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(continued)
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.
SECTION 13. SPECIAL
REGIONAL VALUE-
CONTENT
REQUIREMENTS
Changes in regional
value content level
for automotive
goods
(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
percent, 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
percent, in the
case of
(i) a light-
duty vehicle,
and
(ii) a good
provided for
in any of
headings 8407
and 8408 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
percent, and for
the fiscal year
of a producer
that begins on
the day closest
to January 1,
2002 and
thereafter, not
less than 60
percent, in the
case of
(i) a heavy-
duty vehicle,
(ii) a good
provided for
in any of
headings 8407
and 8408 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
paragraph
(a)(ii) or
provided for
in 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.
Regional value
content level for
motor vehicles
produced in a new
plant or in a refit
plant
(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 percent 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
percent of the
value of all
machinery used
for purposes
of that
process; and
(b) not less than
50 percent 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.
Value of machinery
in a new plant
(3) For purposes of
subsection
(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
good, 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.
Averaging period
for calculation of
RVC for vehicles of
new plant or refit
plant
(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
a choice 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
subsection
(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
subsection
(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
section 6(3) as
the net cost and
the value of non-
originating
materials,
respectively.
Information
required on
document filed when
choosing to
average; timely
filing;
(5) A choice made
under subsection
(4) shall
(a) state the
category chosen
by the producer
and
(i) where the
category
referred to in
subsection
(7)(a) is
chosen, the
model name,
model line,
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
(ii) where the
category
referred to in
subsection
(7)(b) is
chosen, state
the model
name, class of
motor vehicle
and tariff
classification
of the motor
vehicles in
that category,
and the plant
location 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 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) state whether
the choice is
with respect to
a motor vehicle
referred to in
subsection
(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 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.
No rescission or
modification
permitted
(6) A choice 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.
Categories of motor
vehicles for
averaging
(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 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 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 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 (7).
Period for
averaging RVC of
motor vehicles of
new or refit plant
(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 choice
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.
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.
PART VI
GENERAL PROVISIONS
SECTION 14.
ACCUMULATION
Option to determine
origin of good by
accumulating the
production of a
material with
production of the
good in which the
material is used
(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.
Statement required;
information as to
net cost and value
of non-originating
materials from
production of
material if
accumulating for
regional value
content requirement
(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
sections
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 section
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 section
7(1), minus
the amount
stated in the
statement.
Averaging of costs
from accumulated
production
(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 sections
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 section
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 section
7(1), minus
the amount
stated in the
statement.
Accumulated
production
considered to be
production of a
single producer
(4) For purposes of
section 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.
Examples of
accumulation of
production
(6) Each of the
following examples
is an ``Example''
as referred to in
section 2(4).








Example 1: section
14(1)
Producer A,
located in NAFTA
country A, imports
unfinished bearing
rings provided for
in subheading
8482.99 into NAFTA
country A from a
non-NAFTA
territory.
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 1.50
the bearing rings purchased from Producer A)..........
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









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
section 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 0.75
the unfinished bearing rings imported by Producer A)..
Other product costs ($0.75+$0.35)...................... 1.10
Period costs: (($0.15+$0.15), including $0.10 in excluded 0.30
costs)....................................................
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









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
section 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









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
section 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









Therefore, the
bearings are
originating goods.
Example 2: section
14(1)
Producer A,
located in NAFTA
country A, imports
non-originating
cotton, carded or
combed, provided
for in heading
5203 for use in
the production of
cotton yarn
provided for in
heading 5205.
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 5205,
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 provided
for in heading
5208. The change
from non-
originating cotton
yarn to woven
fabric of cotton
is insufficient to
satisfy the
applicable change
in tariff
classification for
heading 5208,
which is a change
from any heading
outside headings
5208 through 5212,
except from
certain headings,
under which
various yarns,
including cotton
yarn provided for
in heading 5205,
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
section 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
5208, under which
the cotton fabric
is classified,
does not exclude a
change from
heading 5203,
under which carded
or combed cotton
is classified.
Therefore, under
section 15(1), the
change from carded
or combed cotton
provided for in
heading 5203 to
the woven fabric
of cotton provided
for in heading
5208 would satisfy
the applicable
change of tariff
classification for
heading 5208. 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
section
14(4)(a)(ii).








