosen by the producer, and
  - (i) where the category referred to in paragraph (5)(a) is chosen, state the model line, model name, class of motor vehicle and tariff classification of the motor vehicles in that category, and the location of the plant at which the motor vehicles are produced,
  - (ii) where the category referred to in paragraph (5)(b) is chosen, state the model name, class of motor vehicle and tariff classification of the motor vehicles in that category, and the location of the plant at which the motor vehicles are produced, and
  - (iii) where the category referred to in paragraph (5)(c) is chosen, state the model line, model name, class of motor vehicle and tariff classification of the motor vehicles in that category, and the locations of the plants at which the motor vehicles are produced;
- (b) state the basis of the calculation described in subsection (9);
- (c) state the producer’s name and address;
- (d) state the period with respect to which the election is made, including the starting and ending dates;
- (e) state the estimated regional value content of motor vehicles in the category on the basis stated under paragraph (b);
- (f) be dated and signed by an authorized officer of the producer; and
- (g) be filed with the customs administration of each NAFTA country to which vehicles in that category are to be exported during the period covered by the election, at least 10 days before the first day of the producer’s fiscal year, or such shorter period as that customs administration may accept.
(3) Where the fiscal year of a producer begins after the date of the entry into force of the Agreement but before one year after that date, the producer may elect that the calculation of regional value content referred to in subsection (1) or subsection (6) be made under that subsection over the period beginning on the date of the entry into force of the Agreement and ending at the end of that fiscal year, in which case the election shall be filed with the customs administration of each NAFTA country to which vehicles are to be exported during the period covered by the election not later than 10 days after the entry into force of the Agreement, or such longer period as that customs administration may accept.
(4) Where the fiscal year of a producer begins on the date of the entry into force of the Agreement, the producer may make the election referred to in subsection (1) not later than 10 days after the entry into force of the Agreement, or such longer period as the customs administration referred to in paragraph (2)(g) may accept.
(5) The categories referred to in subsection (1) are the following:
- (a) the same model line of motor vehicles in the same class of motor vehicles produced in the same plant in the territory of a NAFTA country;
- (b) the same class of motor vehicles produced in the same plant in the territory of a NAFTA country; and
- (c) the same model line of motor vehicles produced in the territory of a NAFTA country.
(6) Where applicable, a producer may elect that the calculation of the regional value content of motor vehicles referred to in Schedule VI be made in accordance with that schedule.
(7) Subject to subsection 5(4) of Schedule VI, the election referred to in subsection (6) shall be filed with the customs administration of the NAFTA country to which vehicles referred to in that schedule are to be exported, at least 10 days before the first day of the producer’s fiscal year with respect to which that election is to apply or such shorter period as the customs administration may accept.
(8) An election filed for the period referred to in subsection (1) or (3) may not be
- (a) rescinded; or
- (b) modified with respect to the category or basis of calculation.
(9) For purposes of this section, where a producer files an election under subsection (1), (3) or (4), including an election referred to in subsection 13(9), the net costs incurred and the values of non-originating materials used by the producer, with respect to
- (a) all motor vehicles that fall within the category chosen by the producer and that are produced during the fiscal year or, in the case of an election filed under subsection (3), during the period with respect to which the election is made, or
- (b) those motor vehicles to be exported to the territory of one or more of the NAFTA countries that fall within the category chosen by the producer and that are produced during the fiscal year or, in the case of an election filed under subsection (3), during the period with respect to which the election is made,
shall be included in the calculation of the regional value content under any of the categories set out in subsection (5).
(10) Where the producer of a motor vehicle has calculated the regional value content of the motor vehicle on the basis of estimated costs, including standard costs, budgeted forecasts or other similar estimating procedures, before or during the producer’s fiscal year, 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 motor vehicle, and, if the motor vehicle does not satisfy the regional value content requirement on the basis of the actual costs, immediately inform any person to whom the producer has provided a Certificate of Origin for the motor vehicle, or a written statement that the motor vehicle is an originating good, that the motor vehicle is a non-originating good.
(11) The following example is an “Example” as referred to in subsection 2(4).
A motor vehicle producer located in NAFTA country A produces vehicles that fall within a category set out in subsection 11(5) that is chosen by the producer. The motor vehicles are to be sold in NAFTA countries A, B and C, as well as in country D, which is not a NAFTA country. Under subsection 11(1), the motor vehicle producer may elect that the sum of the net costs incurred and the sum of the values of non-originating materials used by the producer be calculated over the producer’s fiscal year. The producer may state in the election the basis of the calculation as described in paragraph 11(9)(a), in which case the calculation would be on the basis of all the motor vehicles produced regardless of where they are destined. Alternatively, the producer may state in the election the basis of the calculation as described in paragraph 11(9)(b). In this case, the producer would also need to state that the calculation is on the basis of
- (a) the motor vehicles produced that are for export to NAFTA countries B and C;
- (b) the motor vehicles produced that are for export to only NAFTA country B; or
- (c) the motor vehicles produced that are for export to only NAFTA country C.
The calculation would be on the basis as described in the election.

SOR/95-382, s. 1

Automotive Parts Averaging

12 (1) The regional value content of any or all goods that are of the same tariff provision listed in Schedule IV, or an automotive component assembly, an automotive component, a sub-component or a listed material, produced in the same plant, may, where the producer of those goods elects to do so, be calculated 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 light-duty vehicles;
- (b) original equipment for use in the production of heavy-duty vehicles;
- (c) after-market parts;
- (d) any combination of goods referred to in paragraphs (a) through (c);
- (e) goods that are in a category set out in any of paragraphs (a) through (d) and are sold to one or more motor vehicle producers; and
- (f) goods that are in a category set out in any of paragraphs (a) through (e) and are exported to the territory of one or more of the NAFTA countries.
(5) The period referred to in paragraph (1)(a) is,
- (a) with respect to goods referred to in paragraph (4)(a), (b) or (d), or paragraph 4(e) or (f) where the goods in that category are in a category referred to in paragraph 4(a) or (b), any month, any consecutive three month period that is evenly divisible into the number of months of the producer’s fiscal year, or of the fiscal year of the motor vehicle producer to whom those goods are sold, remaining at the beginning of that period, or the fiscal year of that motor vehicle producer to whom those goods are sold; and
- (b) with respect to goods referred to in paragraph (4)(c), or paragraph (4)(e) or (f) where the goods in that category are in a category referred to in paragraph (4)(c), any month, any consecutive three month period that is evenly divisible into the number of months of the producer’s fiscal year, or of the fiscal year of the motor vehicle producer to whom those goods are sold, remaining at the beginning of that period, or the fiscal year of that producer or of that motor vehicle producer to whom those 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 one or three month period under subsection (5) with respect to the goods referred to in paragraph (5)(a), 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 paragraph (9)(a) 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 paragraph (9)(a) the fiscal year of the motor vehicle producer to whom the goods are sold.
(8) Where a producer of goods chooses a one or three month period under subsection (5) with respect to the goods referred to in paragraph (5)(b), that producer shall be considered to have chosen under that subsection a period or periods of the same duration for the remainder of, at the choice of the producer, the producer’s fiscal year or the fiscal year of the motor vehicle producer to whom those goods are sold.
(9) Where a producer of goods chooses a one or three month period under subsection (5) with respect to the goods, the producer may,
- (a) with respect to goods referred to in paragraph (5)(a), at the end of the fiscal year of the motor vehicle producer to whom those goods are sold, choose the fiscal year of that motor vehicle producer; and
- (b) with respect to goods referred to in paragraph (5)(b), 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.
(10) Where a producer chooses that the regional value content of goods be calculated in accordance with subsection (1) and the goods are in any of the categories set out in paragraphs (4)(d) through (f), the value of non-originating materials
- (a) shall be determined in the manner set out in section 9, where any of those goods are light-duty automotive goods;
- (b) shall be determined in the manner set out in section 10, where any of those goods are heavy-duty automotive goods but none of the goods are light-duty automotive goods; and
- (c) shall be determined in the manner set out in section 7, where none of those goods are light-duty automotive goods or heavy-duty automotive goods.
(11) Where the producer of a good has calculated the regional value content of the good on the basis of estimated costs, including standard costs, budgeted forecasts or other similar estimating procedures, before or during the period chosen under subsection (1), the producer shall conduct an analysis, at the end of the producer’s fiscal year following the end of that period, 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.

