Loading (50 kb)...'
(continued)
shipped to the
buyer of the good;
``identical
materials'' means,
with respect to a
material,
materials that are
the same as that
material in all
respects,
including physical
characteristics,
quality and
reputation but
excluding minor
differences in
appearance;
``LIFO method''
means the method
by which the value
of non-originating
materials last
received in
materials
inventory,
determined in
accordance with
section 7 of this
appendix, is
considered to be
the value of non-
originating
materials used in
the production of
the good first
shipped to the
buyer of the good;
``materials
inventory'' means,
with respect to a
single plant of
the producer of a
good, an inventory
of non-originating
materials that are
identical
materials and that
are used in the
production of the
good; and
``rolling average
method'' means the
method by which
the value of non-
originating
materials used in
the production of
a good that is
shipped to the
buyer of the good
is based on the
average value,
calculated in
accordance with
section 4, of the
non-originating
materials in
materials
inventory.
General
SECTION 2.
For purposes of
sections 5(11) and
(12) and 6(10) of
this appendix, the
following are the
methods for
determining the
value of non-
originating
materials that are
identical
materials and are
used in the
production of a
good:
(a) FIFO method;
(b) LIFO method;
and
(c) rolling
average method.
SECTION 3.
(1) Where a
producer of a good
chooses, with
respect to non-
originating
materials that are
identical
materials, any of
the methods
referred to in
section 2, the
producer may not
use another of
those methods with
respect to any
other non-
originating
materials that are
identical
materials and that
are used in the
production of that
good or in the
production of any
other good.
(2) Where a
producer of a good
produces the good
in more than one
plant, the method
chosen by the
producer shall be
used with respect
to all plants of
the producer in
which the good is
produced.
(3) The method
chosen by the
producer to
determine the
value of non-
originating
materials may be
chosen at any time
during the
producer's fiscal
year and may not
be changed during
that fiscal year.
Average Value for
Rolling Average
Method
SECTION 4.
(1) The average
value of non-
originating
materials that are
identical
materials and that
are used in the
production of a
good that is
shipped to the
buyer of the good
is calculated by
dividing
(a) the total
value of non-
originating
materials that
are identical
materials in
materials
inventory prior
to the shipment
of the good,
determined in
accordance with
section 7 of
this appendix,
by
(b) the total
units of those
non-originating
materials in
materials
inventory prior
to the shipment
of the good.
(2) The average
value calculated
under subsection
(1) is applied to
the remaining
units of non-
originating
materials in
materials
inventory.
ADDENDUM
``EXAMPLES''
ILLUSTRATING THE
APPLICATION OF THE
METHODS FOR
DETERMINING THE
VALUE OF NON-
ORIGINATING
MATERIALS THAT ARE
IDENTICAL MATERIALS
AND THAT ARE USED
IN THE PRODUCTION
OF A GOOD
The following
``examples'' are
based on the
figures set out in
the table below
and on the
following
assumptions:
(a) Materials A
are non-
originating
materials that
are identical
materials that
are used in the
production of
Good A;
(b) one unit of
Materials A is
used to produce
one unit of Good
A;
(c) all other
materials used
in the
production of
Good A are
originating
materials; and
(d) Good A is
produced in a
single plant.
----------------------------------------------------------------------------------------------------------------
Materials inventory (Receipts of Sales (Shipments
materials A) of good A)
Date (M/D/Y) --------------------------------------------------------
Quantity (units) Unit cost * Quantity (units)
----------------------------------------------------------------------------------------------------------------
01/01/94............................................... 200 $1.05
01/03/94............................................... 1,000 1.00
01/05/94............................................... 1,000 1.10
01/08/94............................................... ................. ................. 500
01/09/94............................................... ................. ................. 500
01/10/94............................................... 1,000 1.05
01/14/94............................................... ................. ................. 1,500
01/16/94............................................... 2,000 1.10
01/18/94............................................... ................. ................. 1,500
----------------------------------------------------------------------------------------------------------------
* Unit cost is determined in accordance with section 7 of this appendix.