SECTION 15.
INABILITY TO
PROVIDE SUFFICIENT
INFORMATION
Supplier of
material unable to
provide
information; beyond
control of
supplier; procedure
to be followed by
Customs
(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 Article
509 of the
Agreement, as
implemented in
each NAFTA
country, 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
this appendix
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
this appendix
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 this
appendix 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
Article 507 of
the Agreement,
as implemented
in each NAFTA
country, 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.
``Reasons beyond
control'' of
supplier
(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;
(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.
Exporter or
producer of good
unable to provide
information;
reasons beyond
control of exporter
or producer;
procedure to be
followed by Customs
(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 Article
509 of the
Agreement, as
implemented in
each NAFTA
country, 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; and
(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
Article 507 of
the Agreement,
as implemented
in each NAFTA
country, 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.
``Reasons beyond
control''
(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;
(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.
SECTION 16.
TRANSSHIPMENT
Effect of
subsequent
processing outside
the territory of a
NAFTA country; loss
of originating good
status
(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.
Transshipped good
considered entirely
non-originating
(2) A good that is
a non-originating
good by
application of
subsection (1) is
considered to be
entirely non-
originating for
purposes of this
appendix.
Exceptions for
certain goods
(3) Subsection (1)
does not apply
with respect to a
good provided for
in 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.
SECTION 17. NON-
QUALIFYING
OPERATIONS
Mere dilution;
production or
pricing practice to
circumvent the
provisions of this
appendix
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
this appendix.
SCHEDULE I
Schedule I shall be
the text of Annex
401 to the
Agreement as
implemented in
General Note 12 of
the HTSUS.
SCHEDULE II
VALUE OF GOODS
SECTION 1.
Definitions.
For purposes of
this Schedule,
unless otherwise
stated:
``buyer'' refers to
a person who
purchases a good
from the producer;
``buying
commissions''
means fees paid by
a buyer to that
buyer's agent for
the agent's
services in
representing the
buyer in the
purchase of a
good;
``producer'' refers
to the producer of
the good being
valued.
SECTION 2.
For purposes of
Article 402(2) of
the Agreement, as
implemented by
section 6(2) of
this appendix, the
transaction value
of a good shall be
the price actually
paid or payable
for the good,
determined in
accordance with
section 3 and
adjusted in
accordance with
section 4.
SECTION 3.
(1) The price
actually paid or
payable is the
total payment made
or to be made by
the buyer to or
for the benefit of
the producer. The
payment need not
necessarily take
the form of a
transfer of money;
it may be made by
letters of credit
or negotiable
instruments. The
payment may be
made directly or
indirectly to the
producer. For an
illustration of
this, the
settlement by the
buyer, whether in
whole or in part,
of a debt owed by
the producer is an
indirect payment.
(2) Activities
undertaken by the
buyer on the
buyer's own
account, other
than those for
which an
adjustment is
provided in
section 4, shall
not be considered
to be an indirect
payment, even
though the
activities might
be regarded as
being for the
benefit of the
producer. For an
illustration of
this, the buyer,
by agreement with
the producer,
undertakes
activities
relating to the
marketing of the
good. The costs of
such activities
shall not be added
to the price
actually paid or
payable.
(3) The transaction
value shall not
include the
following charges
or costs, provided
that they are
distinguished from
the price actually
paid or payable:
(a) charges for
construction,
erection,
assembly,
maintenance or
technical
assistance
related to the
good undertaken
after the good
has been sold to
the buyer; or
(b) duties and
taxes paid in
the country in
which the buyer
is located with
respect to the
good.
(4) The flow of
dividends or other
payments from the
buyer to the
producer that do
not relate to the