SOR/95-382, s. 1
SOR/2002-27, s. 4

Special Regional Value-Content Requirements

13 (1) Notwithstanding the regional value-content requirement set out in Schedule I, and except as otherwise provided in subsection (2), the regional value-content requirement for a good referred to in paragraph (a) or (b) is as follows:
- (a) for the fiscal year of a producer that begins on the day closest to January 1, 1998 and for the three following fiscal years of that producer, not less than 56 per cent, and for the fiscal year of a producer that begins on the day closest to January 1, 2002 and thereafter, not less than 62.5 per cent, in the case of
  - (i) a light-duty vehicle, and
  - (ii) a good of any of headings 84.07 and 84.08 and subheading 8708.40, that is for use in a light-duty vehicle; and
- (b) for the fiscal year of a producer that begins on the day closest to January 1, 1998 and for the three following fiscal years of that producer, not less than 55 per cent, and for the fiscal year of a producer that begins on the day closest to January 1, 2002 and thereafter, not less than 60 per cent, in the case of
  - (i) a heavy-duty vehicle,
  - (ii) a good of any of headings 84.07 and 84.08 and subheading 8708.40 that is for use in a heavy-duty vehicle, and
  - (iii) except in the case of a good referred to in subparagraph (a)(ii) or of any of subheadings 8482.10 through 8482.80, 8483.20 and 8483.30, a good of a tariff provision listed in Schedule IV that is subject to a regional value-content requirement and is for use in a light-duty vehicle or a heavy-duty vehicle.
(2) Notwithstanding the regional value-content requirement set out in Schedule I, the regional value-content requirement for a light-duty vehicle or a heavy-duty vehicle that is produced in a plant is as follows:
- (a) not less than 50 per cent for five years after the date on which the first prototype of the motor vehicle is produced in the plant by a motor vehicle assembler, if
  - (i) the motor vehicle is of a class, marque or, except in the case of a heavy-duty vehicle, size category and type of underbody, that was not previously produced by the motor vehicle assembler in the territory of any of the NAFTA countries,
  - (ii) the plant consists of, or includes, a new building in which the motor vehicle is assembled, and
  - (iii) the value of machinery that was never previously used for production, and that is used in the new building or buildings for the purposes of the complete motor vehicle assembly process with respect to that motor vehicle, is at least 90 per cent of the value of all machinery used for purposes of that process; and
- (b) not less than 50 per cent for two years after the date on which the first prototype of the motor vehicle is produced in the plant by a motor vehicle assembler following a refit of that plant, if the motor vehicle is of a class, marque or, except in the case of a heavy-duty vehicle, size category and type of underbody, that was not assembled by the motor vehicle assembler in the plant before the refit.
(3) For purposes of subparagraph (2)(a)(iii), the value of machinery shall be
- (a) where the machinery was acquired by the producer of the motor vehicle from another person, the cost of that machinery that is recorded on the books of the producer;
- (b) where the machinery was used previously by the producer of the motor vehicle in the production of another good, the cost of the machinery that is recorded on the books of the producer minus accumulated depreciation of that machinery that is recorded on those books; and
- (c) where the machinery was produced by the producer of the motor vehicle, the total cost incurred with respect to that machinery, calculated on the basis of the costs that are recorded on the books of the producer.
(4) For purposes of calculating the regional value content of a motor vehicle referred to in subsection (2) that is in any one of the categories set out in subsection (7) that is chosen by the producer, the producer may file with the customs administration of the NAFTA country into the territory of which vehicles in that category are to be imported an election to calculate the regional value content of such vehicles by
- (a) calculating the sum of the net costs incurred and the sum of the values of non-originating materials used by the producer with respect to all of such motor vehicles in the category chosen over
  - (i) the period beginning on the day on which the first prototype of the motor vehicle is produced and ending on the last day of the producer’s first fiscal year that begins on or after the beginning of the period,
  - (ii) a fiscal year of the producer that starts after the period referred to in subparagraph (i) and ends on or before the end of the period referred to in paragraph (2)(a) or (b), or
  - (iii) the period beginning on the first day of the producer’s fiscal year that begins before the end of the period referred to in paragraph (2)(a) or (b) and ending at the end of that period; 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.
(5) An election made under subsection (4) shall
- (a) state the category chosen by the producer and
  - (i) where the category referred to in paragraph (7)(a) is chosen, the model name, model line, class of motor vehicles and tariff classification of the motor vehicles in that category, and the location of the plant at which the motor vehicles are produced, and
  - (ii) where the category referred to in paragraph (7)(b) is chosen, state the model name, class of motor vehicles and tariff classification of the motor vehicles in that category, and the location of the plant at which the motor vehicles are produced;
- (b) state the basis of the calculation described in subsection (8);
- (c) state the producer’s name and address;
- (d) state the period with respect to which the election is made, including the starting and ending dates;
- (e) state the estimated regional value content of motor vehicles in the category on the basis stated under paragraph (b);
- (f) state whether the election is with respect to a motor vehicle referred to in paragraph (2)(a) or (b);
- (g) be dated and signed by an authorized officer of the producer; and
- (h) be filed with the customs administration of each NAFTA country to which vehicles in that category are to be exported during the period covered by the election, at least 10 days before the first day of the producer’s fiscal year, or such shorter period as that customs administration may accept.
(6) An election filed for the period referred to in subsection (4) may not be
- (a) rescinded; or
- (b) modified with respect to the category or basis of calculation.
(7) The categories referred to in subsection (4) are the following:
- (a) the same model line of motor vehicles in the same class of motor vehicles produced in the same plant in the territory of a NAFTA country; and
- (b) the same class of motor vehicles produced in the same plant in the territory of a NAFTA country.
(8) For purposes of subsection (4), the net costs incurred and the values of non-originating materials used by the producer, with respect to
- (a) all motor vehicles that fall within the category chosen by the producer and that are produced during the period with respect to which the election is made, or
- (b) those motor vehicles to be exported to the territory of one or more of the NAFTA countries that fall within the category chosen by the producer and that are produced during the period with respect to which the election is made,
shall be included in the calculation of the regional value content under any of the categories set out in subsection (7).
(9) Where the period referred to in subsection (4) ends on a day other than the last day of the producer’s fiscal year, the producer may, for purposes of section 11, make the election referred to in that section with respect to
- (a) the period beginning on the day following the end of that period and ending on the last day of that fiscal year; or
- (b) the period beginning on the day following the end of that period and ending on the last day of the following full fiscal year.
(10) Where the producer of a motor vehicle has calculated the regional value content of the motor vehicle on the basis of estimated costs, including standard costs, budgeted forecasts or other similar estimating procedures, before or during the producer’s fiscal year, the producer shall conduct an analysis at the end of the producer’s fiscal year of the actual costs incurred over the fiscal year with respect to the production of the motor vehicle, and, if the motor vehicle does not satisfy the regional value-content requirement on the basis of the actual costs, immediately inform any person to whom the producer has provided a Certificate of Origin for the motor vehicle, or a written statement that the motor vehicle is an originating good, that the motor vehicle is a non-originating good.

SOR/95-382, s. 1
SOR/2002-27, s. 99

PART VIGeneral

Accumulation

14 (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 more of the NAFTA 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(1)(c) through (e), 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, other than an amount that includes any of the value of non-originating materials, that is part of the net cost incurred 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 value of the material, determined in accordance with subsection 7(1), 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 subsection 7(1), minus the amount stated in the statement.
(3) Where a good is subject to a regional value-content requirement and an exporter or producer of the good does not have a statement described in subsection (2) but has a statement signed by a producer of a material that is used in the production of the good that
- (a) states 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 a month or any consecutive three, six or twelve month period that falls within the fiscal year of the producer of the good, divided by the number of units of materials with respect to which the statement is made,
  - (i) the net cost incurred by the producer of the good with respect to the material shall be the sum of the net costs incurred by the producer of the material with respect to that material and the identical materials or similar materials, divided by the number of units of materials with respect to which the statement is made, plus, where not included in the net costs incurred by the producer of the material, the costs referred to in paragraphs 7(1)(c) through (e), and
  - (ii) the value of non-originating materials used by the producer of the good with respect to the material shall be the sum of the values of non-originating materials used by the producer of the material with respect to that material and the identical materials or similar materials divided by the number of units of materials with respect to which the statement is made; or
- (b) states any amount, other than an amount that includes any of the values of non-originating materials, that is part of the sum of the net costs incurred 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 a month or any consecutive three, six or twelve month period that falls within the fiscal year of the producer of the good, divided by the number of units of materials with respect to which the statement is made,
  - (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 subsection 7(1), 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 subsection 7(1), minus the amount stated in the statement.
(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) or (3) 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 more of the NAFTA 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) or (3) 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 14(1)
  Producer A, located in NAFTA country A, imports unfinished bearing rings of subheading 8482.99 into NAFTA country A from outside the territories of the NAFTA countries. Producer A further processes the unfinished bearing rings into finished bearing rings, which are 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 (per unit) is calculated as follows:
  - Product costs:
    - Value of originating materials $0.15
    - Value of non-originating materials 0.75
    - Other product costs 0.35
  - Period costs: (including $0.05 in excluded costs) 0.15
  - Other costs: 0.05
    - Total cost of the finished bearing rings, per unit: $1.45
    - Excluded costs: (included in period costs) 0.05
    - Net cost of the finished bearing rings, per unit: $1.40
  Producer A sells the finished bearing rings to Producer B who is located in NAFTA country A for $1.50 each. Producer B further processes them into bearings, and intends to export the bearings to NAFTA country B. Although the bearings satisfy the applicable change in tariff classification, the bearings are subject to a regional value-content requirement.
  - Situation A:
    Producer B does not choose to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. The net cost of the bearings (per unit) is calculated as follows:
    - Product costs:
      - Value of originating materials $0.45
      - Value of non-originating materials (value, per unit, of the bearing rings purchased from Producer A) 1.50
      - Other product costs 0.75
    - Period costs: (including $0.05 in excluded costs) 0.15
    - Other costs: 0.05
    - Total cost of the bearings, per unit: $2.90
    - Excluded costs: (included in period costs) 0.05
    - Net cost of the bearings, per unit: $2.85
    Under the net cost method, the regional value content of the bearings is
    RVC =
    (NC - VNM) ÷ NC × 100
    =
    ($2.85 - $1.50) ÷ $2.85 × 100
    = 47.4%
    Therefore, the bearings are non-originating goods.
  - Situation B:
    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides a statement described in paragraph 14(2)(a) to Producer B. The net cost of the bearings (per unit) is calculated as follows:
    - Product costs:
      - Value of originating materials ($0.45 + $0.15) $0.60
      - Value of non-originating materials (value, per unit, of the unfinished bearing rings imported by Producer A) 0.75
      - Other product costs ($0.75 + $0.35) 1.10
    - Period costs: (($0.15 + $0.15), including $0.10 in excluded costs) 0.30
      - Other costs: ($0.05 + $0.05) 0.10
      - Total cost of the bearings, per unit: $2.85
      - Excluded costs: (included in period costs) 0.10
      - Net cost of the bearings, per unit: $2.75
    Under the net cost method, the regional value content of the bearings is
    RVC =
    (NC - VNM) ÷ NC × 100
    =
    ($2.75 - $0.75) ÷ $2.75 × 100
    = 72.7%
    Therefore, the bearings are originating goods.
  - Situation C:
    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides to Producer B a statement described in paragraph 14(2)(b) that specifies an amount equal to the net cost minus the value of non-originating materials used to produce the finished bearing rings ($1.40 - $0.75 = 0.65). The net cost of the bearings (per unit) is calculated as follows:
    - Product costs:
      - Value of originating materials ($0.45 + $0.65) $1.10
      - Value of non-originating materials ($1.50 - $0.65) 0.85
      - Other product costs 0.75
    - Period costs: (including $0.05 in excluded costs) 0.15
    - Other costs: 0.05
    - Total cost of the bearings, per unit: $2.90
    - Excluded costs: (included in period costs) 0.05
    - Net cost of the bearings, per unit: $2.85
    Under the net cost method, the regional value content of the bearings is
    RVC =
    (NC - VNM) ÷ NC × 100
    =
    ($2.85 - $0.85) ÷ $0.85 × 100
    = 70.2%
    Therefore, the bearings are originating goods.
  - Situation D:
    Producer B chooses to accumulate costs incurred by Producer A with respect to the bearing rings used in the production of the bearings. Producer A provides to Producer B a statement described in paragraph 14(2)(b) that specifies an amount equal to the value of other product costs used in the production of the finished bearing rings ($0.35). The net cost of the bearings (per unit) is calculated as follows:
    - Product costs:
      - Value of originating materials $0.45
      - Value of non-originating materials ($1.50 - $0.35) 1.15
      - Other product costs ($0.75 + $0.35) 1.10
    - Period costs: (including $0.05 in excluded costs) 0.15
    - Other costs: 0.05
    - Total cost of the bearings, per unit: $2.90
    - Excluded costs: (included in period costs) 0.05
    - Net cost of the bearings, per unit: $2.85
    Under the net cost method, the regional value content of the bearings is
    RVC =
    (NC - VNM) ÷ NC × 100
    =
    ($2.85 - $1.15) ÷ $2.85 × 100
    = 59.72%
    Therefore, the bearings are originating goods.
- Example 2: subsection 14(1)
  Producer A, located in NAFTA 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 NAFTA 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 14(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 14(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 14(4)(a)(ii).

