§ 3332. Rules of origin
(a)
Originating goods
(1)
In general
For purposes of implementing the tariff treatment and quantitative restrictions provided for under the Agreement, except as otherwise provided in this section, a good originates in the territory of a NAFTA country if—
(A)
the good is wholly obtained or produced entirely in the territory of one or more of the NAFTA countries;
(B)
(C)
the good is produced entirely in the territory of one or more of the NAFTA countries exclusively from originating materials; or
(D)
except for a good provided for in chapters 61 through 63 of the HTS, the good is produced entirely in the territory of one or more of the NAFTA countries, but one or more of the nonoriginating materials, that are provided for as parts under the HTS and are used in the production of the good, does not undergo a change in tariff classification because—
(2)
Special rules
(A)
Foreign-trade zones
Subparagraph (B) of paragraph (1) shall not apply to a good produced in a foreign-trade zone or subzone (established pursuant to the Act of June 18, 1934, commonly known as the Foreign Trade Zones Act [19 U.S.C. 81a et seq.]) that is entered for consumption in the customs territory of the United States.
(B)
Regional value-content requirement
For purposes of subparagraph (D) of paragraph (1), a good shall be treated as originating in a NAFTA country if the regional value-content of the good, determined in accordance with subsection (b) of this section, is not less than 60 percent where the transaction value method is used, or not less than 50 percent where the net cost method is used, and the good satisfies all other applicable requirements of this section.
(b)
Regional value-content
(1)
In general
Except as provided in paragraph (5), the regional value-content of a good shall be calculated, at the choice of the exporter or producer of the good, on the basis of—
(2)
Transaction value method
(A)
In general
An exporter or producer may calculate the regional value-content of a good on the basis of the following transaction value method:
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(3)
Net cost method
(4)
Value of nonoriginating materials used in originating materials
Except as provided in subsection (c)(1) of this section, and for a motor vehicle identified in subsection (c)(2) of this section or a component identified in Annex 403.2 of the Agreement, the value of nonoriginating materials used by the producer in the production of a good shall not, for purposes of calculating the regional value-content of the good under paragraph (2) or (3), include the value of nonoriginating materials used to produce originating materials that are subsequently used in the production of the good.
(5)
Net cost method must be used in certain cases
An exporter or producer shall calculate the regional value-content of a good solely on the basis of the net cost method described in paragraph (3), if—
(B)
the transaction value of the good is unacceptable under Article 1 of the Customs Valuation Code;
(C)
the good is sold by the producer to a related person and the volume, by units of quantity, of sales of identical or similar goods to related persons during the six-month period immediately preceding the month in which the good is sold exceeds 85 percent of the producer’s total sales of such goods during that period;
(D)
the good is—
(i)
a motor vehicle provided for in heading 8701 or 8702, subheadings 8703.21 through 8703.90, or heading 8704, 8705, or 8706;
(6)
Net cost method allowed for adjustments
If an exporter or producer of a good calculates the regional value-content of the good on the basis of the transaction value method and a NAFTA country subsequently notifies the exporter or producer, during the course of a verification conducted in accordance with chapter 5 of the Agreement, that the transaction value of the good or the value of any material used in the production of the good must be adjusted or is unacceptable under Article 1 of the Customs Valuation Code, the exporter or producer may calculate the regional value-content of the good on the basis of the net cost method.
(7)
Review of adjustment
Nothing in paragraph (6) shall be construed to prevent any review or appeal available in accordance with article 510 of the Agreement with respect to an adjustment to or a rejection of—
(8)
Calculating net cost
The producer may, consistent with regulations implementing this section, calculate the net cost of a good under paragraph (3), by—
(A)
calculating the total cost incurred with respect to all goods produced by that producer, subtracting any sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and nonallowable interest costs that are included in the total cost of all such goods, and reasonably allocating the resulting net cost of those goods to the good;
(B)
calculating the total cost incurred with respect to all goods produced by that producer, reasonably allocating the total cost to the good, and subtracting any sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and nonallowable interest costs that are included in the portion of the total cost allocated to the good; or
(9)
Value of material used in production
Except as provided in paragraph (11), the value of a material used in the production of a good—
(A)
shall—
(B)
if not included under clause (i) or (ii) of subparagraph (A), shall include—
(i)
freight, insurance, packing, and all other costs incurred in transporting the material to the location of the producer;
(10)
Intermediate material
Except for goods described in subsection (c)(1) of this section, any self-produced material, other than a component identified in Annex 403.2 of the Agreement, that is used in the production of a good may be designated by the producer of the good as an intermediate material for the purpose of calculating the regional value-content of the good under paragraph (2) or (3); provided that if the intermediate material is subject to a regional value-content requirement, no other self-produced material that is subject to a regional value-content requirement and is used in the production of the intermediate material may be designated by the producer as an intermediate material.
(c)
Automotive goods
(1)
Passenger vehicles and light trucks, and their automotive parts
For purposes of calculating the regional value-content under the net cost method for—
(A)
a good that is a motor vehicle for the transport of 15 or fewer persons provided for in subheading 8702.10.00 or 8702.90.00, or a motor vehicle provided for in subheadings 8703.21 through 8703.90, or subheading 8704.21 or 8704.31, or
(B)
a good provided for in the tariff provisions listed in Annex 403.1 of the Agreement, that is subject to a regional value-content requirement and is for use as original equipment in the production of a motor vehicle for the transport of 15 or fewer persons provided for in subheading 8702.10.00 or 8702.90.00, or a motor vehicle provided for in subheadings 8703.21 through 8703.90, or subheading 8704.21 or 8704.31,
the value of nonoriginating materials used by the producer in the production of the good shall be the sum of the values of all nonoriginating materials, determined in accordance with subsection (b)(9) of this section at the time the nonoriginating materials are received by the first person in the territory of a NAFTA country who takes title to them, that are imported from outside the territories of the NAFTA countries under the tariff provisions listed in Annex 403.1 of the Agreement and are used in the production of the good or that are used in the production of any material used in the production of the good.
