H. R. 3450—20
Free-Trade Agreement. Any election under this paragraph shall
be made in writing to the Customs Service not later than
the date that is 180 days after the date of entry into force
of the Agreement between the United States and Canada. Any
such election may be made only if the liquidation of such
entry has not become final. For purposes of averaging the
calculation of regional value-content for the goods covered by
such entry, where the producer’s 1989–1990 fiscal year began
after January 1, 1989, the producer may include the period
between January 1, 1989, and the beginning of its first fiscal
year after January 1, 1989, as part of fiscal year 1989–1990.
(d) ACCUMULATION.—
(1) DETERMINATION OF ORIGINATING GOOD.—For purposes
of determining whether a good is an originating good, the
production of the good in the territory of one or more of the
NAFTA countries by one or more producers shall, at the choice
of the exporter or producer of the good, be considered to have
been performed in the territory of any of the NAFTA countries
by that exporter or producer, if—
(A) all nonoriginating materials used in the production
of the good undergo an applicable tariff classification
change set out in Annex 401 of the Agreement;
(B) the good satisfies any applicable regional value-
content requirement; and
(C) the good satisfies all other applicable requirements
of this section.
The requirements of subparagraphs (A) and (B) must be satis-
fied entirely in the territory of one or more of the NAFTA
countries.
(2) TREATMENT AS SINGLE PRODUCER.—For purposes of sub-
section (b)(10), the production of a producer that chooses to
accumulate its production with that of other producers under
paragraph (1) shall be treated as the production of a single
producer.
(e) DE MINIMIS AMOUNTS OF NONORIGINATING MATERIALS.—
(1) IN GENERAL.—Except as provided in paragraphs (3),
(4), (5), and (6), a good shall be considered to be an originating
good if—
(A) the value of all nonoriginating materials used in
the production of the good that do not undergo an
applicable change in tariff classification (set out in Annex
401 of the Agreement) is not more than 7 percent of the
transaction value of the good, adjusted to a F.O.B. basis,
or
(B) where the transaction value of the good is unaccept-
able under Article 1 of the Customs Valuation Code, the
value of all such nonoriginating materials is not more
than 7 percent of the total cost of the good,
provided that the good satisfies all other applicable require-
ments of this section and, if the good is subject to a regional
value-content requirement, the value of such nonoriginating
materials is taken into account in calculating the regional
value-content of the good.
(2) GOODS
NOT
SUBJECT
TO
REGIONAL
VALUE-CONTENT
REQUIREMENT.—A good that is otherwise subject to a regional
value-content requirement shall not be required to satisfy such
requirement if—
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H. R. 3450—21
(A)(i) the value of all nonoriginating materials used
in the production of the good is not more than 7 percent
of the transaction value of the good, adjusted to a F.O.B.
basis; or
(ii) where the transaction value of the good is unaccept-
able under Article 1 of the Customs Valuation Code, the
value of all nonoriginating materials is not more than
7 percent of the total cost of the good; and
(B) the good satisfies all other applicable requirements
of this section.
(3) DAIRY PRODUCTS, ETC.—Paragraph (1) does not apply
to—
(A) a nonoriginating material provided for in chapter
4 of the HTS or a dairy preparation containing over 10
percent by weight of milk solids provided for in subheading
1901.90.30, 1901.90.40, or 1901.90.80 that is used in the
production of a good provided for in chapter 4 of the HTS;
(B) a nonoriginating material provided for in chapter
4 of the HTS or a dairy preparation containing over 10
percent by weight of milk solids provided for in subheading
1901.90.30, 1901.90.40, or 1901.90.80 that is used in the
production of—
(i) preparations for infants containing over 10 per-
cent by weight of milk solids provided for in subheading
1901.10.00;
(ii) mixes and doughs, containing over 25 percent
by weight of butterfat, not put up for retail sale, pro-
vided for in subheading 1901.20.00;
(iii) a dairy preparation containing over 10 percent
by weight of milk solids provided for in subheading
1901.90.30, 1901.90.40, or 1901.90.80;
(iv) a good provided for in heading 2105 or sub-
heading 2106.90.05, or preparations containing over
10 percent by weight of milk solids provided for in