SOR/95-382, s. 1
SOR/2002-27, s. 99

Inability to Provide Sufficient Information

15 (1) Where, during a verification of origin of a good, the person from whom a producer of the good acquired a material used in the production of that good is unable to provide the customs administration that is conducting the verification with sufficient information to substantiate that the material is an originating material or that the value of the material declared for purpose of calculating the regional value content of the good is accurate, and the inability of that person to provide the information is due to reasons beyond the control of that person, the customs administration shall, before making a determination as to the origin or value of the material, consider, where relevant, the following:
- (a) whether the customs administration of the NAFTA country into the territory of which the good was imported issued an advance ruling under section 43.1 of the Customs Act with respect to that material that concluded that the material is an originating material or that the value of the material declared for purposes of calculating the regional value content of the good is accurate;
- (b) whether an independent auditor has confirmed the accuracy of
  - (i) any signed statement referred to in these Regulations with respect to the material,
  - (ii) the information that was used by the person from whom the producer acquired the material to substantiate whether the material is an originating material, or
  - (iii) the information submitted by the producer of the material with an application for an advance ruling where, on the basis of that information, the customs administration concluded that the material is an originating material or that the value declared for the purpose of calculating the regional value content of the good is accurate;
- (c) whether the customs administration has, before the start of the origin verification of the good, conducted a verification of origin of identical materials or similar materials produced by the producer of the material and determined that
  - (i) the identical materials or similar materials are originating materials, or
  - (ii) any signed statement referred to in these Regulations with respect to those identical materials or similar materials is accurate;
- (d) whether the producer of the good has exercised due diligence to ensure that any signed statement that is referred to in these Regulations with respect to the material and that was provided by the person from whom the producer acquired the material is accurate;
- (e) where the customs administration has access only to partial records of the person from whom the producer acquired the material, whether the records provide sufficient evidence to substantiate that the material is an originating material or that the value of the material declared for purposes of calculating the regional value content of the good is accurate;
- (f) whether the customs administration can obtain, subject to sections 107 and 108 of the Customs Act, by means other than those referred to in paragraphs (a) through (e), relevant information regarding the determination of the origin or value of the material from the customs administration of the NAFTA country in the territory of which the person from whom the producer acquired the material was located; and
- (g) whether the producer of the good, the person from whom the producer acquired the material or a representative of that person or producer agrees to bear the expenses incurred in providing the customs administration with the assistance that it may require for determining the origin or value of the material.
(2) For purposes of subsection (1), “reasons beyond the control” of the person from whom the producer of the good acquired the material includes
- (a) the bankruptcy of the person from whom the producer acquired the material or any other financial distress situation or business reorganization that resulted in that person or a related person having lost control of the records containing the information that substantiate that the material is an originating material or the value of the material declared for the purpose of calculating the regional value content of the good; and
- (b) any other reason that results in partial or complete loss of records of that producer that the producer could not reasonably have been expected to foresee, including loss of records due to fire, flooding or other natural cause.
(3) Where, during a verification of origin of a good, the exporter or producer of the good is unable to provide the customs administration conducting the verification with sufficient information to substantiate that the good is an originating good, and the inability of that person to provide the information is due to reasons beyond the control of that person, the customs administration shall, before making a determination as to the origin of the good, consider, where relevant, the following:
- (a) whether the customs administration of the NAFTA country into the territory of which the good was imported issued an advance ruling under section 43.1 of the Customs Act with respect to that good that concluded that the good is an originating good;
- (b) whether an independent auditor has confirmed the accuracy of an origin statement with respect to the good;
- (c) whether the customs administration has, before the start of the origin verification of the good, conducted a verification of origin of identical goods or similar goods produced by the producer of the good and determined that the identical goods or similar goods are originating goods;
- (d) whether the exporter or producer of the good has exercised due diligence to ensure that the information provided to substantiate that the good is an originating good is sufficient;
- (e) where the customs administration has access only to partial records of the exporter or producer of the good, whether the records provide sufficient evidence to substantiate that the good is an originating good;
- (f) whether the customs administration can obtain, subject to sections 107 and 108 of the Customs Act, by means other than those referred to in paragraphs (a) through (e), relevant information regarding the determination of the origin of the good from the customs administration of the NAFTA country in the territory of which the exporter or producer of the good was located; and
- (g) whether the exporter or producer of the good or a representative of that person agrees to bear the expenses incurred in providing the customs administration with the assistance that it may require for determining the origin or value of the good.
(4) For purposes of subsection (3), “reasons beyond the control” of the exporter or producer of the good includes
- (a) the bankruptcy of the exporter or producer or any other financial distress situation or business reorganization that resulted in that person or a related person having lost control of the records containing the information that substantiate that the good is an originating good; and
- (b) any other reason that results in partial or complete loss of records of that exporter or producer that that person could not reasonably have been expected to foresee, including loss of records due to fire, flooding or other natural cause.

SOR/95-382, s. 1

Transshipment

16 (1) A good is not an originating good by reason of having undergone production that occurs entirely in the territory of one or more of the NAFTA countries that would enable the good to qualify as an originating good if subsequent to that production
- (a) the good is withdrawn from customs control outside the territories of the NAFTA countries; or
- (b) the good undergoes further production or any other operation outside the territories of the NAFTA countries, other than unloading, reloading or any other operation necessary to preserve the good in good condition, such as inspection, removal of dust that accumulates during shipment, ventilation, spreading out or drying, chilling, replacing salt, sulphur dioxide or other aqueous solutions, replacing damaged packing materials and containers and removal of units of the good that are spoiled or damaged and present a danger to the remaining units of the good, or to transport the good to the territory of a NAFTA country.
(2) A good that is a non-originating good by application of subsection (1) is considered to be entirely non-originating for purposes of these Regulations.
(3) Subsection (1) does not apply with respect to a good of any of subheadings 8541.10 through 8541.60 and 8542.10 through 8542.70 where any further production or other operation that that good undergoes outside the territories of the NAFTA countries does not result in a change in the tariff classification of the good to a subheading outside subheadings 8541.10 through 8542.90.

SOR/95-382, s. 1
SOR/2002-27, ss. 5, 99

Non-qualifying Operations

17 A good is not an originating good merely by reason of

(a) mere dilution with water or another substance that does not materially alter the characteristics of the good; or
(b) any production or pricing practice with respect to which it may be demonstrated, on the basis of a preponderance of evidence, that the object was to circumvent these Regulations.

SOR/95-382, s. 1

SCHEDULE ISpecific Rules of Origin

1 For purposes of this Schedule,
- (a) the specific rule or set of rules that applies to a tariff provision is set out adjacent to that tariff provision;
- (b) rule that is applicable to a tariff item takes precedence over a rule that is applicable to the heading or subheading under which that tariff item falls;
- (c) a requirement of a change in tariff classification applies only to non-originating materials; and
- (d) a reference to weight in the rules for goods of any of Chapters 1 through 24 shall be construed as a reference to dry weight unless otherwise specified in the Harmonized System.

SOR/96-26, s. 1(F).

SECTION ILive Animals; Animal Products(Chapters 1 Through 5)

Chapter 1	Live Animals
01.01-01.06	A change to headings 01.01 through 01.06 from any other chapter.

SOR/2002-27, s. 99.

Chapter 2	Meat and Edible Meat Offal
02.01-02.10	A change to headings 02.01 through 02.10 from any other chapter.

SOR/2002-27, s. 99.

Chapter 3	Fish and Crustaceans, Molluscs and Other Aquatic Invertebrates
03.01-03.07	A change to headings 03.01 through 03.07 from any other chapter.

SOR/2002-27, s. 99.

Chapter 4	Dairy Produce; Birds’ Eggs; Natural Honey; Edible Products of Animal Origin, Not Elsewhere Specified or Included
04.01-04.10	A change to headings 04.01 through 04.10 from any other chapter, except from tariff item No. 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 or 1901.90.59.

SOR/96-26, s. 2; SOR/97-206, s. 1; SOR/2002-27, s. 99.