Example 1: FIFO
method
By applying the
FIFO method:
(1) the 200 units
of Materials A
received on 01/01/
94 and valued at
$1.05 per unit and
300 units of the
1,000 units of
Material A
received on 01/03/
94 and valued at
$1.00 per unit are
considered to have
been used in the
production of the
500 units of Good
A shipped on 01/08/
94; therefore, the
value of the non-
originating
materials used in
the production of
those goods is
considered to be
$510 [(200 unit x
$1.05) + ($300
units x $1.00)];
(2) 500 units of
the remaining 700
units of Materials
A received on 01/
03/94 and valued
at $1.00 per unit
are considered to
have been used in
the production of
the 500 units of
Good A shipped on
01/09/94;
therefore, the
value of the non-
originating
materials used in
the production of
those goods is
considered to be
$500 (500 units x
$1.00);
(3) the remaining
200 units of the
1,000 of Materials
A received on 01/
03/94 and valued
at $1.00 per unit,
the 1,000 units of
Materials A
received on 01/05/
94 and valued at
$1.10 per unit,
and 300 units of
the 1,000
Materials A
received on 01/10/
94 and valued at
$1.05 per unit are
considered to have
been used in the
production of the
1,500 units of
Good A shipped on
01/14/94;
therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$1,615 [(200 units
x $1.00) + (1,000
units x $1.10) +
(300 units x
$1.05)]; and
(4) the remaining
700 units of the
1,000 units of
Materials A
received on 01/10/
94 and valued at
$1.05 per unit and
800 units of the
2,000 units of
Materials A
received on 01/16/
94 and valued at
$1.10 per unit are
considered to have
been used in the
production of the
1,500 units of
Good A shipped on
01/18/94;
therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$1,615 [(700 x
$1.05) + (800 x
$1.10)].
Example 2: LIFO
method
By applying the
LIFO method:
(1) 500 units of
the 1,000 units of
Materials A
received on 01/05/
94 and valued at
$1.10 per unit are
considered to have
been used in the
production of the
500 units of Good
A shipped on 01/08/
94; therefore, the
value of the non-
originating
materials used in
the production of
those goods is
considered to be
$550 (500 units x
$1.10);
(2) the remaining
500 units of the
1,000 units of
Materials A
received on 01/05/
94 and valued at
$1.10 per unit are
considered to have
been used in the
production of the
500 units of Good
A shipped on 01/09/
94; therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$550 (500 units x
$1.10);
(3) the 1,000 units
of Materials A
received on 01/10/
94 and valued at
$1.05 per unit and
500 units of the
1,000 units of
Material A
received on 01/03/
94 and valued at
$1.00 per unit are
considered to have
been used in the
production of the
1,500 units of
Good A shipped on
01/14/94;
therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$1,550 [(1,000
units x $1.05) +
(500 units x
$1.00)]; and
(4) 1,500 units of
the 2,000 units of
Materials A
received on 01/16/
94 and valued at
$1.10 per unit are
considered to have
been used in the
production of the
1,500 units of
Good A shipped on
01/18/94;
therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$1,650 (1,500
units x $1.10).
Example 3: Rolling
average method
The following
table identifies
the average value
of non-originating
Materials A as
determined under
the rolling
average method.
For purposes of
this example, a
new average value
of non-originating
Materials A is
calculated after
each receipt.
----------------------------------------------------------------------------------------------------------------
Materials inventory
-----------------------------------------------------------------------------------------------------------------
Date (M/D/Y) Quantity (units) Unit cost* Total value
----------------------------------------------------------------------------------------------------------------
Beginning Inventory................. 1/1/94 200 $1.05 $210
Receipt............................. 1/3/94 1,000 1.00 1,000
AVERAGE VALUE....................... ................. 1,200 1.008 1,210
Receipt............................. 1/5/94 1,000 1.10 1,100
AVERAGE VALUE....................... ................. 2,200 1.05 2,310
Shipment............................ 1/8/94 500 1.05 525
AVERAGE VALUE....................... ................. 1,700 1.05 1,785
Shipment............................ 1/9/94 500 1.05 525
AVERAGE VALUE....................... ................. 1,200 1.05 1,260
Receipt............................. 1/16/94 2,000 1.10 2,200
AVERAGE VALUE....................... ................. 3,200 1.08 3,460
----------------------------------------------------------------------------------------------------------------
* Unit cost is determined in accordance with section 7 of this appendix.
By applying the
rolling average
method:
(1) the value of
non-originating
materials used in
the production of
the 500 units of
Good A shipped on
01/08/94 is
considered to be
$525 (500 units x
$1.05); and
(2) the value of
non-originating
materials used in
the production of
the 500 units of
Good A shipped on
01/09/94 is
considered to be
$525 (500 units x
$1.05).
SCHEDULE X
INVENTORY
MANAGEMENT METHODS
PART I
FUNGIBLE MATERIALS
Definitions and
Interpretation
SECTION 1.
Definitions.
