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(continued)
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.
Value of imported
material if customs
value is not in
accordance with
Schedule VIII
(3) For purposes of
subsections
(1)(a)(ii)(A) and
(b)(ii)(A) and
subsections
(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
sections (2)(c)
through (f) are
not included in
that value, those
costs shall be
added to the value
of the material.
Option to use
section 9 tracing
rules in certain
circumstances
(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.
VNM may be
redetermined for
certain acquired
materials
(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 subsection
(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.
Effect on value of
traced material if
value on a
statement cannot be
verified
(7) Where any
person who has
information with
respect to a
statement referred
to in subsection
(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.
Use of value of VNM
as determined under
section 12(3) for
traced material
incorporated into
another 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
subsection
(1)(b)(ii), (d)(i)
or (e)(i) may
state the value of
non-originating
materials,
determined in
accordance with
section 12(3),
with respect to
the material that
incorporates the
heavy-duty
component, sub-
component or
listed material.

Interpretations and
clarifications for
provisions
applicable to rules
for determining VNM
for heavy-duty
automotive goods
(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 section
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
section 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
subsections
(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
subsections
(1)(a)(i) and
(ii) consists of
the costs
referred to
section 2(6),
and is
calculated in
accordance with
that section and
section 2(7).
Examples of
application of
rules for
determining VNM for
heavy-duty
automotive goods
(10) Each of the
following examples
is an ``Example''
as referred to in
section 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.
Situation 1: 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
section 10(1)(c),
is included in the
value of non-
originating
materials used in
the production of
the engine.
Situation 2: 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
section 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
section
10(1)(d)(i), of
the non-
originating
materials that
are incorporated
into the engine,
which is the
value,
determined under
sections 10(1)
(a) through (c)
and paragraph
(e)(ii), of the
non-originating
materials;
(b) the value,
determined under
section
10(1)(d)(ii),
which is an
amount equal to
the amount
determined under
section
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
section
10(1)(d)(iii),
which is an
amount equal to
the amount
determined under
section
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
section
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
section
10(1)(d)(i), from
the person from
whom the engine
was acquired. In
this situation,
the value,
determined under
section 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
section
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 section
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
section
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 section
10(1)(d)(iii) and
is, consequently,
included in the
value of non-
originating
materials used in
the production of
the heavy-duty
vehicle.
Situation 3: 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
section 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
section
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
sections
10(1)(a) through
(d) and (f), or
(b) the value of
the engine,
determined under
section
10(1)(e)(ii).
The heavy-duty
vehicle producer
may only choose
the first option
if that producer
has a statement,
referred to in
section
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
section 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.
Situation 1: 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
section 10(1)(f),
is included in the
value of non-
originating
materials used in
the production of
the engine.
Situation 2: 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
section 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
section
10(1)(d)(i), of
the non-
originating
materials that
are incorporated
into the engine,
which is the
value,
determined under
sections 10(1)
(a) through (c)
and paragraph
(e)(ii), of the
non-originating
materials;
(b) the value,
determined under
section
10(1)(d)(ii),
which is an
amount equal to
the amount
determined under
section
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
section
10(1)(d)(iii),
which is an
amount equal to
the amount
determined under
section
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
section
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
section
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
section 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
section
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 section
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
section
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 section
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.
Situation 3: 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
section 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
section
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
sections 10(1)
(a) through (d)
and (f), or
(b) the value of
the engine,
determined under
section
10(1)(e)(ii).
The heavy-duty
vehicle producer
may only choose
the first option
if that producer
has a statement,
referred to in
section
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
section 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.
Situation 4: 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 section
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
section 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.
Situation: 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
section 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.
Situation: 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 section
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
section 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.
Situation 1: 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
section 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.
Situation 2: 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
section 10(1).
Because none of
sections 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 section
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.
Situation 1:
Calculating the
regional value
content of the
finished block
A sub-component is
not a heavy-duty
automotive good.
As referred to in
section 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.
Situation 2:
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 section
10(1) (d) or (e)
with respect to
that sub-
component. In this
situation, the
value, under
section 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
sections 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.
Situation 1: 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.
Situation 2: 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
section 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 section
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:
Situation:
Transhipment 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
section 10(1)(c).
The value of the
cast head cannot
be deducted from
the value
determined under
section 10(1)(c).
Although the cast
head was once an
originating good,
under section 18
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 section
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
section
10(1)(a)(i), of
the water pump or
the value,
determined under
section
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 chose
to calculate the
regional value
content of the
water pump in
accordance with
section 12(1) over
a period set out
in section
12(5)(a) and using
a category set out
in section
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
section
10(1)(b)(i), of
the water pump or,
if the producer
has a statement
referred to in
section
10(1)(b)(ii)(B),
the value,
determined under
that section, of
the material
imported from
outside the
territories of the
NAFTA countries.
The producer has a
statement referred
to in section
10(1)(b)(ii)(B)
and chooses to use
the value of non-
originating
material
determined under
that section. The
statement states,
as is permitted
under section
10(8), the value
of non-originating
material used in
the production of
the water pump in
accordance with
section 12(3) over
a period set out
in section
12(5)(a) and using
a category set out
in section
12(4)(e).