Chapter 5	Products of Animal Origin, Not Elsewhere Specified or Included
05.01-05.11	A change to headings 05.01 through 05.11 from any other chapter.

SOR/2002-27, s. 99.

SECTION IIVegetable Products(Chapters 6 Through 14)

Note:
Agricultural and horticultural goods grown in the territory of a NAFTA country shall be treated as originating in the territory of that NAFTA country even if grown from seed, bulbs, rootstock, cuttings, slips or other live parts of plants imported from a non-NAFTA country.

Chapter 6	Live Trees and Other Plants; Bulbs, Roots and the Like; Cut Flowers and Ornamental Foliage
06.01-06.04	A change to headings 06.01 through 06.04 from any other chapter.

SOR/2002-27, s. 99.

Chapter 7	Edible Vegetables and Certain Roots and Tubers
07.01-07.14	A change to headings 07.01 through 07.14 from any other chapter.

SOR/2002-27, s. 99.

Chapter 8	Edible Fruit and Nuts; Peel of Citrus Fruit or Melons
08.01-08.14	A change to headings 08.01 through 08.14 from any other chapter.

SOR/2002-27, s. 99.

Chapter 9	Coffee, Tea, Maté and Spices
09.01	A change to heading 09.01 from any other chapter.
0902.10-0902.40	A change to subheadings 0902.10 through 0902.40 from any other subheading, including another subheading within that group.
09.03	A change to heading 09.03 from any other chapter.
0904.11	A change to subheading 0904.11 from any other chapter.
0904.12	A change to subheading 0904.12 from any other subheading.
0904.20	A change to subheading 0904.20 from any other chapter.
09.05	A change to heading 09.05 from any other chapter.
0906.10	A change to subheading 0906.10 from any other chapter.
0906.20	A change to subheading 0906.20 from any other subheading.
09.07	A change to a good of heading 09.07 from within that heading or any other chapter.
0908.10-0909.50	A change to a good of any of subheadings 0908.10 through 0909.50 from within that subheading or any other chapter.
0910.10	A change to a good of subheading 0910.10 from within that subheading or any other chapter.
0910.20	A change to subheading 0910.20 from any other chapter.
0910.30	A change to a good of subheading 0910.30 from within that subheading or any other chapter.
0910.40	A change to subheading 0910.40 from any other chapter.
0910.50-0910.91	A change to subheadings 0910.50 through 0910.91 from any other subheading, including another subheading within that group.
0910.99	(1) A change to dill seeds, crushed or ground, of subheading 0910.99 from dill seeds, neither crushed nor ground, of subheading 0910.99 or any other chapter; or (2) A change to any other good of subheading 0910.99 from any other chapter.

SOR/2002-27, s. 99; SOR/2005-8, s. 1.

Chapter 10	Cereals
10.01-10.08	A change to headings 10.01 through 10.08 from any other chapter.

SOR/2002-27, s. 99.

Chapter 11	Products of the Milling Industry; Malt; Starches; Inulin; Wheat Gluten
11.01-11.09	A change to headings 11.01 through 11.09 from any other chapter.

SOR/2002-27, s. 99.

Chapter 12	Oil Seeds and Oleaginous Fruits; Miscellaneous Grains, Seeds and Fruit; Industrial or Medicinal Plants; Straw and Fodder
12.01-12.06	A change to headings 12.01 through 12.06 from any other chapter.
1207.10-1207.60	A change to subheadings 1207.10 through 1207.60 from any other chapter.
1207.91	A change to a good of subheading 1207.91 from within that subheading or any other chapter.
1207.99	A change to subheading 1207.99 from any other chapter.
12.08-12.14	A change to headings 12.08 through 12.14 from any other chapter.

SOR/2002-27, s. 99; SOR/2005-8, s. 2.

Chapter 13	Lac; Gums, Resins and Other Vegetable Saps and Extracts
13.01	A change to heading 13.01 from any other chapter, except from concentrates of poppy straw of subheading 2939.11.
1302.11-1302.32	A change to subheadings 1302.11 through 1302.32 from any other chapter, except from concentrates of poppy straw of subheading 2939.11.
1302.39	(1) A change to carrageenan of subheading 1302.39 from within that subheading or any other chapter, provided that the non-originating materials of subheading 1302.39 do not exceed 50 per cent by weight of the good; or (2) A change to any other good of subheading 1302.39 from any other chapter, except from concentrates of poppy straw of subheading 2939.11.

SOR/2002-27, s. 6; SOR/2005-8, s. 3.

Chapter 14	Vegetable Plaiting Materials; Vegetable Products Not Elsewhere Specified or Included
14.01-14.04	A change to headings 14.01 through 14.04 from any other chapter.

SOR/2002-27, s. 99.

SECTION IIIAnimal or Vegetable Fats and Oils and their Cleavage Products; Prepared Edible Fats; Animal or Vegetable Waxes(Chapter 15)

Chapter 15	Animal or Vegetable Fats and Oils and Their Cleavage Products; Prepared Edible Fats; Animal or Vegetable Waxes
15.01-15.18	A change to headings 15.01 through 15.18 from any other chapter, except from heading 38.23.
1520	A change to heading 15.20 from any other heading, except from heading 38.23.
15.21-15.22	A change to headings 15.21 through 15.22 from any other chapter.

SOR/96-26, ss. 3, 4; SOR/2002-27, s. 99.

SECTION IVPrepared Foodstuffs; Beverages, Spirits and Vinegar; Tobacco and Manufactured Tobacco Substitutes(Chapters 16 Through 24)

Chapter 16	Preparations of Meat, of Fish or of Crustaceans, Molluscs or Other Aquatic Invertebrates
16.01-16.05	A change to headings 16.01 through 16.05 from any other chapter.

SOR/2002-27, s. 99.

Chapter 17	Sugars and Sugar Confectionery
17.01-17.03	A change to headings 17.01 through 17.03 from any other chapter.
17.04	A change to heading 17.04 from any other heading.

SOR/2002-27, s. 99.

Chapter 18	Cocoa and Cocoa Preparations
18.01-18.05	A change to headings 18.01 through 18.05 from any other chapter.
1806.10
1806.10.10	A change to tariff item No. 1806.10.10 from any other heading.
1806.10	A change to subheading 1806.10 from any other heading, provided that the non-originating sugar of Chapter 17 constitutes no more than 35 per cent by weight of the sugar and the non-originating cocoa powder of heading 18.05 constitutes no more than 35 per cent by weight of the cocoa powder.
1806.20	A change to subheading 1806.20 from any other heading.
1806.31	A change to subheading 1806.31 from any other subheading.
1806.32	A change to subheading 1806.32 from any other heading.
1806.90	A change to subheading 1806.90 from any other subheading.

SOR/2002-27, s. 99.

Chapter 19	Preparations of Cereals, Flour, Starch or Milk; Pastrycooks’ Products
1901.10
1901.10.20	A change to tariff item No. 1901.10.20 from any other chapter, except from Chapter 4.
1901.10	A change to subheading 1901.10 from any other chapter.
1901.20
1901.20.11, 1901.20.12, 1901.20.21, 1901.20.22	A change to tariff item No. 1901.20.11, 1901.20.12, 1901.20.21 or 1901.20.22 from any other chapter, except from Chapter 4.
1901.20	A change to subheading 1901.20 from any other chapter.
1901.90
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, 1901.90.59	A change to tariff item No. 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 or 1901.90.59 from any other chapter, except from Chapter 4.
1901.90	A change to subheading 1901.90 from any other chapter.
19.02-19.03	A change to headings 19.02 through 19.03 from any other chapter.
1904.10	A change to subheading 1904.10 from any other chapter.
1904.20	A change to subheading 1904.20 from any other subheading, except from Chapter 20.
1904.30-1904.90	A change to subheadings 1904.30 through 1904.90 from any other chapter.
19.05	A change to heading 19.05 from any other chapter.

SOR/95-23, ss. 1, 2; SOR/96-26, s. 5; SOR/97-206, s. 2; SOR/2000-86, s. 5; SOR/2002-27, ss. 7, 99.

Chapter 20	Preparations of Vegetables, Fruit, Nuts or Other Parts of Plants
	Note: Fruit, nut and vegetable preparations of Chapter 20 that have been prepared or preserved merely by freezing, by packing (including canning) in water, brine or natural juices, or by roasting, either dry or in oil (including processing incidental to freezing, packing, or roasting), shall be treated as an originating good only if the fresh good were wholly produced or obtained entirely in the territory of one or more of the NAFTA countries.
20.01-20.07	A change to headings 20.01 through 20.07 from any other chapter.
2008.11
2008.11.20	A change to tariff item No. 2008.11.20 from any other heading, except from heading 12.02.
2008.11	A change to subheading 2008.11 from any other chapter.
2008.19-2008.99	A change to subheadings 2008.19 through 2008.99 from any other chapter.
2009.11-2009.39	A change to subheadings 2009.11 through 2009.39 from any other chapter, except from heading 08.05.
2009.41-2009.80	A change to subheadings 2009.41 through 2009.80 from any other chapter.
2009.90	(1) A change to subheading 2009.90 from any other chapter; or (2) A change to subheading 2009.90 from any other subheading within Chapter 20, whether or not there is also a change from any other chapter, provided that a single juice ingredient, or juice ingredients from a single non-NAFTA country, constitute in single strength form no more than 60 per cent by volume of the good.

SOR/2002-27, ss. 8, 9, 99.

