H. R. 3450—25
in the production of that good is not wholly obtained in the
territory of Mexico, or
(3) subheading 1806.10.42 or 2106.90.12 that is exported
from the territory of Mexico, if any material provided for in
subheading 1701.99 used in the production of that good is
not a qualifying good,
such good shall be treated as a nonoriginating good and, for pur-
poses of this subsection, the terms ‘‘qualifying good’’ and ‘‘wholly
obtained in the territory of’’ have the meaning given such terms
in paragraph 26 of section A of Annex 703.2 of the Agreement.
(p) DEFINITIONS.—For purposes of this section—
(1) CLASS OF MOTOR VEHICLES.—The term ‘‘class of motor
vehicles’’ means any one of the following categories of motor
vehicles:
(A) Motor vehicles provided for in subheading 8701.20,
subheading 8704.10, 8704.22, 8704.23, 8704.32, or 8704.90,
or heading 8705 or 8706, or motor vehicles designed for
the transport of 16 or more persons provided for in sub-
heading 8702.10.00 or 8702.90.00.
(B) Motor vehicles provided for in subheading 8701.10,
or subheadings 8701.30 through 8701.90.
(C) Motor vehicles for the transport of 15 or fewer
persons 
provided 
for 
in 
subheading 
8702.10.00 
or
8702.90.00, or motor vehicles provided for in subheading
8704.21 or 8704.31.
(D) Motor vehicles provided for in subheadings 8703.21
through 8703.90.
(2) CUSTOMS VALUATION CODE.—The term ‘‘Customs Valu-
ation Code’’ means the Agreement on Implementation of Article
VII of the General Agreement on Tariffs and Trade, including
its interpretative notes.
(3) F.O.B.—The term ‘‘F.O.B.’’ means free on board, regard-
less of the mode of transportation, at the point of direct ship-
ment by the seller to the buyer.
(4) FUNGIBLE GOODS AND FUNGIBLE MATERIALS.—The terms
‘‘fungible goods’’ and ‘‘fungible materials’’ mean goods or mate-
rials that are interchangeable for commercial purposes and
whose properties are essentially identical.
(5) GENERALLY
ACCEPTED
ACCOUNTING
PRINCIPLES.—The
term ‘‘Generally Accepted Accounting Principles’’ means the
recognized consensus or substantial authoritative support in
the territory of a NAFTA country with respect to the recording
of revenues, expenses, costs, assets and liabilities, disclosure
of information, and preparation of financial statements. These
standards may be broad guidelines of general application as
well as detailed standards, practices, or procedures.
(6) GOODS WHOLLY OBTAINED OR PRODUCED ENTIRELY IN
THE TERRITORY OF ONE OR MORE OF THE NAFTA COUNTRIES.—
The term ‘‘goods wholly obtained or produced entirely in the
territory of one or more of the NAFTA countries’’ means—
(A) mineral goods extracted in the territory of one
or more of the NAFTA countries;
(B) vegetable goods harvested in the territory of one
or more of the NAFTA countries;
(C) live animals born and raised in the territory of
one or more of the NAFTA countries;
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H. R. 3450—26
(D) goods obtained from hunting, trapping, or fishing
in the territory of one or more of the NAFTA countries;
(E) goods (such as fish, shellfish, and other marine
life) taken from the sea by vessels registered or recorded
with a NAFTA country and flying its flag;
(F) goods produced on board factory ships from the
goods referred to in subparagraph (E), if such factory ships
are registered or recorded with that NAFTA country and
fly its flag;
(G) goods taken by a NAFTA country or a person
of a NAFTA country from the seabed or beneath the seabed
outside territorial waters, provided that a NAFTA country
has rights to exploit such seabed;
(H) goods taken from outer space, if the goods are
obtained by a NAFTA country or a person of a NAFTA
country and not processed in a country other than a NAFTA
country;
(I) waste and scrap derived from—
(i) production in the territory of one or more of
the NAFTA countries; or
(ii) used goods collected in the territory of one
or more of the NAFTA countries, if such goods are
fit only for the recovery of raw materials; and
(J) goods produced in the territory of one or more
of the NAFTA countries exclusively from goods referred
to in subparagraphs (A) through (I), or from their deriva-
tives, at any stage of production.
(7) IDENTICAL OR SIMILAR GOODS.—The term ‘‘identical or
similar goods’’ means ‘‘identical goods’’ and ‘‘similar goods’’,
respectively, as defined in the Customs Valuation Code.
(8) INDIRECT MATERIAL.—
(A) The term ‘‘indirect material’’ means a good—
(i) used in the production, testing, or inspection
of a good but not physically incorporated into the good,
or
(ii) used in the maintenance of buildings or the
operation of equipment associated with the production
of a good,
in the territory of one or more of the NAFTA countries.
(B) When used for a purpose described in subparagraph
(A), the following materials are among those considered
to be indirect materials:
(i) Fuel and energy.
(ii) Tools, dies, and molds.
(iii) Spare parts and materials used in the mainte-
nance of equipment and buildings.
(iv) Lubricants, greases, compounding materials,
and other materials used in production or used to
operate equipment and buildings.
(v) Gloves, glasses, footwear, clothing, safety equip-
ment, and supplies.
(vi) Equipment, devices, and supplies used for test-
ing or inspecting the goods.
(vii) Catalysts and solvents.
(viii) Any other goods that are not incorporated
into the good, if the use of such goods in the production
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H. R. 3450—27
of the good can reasonably be demonstrated to be a
part of that production.