SECTION 11. MOTOR
VEHICLE AVERAGING
NC and VNM for
motor vehicles may
be averaged over
producer's fiscal
year
(1) For purposes of
calculating the
regional value
content of light-
duty vehicles or
heavy-duty
vehicles, the
producer of those
motor vehicles may
choose 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
section 6(3) as
the net cost and
the value of non-
originating
materials,
respectively.
Information
required when
producer chooses to
average for motor
vehicles
(2) A choice made
under subsection
(1) shall
(a) state the
category chosen
by the producer,
and
(i) where the
category
referred to in
subsection
(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
subsection
(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
subsection
(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 choice 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 choice,
at least 10 days
before the first
day of the
producer's
fiscal year, or
such shorter
period as that
customs
administration
may accept.
Averaging period
(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
choose that the
calculation of
regional value
content referred
to in subsection
(1) or (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 choice
shall be filed
with the customs
administration of
each NAFTA country
to which vehicles
are to be exported
during the period
covered by the
choice 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 choice
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
subsection (2)(g)
may accept.
Categories of motor
vehicles for
averaging
(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
choose that the
calculation of the
regional value
content of motor
vehicles referred
to in Schedule VI
be made in
accordance with
that schedule.
Timely filing of
choice to average
(7) Subject to
section 5(4) of
Schedule VI, the
choice 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
choice is to apply
or such shorter
period as the
customs
administration may
accept.
Choice to average
cannot be rescinded
(8) A choice 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.
Averaged net cost
and VNM included in
calculation of RVC
on the basis of
producer's option
to include all
vehicles of
category or only
certain exported
vehicles of
category
(9) For purposes of
this section,
where a producer
files a choice
under subsection
(1), (3) or (4),
including a choice
referred to in
section 13(9), the
net cost 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 a choice
filed under
subsection (3),
during the
period with
respect to which
the choice 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 a choice
filed under
subsection (3),
during the
period with
respect to which
the choice is
made,
shall be included
in the calculation
of the regional
value content
under any of the
categories set out
in subsection (5).
Year-end analysis
required if
averaging based on
estimated costs;
obligation to
notify of change in
status
(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
section 2(4).








Example:
A motor vehicle
producer located
in NAFTA country A
produces vehicles
that fall within a
category set out
in section 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 section
11(1), the motor
vehicle producer
may choose 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 choice the
basis of the
calculation as
described in
section 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 choice the
basis of the
calculation as
described in
section 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 choice.








SECTION 12.
AUTOMOTIVE PARTS
AVERAGING
NC and VNM for
automotive parts
may be averaged to
determine RVC of
parts
(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
chooses 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
section 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).
VNM for each unit
in a category of
goods for which
averaging used
(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 subsection
(1)(a) divided by
the number of
units of the goods
in that category
and produced
during that
period.
Categories of
automotive parts
for averaging
(4) The categories
referred to in
subsection (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.
Periods for
averaging RVC for
automotive parts
(5) The period
referred to in
subsection (1)(a)
is,
(a) with respect
to goods
referred to in
subsection
(4)(a), (b) or
(d), or
subsection 4(e)
or (f) where the
goods in that
category are in
a category
referred to in
subsection 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
subsection
(4)(c), or
subsection
(4)(e) or (f)
where the goods
in that category
are in a
category
referred to in
subsection
(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.
Choice to average
may not be
rescinded
(6) A choice made
under subsection
(1) may not be
rescinded or
modified with
respect to the
goods or the
period with
respect to which
the choice 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
subsection (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 subsection
(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
subsection
(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
subsection (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
subsection
(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
subsection
(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.
Applicable method
for averaging VNM
under different
categories
(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 subsections (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.
Year-end analysis
required if
averaging based on
estimated costs;
obligation to
notify of change in
status
(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 (continued)