Chapter 21	Miscellaneous Edible Preparations
21.01
2101.11.10	A change to tariff item No. 2101.11.10 from any other chapter, provided that the non-originating coffee of Chapter 9 constitutes no more than 60 per cent by weight of the good.
21.01	A change to heading 21.01 from any other chapter.
21.02	A change to heading 21.02 from any other chapter.
2103.10	A change to subheading 2103.10 from any other chapter.
2103.20
2103.20.10	A change to tariff item No. 2103.20.10 from any other chapter, except from subheading 2002.90.
2103.20	A change to subheading 2103.20 from any other chapter.
2103.30	A change to subheading 2103.30 from any other chapter.
2103.90	(1) A change to mixed condiments or mixed seasonings of subheading 2103.90 from yeasts of subheading 2102.10 or 2102.20 or any other chapter; or (2) A change to any other good of subheading 2103.90 from any other chapter.
21.04	A change to heading 21.04 from any other chapter.
21.05	A change to heading 21.05 from any other heading, except from Chapter 4 or tariff item No. 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 or 1901.90.59.
21.06
2106.90.31, 2106.90.32, 2106.90.33, 2106.90.34, 2106.90.35	A change to tariff item No. 2106.90.31, 2106.90.32, 2106.90.33, 2106.90.34 or 2106.90.35 from any other chapter, except from Chapter 4 or from tariff item No. 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 or 1901.90.59.
2106.90.91	A change to tariff item No. 2106.90.91 from any other chapter, except from heading 08.05 or 20.09 or tariff item No. 2202.90.31.
2106.90.92	(1) A change to tariff item No. 2106.90.92 from any other chapter, except from heading 20.09 or tariff item No. 2202.90.32; or (2) A change to tariff item No. 2106.90.92 from any other subheading within Chapter 21, heading 20.09, or tariff item No. 2202.90.32, whether or not there is also a change from any other chapter, provided that a single juice ingredient, or juice ingredients from a single non-NAFTA country, constitute in single strength form no more than 60 per cent by volume of the good.
2106.90.93, 2106.90.94, 2106.90.95	A change to tariff item No. 2106.90.93, 2106.90.94 or 2106.90.95 from any other chapter, except from Chapter 4 or tariff item No. 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 or 1901.90.59.
2106.90.96	A change to tariff item No. 2106.90.96 from any other tariff item No., except from headings 22.03 through 22.09.
21.06	A change to heading 21.06 from any other chapter.

SOR/95-23, ss. 3, 4; SOR/96-26, ss. 6, 7, 8(E), 9(E), 10; SOR/97-206, ss. 3, 4; SOR/2000-86, s. 6; SOR/2002-27, s. 99; SOR/2005-8, s. 4.

Chapter 22	Beverages, Spirits and Vinegar
22.01	A change to heading 22.01 from any other chapter.
2202.10	A change to subheading 2202.10 from any other chapter.
2202.90
2202.90.31	A change to tariff item No. 2202.90.31 from any other chapter, except from heading 08.05 or 20.09 or tariff item No. 2106.90.91.
2202.90.32	(1) A change to tariff item No. 2202.90.32 from any other chapter, except from heading 20.09 or tariff item No. 2106.90.92; or (2) A change to tariff item No. 2202.90.32 from any other subheading within Chapter 22, heading 20.09, or tariff item No. 2106.90.92, whether or not there is also a change from any other chapter, provided that a single juice ingredient, or juice ingredients from a single non-NAFTA country, constitute in single strength form no more than 60 per cent by volume of the good.
2202.90.41, 2202.90.42, 2202.90.43, 2202.90.49	A change to tariff item No. 2202.90.41, 2202.90.42, 2202.90.43 or 2202.90.49 from any other chapter, except from Chapter 4 or from tariff item No. 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 or 1901.90.59.
2202.90	A change to subheading 2202.90 from any other chapter.
22.03-22.07	A change to headings 22.03 through 22.07 from any heading outside that group, except from tariff item No. 2106.90.96 or headings 22.08 through 22.09.
2208.20	A change to subheading 2208.20 from any other heading, except from tariff item No. 2106.90.96 or headings 22.03 through 22.07 or 22.09.
2208.30-2208.70	No required change in tariff classification to subheadings 2208.30 through 2208.70, provided that the non-originating alcoholic ingredients constitute no more than 10 per cent of the alcoholic content of the good by volume.
2208.90	A change to subheading 2208.90 from any other heading, except from tariff item No. 2106.90.96 or headings 22.03 through 22.07 or 22.09.
22.09	A change to heading 22.09 from any other heading, except from tariff item No. 2106.90.96 or headings 22.03 through 22.08.

SOR/95-23, s. 5; SOR/96-26, ss. 11(E), 12; SOR/97-206, s. 5; SOR/2002-27, s. 99; SOR/2003-24, s. 1.

Chapter 23	Residues and Waste From the Food Industries; Prepared Animal Fodder
23.01-23.08	A change to headings 23.01 through 23.08 from any other chapter.
2309.10	A change to subheading 2309.10 from any other heading.
2309.90
2309.90.31, 2309.90.32, 2309.90.33, 2309.90.35, 2309.90.36	A change to tariff item No. 2309.90.31, 2309.90.32, 2309.90.33, 2309.90.35 or 2309.90.36 from any other heading, except from Chapter 4 or from tariff item No. 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 or 1901.90.59.
2309.90	A change to subheading 2309.90 from any other heading.

SOR/95-23, s. 6; SOR/97-206, s. 6; SOR/2002-27, s. 99.

Chapter 24	Tobacco and Manufactured Tobacco Substitutes
24.01-24.03	A change to headings 24.01 through 24.03 from tariff item No. 2401.10.10, 2401.20.10 or 2403.91.10 or any other chapter.

SOR/96-26, s. 13; SOR/2000-86, s. 7; SOR/2002-27, s. 99.

SECTION VMineral Products(Chapters 25 Through 27)

Chapter 25	Salt; Sulphur; Earths and Stone; Plastering Materials, Lime and Cement
25.01-25.30	A change to headings 25.01 through 25.30 from any other chapter.

SOR/2002-27, s. 99.

Chapter 26	Ores, Slag and Ash
26.01-26.21	A change to headings 26.01 through 26.21 from any other chapter.

SOR/2002-27, s. 99.

Chapter 27	Mineral Fuels, Mineral Oils and Products of Their Distillation; Bituminous Substances; Mineral Waxes
	Note: For the purposes of heading 27.10, the following processes confer origin: (a) Atmospheric distillation — A separation process in which petroleum oils are converted, in a distillation tower, into fractions according to boiling point and the vapor then condensed into different liquefied fractions. Liquefied petroleum gas, naphtha, gasoline, kerosene, diesel/heating oil, light gas oils and lubricating oil are produced from petroleum distillation; (b) Vacuum distillation — Distillation at a pressure below atmospheric but not so low that it would be classed as molecular distillation. Vacuum distillation is useful for distilling high-boiling and heat-sensitive materials such as heavy distillates in petroleum oils to produce light to heavy vacuum gas oils and residuum. In some refineries gas oils may be further processed into lubricating oils; (c) Catalytic hydroprocessing — The cracking and/or treating of petroleum oils with hydrogen at high temperature and under pressure, in the presence of special catalysts. Catalytic hydroprocessing includes hydrocracking and hydrotreating; (d) Reforming (catalytic reforming) — The rearrangement of molecules in a naphtha boiling range material to form higher octane aromatics (i.e., improved antiknock quality at the expense of gasoline yield). A main product is catalytic reformate, a blend component for gasoline. Hydrogen is another by-product; (e) Alkylation — A process whereby a high-octane blending component for gasolines is derived from catalytic combination of an isoparaffin and an olefin; (f) Cracking — A refining process involving decomposition and molecular recombination of organic compounds, especially hydrocarbons obtained by means of heat, to form molecules suitable for motor fuels, monomers, petrochemicals, etc.: (i) Thermal cracking — Exposes the distillate to temperatures of approximately 540-650°C (1000-1200°F) for varying periods of time. Process produces modest yields of gasoline and higher yields of residual products for fuel oil blending, (ii) Catalytic cracking — Hydrocarbon vapors are passed at approximately 400°C (750°F) over a metallic catalyst (e.g., silica-alumina or platinum); the complex recombinations (alkylation, polymerization, isomerization, etc.) occur within seconds to yield high-octane gasoline. Process yields less residual oils and light gases than thermal cracking; (g) Coking — A thermal cracking process for the conversion of heavy low grade products, such as reduced crude, straight run pitch, cracked tars and shale oil into solid coke (carbon) and lower boiling hydrocarbon products which are suitable as feed for other refinery units for conversion into lighter products; and (h) Isomerization — The refinery process of converting petroleum compounds into their isomers.
27.01-27.03	A change to headings 27.01 through 27.03 from any other chapter.
27.04	A change to heading 27.04 from any other heading.
27.05-27.09	A change to headings 27.05 through 27.09 from any other chapter.
27.10	(1) A change to heading 27.10 from any other heading, except from headings 27.11 through 27.15; or (2) Production of any good of heading 27.10 as the result of atmospheric distillation, vacuum distillation, catalytic hydroprocessing, catalytic reforming, alkylation, catalytic cracking, thermal cracking, coking or isomerization.
27.11-27.15	A change to headings 27.11 through 27.15 from any heading outside that group, except from heading 27.10.
27.16	A change to heading 27.16 from any other heading.

SOR/2002-27, s. 99; SOR/2003-24, ss. 2, 3.

