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(f) Regional value content.
(i) For purposes of subdivision (b)(ii)(B) of this note, except for goods to which subdivision (f)(iii) applies, the regional value content of a good referred to in subdivision (n) of this note, shall be calculated by the importer, exporter or producer of the good on the basis of the build-down method or the build-up method described below.
(A) For the build-down method, the regional value content of a good may be calculated on the basis of the formula
RVC = ((AV-VNM)/AV) X 100
where RVC is the regional value content of the good, expressed as a percentage; AV is the adjusted value of the good; and VNM is 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.
(B) For the build-up method, the regional value content of a good may be calculated on the basis of the formula
RVC = ((VOM)/AV) X 100
where RVC is the regional value content of the good, expressed as a percentage; AV is the adjusted value of the good; and VOM is the value of originating materials that are acquired or self-produced, and used by the producer in the production of the good.
(ii) Value of materials.
(A) For the purpose of calculating the regional value content of a good under this note, and for purposes of applying the de minimis rules under subdivision (e) of this note, the value of a material is--
(1) in the case of a material that is imported by the producer of the good, the adjusted value of the material;
(2) 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 interpretive notes of the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 referred to in section 101(d)(8) of the Uruguay Round Agreements Act, 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; or
(3) in the case of a material that is self-produced, the sum of--
(I) all expenses incurred in the production of the material, including general expenses; and
(II) an amount for profit equivalent to the profit added in the normal course of trade.
(B) The following expenses, if not included in the value of an originating material calculated under subdivision (f)(ii)(A) above, may be added to the value of the originating material:
(1) the costs of freight, insurance, packing and all other costs incurred in transporting the material within or between the territory of one or more of the parties to the Agreement to the location of the producer;
(2) duties, taxes and customs brokerage fees on the material paid in the territory of one or more of the parties to the Agreement, other than duties or taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable;
(3) the cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of renewable scrap or byproducts.
(C) The following expenses, if included in the value of a nonoriginating material calculated under subdivision (f)(ii)(A) above, may be deducted from the value of the nonoriginating material:
(1) the costs of freight, insurance, packing and all other costs incurred in transporting the material within or between the territory of one or more of the parties to the Agreement to the location of the producer;
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(2) duties, taxes and customs brokerage fees on the material paid in the territory of one or more of the parties to the Agreement, other than duties or taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable;
(3) the cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of renewable scrap or byproducts;
(4) the cost of originating materials used in the production of the nonoriginating material in the territory of one or more of the parties to the Agreement.
(iii) Special rule for certain automotive goods.
(A) For purposes of subdivision (b)(ii)(B) of this note, the regional value content of an automotive good referred to in subdivision (n) of this note may be calculated by the importer, exporter or producer of the good on the basis of the following net cost method:
RVC = ((NC-VNM)/NC) X 100
where RVC is the regional value content of the automotive good, expressed as a percentage; NC is the net cost of the automotive good; and 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. For purposes of this subdivision, the term “automotive good” means a good provided for in any of subheadings 8407.31 through 8407.34, subheading 8408.20, heading 8409 or in any of headings 8701 through 8708, inclusive, of the tariff schedule.
(B) For purposes of determining the regional value content under this subdivision 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 calculated under the formula contained in subdivision (A) above, over the producer’s fiscal year--
(1) with respect to all motor vehicles in any one of the categories described in subdivision (C), below; or
(2) with respect to all motor vehicles in any such category that are exported to the territory of one or more of the parties to the Agreement.
(C) A category is described for purposes of subdivision (B)(1) above if it--
(1) is the same model line of motor vehicles, is in the same class of vehicles, and is produced in the same plant in the territory of a party to the Agreement, as the good described in subdivision (B) for which regional value content is being calculated;
(2) is the same class of motor vehicles, and is produced in the same plant in the territory of a party to the Agreement, as the good described in subdivision (B) for which regional value content is being calculated; or
(3) is the same model line of motor vehicles produced in the territory of a party to the Agreement, as the good described in subdivision (B) for which regional value content is being calculated.