(2)
Other vehicles and their automotive parts
For purposes of calculating the regional value-content under the net cost method for a good that is a motor vehicle provided for in heading 8701, subheading 8704.10, 8704.22, 8704.23, 8704.32, or 8704.90, or heading 8705 or 8706, a motor vehicle for the transport of 16 or more persons provided for in subheading 8702.10.00 or 8702.90.00, or a component identified in Annex 403.2 of the Agreement for use as original equipment in the production of the motor vehicle, the value of nonoriginating materials used by the producer in the production of the good shall be the sum of—
(3)
Averaging permitted
(A)
In general
For purposes of calculating the regional value-content of a motor vehicle described in paragraph (1) or (2), the producer may average its calculation over its fiscal year, using any of the categories described in subparagraph (B), on the basis of either all motor vehicles in the category or on the basis of only the motor vehicles in the category that are exported to the territory of one or more of the other NAFTA countries.
(B)
Category described
A category is described in this subparagraph if it is—
(i)
the same model line of motor vehicles in the same class of vehicles produced in the same plant in the territory of a NAFTA country;
(4)
Annex 403.1 and Annex 403.2
For purposes of calculating the regional value-content for any or all goods provided for in a tariff provision listed in Annex 403.1 of the Agreement, or a component or material identified in Annex 403.2 of the Agreement, produced in the same plant, the producer of the good may—
(5)
Phase-in of regional value-content requirement
Notwithstanding Annex 401 of the Agreement, and except as provided in paragraph (6), the regional value-content requirement shall be—
(A)
for a producer’s fiscal year beginning on the day closest to January 1, 1998, and thereafter, 56 percent calculated under the net cost method, and for a producer’s fiscal year beginning on the day closest to January 1, 2002, and thereafter, 62.5 percent calculated under the net cost method, for—
(B)
for a producer’s fiscal year beginning on the day closest to January 1, 1998, and thereafter, 55 percent calculated under the net cost method, and for a producer’s fiscal year beginning on the day closest to January 1, 2002, and thereafter, 60 percent calculated under the net cost method, for—
(i)
a good that is a motor vehicle provided for in heading 8701, subheading 8704.10, 8704.22, 8704.23, 8704.32, or 8704.90, or heading 8705 or 8706, or a motor vehicle for the transport of 16 or more persons provided for in subheading 8702.10.00 or 8702.90.00;
(ii)
a good provided for in heading 8407 or 8408, or subheading 8708.40 that is for use in a motor vehicle identified in clause (i); and
(iii)
except for a good identified in subparagraph (A)(ii) or a good provided for in subheadings 8482.10 through 8482.80, or subheading 8483.20 or 8483.30, a good identified in Annex 403.1 of the Agreement that is subject to a regional value-content requirement and is for use in a motor vehicle identified in subparagraph (A)(i) or (B)(i).
(6)
New and refitted plants
The regional value-content requirement for a motor vehicle identified in paragraph (1) or (2) shall be—
(A)
50 percent for 5 years after the date on which the first motor vehicle prototype is produced in a plant by a motor vehicle assembler, if—
(B)
50 percent for 2 years after the date on which the first motor vehicle prototype is produced at a plant following a refit, if it is a motor vehicle of a class, or marque, or, except for a motor vehicle identified in paragraph (2), size category and underbody, different from that assembled by the motor vehicle assembler in the plant before the refit.
(7)
Election for certain vehicles from Canada
In the case of goods provided for in subheadings 8703.21 through 8703.90, or subheading 8704.21 or 8704.31, exported from Canada directly to the United States, and entered on or after January 1, 1989, and before the date of entry into force of the Agreement between the United States and Canada, an importer may elect to use the rules of origin set out in this section in lieu of the rules of origin contained in section 202 of the United States-Canada Free-Trade Agreement Implementation Act of 1988 (19 U.S.C. 2112 note ) and may elect to use the method for calculating the value of nonoriginating materials established in article 403(2) of the Agreement in lieu of the method established in article 403(1) of the Agreement for purposes of determining eligibility for preferential duty treatment under the United States-Canada 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;
The requirements of subparagraphs (A) and (B) must be satisfied entirely in the territory of one or more of the NAFTA countries.
(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 unacceptable 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 requirements 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—
(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 percent 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, provided 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;
(C)
a nonoriginating material provided for in heading 0805 or subheadings 2009.11 through 2009.30 that is used in the production of—
(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;
(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 production 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—
(4)
Certain fruit juices
Paragraph (1) does not apply to a nonoriginating single juice ingredient provided for in heading 2009 that is used in the production of—
(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.
(f)
Fungible goods and materials
For purposes of determining 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
(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—
(h)
Indirect materials
An indirect material shall be considered 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
Packing materials and containers in which a good is packed for shipment shall be disregarded—
(k)
Transshipment
A good shall not be considered to be an originating good by reason of having undergone production that satisfies the requirements of subsection (a) of this section 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 considered to be an originating good merely by reason of—
(m)
Interpretation and application
For purposes of this section:
(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) of this section, 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;
(n)
Origin of automatic data processing goods
Notwithstanding any other provision of this section, when the NAFTA countries apply the 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 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 purposes 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 subheading 8702.10.00 or 8702.90.00.
(2)
Customs Valuation Code
The term “Customs Valuation 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, regardless of the mode of transportation, at the point of direct shipment by the seller to the buyer.
(4)
Fungible goods and fungible materials
The terms “fungible goods” and “fungible materials” mean goods or materials 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—
(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;
(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.