subheading 2106.90.15, 2106.90.40, 2106.90.50, or
2106.90.65;
(v) a good provided for in subheading 2202.90.10
or 2202.90.20; or
(vi) animal feeds containing over 10 percent by
weight of milk solids provided for in subheading
2309.90.30;
(C) a nonoriginating material provided for in heading
0805 or subheadings 2009.11 through 2009.30 that is used
in the production of—
(i) a good provided for in subheadings 2009.11
through 2009.30, or subheading 2106.90.16, or con-
centrated fruit or vegetable juice of any single fruit
or vegetable, fortified with minerals or vitamins, pro-
vided for in subheading 2106.90.19; or
(ii) a good provided for in subheading 2202.90.30
or 2202.90.35, or fruit or vegetable juice of any single
fruit or vegetable, fortified with minerals or vitamins,
provided for in subheading 2202.90.36;
(D) a nonoriginating material provided for in chapter
9 of the HTS that is used in the production of instant
coffee, not flavored, provided for in subheading 2101.10.20;
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H. R. 3450—22
(E) a nonoriginating material provided for in chapter
15 of the HTS that is used in the production of a good
provided for in headings 1501 through 1508, or heading
1512, 1514, or 1515;
(F) a nonoriginating material provided for in heading
1701 that is used in the production of a good provided
for in headings 1701 through 1703;
(G) a nonoriginating material provided for in chapter
17 of the HTS or heading 1805 that is used in the produc-
tion of a good provided for in subheading 1806.10;
(H) a nonoriginating material provided for in headings
2203 through 2208 that is used in the production of a
good provided for in headings 2207 through 2208;
(I) a nonoriginating material used in the production
of—
(i) a good provided for in subheading 7321.11.30;
(ii) a good provided for in subheading 8415.10,
subheadings 8415.81 through 8415.83, subheadings
8418.10 through 8418.21, subheadings 8418.29 through
8418.40, subheading 8421.12 or 8422.11, subheadings
8450.11 through 8450.20, or subheadings 8451.21
through 8451.29;
(iii) trash compactors provided for in subheading
8479.89.60; or
(iv) a good provided for in subheading 8516.60.40;
and
(J) a printed circuit assembly that is a nonoriginating
material used in the production of a good where the
applicable change in tariff classification for the good, as
set out in Annex 401 of the Agreement, places restrictions
on the use of such nonoriginating material.
(4) CERTAIN FRUIT JUICES.—Paragraph (1) does not apply
to a nonoriginating single juice ingredient provided for in head-
ing 2009 that is used in the production of—
(A) a good provided for in subheading 2009.90, or con-
centrated mixtures of fruit or vegetable juice, fortified with
minerals 
or 
vitamins, 
provided 
for 
in 
subheading
2106.90.19; or
(B) mixtures of fruit or vegetable juices, fortified with
minerals 
or 
vitamins, 
provided 
for 
in 
subheading
2202.90.39.
(5) GOODS PROVIDED FOR IN CHAPTERS 1 THROUGH 27 OF
THE HTS.—Paragraph (1) does not apply to a nonoriginating
material used in the production of a good provided for in
chapters 1 through 27 of the HTS unless the nonoriginating
material is provided for in a different subheading than the
good for which origin is being determined under this section.
(6) GOODS PROVIDED FOR IN CHAPTERS 50 THROUGH 63 OF
THE HTS.—A good provided for in chapters 50 through 63 of
the HTS, that does not originate because certain fibers or
yarns used in the production of the component of the good
that determines the tariff classification of the good do not
undergo an applicable change in tariff classification set out
in Annex 401 of the Agreement, shall be considered to be
a good that originates if the total weight of all such fibers
or yarns in that component is not more than 7 percent of
the total weight of that component.
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H. R. 3450—23
(f) FUNGIBLE GOODS AND MATERIALS.—For purposes of deter-
mining whether a good is an originating good—
(1) if originating and nonoriginating fungible materials are
used in the production of the good, the determination of whether
the materials are originating need not be made through the
identification of any specific fungible material, but may be
determined on the basis of any of the inventory management
methods set out in regulations implementing this section; and
(2) if originating and nonoriginating fungible goods are
commingled and exported in the same form, the determination
may be made on the basis of any of the inventory management
methods set out in regulations implementing this section.