purchase of the
good are not part
of the transaction
value.
SECTION 4.
(1) In determining
the transaction
value of a good,
the following
shall be added to
the price actually
paid or payable:
(a) to the extent
that they are
incurred by the
buyer, or by a
related person
on behalf of the
buyer, with
respect to the
good being
valued and are
not included in
the price
actually paid or
payable
(i) commissions
and brokerage
fees, except
buying
commissions,
(ii) the costs
of
transporting
the good to
the producer's
point of
direct
shipment and
the costs of
loading,
unloading,
handling and
insurance that
are associated
with that
transportation
, and
(iii) where the
packaging
materials and
containers in
which the good
is packaged
for retail
sale are
classified
with the good
under the
Harmonized
System, the
value of the
packaging
materials and
containers;
(b) the value,
reasonably
allocated in
accordance with
subsection (12),
of the following
elements where
they are
supplied
directly or
indirectly to
the producer by
the buyer, free
of charge or at
reduced cost for
use in
connection with
the production
and sale of the
good, to the
extent that the
value is not
included in the
price actually
paid or payable:
(i) a material,
other than an
indirect
material, used
in the
production of
the good,
(ii) tools,
dies, molds
and similar
indirect
materials used
in the
production of
the good,
(iii) an
indirect
material,
other than
those referred
to in
subparagraph
(ii) or in
paragraphs
(c), (e) or
(f) of the
definition
``indirect
material'' set
out in Article
415 of the
Agreement, as
implemented by
section 2(1)
of this
appendix, used
in the
production of
the good, and
(iv)
engineering,
development,
artwork,
design work,
and plans and
sketches
necessary for
the production
of the good,
regardless of
where
performed;
(c) the royalties
related to the
good, other than
charges with
respect to the
right to
reproduce the
good in the
territory of one
or more of the
NAFTA countries,
that the buyer
must pay
directly or
indirectly as a
condition of
sale of the
good, to the
extent that such
royalties are
not included in
the price
actually paid or
payable; and
(d) the value of
any part of the
proceeds of any
subsequent
resale, disposal
or use of the
good that
accrues directly
or indirectly to
the producer.
(2) The additions
referred to in
subsection (1)
shall be made to
the price actually
paid or payable
under this section
only on the basis
of objective and
quantifiable data.
(3) Where objective
and quantifiable
data do not exist
with regard to the
additions required
to be made to the
price actually
paid or payable
under subsection
(1), the
transaction value
cannot be
determined under
section 2.
(4) No additions
shall be made to
the price actually
paid or payable
for the purpose of
determining the
transaction value
except as provided
in this section.
(5) The amounts to
be added under
subsections (1)(a)
(i) and (ii) shall
be
(a) those amounts
that are
recorded on the
books of the
buyer, or
(b) where those
amounts are
costs incurred
by a related
person on behalf
of the buyer and
are not recorded
on the books of
the buyer, those
amounts that are
recorded on the
books of that
related person.
(6) The value of
the packaging
materials and
containers
referred to in
subsection
(1)(a)(iii) and
the value of the
elements referred
to in subsection
(1)(b)(i) shall be
(a) where the
packaging
materials and
containers or
the elements are
imported from
outside the
territory of the
NAFTA country in
which the
producer is
located, the
customs value of
the packaging
materials and
containers or
the elements,
(b) where the
buyer, or a
related person
on behalf of the
buyer, purchases
the packaging
materials and
containers or
the elements
from an
unrelated person
in the territory
of the NAFTA
country in which
the producer is
located, the
price actually
paid or payable
for the
packaging
materials and
containers or
the elements,
(c) where the
buyer, or a
related person
on behalf of the
buyer, acquires
the packaging
materials and
containers or
the elements
from an
unrelated person
in the territory
of the NAFTA
country in which
the producer is
located other
than through a
purchase, the
value of the
consideration
related to the
acquisition of
the packaging
materials and
containers or
the elements,
based on the
cost of the
consideration
that is recorded
on the books of
the buyer or the
related person,
or
(d) where the
packaging
materials and
containers or
the elements are (continued)