SECTION VIProducts of the Chemical or Allied Industries(Chapters 28 Through 38)

Chapter 28	Inorganic Chemicals; Organic or Inorganic Compounds of Precious Metals, of Rare-Earth Metals, of Radioactive Elements or of Isotopes
2801.10-2801.30	A change to subheadings 2801.10 through 2801.30 from any other subheading, including another subheading within that group.
28.02-28.03	A change to headings 28.02 through 28.03 from any other heading, including another heading within that group.
2804.10-2804.50	A change to subheadings 2804.10 through 2804.50 from any other subheading, including another subheading within that group.
2804.61-2804.69	(1) A change to subheadings 2804.61 through 2804.69 from any subheading outside that group; or (2) A change to subheadings 2804.61 through 2804.69 from any other subheading within that group, whether or not there is also a change from any subheading outside that group, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2804.70-2804.90	A change to subheadings 2804.70 through 2804.90 from any other subheading, including another subheading within that group.
2805.11-2805.12	A change to subheadings 2805.11 through 2805.12 from any other subheading, including another subheading within that group.
2805.19	(1) A change to other alkali metals of subheading 2805.19 from other alkaline earth metals of subheading 2805.19 or any other subheading; or (2) A change to other alkaline earth metals of subheading 2805.19 from other alkali metals of subheading 2805.19 or any other subheading.
2805.30-2805.40	A change to subheadings 2805.30 through 2805.40 from any other subheading, including another subheading within that group.
2806.10	(1) A change to subheading 2806.10 from any other subheading, except from subheading 2801.10; or (2) A change to subheading 2806.10 from subheading 2801.10, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2806.20	A change to subheading 2806.20 from any other subheading.
28.07-28.08	A change to headings 28.07 through 28.08 from any other heading, including another heading within that group.
2809.10-2814.20	A change to subheadings 2809.10 through 2814.20 from any other subheading, including another subheading within that group.
2815.11-2815.12	(1) A change to subheadings 2815.11 through 2815.12 from any other heading; or (2) A change to subheadings 2815.11 through 2815.12 from any other subheading within heading 28.15, including another subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2815.20	A change to subheading 2815.20 from any other subheading.
2815.30	(1) A change to subheading 2815.30 from any other subheading, except from subheadings 2815.11 through 2815.20; or (2) A change to subheading 2815.30 from subheadings 2815.11 through 2815.20, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2816.10	A change to subheading 2816.10 from any other subheading.
2816.40	(1) A change to oxide, hydroxide or peroxide of strontium of subheading 2816.40 from oxide, hydroxide or peroxide of barium of subheading 2816.40 or any other subheading; or (2) A change to oxide, hydroxide or peroxide of barium of subheading 2816.40 from oxide, hydroxide or peroxide of strontium of subheading 2816.40 or any other subheading.
2817.00-2818.30	A change to subheadings 2817.00 through 2818.30 from any other subheading, including another subheading within that group.
2819.10	(1) A change to subheading 2819.10 from any other heading; or (2) A change to subheading 2819.10 from subheading 2819.90, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2819.90	A change to subheading 2819.90 from any other subheading.
2820.10	(1) A change to subheading 2820.10 from any other heading; or (2) A change to subheading 2820.10 from subheading 2820.90, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2820.90	A change to subheading 2820.90 from any other subheading.
2821.10-2821.20	(1) A change to subheadings 2821.10 through 2821.20 from any other heading; or (2) A change to subheadings 2821.10 through 2821.20 from any other subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
28.22-28.23	A change to headings 28.22 through 28.23 from any other heading, including another heading within that group.
2824.10-2824.90	(1) A change to subheadings 2824.10 through 2824.90 from any other heading; or (2) A change to subheadings 2824.10 through 2824.90 from any other subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2825.10-2826.90	A change to subheadings 2825.10 through 2826.90 from any other subheading, including another subheading within that group.
2827.10-2827.36	A change to subheadings 2827.10 through 2827.36 from any other subheading, including another subheading within that group.
2827.39	(1) A change to barium chloride of subheading 2827.39 from other chlorides of subheading 2827.39 or any other subheading; or (2) A change to other chlorides of subheading 2827.39 from barium chloride of subheading 2827.39 or any other subheading.
2827.41-2827.60	A change to subheadings 2827.41 through 2827.60 from any other subheading, including another subheading within that group.
2828.10-2828.90	A change to subheadings 2828.10 through 2828.90 from any other subheading, including another subheading within that group.
2829.11	A change to subheading 2829.11 from any other subheading.
2829.19-2829.90	(1) A change to subheadings 2829.19 through 2829.90 from any other chapter, except from Chapters 28 through 38; or (2) A change to subheadings 2829.19 through 2829.90 from any other subheading within Chapters 28 through 38, including another subheading within that group, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2830.10-2833.40	A change to subheadings 2830.10 through 2833.40 from any other subheading, including another subheading within that group.
2834.10-2834.21	A change to subheadings 2834.10 through 2834.21 from any other subheading, including another subheading within that group.
2834.29	(1) A change to bismuth nitrates of subheading 2834.29 from other nitrates of subheading 2834.29 or any other subheading; or (2) A change to other nitrates of subheading 2834.29 from bismuth nitrates of subheading 2834.29 or any other subheading.
2835.10-2835.39	A change to subheadings 2835.10 through 2835.39 from any other subheading, including another subheading within that group.
2836.10	A change to subheading 2836.10 from any other subheading.
2836.20-2836.30	(1) A change to subheadings 2836.20 through 2836.30 from any subheading outside that group; or (2) A change to subheadings 2836.20 through 2836.30 from any other subheading within that group, whether or not there is also a change from any subheading outside that group, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2836.40-2836.99	A change to subheadings 2836.40 through 2836.99 from any other subheading, including another subheading within that group.
2837.11-2840.30	A change to subheadings 2837.11 through 2840.30 from any other subheading, including another subheading within that group.
2841.10-2841.30	A change to subheadings 2841.10 through 2841.30 from any other subheading, including another subheading within that group.
2841.50	(1) A change to potassium dichromate of subheading 2841.50 from other chromates, dichromates or peroxochromates of subheading 2841.50 or any other subheading; or (2) A change to other chromates, dichromates or peroxochromates of subheading 2841.50 from potassium dichromate of subheading 2841.50 or any other subheading.
2841.61-2841.90	A change to subheadings 2841.61 through 2841.90 from any other subheading, including another subheading within that group.
2842.10	(1) A change to double or complex silicates, including chemically defined aluminosilicates, of subheading 2842.10 from non-chemically defined aluminosilicates of subheading 2842.10 or any other subheading; (2) A change to non-chemically defined aluminosilicates of subheading 2842.10 from any other chapter, except from Chapters 28 through 38; or (3) A change to non-chemically defined aluminosilicates of subheading 2842.10 from double or complex silicates, including chemically defined aluminosilicates, of subheading 2842.10 or any other subheading within Chapters 28 through 38, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2842.90	A change to subheading 2842.90 from any other subheading.
2843.10-2850.00	A change to subheadings 2843.10 through 2850.00 from any other subheading, including another subheading within that group.
28.51	(1) A change to heading 28.51 from any other chapter, except from Chapters 28 through 38; or (2) A change to heading 28.51 from any other subheading within Chapters 28 through 38, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.

SOR/96-27, s. 1; SOR/2002-27, ss. 10 to 14, 99.