For purposes of
this part,
``average method''
means the method
by which the
origin of fungible
materials
withdrawn from
materials
inventory is based
on the ratio,
calculated under
section 5, of
originating
materials and non-
originating
materials in
materials
inventory;
``FIFO method''
means the method
by which the
origin of fungible
materials first
received in
materials
inventory is
considered to be
the origin of
fungible materials
first withdrawn
from materials
inventory;
``LIFO method''
means the method
by which the
origin of fungible
materials last
received in
materials
inventory is
considered to be
the origin of
fungible materials
first withdrawn
from materials
inventory;
``materials
inventory'' means,
(a) with respect
to a producer of
a good, an
inventory of
fungible
materials that
are used in the
production of
the good, and
(b) with respect
to a person from
whom the
producer of the
good acquired
those fungible
materials, an
inventory from
which fungible
materials are
sold or
otherwise
transferred to
the producer of
the good;
``opening
inventory'' means
the materials
inventory at the
time an inventory
management method
is chosen;
``origin
identifier'' means
any mark that
identifies
fungible materials
as originating
materials or non-
originating
materials.
General
SECTION 2.
The inventory
management methods
for determining
whether fungible
materials referred
to in section
7(16)(a) of this
appendix are
originating
materials are the
following:
(a) specific
identification
method;
(b) FIFO method;
(c) LIFO method;
and
(d) average
method.
SECTION 3.
A producer of a
good, or a person
from whom the
producer acquired
the fungible
materials that are
used in the
production of the
good, may choose
only one of the
inventory
management methods
referred to in
section 2, and, if
the averaging
method is chosen,
only one averaging
period in each
fiscal year of
that producer or
person for the
materials
inventory.
Specific
Identification
Method
SECTION 4.
(1) Except as
otherwise provided
under subsection
(2), where the
producer or person
referred to in
section 3 chooses
the specific
identification
method, the
producer or person
shall physically
segregate, in
materials
inventory,
originating
materials that are
fungible materials
from non-
originating
materials that are
fungible
materials.
(2) Where
originating
materials or non-
originating
materials that are
fungible materials
are marked with an
origin identifier,
the producer or
person need not
physically
segregate those
materials under
subsection (1) if
the origin
identifier remains
visible throughout
the production of
the good.
Average Method
SECTION 5.
Where the producer
or person referred
to in section 3
chooses the
average method,
the origin of
fungible materials
withdrawn from
materials
inventory is
determined on the
basis of the ratio
of originating
materials and non-
originating
materials in
materials
inventory that is
calculated under
sections 6 through
8.
SECTION 6.
(1) Except as
otherwise provided
in sections 7 and
8, the ratio is
calculated with
respect to a month
or three-month
period, at the
choice of the
producer or
person, by
dividing
(a) the sum of
(i) the total
units of
originating
materials or
non-
originating
materials that
are fungible
materials and
that were in
materials
inventory at
the beginning
of the
preceding one-
month or three-
month period,
and
(ii) the total
units of
originating
materials or
non-
originating
materials that
are fungible
materials and
that were
received in
materials
inventory
during that
preceding one-
month or three-
month period,
by
(b) the sum of
(i) the total
units of
originating
materials and
non-
originating
materials that
are fungible
materials and
that were in
materials
inventory at
the beginning
of the
preceding one-
month or three-
month period,
and
(ii) the total
units of
originating
materials and
non-
originating
materials that
are fungible
materials and
that were
received in
materials
inventory
during that
preceding one-
month or three-
month period.
(2) The ratio
calculated with
respect to a
preceding month or
three-month period
under subsection
(1) is applied to
the fungible
materials
remaining in
materials
inventory at the
end of the
preceding month or
three-month
period.
SECTION 7.
(1) Where the good
is subject to a
regional value-
content
requirement and
the regional value
content is
calculated under
the net cost
method and the
producer or person
chooses to average
over a period
under sections
6(15), 11(1), (3)
or (6), 12(1) or
13(4) of this
appendix, the
ratio is
calculated with
respect to that
period by dividing
(a) the sum of
(i) the total
units of
originating
materials or
non-
originating
materials that
are fungible
materials and
that were in
materials
inventory at
the beginning
of the period,
and
(ii) the total
units of
originating
materials or
non-
originating
materials that
are fungible
materials and
that were
received in
materials
inventory
during that
period,
by
(b) the sum of
(i) the total
units of
originating
materials and
non-
originating
materials that
are fungible
materials and
that were in
materials
inventory at
the beginning
of the period,
and
(ii) the total
units of
originating
materials and
non-
originating
materials that
are fungible
materials and
that were
received in
materials
inventory
during that
period.
(2) The ratio
calculated with
respect to a
period under
subsection (1) is
applied to the
fungible materials
remaining in
materials
inventory at the
end of the period.
SECTION 8.
