CUSMA Rules of Origin Regulations — CUSMA Rules of Origin Regulations
Example 3 (subsection (7)): Effects of the designation of self-produced materials on net cost The ability to designate intermediate materials helps to put the vertically integrated producer who is self-producing materials that are used in the production of a good on par with a producer who is purchasing materials and valuing those materials in accordance with subsection (1). The following situations demonstrate how this is achieved: Situation A A producer located in a CUSMA country produces a bicycle that is subject to a regional value content requirement of 50% under the net cost method. The bicycle satisfies all other applicable requirements of these Regulations. The producer purchases a bicycle frame, which is used in the production of the bicycle, from a supplier located in a CUSMA country. The value of the frame determined in accordance with subsection (1) is $11.00. The frame is an originating material. All other materials used in the production of the bicycle are non-originating materials. The net cost of the bicycle is determined as follows: Product costs: Value of originating materials (bicycle frame) $11.00 Value of non-originating materials $5.50 Other product costs $6.50 Period costs (including $0.20 in excluded costs): $0.50 Other costs: $0.10 Total cost of the bicycle: $23.60 Excluded costs (included in period costs): $0.20 Net cost of the bicycle: $23.40 The regional value content of the bicycle is calculated as follows: RVC = (NC − VNM) ÷ NC × 100 = ($23.40 − $5.50) ÷ $23.40 × 100 = 76.5% The regional value content of the bicycle is 76.5% and the bicycle, therefore, qualifies as an originating good. Situation B A producer located in a CUSMA country produces a bicycle that is subject to a regional value content requirement of 50% under the net cost method. The bicycle satisfies all other applicable requirements of these Regulations. The producer self-produces the bicycle frame that is used in the production of the bicycle. The costs to produce the frame are the following: Product costs: Value of originating materials $1.00 Value of non-originating materials $7.50 Other product costs $1.50 Period costs (including $0.20 in excluded costs): $0.50 Other costs: $0.10 Total cost of the bicycle frame: $10.60 Additional costs to produce the bicycle are the following: Product costs: Value of originating materials $0.00 Value of non-originating materials $5.50 Other product costs $6.50 Period costs (including $0.20 in excluded costs): $0.50 Other costs: $0.10 Total additional costs: $12.60 The producer does not designate the bicycle frame as an intermediate material under subsection (6). The net cost of the bicycle is calculated as follows: Costs of the bicycle frame (not designated as an intermediate material) ($) Additional costs to produce the bicycle ($) Total ($) Product costs: Value of originating materials 1.00 0.00 1.00 Value of non-originating materials 7.50 5.50 13.00 Other product costs 1.50 6.50 8.00 Period costs (including $0.20 in excluded costs): 0.50 0.50 1.00 Other costs: 0.10 0.10 0.20 Total cost of the bicycle: 10.60 12.60 23.20 Excluded costs (in period costs) 0.20 0.20 0.40 Net cost of the bicycle (total cost minus excluded costs): 22.80 The regional value content of the bicycle is calculated as follows: RVC = (NC − VNM) ÷ NC × 100 = ($22.80 − $13.00) ÷ $22.80 × 100 = 42.9% The regional value content of the bicycle is 42.9% and the bicycle, therefore, does not qualify as an originating good. Situation C A producer located in a CUSMA country produces a bicycle that is subject to a regional value content requirement of 50% under the net cost method. The bicycle satisfies all other applicable requirements of these Regulations. The producer self-produces the bicycle frame that is used in the production of the bicycle. The costs to produce the frame are the following: Product costs: Value of originating materials $1.00 Value of non-originating materials $7.50 Other product costs $1.50 Period costs (includi