(D) For purposes of determining the regional value content under subdivision (A) above for automotive goods 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--
(1) average the amounts calculated under the formula contained in subdivision (A) above over--
(I) the fiscal year of the motor vehicle producer to whom the automotive goods are sold,
(II) any quarter or month, or
(III) its own fiscal year,
if the goods were produced during the fiscal year, quarter or month that is the basis for the calculation;
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(2) determine the average referred to in subdivision (1) separately for such goods sold to one or more motor vehicle producers; or
(3) make a separate determination under subdivision (1) or (2) for automotive goods that are exported to the territory of one or more of the parties to the Agreement.
(E) The importer, exporter or producer shall, consistent with the provisions regarding allocation of costs set out in generally accepted accounting principles, determine the net cost of an automotive good under subdivision (B) by--
(1) calculating the total cost incurred with respect to all goods produced by the producer of the automotive good, 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 then reasonably allocating the resulting net cost of those goods to the automotive good;
(2) 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 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 automotive good; or
(3) reasonably allocating each cost that forms part of the total cost incurred with respect to the automotive good so that the aggregate of all such costs does not include any sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs or nonallowable interest costs.
(F) For purposes of this note, the term “class of motor vehicles” means any one of the following categories of motor vehicles:
(1) motor vehicles provided for in subheading 8701.20, 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or heading 8705 or 8706, or motor vehicles for the transport of 16 or more persons provided for in subheading 8702.10 or 8702.90;
(2) motor vehicles provided for in subheading 8701.10 or any of subheadings 8701.30 through 8701.90, inclusive;
(3) motor vehicles for the transport of 15 or fewer persons provided for in subheading 8702.10 or 8702.90, or motor vehicles provided for in subheading 8704.21 or 8704.31; or
(4) motor vehicles provided for in any of subheadings 8703.21 through 8703.90, inclusive.
(G) For purposes of this note, the term “model line” means a group of motor vehicles having the same platform or model name.
(H) For purposes of this note, the term “nonallowable interest costs” means interest costs incurred by a producer that exceed 700 basis points above the applicable official interest rate for comparable maturities of the party to the Agreement in which the producer is located.
(I) For purposes of this note, the term “reasonably allocate” means to apportion in a manner that would be appropriate under generally accepted accounting principles.
(J) For purposes of this note, the term “total cost” means all product costs, period costs and other costs for a good incurred in the territory of one or more of the parties to the Agreement.
(g) Accessories, spare parts or tools.
(i) Subject to subdivision (g)(ii) and (g)(iii), 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 production of the good undergo the applicable change in tariff classification set out in subdivision (n) of this note.
(ii) Subdivision (g)(i) shall apply only if--
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(A) the accessories, spare parts or tools are classified with and not invoiced separately from the good, regardless of whether they appear specified or separately identified in the invoice for the good; and
(B) the quantities and value of the accessories, spare parts or tools are customary for the good.
(iii) If the good is subject to a regional value content requirement, the value of the accessories, spare parts or tools shall be taken into account as originating or nonoriginating materials, as the case may be, in calculating the regional value content of the good.
(h) Fungible goods and materials.
(i) A person claiming that a fungible good or fungible material is an originating good may base the claim either on the physical segregation of the fungible good or fungible material or by using an inventory management method with respect to the fungible good or fungible material. For purposes of this subdivision, the term “inventory management method” means:
(A) averaging,
(B) “last-in, first-out,”
(C) “first-in, first out,” or
(D) any other method that is recognized in the generally accepted accounting principles of the party to the Agreement in which the production is performed or otherwise accepted by that country.
The term “fungible good” or fungible material” means a good or material, as the case may be, that is interchangeable with another good or material for commercial purposes and the properties of which are essentially identical to such other good or material.
(ii) A person selecting an inventory management method under subdivision (h)(i) for a particular fungible good or fungible material shall continue to use that method for that fungible good or fungible material throughout the fiscal year of that person.
