of the applicable NTR (MFN) rate of duty 
over the schedule rate of duty. 
(3) NOTICE.—Not later than 60 days after the 
date on which the Secretary of the Treasury first as-
sesses an additional duty in a calendar year on a 
good under this subsection, the Secretary shall no-
tify the Government of Panama in writing of such 
action and shall provide to that Government data 
supporting the assessment of the additional duty. 
(c) EXCEPTIONS.—No additional duty shall be as-
sessed on a good under subsection (b) if, at the time of 
entry, the good is subject to import relief under— 
(1) subtitle A of title III of this Act; or 
(2) chapter 1 of title II of the Trade Act of 
1974 (19 U.S.C. 2251 et seq.). 
(d) TERMINATION.—The assessment of an additional 
duty on a good under subsection (b) shall cease to apply 
to that good on the date on which duty-free treatment 
must be provided to that good under the Schedule of the 
United States to Annex 3.3 of the Agreement. 
SEC. 203. RULES OF ORIGIN. 
(a) APPLICATION
AND INTERPRETATION.—In this 
section: 
(1) TARIFF
CLASSIFICATION.—The basis for 
any tariff classification is the HTS. 
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(2) REFERENCE
TO
HTS.—Whenever in this 
section there is a reference to a chapter, heading, or 
subheading, such reference shall be a reference to a 
chapter, heading, or subheading of the HTS. 
(3) COST OR VALUE.—Any cost or value re-
ferred to in this section shall be recorded and main-
tained in accordance with the generally accepted ac-
counting principles applicable in the territory of the 
country in which the good is produced (whether 
Panama or the United States). 
(b) ORIGINATING GOODS.—For purposes of this Act 
and for purposes of implementing the preferential tariff 
treatment provided for under the Agreement, except as 
otherwise provided in this section, a good is an originating 
good if— 
(1) the good is a good wholly obtained or pro-
duced entirely in the territory of Panama, the 
United States, or both; 
(2) the good— 
(A) is produced entirely in the territory of 
Panama, the United States, or both, and— 
(i) each of the nonoriginating mate-
rials used in the production of the good 
undergoes an applicable change in tariff 
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classification specified in Annex 4.1 of the 
Agreement; or 
(ii) the good otherwise satisfies any 
applicable regional value-content or other 
requirements specified in Annex 4.1 of the 
Agreement; and 
(B) satisfies all other applicable require-
ments of this section; or 
(3) the good is produced entirely in the terri-
tory of Panama, the United States, or both, exclu-
sively from materials described in paragraph (1) or 
(2). 
(c) REGIONAL VALUE-CONTENT.— 
(1) IN GENERAL.—For purposes of subsection 
(b)(2), the regional value-content of a good referred 
to in Annex 4.1 of the Agreement, except for goods 
to which paragraph (4) applies, shall be calculated 
by the importer, exporter, or producer of the good, 
on the basis of the build-down method described in 
paragraph (2) or the build-up method described in 
paragraph (3). 
(2) BUILD-DOWN METHOD.— 
(A) IN GENERAL.—The regional value-con-
tent of a good may be calculated on the basis 
of the following build-down method: 
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AV–VNM 
RVC = ————— × 100 
AV 
(B) DEFINITIONS.—In subparagraph (A): 
(i) RVC.—The term ‘‘RVC’’ means 
the regional value-content of the good, ex-
pressed as a percentage. 
(ii) AV.—The term ‘‘AV’’ means the 
adjusted value of the good. 
(iii) VNM.—The term ‘‘VNM’’ means 
the value of nonoriginating materials that 
are acquired and used by the producer in 
the production of the good, but does not 
include the value of a material that is self- 
produced. 
(3) BUILD-UP METHOD.— 
(A) IN GENERAL.—The regional value-con-
tent of a good may be calculated on the basis 
of the following build-up method: 
VOM 
RVC = ————— × 100 
AV 
(B) DEFINITIONS.—In subparagraph (A): 
(i) RVC.—The term ‘‘RVC’’ means 
the regional value-content of the good, ex-
pressed as a percentage. 
(ii) AV.—The term ‘‘AV’’ means the 
adjusted value of the good. 
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(iii) VOM.—The term ‘‘VOM’’ means 
the value of originating materials that are 
acquired or self-produced, and used by the 
producer in the production of the good. 
(4) SPECIAL RULE FOR CERTAIN AUTOMOTIVE 
GOODS.— 
(A) IN GENERAL.—For purposes of sub-
section (b)(2), the regional value-content of an 
automotive good referred to in Annex 4.1 of the 
Agreement may be calculated by the importer, 
exporter, or producer of the good on the basis 
of the build-down method described in para-
graph (2), the build-up method described in 
paragraph (3), or the following net cost method: 
NC¥VNM 
RVC = ————— × 100 
NC 
(B) DEFINITIONS.—In subparagraph (A): 
(i) AUTOMOTIVE
GOOD.—The term 
‘‘automotive good’’ means a good provided 
for in any of subheadings 8407.31 through 
8407.34, subheading 8408.20, heading 
8409, or any of headings 8701 through 
8708. 