(1) Where the good
is subject to a
regional value-
content
requirement and
the regional value
content of that
good is calculated
under the
transaction value
method or the net
cost method, the
ratio is
calculated with
respect to each
shipment of the
good by dividing
(a) the total
units of
originating
materials or non-
originating
materials that
are fungible
materials and
that were in
materials
inventory prior
to the shipment,
by
(b) the total
units of
originating
materials and
non-originating
materials that
are fungible
materials and
that were in
materials
inventory prior
to the shipment.
(2) The ratio
calculated with
respect to a
shipment of a good
under subsection
(1) is applied to
the fungible
materials
remaining in
materials
inventory after
the shipment.
Manner of Dealing
With Opening
Inventory
SECTION 9.
(1) Except as
otherwise provided
under subsections
(2) and (3), where
the producer or
person referred to
in section 3 has
fungible materials
in opening
inventory, the
origin of those
fungible materials
is determined by
(a) identifying,
in the books of
the producer or
person, the
latest receipts
of fungible
materials that
add up to the
amount of
fungible
materials in
opening
inventory;
(b) determining
the origin of
the fungible
materials that
make up those
receipts; and
(c) considering
the origin of
those fungible
materials to be
the origin of
the fungible
materials in
opening
inventory.
(2) Where the
producer or person
chooses the
specific
identification
method and has, in
opening inventory,
originating
materials or non-
originating
materials that are
fungible materials
and that are
marked with an
origin identifier,
the origin of
those fungible
materials is
determined on the
basis of the
origin identifier.
(3) The producer or
person may
consider all
fungible materials
in opening
inventory to be
non-originating
materials.
PART II
FUNGIBLE GOODS
Definitions and
Interpretation
SECTION 10.
Definitions.
For purposes of
this part,
``average method''
means the method
by which the
origin of fungible
goods withdrawn
from finished
goods inventory is
based on the
ratio, calculated
under section 12,
of originating
goods and non-
originating goods
in finished goods
inventory;
``FIFO method''
means the method
by which the
origin of fungible
goods first
received in
finished goods
inventory is
considered to be
the origin of
fungible goods
first withdrawn
from finished
goods inventory;
``finished goods
inventory'' means
an inventory from
which fungible
goods are sold or
otherwise
transferred to
another person;
``LIFO method''
means the method
by which the
origin of fungible
goods last
received in
finished goods
inventory is
considered to be
the origin of
fungible goods
first withdrawn
from finished
goods inventory;
``opening
inventory'' means
the finished goods
inventory at the
time an inventory
management method
is chosen; and
``origin
identifier'' means
any mark that
identifies
fungible goods as
originating goods
or non-originating
goods.
General
SECTION 11.
The inventory
management methods
for determining
whether fungible
goods referred to
in section
7(16)(b) of this
appendix are
originating goods
are the following:
(a) specific
identification
method;
(b) FIFO method;
(c) LIFO method;
and
(d) average
method.
SECTION 12.
An exporter of a
good, or a person
from whom the
exporter acquired
the fungible good,
may choose only
one of the
inventory
management methods
referred to in
section 11,
including only one
averaging period
in the case of the
average method, in
each fiscal year
of that exporter
or person for each
finished goods
inventory of the
exporter or
person.
Specific
Identification
Method
SECTION 13.
(1) Except as
provided under
subsection (2),
where the exporter
or person referred
to in section 12
chooses the
specific
identification
method, the
exporter or person
shall physically
segregate, in
finished goods
inventory,
originating goods
that are fungible
goods from non-
originating goods
that are fungible
goods.
(2) Where
originating goods
or non-originating
goods that are
fungible goods are
marked with an
origin identifier,
the exporter or
person need not
physically
segregate those
goods under
subsection (1) if
the origin
identifier is
visible on the
fungible goods.
Average Method
SECTION 14.
(1) Where the
exporter or person
referred to in
section 12 chooses
the average
method, the origin
of each shipment
of fungible goods
withdrawn from
finished goods
inventory during a
month or three-
month period, at
the choice of the
exporter or
person, is
determined on the
basis of the ratio
of originating
goods and non-
originating goods
in finished goods
inventory for the
preceding one-
month or three-
month period that
is calculated by
dividing
(a) the sum of
(i) the total
units of
originating
goods or non-
originating
goods that are
fungible goods
and that were
in finished
goods
inventory at
the beginning
of the
preceding one-
month or three-
month period,
and
(ii) the total
units of
originating
goods or non-
originating
goods that are
fungible goods
and that were
received in
finished goods
inventory
during that
preceding one-
month or three-
month period,
by
(b) the sum of
(i) the total
units of
originating
goods and non-
originating
goods that are
fungible goods
and that were
in finished
goods
inventory at
the beginning
of the
preceding one-
month or three-
month period,
and
(ii) the total
units of
originating
goods and non-
originating
goods that are
fungible goods
and that were
received in
finished goods
inventory
during that
preceding one-
month or three-
month period.