Chapter 29	Organic Chemicals
2901.10-2901.29	A change to subheadings 2901.10 through 2901.29 from any other subheading, including another subheading within that group.
2902.11-2902.44	A change to subheadings 2902.11 through 2902.44 from any other subheading, including another subheading within that group.
2902.50	(1) A change to subheading 2902.50 from any other subheading, except from subheading 2902.60; or (2) A change to subheading 2902.50 from subheading 2902.60, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2902.60-2902.90	A change to subheadings 2902.60 through 2902.90 from any other subheading, including another subheading within that group.
2903.11-2903.15	(1) A change to subheadings 2903.11 through 2903.15 from any other subheading, including another subheading within that group, except from headings 29.01 through 29.02; or (2) A change to subheadings 2903.11 through 2903.15 from headings 29.01 through 29.02, whether or not there is also a change from any other subheading, including another subheading within subheadings 2903.11 through 2903.15, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2903.19	(1) A change to 1,2-dichloropropane (propylene dichloride) or dichlorobutanes of subheading 2903.19 from other saturated chlorinated derivatives of acyclic hydrocarbons of subheading 2903.19 or any other subheading, except from headings 29.01 through 29.02; (2) A change to 1,2-dichloropropane (propylene dichloride) or dichlorobutanes of subheading 2903.19 from headings 29.01 through 29.02, whether or not there is also a change from other saturated chlorinated derivatives of acyclic hydrocarbons of subheading 2903.19 or any other subheading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used; (3) A change to other saturated chlorinated derivatives of acyclic hydrocarbons of subheading 2903.19 from 1,2-dichloropropane (propylene dichloride) or dichlorobutanes of subheading 2903.19 or any other subheading, except from headings 29.01 through 29.02; or (4) A change to other saturated chlorinated derivatives of acyclic hydrocarbons of subheading 2903.19 from headings 29.01 through 29.02, whether or not there is also a change from 1,2-dichloropropane (propylene dichloride) or dichlorobutanes of subheading 2903.19 or any other subheading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2903.21-2903.30	(1) A change to subheadings 2903.21 through 2903.30 from any other subheading, including another subheading within that group, except from headings 29.01 through 29.02; or (2) A change to subheadings 2903.21 through 2903.30 from headings 29.01 through 29.02, whether or not there is also a change from any other subheading, including another subheading within subheadings 2903.21 through 2903.30, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2903.41-2903.69	(1) A change to subheadings 2903.41 through 2903.69 from any other subheading, including another subheading within that group, except from heading 29.01 or 29.02; or (2) A change to subheadings 2903.41 through 2903.69 from heading 29.01 or 29.02, whether or not there is also a change from any other subheading, including another subheading within subheadings 2903.41 through 2903.69, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2904.10-2904.90	(1) A change to subheadings 2904.10 through 2904.90 from any other subheading, including another subheading within that group, except from headings 29.01 through 29.03; or (2) A change to subheadings 2904.10 through 2904.90 from headings 29.01 through 29.03, whether or not there is also a change from any other subheading, including another subheading within subheadings 2904.10 through 2904.90, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2905.11-2905.49	A change to subheadings 2905.11 through 2905.49 from any other subheading, including another subheading within that group.
2905.51-2905.59	A change to subheadings 2905.51 through 2905.59 from any subheading outside that group.
2906.11-2906.29	A change to subheadings 2906.11 through 2906.29 from any other subheading, including another subheading within that group.
2907.11-2907.23	A change to subheadings 2907.11 through 2907.23 from any other subheading, including another subheading within that group.
2907.29	(1) A change to phenol-alcohols of subheading 2907.29 from polyphenols of subheading 2907.29 or any other subheading; or (2) A change to polyphenols of subheading 2907.29 from phenol-alcohols of subheading 2907.29 or any other subheading.
2908.10-2908.90	(1) A change to subheadings 2908.10 through 2908.90 from any other heading, except from heading 29.07; or (2) A change to subheadings 2908.10 through 2908.90 from any other subheading within that group or heading 29.07, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2909.11-2909.20	(1) A change to subheadings 2909.11 through 2909.20 from any other heading; or (2) A change to subheadings 2909.11 through 2909.20 from any other subheading within heading 29.09, including another subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2909.30	A change to subheading 2909.30 from any other subheading.
2909.41-2909.60	(1) A change to subheadings 2909.41 through 2909.60 from any other heading; or (2) A change to subheadings 2909.41 through 2909.60 from any other subheading within heading 29.09, including another subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2910.10-2911.00	A change to subheadings 2910.10 through 2911.00 from any other subheading, including another subheading within that group.
2912.11	A change to subheading 2912.11 from any other subheading.
2912.12	(1) A change to subheading 2912.12 from any other subheading, except from subheading 2901.21; or (2) A change to subheading 2912.12 from subheading 2901.21, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2912.13-2912.50	A change to subheadings 2912.13 through 2912.50 from any other subheading, including another subheading within that group.
2912.60	(1) A change to subheading 2912.60 from any other subheading, except from subheading 2912.11; or (2) A change to subheading 2912.60 from subheading 2912.11, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
29.13	(1) A change to heading 29.13 from any other heading, except from heading 29.12; or (2) A change to heading 29.13 from heading 29.12, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2914.11-2914.70	A change to subheadings 2914.11 through 2914.70 from any other subheading, including another subheading within that group.
2915.11	A change to subheading 2915.11 from any other subheading.
2915.12	(1) A change to subheading 2915.12 from any other subheading, except from subheading 2915.11; or (2) A change to subheading 2915.12 from subheading 2915.11, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2915.13	A change to subheading 2915.13 from any other subheading.
2915.21	(1) A change to subheading 2915.21 from any other subheading, except from subheading 2912.12; or (2) A change to subheading 2915.21 from subheading 2912.12, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2915.22-2915.31	(1) A change to subheadings 2915.22 through 2915.31 from any other subheading, including another subheading within that group, except from subheading 2915.21; or (2) A change to subheadings 2915.22 through 2915.31 from subheading 2915.21, whether or not there is also a change from any other subheading, including another subheading within that group, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2915.32	A change to subheading 2915.32 from any other subheading.
2915.33-2915.34	(1) A change to subheadings 2915.33 through 2915.34 from any other subheading, including another subheading within that group, except from subheading 2915.21; or (2) A change to subheadings 2915.33 through 2915.34 from subheading 2915.21, whether or not there is also a change from any other subheading, including another subheading within that group, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2915.35	A change to subheading 2915.35 from any other subheading.
2915.39-2915.40	(1) A change to subheadings 2915.39 through 2915.40 from any other subheading, including another subheading within that group, except from subheading 2915.21; or (2) A change to subheadings 2915.39 through 2915.40 from subheading 2915.21, whether or not there is also a change from any other subheading, including another subheading within that group, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2915.50-2915.70	A change to subheadings 2915.50 through 2915.70 from any other subheading, including another subheading within that group.
2915.90	(1) A change to subheading 2915.90 from any other subheading; or (2) A change to valproic salts of subheading 2915.90 from valproic acids of subheading 2915.90.
2916.11-2917.39	A change to subheadings 2916.11 through 2917.39 from any other subheading, including another subheading within that group.
2918.11-2918.16	A change to subheadings 2918.11 through 2918.16 from any other subheading, including another subheading within that group.
2918.19	(1) A change to phenylglycolic acid (mandelic acid), its salts or esters of subheading 2918.19 from any other good of subheading 2918.19 or any other subheading; or (2) A change to any other good of subheading 2918.19 from phenylglycolic acid (mandelic acid), its salts or esters of subheading 2918.19 or any other subheading.
2918.21	A change to subheading 2918.21 from any other subheading.
2918.22-2918.23	(1) A change to subheadings 2918.22 through 2918.23 from any other subheading, including another subheading within that group, except from subheading 2918.21; or (2) A change to subheadings 2918.22 through 2918.23 from subheading 2918.21, whether or not there is also a change from any other subheading, including another subheading within that group, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2918.29-2918.30	(1) A change to subheadings 2918.29 through 2918.30 from any other subheading, including another subheading within that group; or (2) A change to parabens of subheading 2918.29 from p-hydroxybenzoic acid of subheading 2918.29.
2918.90	(1) A change to subheading 2918.90 from any other subheading, except from subheading 2908.10 or 2915.40; or (2) A change to subheading 2918.90 from subheading 2908.10 or 2915.40, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
29.19	A change to heading 29.19 from any other heading.
2920.10-2920.90	A change to subheadings 2920.10 through 2920.90 from any other subheading, including another subheading within that group.
2921.11-2921.12	(1) A change to subheadings 2921.11 through 2921.12 from any other heading, except from heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26; or (2) A change to subheadings 2921.11 through 2921.12 from any other subheading within heading 29.21, including another subheading within that group, or heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2921.19	A change to subheading 2921.19 from any other subheading.
2921.21-2921.29	(1) A change to subheadings 2921.21 through 2921.29 from any other heading, except from heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26; or (2) A change to subheadings 2921.21 through 2921.29 from any other subheading within heading 29.21, including another subheading within that group, or heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2921.30	A change to subheading 2921.30 from any other subheading.
2921.41-2921.45	(1) A change to subheadings 2921.41 through 2921.45 from any other heading, except from heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26; or (2) A change to subheadings 2921.41 through 2921.45 from any other subheading within heading 29.21, including another subheading within that group, or heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2921.46-2921.49	(1) A change to subheadings 2921.46 through 2921.49 from any other heading, except from heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26; or (2) A change to subheadings 2921.46 through 2921.49 from any subheading outside that group within heading 29.21 or heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2921.51-2921.59	(1) A change to subheadings 2921.51 through 2921.59 from any other heading, except from heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26; or (2) A change to subheadings 2921.51 through 2921.59 from any other subheading within heading 29.21, including another subheading within that group, or heading 29.01, 29.02, 29.04, 29.16, 29.17 or 29.26, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2922.11-2922.13	(1) A change to subheadings 2922.11 through 2922.13 from any other heading, except from headings 29.05 through 29.21; or (2) A change to subheadings 2922.11 through 2922.13 from any other subheading within heading 29.22, including another subheading within that group, or headings 29.05 through 29.21, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2922.14-2922.19	(1) A change to subheadings 2922.14 through 2922.19 from any other heading, except from headings 29.05 through 29.21; or (2) A change to subheadings 2922.14 through 2922.19 from any subheading outside that group within heading 29.22 or headings 29.05 through 29.21, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2922.21-2922.29	(1) A change to subheadings 2922.21 through 2922.29 from any other heading, except from headings 29.05 through 29.21; or (2) A change to subheadings 2922.21 through 2922.29 from any other subheading within heading 29.22, including another subheading within that group, or headings 29.05 through 29.21, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2922.31-2922.39	(1) A change to subheadings 2922.31 through 2922.39 from any other heading, except from headings 29.05 through 29.21; or (2) A change to subheadings 2922.31 through 2922.39 from any subheading outside that group within heading 29.22 or headings 29.05 through 29.21, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2922.41-2922.43	(1) A change to subheadings 2922.41 through 2922.43 from any other heading, except from headings 29.05 through 29.21; or (2) A change to subheadings 2922.41 through 2922.43 from any other subheading within heading 29.22, including another subheading within that group, or headings 29.05 through 29.21, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2922.44-2922.49	(1) A change to subheadings 2922.44 through 2922.49 from any other heading, except from headings 29.05 through 29.21; or (2) A change to subheadings 2922.44 through 2922.49 from any subheading outside that group within heading 29.22 or headings 29.05 through 29.21, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2922.50	(1) A change to subheading 2922.50 from any other heading, except from headings 29.05 through 29.21; or (2) A change to subheading 2922.50 from any other subheading within heading 29.22 or headings 29.05 through 29.21, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2923.10-2923.90	A change to subheadings 2923.10 through 2923.90 from any other subheading, including another subheading within that group.
2924.11-2924.19	A change to subheadings 2924.11 through 2924.19 from any subheading outside that group.
2924.21	(1) A change to subheading 2924.21 from any other subheading, except from subheading 2917.20; or (2) A change to subheading 2924.21 from subheading 2917.20, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2924.23	(1) A change to subheading 2924.23 from any other subheading, except from subheading 2917.20 or 2924.24 through 2924.29; (2) A change to 2-acetamidobenzonic acid (N-acetylanthranilic acid) of subheading 2924.23 from its salts of subheading 2924.23 or subheading 2917.20 or 2924.24 through 2924.29, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used; or (3) A change to salts of subheading 2924.23 from 2-acetamidobenzoic acid (N-acetylanthranilic acid) of subheading 2924.23 or subheading 2917.20 or 2924.24 through 2924.29, whether or not there is also a change from any other subheading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2924.24-2924.29	(1) A change to subheadings 2924.24 through 2924.29 from any subheading outside that group, except from subheading 2917.20 or 2924.23; or (2) A change to subheadings 2924.24 through 2924.29 from subheading 2917.20 or 2-acetamidobenzoic acid (N-acetylanthranilic acid) of subheading 2924.23, whether or not there is also a change from any subheading outside that group, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2925.11	A change to subheading 2925.11 from any other subheading.
2925.12-2925.19	A change to subheadings 2925.12 through 2925.19 from any subheading outside that group.
2925.20	A change to subheading 2925.20 from any other subheading.
2926.10-2926.20	A change to subheadings 2926.10 through 2926.20 from any other subheading, including another subheading within that group.
2926.30-2926.90	A change to subheadings 2926.30 through 2926.90 from any subheading outside that group.
29.27-29.28	A change to headings 29.27 through 29.28 from any other heading, including another heading within that group.
2929.10-2929.90	(1) A change to subheadings 2929.10 through 2929.90 from any other subheading, including another subheading within that group, except from heading 29.21; or (2) A change to subheadings 2929.10 through 2929.90 from heading 29.21, whether or not there is also a change from any other subheading, including another subheading within that group, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2930.10-2930.90	A change to subheadings 2930.10 through 2930.90 from any other subheading, including another subheading within that group.
29.31	A change to heading 29.31 from any other heading.
2932.11-2932.94	(1) A change to subheadings 2932.11 through 2932.94 from any other heading; or (2) A change to subheadings 2932.11 through 2932.94 from any other subheading within heading 29.32, including another subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2932.95-2932.99	(1) A change to subheadings 2932.95 through 2932.99 from any other heading; or (2) A change to subheadings 2932.95 through 2932.99 from any subheading outside that group within heading 29.32, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2933.11-2933.32	(1) A change to subheadings 2933.11 through 2933.32 from any other heading; or (2) A change to subheadings 2933.11 through 2933.32 from any other subheading within heading 29.33, including another subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2933.33-2933.39	(1) A change to subheadings 2933.33 through 2933.39 from any other heading; or (2) A change to subheadings 2933.33 through 2933.39 from any subheading outside that group within heading 29.33, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2933.41-2933.49	(1) A change to subheadings 2933.41 through 2933.49 from any other heading; or (2) A change to subheadings 2933.41 through 2933.49 from any subheading outside that group within heading 29.33, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2933.52-2933.54	(1) A change to subheadings 2933.52 through 2933.54 from any other heading; or (2) A change to subheadings 2933.52 through 2933.54 from any subheading outside that group within heading 29.33, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2933.55-2933.59	(1) A change to subheadings 2933.55 through 2933.59 from any other heading; or (2) A change to subheadings 2933.55 through 2933.59 from any subheading outside that group within heading 29.33, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2933.61-2933.69	(1) A change to subheadings 2933.61 through 2933.69 from any other heading; or (2) A change to subheadings 2933.61 through 2933.69 from any other subheading within heading 29.33, including another subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2933.71	(1) A change to subheading 2933.71 from any other chapter, except from Chapters 28 through 38; or (2) A change to subheading 2933.71 from any other subheading within Chapters 28 through 38, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2933.72-2933.79	(1) A change to subheadings 2933.72 through 2933.79 from any other heading; or (2) A change to subheadings 2933.72 through 2933.79 from any subheading outside that group within heading 29.33, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2933.91-2933.99	(1) A change to subheadings 2933.91 through 2933.99 from any other heading; or (2) A change to subheadings 2933.91 through 2933.99 from any subheading outside that group within heading 29.33, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2934.10-2934.30	A change to subheadings 2934.10 through 2934.30 from any other subheading, including another subheading within that group.
2934.91-2934.99	(1) A change to subheadings 2934.91 through 2934.99 from any subheading outside that group; or (2) A change to nucleic acids of subheadings 2934.91 through 2934.99 from other heterocyclic compounds of subheadings 2934.91 through 2934.99.
29.35	A change to heading 29.35 from any other heading.
2936.10-2936.90	(1) A change to subheadings 2936.10 through 2936.90 from any other heading; or (2) A change to subheadings 2936.10 through 2936.90 from any other subheading within that group, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2937.11-2937.90	(1) A change to subheadings 2937.11 through 2937.90 from any other chapter, except from Chapters 28 through 38; or (2) A change to subheadings 2937.11 through 2937.90 from any other subheading within Chapters 28 through 38, including another subheading within that group, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
2938.10-2938.90	(1) A change to subheadings 2938.10 through 2938.90 from any other heading, except from heading 29.40; or (2) A change to subheadings 2938.10 through 2938.90 from any other subheading within that group or heading 29.40, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2939.11	(1) A change to concentrates of poppy straw of subheading 2939.11 from any other subheading, except from Chapter 13; or (2) A change to any other good of subheading 2939.11 from concentrates of poppy straw of subheading 2939.11 or any other subheading, except from subheading 2939.19.
2939.19	A change to subheading 2939.19 from concentrates of poppy straw of subheading 2939.11 or any other subheading, except from any other good of subheading 2939.11.
2939.21-2939.42	A change to subheadings 2939.21 through 2939.42 from any other subheading, including another subheading within that group.
2939.43-2939.49	A change to subheadings 2939.43 through 2939.49 from any subheading outside that group.
2939.51-2939.59	A change to subheadings 2939.51 through 2939.59 from any subheading outside that group.
2939.61-2939.69	A change to subheadings 2939.61 through 2939.69 from any other subheading, including another subheading within that group.
2939.91-2939.99	(1) A change to subheadings 2939.91 through 2939.99 from any subheading outside that group; (2) A change to nicotine or its salts of subheading 2939.99 from any other good of subheading 2939.99; or (3) A change to any other good of subheading 2939.99 from nicotine or its salts of subheading 2939.99.
29.40	(1) A change to heading 29.40 from any other heading, except from heading 29.38; or (2) A change to heading 29.40 from heading 29.38, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
2941.10-2941.90	(1) A change to subheadings 2941.10 through 2941.90 from any other chapter, except from Chapters 28 through 38; or (2) A change to subheadings 2941.10 through 2941.90 from any other subheading within Chapters 28 through 38, including another subheading within that group, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.
29.42	(1) A change to heading 29.42 from any other chapter, except from Chapters 28 through 38; or (2) A change to heading 29.42 from any other heading within Chapters 28 through 38, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than: (a) 60 per cent where the transaction value method is used, or (b) 50 per cent where the net cost method is used.