(g) ACCESSORIES, SPARE PARTS, OR TOOLS.—
(1) IN
GENERAL.—Except as provided in paragraph (2),
accessories, spare parts, or tools delivered with the good that
form part of the good’s standard accessories, spare parts, or
tools shall—
(A) be considered as originating goods if the good is
an originating good, and
(B) be disregarded in determining whether all the
nonoriginating materials used in the production of the good
undergo an applicable change in tariff classification set
out in Annex 401 of the Agreement.
(2) CONDITIONS.—Paragraph (1) shall apply only if—
(A) the accessories, spare parts, or tools are not
invoiced separately from the good;
(B) the quantities and value of the accessories, spare
parts, or tools are customary for the good; and
(C) in any case in which the good is subject to a
regional value-content requirement, the value of the acces-
sories, spare parts, or tools are taken into account as origi-
nating or nonoriginating materials, as the case may be,
in calculating the regional value-content of the good.
(h) INDIRECT MATERIALS.—An indirect material shall be consid-
ered to be an originating material without regard to where it
is produced.
(i) PACKAGING MATERIALS AND CONTAINERS FOR RETAIL SALE.—
Packaging materials and containers in which a good is packaged
for retail sale, if classified with the good, shall be disregarded
in determining whether all the nonoriginating materials used in
the production of the good undergo an applicable change in tariff
classification set out in Annex 401 of the Agreement. If the good
is subject to a regional value-content requirement, the value of
such packaging materials and containers shall be taken into account
as originating or nonoriginating materials, as the case may be,
in calculating the regional value-content of the good.
(j) PACKING MATERIALS AND CONTAINERS FOR SHIPMENT.—Pack-
ing materials and containers in which a good is packed for shipment
shall be disregarded—
(1) in determining whether the nonoriginating materials
used in the production of the good undergo an applicable change
in tariff classification set out in Annex 401 of the Agreement;
and
(2) in determining whether the good satisfies a regional
value-content requirement.
(k) TRANSSHIPMENT.—A good shall not be considered to be
an originating good by reason of having undergone production that
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H. R. 3450—24
satisfies the requirements of subsection (a) if, subsequent to that
production, 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 it in good condition or to transport the good to the territory
of a NAFTA country.
(l) NONQUALIFYING OPERATIONS.—A good shall not be consid-
ered to be an originating good merely by reason of—
(1) mere dilution with water or another substance that
does not materially alter the characteristics of the good; or
(2) any production or pricing practice with respect to which
it may be demonstrated, by a preponderance of evidence, that
the object was to circumvent this section.
(m) INTERPRETATION AND APPLICATION.—For purposes of this
section:
(1) The basis for any tariff classification is the HTS.
(2) Except as otherwise expressly provided, whenever in
this section there is a reference to a heading or subheading
such reference shall be a reference to a heading or subheading
of the HTS.
(3) In applying subsection (a)(4), the determination of
whether a heading or subheading under the HTS provides
for and specifically describes both a good and its parts shall
be made on the basis of the nomenclature of the heading
or subheading, the rules of interpretation, or notes of the HTS.
(4) In applying the Customs Valuation Code—
(A) the principles of the Customs Valuation Code shall
apply to domestic transactions, with such modifications
as may be required by the circumstances, as would apply
to international transactions;
(B) the provisions of this section shall take precedence
over the Customs Valuation Code to the extent of any
difference; and
(C) the definitions in subsection (o) shall take prece-
dence over the definitions in the Customs Valuation Code
to the extent of any difference.
(5) All costs referred to in this section shall be recorded
and maintained in accordance with the Generally Accepted
Accounting Principles applicable in the territory of the NAFTA
country in which the good is produced.
(n) ORIGIN OF AUTOMATIC DATA PROCESSING GOODS.—Notwith-
standing any other provision of this section, when the NAFTA
countries apply the most-favored-nation rate of duty described in
paragraph 1 of section A of Annex 308.1 of the Agreement to
a good provided for under the tariff provisions set out in Table
308.1.1 of such Annex, the good shall, upon importation from a
NAFTA country, be deemed to originate in the territory of a NAFTA
country for purposes of this section.
(o) SPECIAL RULE
FOR CERTAIN AGRICULTURAL PRODUCTS.—
Notwithstanding any other provision of this section, for purposes
of applying a rate of duty to a good provided for in—
(1) heading 1202 that is exported from the territory of
Mexico, if the good is not wholly obtained in the territory
of Mexico,
(2) subheading 2008.11 that is exported from the territory
of Mexico, if any material provided for in heading 1202 used
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