(2) The calculation
with respect to a
preceding month or
three-month period
under subsection
(1) is applied to
the fungible goods
remaining in
finished goods
inventory at the
end of the
preceding month or
three-month
period.
Manner of Dealing
with Opening
Inventory
SECTION 15.
(1) Except as
otherwise provided
under subsections
(2) and (3), where
the exporter or
person referred to
in section 12 has
fungible goods in
opening inventory,
the origin of
those fungible
goods is
determined by
(a) identifying,
in the books of
the exporter or
person, the
latest receipts
of fungible
goods that add
up to the amount
of fungible
goods in opening
inventory;
(b) determining
the origin of
the fungible
goods that make
up those
receipts; and
(c) considering
the origin of
those fungible
goods to be the
origin of the
fungible goods
in opening
inventory.
(2) Where the
exporter or person
chooses the
specific
identification
method and has, in
opening inventory,
originating goods
or non-originating
goods that are
fungible goods and
that are marked
with an origin
identifier, the
origin of those
fungible goods is
determined on the
basis of the
origin identifier.
(3) The exporter or
person may
consider all
fungible goods in
opening inventory
to be non-
originating goods.
ADDENDUM A
``EXAMPLES''
ILLUSTRATING THE
APPLICATION OF THE
INVENTORY
MANAGEMENT METHODS
TO DETERMINE THE
ORIGIN OF FUNGIBLE
MATERIALS
The following
``examples'' are
based on the
figures set out in
the table below
and on the
following
assumptions:
(a) originating
Material A and
non-originating
Material A that
are fungible
materials are
used in the
production of
Good A;
(b) one unit of
Material A is
used to produce
one unit of Good
A;
(c) Material A is
only used in the
production of
Good A;
(d) all other
materials used
in the
production of
Good A are
originating
materials; and
(e) the producer
of Good A
exports all
shipments of
Good A to the
territory of a
NAFTA country.
----------------------------------------------------------------------------------------------------------------
Materials inventory (Receipts of material A) Sales (Shipments
--------------------------------------------------------- of good A)
Date (M/D/Y) ------------------
Quantity (units) Unit cost * Total value Quantity (units)
----------------------------------------------------------------------------------------------------------------
12/18/93............................ 100 (O \1\) $1.00 $100
12/27/93............................ 100 (N \2\) 1.10 110
01/01/94............................ 200 (OI \3\)
01/01/94............................ 1,000 (O) 1.00 1,000
01/05/94............................ 1,000 (N) 1.10 1,100
01/10/94............................ ................. ................. ................. 100
01/10/94............................ 1,000 (O) 1.05 1,050
01/15/94............................ ................. ................. ................. 700
01/16/94............................ 2,000 (N) 1.10 2,200
01/20/94............................ ................. ................. ................. 1,000
01/23/94............................ ................. ................. ................. 900
----------------------------------------------------------------------------------------------------------------
* Unit cost is determined in accordance with section 7 of this appendix.
\1\ ``O'' denotes originating materials.
\2\ ``N'' denotes non-originating materials.
\3\ ``OI'' denotes opening inventory.
Example 1: FIFO
method
Good A is subject
to a regional
value-content
requirement.
Producer A is
using the
transaction value
method to
determine the
regional value
content of Good A.
By applying the
FIFO method:
(1) the 100 units
of originating
Material A in
opening inventory
that were received
in materials
inventory on 12/18/
93 are considered
to have been used
in the production
of the 100 units
of Good A shipped
on 01/10/94;
therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$0;
(2) the 100 units
of non-originating
Material A in
opening inventory
that were received
in materials
inventory on 12/27/
93 and 600 units
of the 1,000 units
of originating
Material A that
were received in
materials
inventory on 01/01/
94 are considered
to have been used
in the production
of the 700 units
of Good A shipped
on 01/15/94;
therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$110 (100 units x
$1.10);
(3) the remaining
400 units of the
1,000 units of
originating
Material A that
were received in
materials
inventory on 01/01/
94 and 600 units
of the 1,000 units
of non-originating
Material A that
were received in
materials
inventory on 01/05/
94 are considered
to have been used
in the production
of the 1,000 units
of Good A shipped
on 01/20/94;
therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$660 (600 units x
$1.10); and
(4) the remaining
400 units of the
1,000 units of non-
originating
Material A that
were received in
materials
inventory on 01/05/
94 and 500 units
of the 1,000 units
of originating
Material A that
were received in
materials
inventory on 01/10/
94 are considered
to have been used
in the production
of the 900 units
of Good A shipped
on 01/23/94;
therefore, the
value of non-
originating
materials used in
the production of
those goods is
considered to be
$440 (400 units x
$1.10).