SOR/96-27, s. 1; SOR/97-206, ss. 7, 8; SOR/2002-27, ss. 15 to 29, 99; SOR/2003-24, s. 4.

Chapter 30	Pharmaceutical Products
3001.10-3001.20	(1) A change to subheadings 3001.10 through 3001.20 from any other heading, except from subheading 3006.80; or (2) A change to subheadings 3001.10 through 3001.20 from any other subheading within heading 30.01, including another subheading within that group, whether or not there is also a change from any other heading, except from subheading 3006.80, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3001.90	A change to subheading 3001.90 from any other subheading, except from subheading 3006.80.
3002.10-3002.90	A change to subheadings 3002.10 through 3002.90 from any other subheading, including another subheading within that group, except from subheading 3006.80.
3003.10-3003.90	(1) A change to subheadings 3003.10 through 3003.90 from any other heading, except from subheading 3006.80; or (2) A change to subheadings 3003.10 through 3003.90 from any other subheading within heading 30.03, whether or not there is also a change from any other heading, except from subheading 3006.80, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3004.10-3004.31	(1) A change to subheadings 3004.10 through 3004.31 from any other heading, except from heading 30.03 or subheading 3006.80; or (2) A change to subheadings 3004.10 through 3004.31 from heading 30.03 or any other subheading within heading 30.04, including another subheading within that group, whether or not there is also a change from any other heading, except from subheading 3006.80, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3004.32	(1) A change to hormone derivatives of corticosteroid hormones of subheading 3004.32 from corticosteroid hormones or structural analogues of corticosteroid hormones of subheading 3004.32 or any other subheading, except from subheading 3004.39 or 3006.80; (2) A change to structural analogues of corticosteroid hormones of subheading 3004.32 from corticosteroid hormones or derivatives of subheading 3004.32 or any other subheading, except from subheading 3004.39 or 3006.80; (3) A change to any other good of subheading 3004.32 from any other heading, except from heading 30.03 or subheading 3006.80; or (4) A change to any other good of subheading 3004.32 from hormone derivatives or structural analogues of corticosteroid hormones of subheading 3004.32, heading 30.03 or any other subheading within heading 30.04, whether or not there is also a change from any other heading, except from subheading 3006.80, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3004.39	A change to subheading 3004.39 from any other subheading, except from subheading 3006.80.
3004.40-3004.50	(1) A change to subheadings 3004.40 through 3004.50 from any other heading, except from heading 30.03 or subheading 3006.80; or (2) A change to subheadings 3004.40 through 3004.50 from heading 30.03 or any other subheading within heading 30.04, including another subheading within that group, whether or not there is also a change from any other heading, except from subheading 3006.80, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3004.90	A change to subheading 3004.90 from any other subheading, except from subheading 3006.80.
3005.10-3005.90	(1) A change to subheadings 3005.10 through 3005.90 from any other heading, except from subheading 3006.80; or (2) A change to subheadings 3005.10 through 3005.90 from any other subheading within heading 30.05, whether or not there is also a change from any other heading, except from subheading 3006.80, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3006.10	(1) A change to subheading 3006.10 from any other heading; or (2) A change to subheading 3006.10 from any other subheading within heading 30.06, except from subheading 3006.80, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3006.20	A change to subheading 3006.20 from any other subheading, except from subheading 3006.80.
3006.30-3006.60	(1) A change to subheadings 3006.30 through 3006.60 from any other heading; or (2) A change to subheadings 3006.30 through 3006.60 from any other subheading within heading 30.06, including another subheading within that group, except from subheading 3006.80, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3006.70	(1) A change to subheading 3006.70 from any other chapter, except from Chapters 28 through 38; or (2) A change to subheading 3006.70 from any other subheading within Chapters 28 through 38, except from subheading 3006.80, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than: (a) 60 percent where the transaction value method is used, or (b) 50 percent where the net cost method is used.
3006.80	A change to subheading 3006.80 from any other chapter.

SOR/96-27, s. 1; SOR/2002-27, ss. 30 to 42.

Chapter 31	Fertilizers
31.01	A change to heading 31.01 from any other heading.
3102.10-3105.90	A change to subheadings 3102.10 through 3105.90 from any other subheading, including another subheading within that group.