(ii) RVC.—The term ‘‘RVC’’ means 
the regional value-content of the auto-
motive good, expressed as a percentage. 
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(iii) NC.—The term ‘‘NC’’ means the 
net cost of the automotive good. 
(iv) VNM.—The term ‘‘VNM’’ means 
the value of nonoriginating materials that 
are acquired and used by the producer in 
the production of the automotive good, but 
does not include the value of a material 
that is self-produced. 
(C) MOTOR VEHICLES.— 
(i) BASIS
OF
CALCULATION.—For 
purposes of determining the regional value- 
content under subparagraph (A) for an 
automotive good that is a motor vehicle 
provided for in any of headings 8701 
through 8705, an importer, exporter, or 
producer may average the amounts cal-
culated under the net cost formula con-
tained in subparagraph (A), over the pro-
ducer’s fiscal year— 
(I) with respect to all motor vehi-
cles in any one of the categories de-
scribed in clause (ii); or 
(II) with respect to all motor ve-
hicles in any such category that are 
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exported to the territory of Panama 
or the United States. 
(ii) CATEGORIES.—A category is de-
scribed in this clause if it— 
(I) is the same model line of 
motor vehicles, is in the same class of 
motor vehicles, and is produced in the 
same plant in the territory of Panama 
or the United States, as the good de-
scribed in clause (i) for which regional 
value-content is being calculated; 
(II) is the same class of motor 
vehicles, and is produced in the same 
plant in the territory of Panama or 
the United States, as the good de-
scribed in clause (i) for which regional 
value-content is being calculated; or 
(III) is the same model line of 
motor vehicles produced in the terri-
tory of Panama or the United States 
as the good described in clause (i) for 
which regional value-content is being 
calculated. 
(D) OTHER
AUTOMOTIVE
GOODS.—For 
purposes of determining the regional value-con-
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tent under subparagraph (A) for automotive 
materials provided for in any of subheadings 
8407.31 
through 
8407.34, 
in 
subheading 
8408.20, or in heading 8409, 8706, 8707, or 
8708, that are produced in the same plant, an 
importer, exporter, or producer may— 
(i) average the amounts calculated 
under the net cost formula contained in 
subparagraph (A) over— 
(I) the fiscal year of the motor 
vehicle producer to whom the auto-
motive goods are sold, 
(II) any quarter or month, or 
(III) the fiscal year of the pro-
ducer of such goods, 
if the goods were produced during the fis-
cal year, quarter, or month that is the 
basis for the calculation; 
(ii) determine the average referred to 
in clause (i) separately for such goods sold 
to 1 or more motor vehicle producers; or 
(iii) make a separate determination 
under clause (i) or (ii) for such goods that 
are exported to the territory of Panama or 
the United States. 
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(E) CALCULATING
NET
COST.—The im-
porter, exporter, or producer of an automotive 
good shall, consistent with the provisions re-
garding allocation of costs provided for in gen-
erally accepted accounting principles, determine 
the net cost of the automotive good under sub-
paragraph (B) by— 
(i) calculating the total cost incurred 
with respect to all goods produced by the 
producer of the automotive good, sub-
tracting any sales promotion, marketing, 
and after-sales service costs, royalties, 
shipping and packing costs, and nonallow-
able interest costs that are included in the 
total cost of all such goods, and then rea-
sonably allocating the resulting net cost of 
those goods to the automotive good; 
(ii) calculating the total cost incurred 
with respect to all goods produced by that 
producer, reasonably allocating the total 
cost to the automotive good, and then sub-
tracting any sales promotion, marketing, 
and after-sales service costs, royalties, 
shipping and packing costs, and nonallow-
able interest costs that are included in the 
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portion of the total cost allocated to the 
automotive good; or 
(iii) reasonably allocating each cost 
that forms part of the total cost incurred 
with respect to the automotive good so that 
the aggregate of these costs does not in-
clude any sales promotion, marketing, and 
after-sales service costs, royalties, shipping 
and packing costs, or nonallowable interest 
costs. 