Example 2: LIFO
method
Good A is subject
to a change in
tariff
classification
requirement and
the non-
originating
Material A used in
the production of
Good A does not
undergo the
applicable change
in tariff
classification.
Therefore, where
originating
Material A is used
in the production
of Good A, Good A
is an originating
good and, where
non-originating
Material A is used
in the production
of Good A, Good A
is a non-
originating good.
By applying the
LIFO method:
(1) 100 units of
the 1,000 units of
non-originating
Material A that
were received in
materials
inventory on 01/05/
94 are considered
to have been used
in the production
of the 100 units
of Good A shipped
on 01/10/94;
(2) 700 units of
the 1,000 units of
originating
Material A that
were received in
materials
inventory on 01/10/
94 are considered
to have been used
in the production
of the 700 units
of Good A shipped
on 01/15/94;
(3) 1,000 units of
the 2,000 units of
non-originating
Material A that
were received in
materials
inventory on 01/16/
94 are considered
to have been used
in the production
of the 1,000 units
of Good A shipped
on 01/20/94; and
(4) 900 units of
the remaining
1,000 units of non-
originating
Material A that
were received in
materials
inventory on 01/16/
94 are considered
to have been used
in the production
of the 900 units
of Good A shipped
on 01/23/94.
Example 3: Average
method
Good A is subject
to an applicable
regional value-
content
requirement.
Producer A is
using the
transaction value
method to
determine the
regional value
content of Good A.
Producer A
determines the
average value of
non-originating
Material A and the
ratio of
originating
Material A to
total value of
originating
Material A and non-
originating
Material A in the
following table.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Materials inventory Sales
------------------------------------------------------------------------------------ (Shipments
Date (M/D/ (Receipts of material A) (Non-originating material) of good A)
Y) -----------------------------------------------------------------------------------------------
Total Unit cost Quantity Total Quantity
Quantity (units) value * (units) value Ratio (units)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Receipt...................................... 12/18/93 100 (O \1\) $100 $1.00
Receipt...................................... 12/27/93 100 (N \2\) 110 1.10 100 $110.00
-------------------------------------------------------------------------
NEW AVERAGE INV. VALUE....................... ......... 200 (OI \3\) 210 1.05 100 105.00 0.50
Receipt...................................... 01/01/94 1,000 (O) 1,000 1.00
-------------------------------------------------------------------------
NEW AVERAGE INV. VALUE....................... ......... 1,200 1,210 1.01 100 101.00 0.08
Receipt...................................... 01/05/94 1,000 (N) 1,100 1.10 1,000 1,100.00
-------------------------------------------------------------------------
NEW AVERAGE INV. VALUE....................... ......... 2,200 2,310 1.05 1,100 1,155.00 0.50
Shipment..................................... 01/10/94 (100) (105) 1.05 (50) (52.50) ......... 100
Receipt...................................... 01/10/94 1,000 (O) 1,050 1.05
-------------------------------------------------------------------------
NEW AVERAGE INV. VALUE....................... ......... 3,100 3,255 1.05 1,050 1,102.50 0.34
Shipment..................................... 01/15/94 (700) (735) 1.05 (238) (249.90) ......... 700
Receipt...................................... 01/16/94 2,000 (N) 2,200 1.10 2,000 2,000.00
-------------------------------------------------------------------------
NEW AVERAGE INV. VALUE....................... ......... 4,400 4,720 1.07 2,816 3,013.20 0.64
Shipment..................................... 01/20/94 (1,000) (1,070) 1.07 (640) (648.80) ......... 1,000
Shipment..................................... 01/23/94 (900) (963) 1.07 (576) (616.32) ......... 900
-------------------------------------------------------------------------
NEW AVERAGE INV. VALUE....................... ......... 2,500 2,687 1.07 1,596 1,707.24 0.64
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Unit cost is determined in accordance with section 7 of this appendix.
\1\ ``O'' denotes originating materials.
\2\ ``N'' denotes non-originating materials.
\3\ ``OI'' denotes opening inventory.