(9) INTERMEDIATE
MATERIAL.—The term ‘‘intermediate
material’’ means a material that is self-produced, used in the
production of a good, and designated pursuant to subsection
(b)(10).
(10) MARQUE.—The term ‘‘marque’’ means the trade name
used by a separate marketing division of a motor vehicle assem-
bler.
(11) MATERIAL.—The term ‘‘material’’ means a good that
is used in the production of another good and includes a part
or an ingredient.
(12) MODEL LINE.—The term ‘‘model line’’ means a group
of motor vehicles having the same platform or model name.
(13) MOTOR VEHICLE ASSEMBLER.—The term ‘‘motor vehicle
assembler’’ means a producer of motor vehicles and any related
persons or joint ventures in which the producer participates.
(14) NAFTA COUNTRY.—The term ‘‘NAFTA country’’ means
the United States, Canada or Mexico for such time as the
Agreement is in force with respect to Canada or Mexico, and
the United States applies the Agreement to Canada or Mexico.
(15) NEW BUILDING.—The term ‘‘new building’’ means a
new construction, including at least the pouring or construction
of new foundation and floor, the erection of a new structure
and roof, and installation of new plumbing, electrical, and other
utilities to house a complete vehicle assembly process.
(16) NET COST.—The term ‘‘net cost’’ means total cost less
sales promotion, marketing and after-sales service costs, royal-
ties, shipping and packing costs, and nonallowable interest
costs that are included in the total cost.
(17) NET COST OF A GOOD.—The term ‘‘net cost of a good’’
means the net cost that can be reasonably allocated to a good
using one of the methods set out in subsection (b)(8).
(18) 
NONALLOWABLE
INTEREST
COSTS.—The 
term
‘‘nonallowable interest costs’’ means interest costs incurred by
a producer as a result of an interest rate that exceeds the
applicable federal government interest rate for comparable
maturities by more than 700 basis points, determined pursuant
to regulations implementing this section.
(19) NONORIGINATING GOOD; NONORIGINATING MATERIAL.—
The term ‘‘nonoriginating good’’ or ‘‘nonoriginating material’’
means a good or material that does not qualify as an originating
good or material under the rules of origin set out in this
section.
(20) ORIGINATING.—The term ‘‘originating’’ means qualify-
ing under the rules of origin set out in this section.
(21) PRODUCER.—The term ‘‘producer’’ means a person who
grows, mines, harvests, fishes, traps, hunts, manufactures,
processes, or assembles a good.
(22) PRODUCTION.—The term ‘‘production’’ means growing,
mining, harvesting, fishing, trapping, hunting, manufacturing,
processing, or assembling a good.
(23) REASONABLY ALLOCATE.—The term ‘‘reasonably allo-
cate’’ means to apportion in a manner appropriate to the cir-
cumstances.
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H. R. 3450—28
(24) REFIT.—The term ‘‘refit’’ means a plant closure, for
purposes of plant conversion or retooling, that lasts at least
3 months.
(25) RELATED PERSONS.—The term ‘‘related persons’’ means
persons specified in any of the following subparagraphs:
(A) Persons who are officers or directors of one
another’s businesses.
(B) Persons who are legally recognized partners in
business.
(C) Persons who are employer and employee.
(D) Persons one of whom owns, controls, or holds 25
percent or more of the outstanding voting stock or shares
of the other.
(E) Persons if 25 percent or more of the outstanding
voting stock or shares of each of them is directly or
indirectly owned, controlled, or held by a third person.
(F) Persons one of whom is directly or indirectly con-
trolled by the other.
(G) Persons who are directly or indirectly controlled
by a third person.
(H) Persons who are members of the same family.
For purposes of this paragraph, the term ‘‘members of the
same family’’ means natural or adoptive children, brothers,
sisters, parents, grandparents, or spouses.
(26) ROYALTIES.—The term ‘‘royalties’’ means payments of
any kind, including payments under technical assistance or
similar agreements, made as consideration for the use or right
to use any copyright, literary, artistic, or scientific work, patent,
trademark, design, model, plan, secret formula, or process. It
does not include payments under technical assistance or similar
agreements that can be related to specific services such as—
(A) personnel training, without regard to where per-
formed; and
(B) if performed in the territory of one or more of
the NAFTA countries, engineering, tooling, die-setting, soft-
ware design and similar computer services, or other serv-
ices.
(27) SALES PROMOTION, MARKETING, AND AFTER-SALES SERV-
ICE COSTS.—The term ‘‘sales promotion, marketing, and after-
sales service costs’’ means the costs related to sales promotion,
marketing, and after-sales service for the following:
(A) Sales and marketing promotion, media advertising,
advertising and market research, promotional and dem-
onstration materials, exhibits, sales conferences, trade
shows, conventions, banners, marketing displays, free sam-
ples, sales, marketing and after-sales service literature
(product brochures, catalogs, technical literature, price
lists, service manuals, sales aid information), establishment
and protection of logos and trademarks, sponsorships,
wholesale and retail restocking charges, and entertainment.
(B) Sales and marketing incentives, consumer, retailer,
or wholesaler rebates, and merchandise incentives.
(C) Salaries and wages, sales commissions, bonuses,
benefits (such as medical, insurance, and pension), travel-
ing and living expenses, and membership and professional
fees for sales promotion, marketing, and after-sales service
personnel.
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