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   (iii) For the purposes of this note, the term “adjusted value” means 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 referred to in section 101(d)(8) of the Uruguay Round Agreements Act (19 U.S.C. 3511(d)(8)), adjusted, if necessary, to exclude any costs, charges or expenses incurred for transportation, insurance and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation.

(f) Accumulation.

(i) For purposes of this note, originating 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.

(ii) A good that is produced in the territory of Panama or of the United States, or both, by one or more producers, is an originating good if the good satisfies all of the applicable requirements of this note.

(g) Regional value content.

(i) For purposes of subdivision (b)(ii)(B) of this note, the regional value content of a good referred to in subdivision (o) of this note, except for goods to which subdivision (h) applies, shall be calculated by the importer, exporter or producer of the good, on the basis of the build-down method described in subdivision (g)(i)(A) or the build-up method described in (g)(i)(B) 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, 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; or

(B) For the build-up method, the regional value content may be calculated on the basis of the formula RVC = (VOM/AV) x 100, where RVC is the regional value content, 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 subdivision (g)(i) and for purposes of applying the de minimis provisions of 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 (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

(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 value of materials may be further adjusted as follows:

(1) for originating materials, the following expenses, if not included in the value of an originating material calculated under subdivision (A) above, 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 between the territory of Panama or of the United States, or both, to the location of the producer;
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       (II) duties, taxes and customs brokerage fees on the material paid in the territory of Panama or of the United States, or both, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable; and

(III) 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; and

(2) for non-originating materials, if included in the value of a nonoriginating material calculated under subdivision (A) above, the following expenses 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 between the territory of Panama or of the United States, or both, to the location of the producer;

(II) duties, taxes and customs brokerage fees on the material paid in the territory of Panama or of the United States, or both, other than duties and 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 resulting from the use of the material in the production of the good, less the value of renewable scrap or by-products; or

(IV) the cost of originating materials used in the production of the nonoriginating material in the territory of Panama or of the United States, or both.

(C) All costs considered for the calculation of regional value content shall be recorded and maintained in conformity with the generally accepted accounting principles applicable in the territory of the country in which the good is produced (whether Panama or the United States). The term “generally accepted accounting principles”--

(i) means the recognized consensus or substantial authoritative support given in the territory of Panama or of the United States, as the case may be, with respect to the recording of revenues, expenses, costs, assets and liabilities, the disclosure of information and the preparation of financial statements, and

(ii) may encompass broad guidelines for general application as well as detailed standards, practices and procedures.

(h) Automotive goods.

(i) For purposes of subdivision (b)(ii)(B) of this note, the regional value content of an automotive good referred to in subdivision (o) of this note may be calculated by the importer, exporter or producer of the good on the basis of the build-down method described in subdivision (g)(i)(A) of this note, the build-up method described in subdivision (g)(i)(B) of this note or the following net cost method, RVC = ((NC - VNM)/NC) X 100, where RVC is the regional value content, expressed as a percentage; NC is the net cost of the good; and VNM is the value of nonoriginating materials 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.

(ii) For purposes of this subdivision, the term “automotive good” means a good classified under in any of subheadings 8407.31 through 8407.34 (engines) or 8408.20 (diesel engines for vehicles) and headings 8409 (parts of engines), 8701 through 8705 (motor vehicles), 8706 (chassis), 8707 (bodies) and 8708 (motor vehicle parts).

(iii) For purposes of determining the regional value content under subdivision (h)(i) of this note 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 net cost formula contained in subdivision (h)(i), over the producer’s fiscal year–

(A) with respect to all motor vehicles in any one of the categories described in subdivision (h)(iv), or

(B) with respect to all motor vehicles in any such category that are exported to the territory of Panama or of the United States.
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   (iv) A category is described in this subdivision if it–

(A) 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 of the United States, as the good described in subdivision (h)(iii) for which regional value content is being calculated;

(B) is the same class of motor vehicles, and is produced in the same plant in the territory of Panama or of the United States, as the good described in subdivision (h)(iii) for which regional value content is being calculated; or

(C) is the same model line of motor vehicles produced in the territory of Panama or of the United States as the good described in subdivision (h)(iii) for which regional value content is being calculated.

For purposes of this note, the term “model line of motor vehicles” means a group of motor vehicles having the same platform or model name.

(v) 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, 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;

(B) motor vehicles provided for in subheading 8701.10 or any of subheadings 8701.30 through 8701.90;

(C) 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

(D) motor vehicles provided for in any of subheadings 8703.21 through 8703.90.

(vi) For purposes of determining the regional value content under subdivision (g) of this note 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–

(A) average the amounts calculated under the net cost formula contained in subdivision (h)(i) over–

(1) the fiscal year of the motor vehicle producer to whom the automotive goods are sold,

(2) any quarter or month, or

(3) the fiscal year of the producer of such goods,

if the goods were produced during the fiscal year, quarter or month that is the basis for the calculation;

(B) determine the average referred to in subdivision (vi)(A) separately for such goods sold to one or more motor vehicle producers; or

(C) make a separate determination under subdivision (vi)(A) or (vi)(B) for such goods that are exported to the territory of Panama or of the United States.

The term “automotive materials” refers to such goods classified in the following provisions: subheadings 8407.31 through 8407.34 (engines) or 8708.20 (diesel engines for vehicles) and headings 8409 (parts of engines), 8706 (chassis), 8707 (bodies) and 8708 (motor vehicle parts).
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  (vii) The importer, exporter or producer of an automotive good shall, consistent with the provisions regarding allocation of costs provided for in generally accepted accounting principles, determine the net cost of the automotive good under subdivision    (h)(ii) by–

(A) 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;

(B) 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

(C) 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 include any sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs or nonallowable interest costs.

(viii) For purposes of this note--

(A) 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 country in which the producer is located;

(B) the term “net cost” means total cost minus sales promotion, marketing, and after-sales service costs, royalties, shipping and packing costs and nonallowable interest costs that are included in the total cost;

(C) the term “reasonably allocating” means apportioning in a manner that would be appropriate under generally accepted accounting principles; and

(D) the term “total cost” means all product costs, period costs and other costs for a good incurred in the territory of Panama or of the United States, or both.

(i) Accessories, spare parts or tools.

(i) Subject to subdivisions (ii) and (iii) of this subdivision, 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 forth in subdivision (o) of this note.

(ii) Subdivision (i)(i) 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 accessories, spare parts or tools are specified or are 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.
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 (j) 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 country in which the production is performed (whether Panama or the United States) 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 (j)(i) above 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 such person.

(k) Packaging materials and containers.

(i) Packaging materials and containers in which a good is packaged for retail sale, if classified with the good for which the tariff treatment under the terms of this note is claimed, 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 (o) 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) Packing materials and containers for shipment shall be disregarded in determining whether a good is an originating good. For purposes of this note, the term “packing materials and containers for shipment” means goods used to protect another good during its transportation and does not include the packaging materials and containers in which the other good is packaged for retail sale.

(l) Indirect materials.

For purposes of this note, an indirect material shall be treated as an originating material without regard to where it is produced. The term “indirect material” means a good used in the production, testing or inspection of another good but not physically incorporated into that other good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of another 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;

(vi) equipment, devices and supplies used for testing or inspecting the good;

(vii) catalysts and solvents; and