(d) VALUE OF MATERIALS.— 
(1) IN GENERAL.—For the purpose of calcu-
lating the regional value-content of a good under 
subsection (c), and for purposes of applying the de 
minimis rules under subsection (f), the value of a 
material is— 
(A) in the case of a material that is im-
ported by the producer of the good, the ad-
justed value of the material; 
(B) in the case of a material acquired in 
the territory in which the good is produced, the 
value, determined in accordance with Articles 1 
through 8, Article 15, and the corresponding in-
terpretive notes, of the Agreement on Imple-
mentation of Article VII of the General Agree-
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ment on Tariffs and Trade 1994 referred to in 
section 101(d)(8) of the Uruguay Round Agree-
ments Act (19 U.S.C. 3511(d)(8)), as set forth 
in regulations promulgated by the Secretary of 
the Treasury providing for the application of 
such Articles in the absence of an importation 
by the producer; or 
(C) in the case of a material that is self- 
produced, the sum of— 
(i) all expenses incurred in the pro-
duction of the material, including general 
expenses; and 
(ii) an amount for profit equivalent to 
the profit added in the normal course of 
trade. 
(2) FURTHER ADJUSTMENTS TO THE VALUE OF 
MATERIALS.— 
(A) ORIGINATING
MATERIAL.—The fol-
lowing expenses, if not included in the value of 
an originating material calculated under para-
graph (1), may be added to the value of the 
originating material: 
(i) The costs of freight, insurance, 
packing, and all other costs incurred in 
transporting the material within or be-
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tween the territory of Panama, the United 
States, or both, to the location of the pro-
ducer. 
(ii) Duties, taxes, and customs broker-
age fees on the material paid in the terri-
tory of Panama, the United States, or 
both, other than duties or taxes that are 
waived, refunded, refundable, or otherwise 
recoverable, including credit against duty 
or tax paid or payable. 
(iii) The cost of waste and spoilage re-
sulting from the use of the material in the 
production of the good, less the value of 
renewable scrap or byproducts. 
(B) 
NONORIGINATING
MATERIAL.—The 
following expenses, if included in the value of a 
nonoriginating material calculated under para-
graph (1), may be deducted from the value of 
the nonoriginating material: 
(i) The costs of freight, insurance, 
packing, and all other costs incurred in 
transporting the material within or be-
tween the territory of Panama, the United 
States, or both, to the location of the pro-
ducer. 
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(ii) Duties, taxes, and customs broker-
age fees on the material paid in the terri-
tory of Panama, the United States, or 
both, other than duties or taxes that are 
waived, refunded, refundable, or otherwise 
recoverable, including credit against duty 
or tax paid or payable. 
(iii) The cost of waste and spoilage re-
sulting from the use of the material in the 
production of the good, less the value of 
renewable scrap or byproducts. 
(iv) The cost of originating materials 
used in the production of the nonorigi-
nating material in the territory of Panama, 
the United States, or both. 
(e) ACCUMULATION.— 
(1) ORIGINATING MATERIALS USED IN PRODUC-
TION OF GOODS OF THE OTHER COUNTRY.—Origi-
nating materials from the territory of Panama or 
the United States that are used in the production of 
a good in the territory of the other country shall be 
considered to originate in the territory of such other 
country. 
(2) MULTIPLE
PRODUCERS.—A good that is 
produced in the territory of Panama, the United 
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States, or both, by 1 or more producers, is an origi-
nating good if the good satisfies the requirements of 
subsection (b) and all other applicable requirements 
of this section. 
(f) DE MINIMIS AMOUNTS OF NONORIGINATING MA-
TERIALS.— 
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (3), a good that does not undergo a 
change in tariff classification pursuant to Annex 4.1 
of the Agreement is an originating good if— 
(A) the value of all nonoriginating mate-
rials that— 
(i) are used in the production of the 
good, and 
(ii) do not undergo the applicable 
change in tariff classification (set forth in 
Annex 4.1 of the Agreement), 
does not exceed 10 percent of the adjusted 
value of the good; 
(B) the good meets all other applicable re-
quirements of this section; and 
(C) the value of such nonoriginating mate-
rials is included in the value of nonoriginating 
materials for any applicable regional value-con-
tent requirement for the good. 
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(2) EXCEPTIONS.—Paragraph (1) does not 
apply to the following: 
(A) A nonoriginating material provided for 
in chapter 4, or a nonoriginating dairy prepara-
tion containing over 10 percent by weight of 
milk solids provided for in subheading 1901.90 
or 2106.90, that is used in the production of a 
good provided for in chapter 4. 
(B) A nonoriginating material provided for 
in chapter 4, or a nonoriginating dairy prepara-
tion containing over 10 percent by weight of 
milk solids provided for in subheading 1901.90, 
that is used in the production of the following 
goods: 
(i) Infant preparations containing 
over 10 percent by weight of milk solids 
provided for in subheading 1901.10. 
(ii) Mixes and doughs, containing over 
25 percent by weight of butterfat, not put 
up for retail sale, provided for in sub-
heading 1901.20. 
(iii) Dairy preparations containing 
over 10 percent by weight of milk solids 
provided for in subheading 1901.90 or 
2106.90. 
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(iv) Goods provided for in heading 
2105. 