By applying the average method:
(1) before the shipment of the 100 units of Material A on 01/10/94, the
ratio of units of originating Material A to total units of Material A
in materials inventory was .50 (1,100 units/2,200 units) and the ratio
of units of non-originating Material A to total units of Material A in
materials inventory was .50 (1,100 units/2,200 units); based on those
ratios, 50 units (100 units x .50) of originating Material A and 50
units (100 units x .50) of non-originating Material A are considered to
have been used in the production of the 100 units of Good A shipped on
01/10/94; therefore, the value of non-originating Material A used in
the production of those goods is considered to be $52.50 [100 units x
$1.05 (average unit value) x .50]; the ratios are applied to the units
of Material A remaining in materials inventory after the shipment:
1,050 units (2,100 units x .50) are considered to be originating
materials and 1,050 units (2,100 units x .50) are considered to be non-
originating materials;
(2) before the shipment of the 700 units of Good A on 01/15/94, the
ratio of units of originating Material A to total units of Material A
in materials inventory was 66% (2,050 units/3,100 units) and the ratio
of units of non-originating Material A to total units of Material A in
materials inventory was 34% (1,050 units/3,100 units); based on those
ratios, 462 units (700 units x .66) of originating Material A and 238
units (700 units x .34) of non-originating Material A are considered to
have been used in the production of the 700 units of Good A shipped on
01/15/94; therefore, the value of non-originating Material A used in
the production of those goods is considered to be $249.90 [700 units x
$1.05 (average unit value) x 34%]; the ratios are applied to the units
of Material A remaining in materials inventory after the shipment:
1,584 units (2,400 units x .66) are considered to be originating
materials and 816 units (2,400 units x .34) are considered to be non-
originating materials;
(3) before the shipment of the 1,000 units of Material A on 01/20/94,
the ratio of units of originating Material A to total units of Material
A in materials inventory was 36% (1,584 units/4,400 units) and the
ratio of units of non-originating Material A to total units of Material
A in materials inventory was 64% (2,816 units/4,400 units); based on
those ratios, 360 units (1,000 units x .36) of originating Material A
and 640 units (1,000 units x .64) of non-originating Material A are
considered to have been used in the production of the 1,000 units of
Good A shipped on 01/20/94; therefore, the value of non-originating
Material A used in the production of those goods is considered to be
$684.80 [1,000 units x $1.07 (average unit value) x 64%]; those ratios
are applied to the units of Material A remaining in materials inventory
after the shipment: 1,224 units (3,400 units x .36) are considered to
be originating materials and 2,176 units (3,400 units x .64) are
considered to be non-originating materials;
(4) before the shipment of the 900 units of Good A on 01/23/94, the
ratio of units of originating Material A to total units of Material A
in materials inventory was 36% (1,224 units/3,400 units) and the ratio
of units of non-originating Material A to total units of Material A in
materials inventory was 64% (2,176 units/3,400 units; based on those
ratios, 324 units (900 units x .36) of originating Material A and 576
units (900 units x .64) of non-originating Material A are considered to
have been used in the production of the 900 units of Good A shipped on
01/23/94; therefore, the value of non-originating Material A used in
the production of those goods is considered to be $616.32 [900 units x
$1.07 (average unit value) x 64%]; those ratios are applied to the
units of Material A remaining in materials inventory after the
shipment: 900 units (2,500 units x .36) are considered to be
originating materials and 1,600 units (2,500 units x .64) are
considered to be non-originating materials.
Example 4: Average method
Good A is subject to an applicable regional value-content requirement.
Producer A is using the net cost method and is averaging over a period
of one month under section 6(15)(a) of this appendix to determine the
regional value content of Good A.
By applying the average method:
the ratio of units of originating Material A to total units of
Material A in materials inventory for January 1994 is 40.4% (2,100
units/5,200 units);
based on that ratio, 1,091 units (2,700 units x .404) of originating
Material A and 1,609 units (2,700 units-1,091 units) of non-
originating Material A are considered to have been used in the
production of the 2,700 units of Good A shipped in January 1994;
therefore, the value of non-originating materials used in the
production of those goods is considered to be $0.64 per unit [$5,560
(total value of Material A in materials inventory)/ $5,200 (units of
Material A in materials inventory) = $1.07 (average unit value) x (1-
.404)] or $1,728 ($0.64 x 2,700 units); and
that ratio is applied to the units of Material A remaining in
materials inventory on January 31, 1994: 1,010 units (2,500 units x
.404) are considered to be originating materials and 1,490 units
(2,500 units-1,010 units) are considered to be non-originating
materials.
ADDENDUM B
``EXAMPLES''
ILLUSTRATING THE
APPLICATION OF THE
INVENTORY
MANAGEMENT METHODS
TO DETERMINE
THE ORIGIN OF
FUNGIBLE GOODS
The following
``examples'' are
based on the
figures set out in
the table below
and on the
assumption that
Exporter A
acquires
originating Good A
and non-
originating Good A
that are fungible
goods and
physically
combines or mixes
Good A before
exporting those
goods to the buyer
of those goods.