(i) Packaging or packing materials and containers.
(i) 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 the applicable change in tariff classification set out in subdivision (n) of this note and, 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.
(ii) For shipment.--Packing materials and containers for shipment shall be disregarded in determining whether a good is an originating good.
(j) Indirect materials.
An indirect material shall be treated as an originating material for purposes of this note without regard to where it is produced. The term “indirect material” means a good used in the production, testing or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including–
(i) fuel and energy;
(ii) tools, dies and molds;
(iii) spare parts and materials used in the maintenance of equipment or buildings;
(iv) lubricants, greases, compounding materials and other materials used in production or used to operate equipment or buildings;
(v) gloves, glasses, footwear, clothing, safety equipment and supplies;
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(vi) equipment, devices and supplies used for testing or inspecting the good;
(vii) catalysts and solvents; and
(viii) any other goods that are not incorporated into the good but the use of which in the production of the good can reasonably be demonstrated to be a part of that production.
(k) For the purposes of this note, the term “generally accepted accounting principles” means the recognized consensus or substantial authoritative support in the territory of a party to the Agreement with respect to the recording of revenues, expenses, costs, assets and liabilities, the disclosure of information and the preparation of financial statements. The principles may encompass broad guidelines of general application as well as detailed standards, practices and procedures.
(l) Claims for preferential tariff treatment; record-keeping requirements and verification.
(i) Claims for preferential tariff treatment.--An importer may make a claim for the tariff and other treatment provided for under the terms of this note based on either--
(A) a written or electronic certification by the importer, exporter or producer; or
(B) the importer’s knowledge that the good is an originating good, including reasonable reliance on information in the importer’s possession that the good is an originating good;
in such form and manner as may be required in applicable regulations.
(ii) Record-keeping requirements.--An importer of a good, for which entry is claimed under the terms of this note, shall maintain, for a minimum of five years from the date of importation of the good, all records and documents necessary to demonstrate that the good qualified for the tariff and other treatment provided for under the terms of this note, in such form and manner as may be required in applicable regulations.
(iii) Verification.--For purposes of determining whether a good imported into the customs territory of the United States from the territory of another party to the Agreement qualifies as an originating good under the provisions of this note, the appropriate customs officer may conduct a verification as set forth in pertinent regulations.
(m) Interpretation and application of rules of origin.
(i) Unless otherwise specified, the requirements of any rule in subdivision (n) of this note that is set out adjacent to a heading or subheading of the tariff schedule and specifies a change of tariff classification applies only to nonoriginating materials. For purposes of this subdivision and subdivision (n) of this note, a tariff provision is a “heading” if its article description is not indented; a provision is a “subheading” if it is designated by 6 digits under the Harmonized Commodity Description and Coding System; and the terms “chapter” and “section” refer to a chapter or section, respectively, of the tariff schedule.
(ii) Where a specific rule in subdivision (n) of this note is defined using the criterion of a change in tariff classification, and the rule is written to exclude tariff provisions at the level of a chapter, heading or subheading of the tariff schedule, such rule shall be construed to require that materials classified in those excluded provisions be originating for the good to qualify as originating.
(iii) When a heading or subheading of the tariff schedule is subject to alternative specific rules in subdivision (n) of this note, the rule will be considered to be met if a good satisfies one of the alternatives.
(iv) When a single rule is applicable to a group of headings or subheadings, and that rule of origin specifies a change of heading or subheading, the requirement shall be interpreted so that the change of heading or subheading may occur within a single heading or subheading or between headings or subheadings of the group. When, however, a rule refers to a change in heading or subheading “outside that group,” such change in heading or subheading must occur from a heading or subheading that is outside the group of headings or subheadings set out in the rule.
(v) References to weight in the rules set forth in subdivision (n) of this note for goods provided for in chapters 1 through 24 of the tariff schedule are to dry weight, unless otherwise specified in the tariff schedule.