(v) Beverages containing milk pro-
vided for in subheading 2202.90. 
(vi) Animal feeds containing over 10 
percent by weight of milk solids provided 
for in subheading 2309.90. 
(C) A nonoriginating material provided for 
in heading 0805, or any of subheadings 
2009.11 through 2009.39, that is used in the 
production of a good provided for in any of sub-
headings 2009.11 through 2009.39, or in fruit 
or vegetable juice of any single fruit or vege-
table, fortified with minerals or vitamins, con-
centrated or unconcentrated, provided for in 
subheading 2106.90 or 2202.90. 
(D) A nonoriginating material provided for 
in heading 0901 or 2101 that is used in the 
production of a good provided for in heading 
0901 or 2101. 
(E) A nonoriginating material provided for 
in heading 1006 that is used in the production 
of a good provided for in heading 1102 or 1103 
or subheading 1904.90. 
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(F) A nonoriginating material provided for 
in chapter 15 that is used in the production of 
a good provided for in chapter 15. 
(G) A nonoriginating material provided for 
in heading 1701 that is used in the production 
of a good provided for in any of headings 1701 
through 1703. 
(H) A nonoriginating material provided for 
in chapter 17 that is used in the production of 
a good provided for in subheading 1806.10. 
(I) Except as provided in subparagraphs 
(A) through (H) and Annex 4.1 of the Agree-
ment, a nonoriginating material used in the 
production of a good provided for in any of 
chapters 1 through 24, unless the nonorigi-
nating material is provided for in a different 
subheading than the good for which origin is 
being determined under this section. 
(3) TEXTILE OR APPAREL GOODS.— 
(A) IN GENERAL.—Except as provided in 
subparagraph (B), a textile or apparel good 
that is not an originating good because certain 
fibers or yarns used in the production of the 
component of the good that determines the tar-
iff classification of the good do not undergo an 
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applicable change in tariff classification, set 
forth in Annex 4.1 of the Agreement, shall be 
considered to be an originating good if— 
(i) the total weight of all such fibers 
or yarns in that component is not more 
than 10 percent of the total weight of that 
component; or 
(ii) the yarns are those described in 
section 204(b)(3)(B)(vi)(IV) of the Andean 
Trade 
Preference 
Act 
(19 
U.S.C. 
3203(b)(3)(B)(vi)(IV)) (as in effect on 
February 12, 2011). 
(B) 
CERTAIN
TEXTILE
OR
APPAREL 
GOODS.—A textile or apparel good containing 
elastomeric yarns in the component of the good 
that determines the tariff classification of the 
good shall be considered to be an originating 
good only if such yarns are wholly formed and 
finished in the territory of Panama, the United 
States, or both. 
(C) FABRIC, YARN, OR FIBER.—For pur-
poses of this paragraph, in the case of a good 
that is a fabric, yarn, or fiber, the term ‘‘com-
ponent of the good that determines the tariff 
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classification of the good’’ means all of the fi-
bers in the good. 
(g) FUNGIBLE GOODS AND MATERIALS.— 
(1) IN GENERAL.— 
(A) CLAIM
FOR
PREFERENTIAL
TARIFF 
TREATMENT.—A person claiming that a fun-
gible good or fungible material is an originating 
good may base the claim either on the physical 
segregation of the fungible good or fungible ma-
terial or by using an inventory management 
method with respect to the fungible good or 
fungible material. 
(B) INVENTORY MANAGEMENT METHOD.— 
In this subsection, the term ‘‘inventory manage-
ment method’’ means— 
(i) averaging; 
(ii) ‘‘last-in, first-out’’; 
(iii) ‘‘first-in, first-out’’; or 
(iv) any other method— 
(I) recognized in the generally 
accepted accounting principles of the 
country in which the production is 
performed (whether Panama or the 
United States); or 
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(II) otherwise accepted by that 
country. 
(2) ELECTION
OF
INVENTORY
METHOD.—A 
person selecting an inventory management method 
under paragraph (1) for a particular fungible good 
or fungible material shall continue to use that meth-
od for that fungible good or fungible material 
throughout the fiscal year of such person. 
(h) ACCESSORIES, SPARE PARTS, OR TOOLS.— 
(1) IN GENERAL.—Subject to paragraphs (2) 
and (3), accessories, spare parts, or tools delivered 
with a good that form part of the good’s standard 
accessories, spare parts, or tools shall— 
(A) be treated as originating goods if the 
good is an originating good; and 
(B) be disregarded in determining whether 
all the nonoriginating materials used in the pro-
duction of the good undergo the applicable 
change in tariff classification set forth in Annex 
4.1 of the Agreement. 
(2) CONDITIONS.—Paragraph (1) shall apply 
only if— 
(A) the accessories, spare parts, or tools 
are classified with and not invoiced separately 
from the good, regardless of whether such ac-
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