----------------------------------------------------------------------------------------------------------------
Finished goods Sales (shipments of
inventory (receipts of good A)
Date (M/D/Y) good A) ------------------------
-------------------------
Quantity (units) Quantity (units)
----------------------------------------------------------------------------------------------------------------
12/18/93...................................................... 100 (O \1\)
12/27/93...................................................... 100 (N \2\)
01/01/94...................................................... 200 (OI \3\)
01/01/94...................................................... 1,000 (O)
01/05/94...................................................... 1,000 (N)
01/10/94...................................................... ....................... 100
01/15/94...................................................... 1,000 (O)
01/16/94...................................................... ....................... 700
01/20/94...................................................... 2,000 (N)
01/20/94...................................................... ....................... 1,000
01/23/94...................................................... ....................... 900
----------------------------------------------------------------------------------------------------------------
\1\ ``O'' denotes originating goods.
\2\ ``N'' denotes non-originating goods.
\3\ ``OI'' denotes opening inventory.
Example 1: FIFO
method
By applying the
FIFO method:
(1) the 100 units
of originating
Good A in opening
inventory that
were received in
finished goods
inventory on 12/18/
93 are considered
to be the 100
units of Good A
shipped on 01/10/
94;
(2) the 100 units
of non-originating
Good A in opening
inventory that
were received in
finished goods
inventory on 12/27/
93 and 600 units
of the 1,000 units
of originating
Good A that were
received in
finished goods
inventory on 01/01/
94 are considered
to be the 700
units of Good A
shipped on 01/15/
94;
(3) the remaining
400 units of the
1,000 units of
originating Good A
that were received
in finished goods
inventory on 01/01/
94 and 600 units
of the 1,000 units
of non-originating
Good A that were
received in
finished goods
inventory on 01/05/
94 are considered
to be the 1,000
units of Good A
shipped on 01/20/
94; and
(4) the remaining
400 units of the
1,000 units of non-
originating Good A
that were received
in finished goods
inventory on 01/05/
94 and 500 units
of the 1,000 units
of originating
Good A that were
received in
finished goods
inventory on 01/10/
94 are considered
to be the 900
units of Good A
shipped on 01/23/
94.
Example 2: LIFO
method
By applying the
LIFO method:
(1) 100 units of
the 1,000 units of
non-originating
Good A that were
received in
finished goods
inventory on 01/05/
94 are considered
to be the 100
units of Good A
shipped on 01/10/
94;
(2) 700 units of
the 1,000 units of
originating Good A
that were received
in finished goods
inventory on 01/10/
94 are considered
to be the 700
units of Good A
shipped on 01/15/
94;
(3) 1,000 units of
the 2,000 units of
non-originating
Good A that were
received in
finished goods
inventory on 01/16/
94 are considered
to be the 1,000
units of Good A
shipped on 01/20/
94; and
(4) 900 units of
the remaining
1,000 units of non-
originating Good A
that were received
in finished goods
inventory on 01/16/
94 are considered
to be the 900
units of Good A
shipped on 01/23/
94.
Example 3: Average
method
Exporter A chooses
to determine the
origin of Good A
on a monthly
basis. Exporter A
exported 3,000
units of Good A
during the month
of February 1994.
The origin of the
units of Good A
exported during
that month is
determined on the
basis of the
preceding month,
that is January
1994.
By applying the
average method:
the ratio of
originating
goods to all
goods in
finished goods
inventory for
the month of
January 1994 is
40.4% (2,100
units/5,200
units);
based on that
ratio, 1,212
units (3,000
units x .404) of
Good A shipped
in February 1994
are considered
to be
originating
goods and 1,788
units (3,000
units - 1,212
units) of Good A
are considered
to be non-
originating
goods; and
that ratio is
applied to the
units of Good A
remaining in
finished goods
inventory on
January 31,
1994: 1,010
units (2,500
units x .404)
are considered
to be
originating
goods and 1,490
units (2,500
units - 1,010
units) are
considered to be
non-originating
goods.
SCHEDULE XI
METHOD FOR
CALCULATING NON-
ALLOWABLE INTEREST
COSTS
Definitions and
Interpretation
SECTION 1.
Definitions.
For purposes of
this Schedule,
``fixed-rate
contract'' means a
loan contract,
installment
purchase contract
or other financing
agreement in which
the interest rate
remains constant
throughout the
life of the
contract or
agreement;
``linear
interpolation''
means, with
respect to the
yield on federal
government debt
obligations, the
application of the
following
mathematical
formula:
A+[((B-A)x(E-D))/(C-
D)]
where
A is the yield
on federal
government
debt
obligations
that are
nearest in
maturity but
of shorter
maturity than
the weighted
average
principal (continued)