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(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.
(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.
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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
(viii) any other good that is not incorporated into the other good but the use of which in the production of the other good can reasonably be demonstrated to be a part of that production.
(m) Record-keeping requirements and verification.
(i) An importer claiming preferential tariff treatment for a good imported into the territory of the United States under the provisions of this note based on a importer’s certification or its knowledge (including reasonable reliance on information in the importer’s possession) that the good is an originating good shall maintain, for a minimum of five years from the date of importation of the good, all records necessary to demonstrate that the good qualified for the preferential tariff treatment claimed under this note.
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(ii) An importer claiming preferential tariff treatment for a good imported into the territory of the United States based on a certification issued by the exporter or producer shall maintain, for a minimum of five years from the date of importation of the good, a copy of the certification that served as the basis for the claim. If the importer possesses records demonstrating that the good satisfies the requirements to remain originating under subdivision (c)(iii) of this note, the importer shall maintain such records for a minimum of five years from the date of importation of the good; shall make a written declaration that the good qualifies as originating, under the terms of applicable regulations; and shall be prepared to submit, upon request by the appropriate customs officer, a certification of origin demonstrating that the good qualifies as an originating good under the provisions of this note, including pertinent cost and manufacturing information and all other information requested by such customs officer.
(iii) A certification that a good is originating may be in written or electronic form, including but not limited to the following elements:
(A) the name of the certifying person, including as necessary contact or other identifying information;
(B) the importer of the good (if known);
(C) the exporter of the good (if different from the producer);
(D) the producer of the good (if known);
(E) the classification of the good in the tariff schedule and a description of the good;
(F) information demonstrating that the good is originating;
(G) the date of the certification; and
(H) in the case of a blanket certification of multiple shipments of identical goods within any period specified in the written or electronic certification, not exceeding 12 months from the date of the certification, the period of time that the certification covers. For purposes of this subdivision, the term “identical goods” means goods that are the same in all respects relevant to the rule of origin that qualifies the goods as originating goods.
Importers shall, upon request by the appropriate customs officer, make available such records as are necessary under applicable regulations to demonstrate that a good qualifies as an originating good under the provisions of this note.
(iv) For purposes of determining whether a good imported into the customs territory of the United States from the territory of Panama qualifies as an originating good under the provisions of this note, the appropriate customs officer may conduct a verification under such terms or procedures as the United States and Panama may agree, as set forth in pertinent regulations.
(n) Interpretation of rules of origin.
(i) Unless otherwise specified, a rule in subdivision (o) of this note that is set out adjacent and is applicable to a 6-digit subheading in the tariff schedule shall take precedence over a rule applicable to a 4-digit heading superior thereto and covering the goods of such subheading. For purposes of this subdivision and subdivision (o) 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.
(ii) Reference to weight in the rules set forth in subdivision (o) of this note for goods provided for in chapters 1 through 24 of the tariff schedule means dry weight, unless otherwise specified in the tariff schedule.
(iii) A requirement of a change in tariff classification in subdivision (o) of this note applies only to nonoriginating materials.
(iv) For purposes of applying this note to goods of chapters 6 through 14, inclusive, agricultural and horticultural goods grown in the territory of Panama or of the United States shall be treated as originating therein even if grown from seed, bulbs, rootstock, cuttings, grafts, shoots, buds or other live parts of plants imported from a country other than Panama or the United States.
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(v) For purposes of applying this note to goods of chapters 27 through 40, inclusive (except a good of heading 3823), of the tariff schedule,a good that undergoes a chemical reaction as defined herein shall be treated as an originating good for purposes of this note, notwithstanding any product-specific rules enumerated in this note, provided all other applicable requirements are satisfied. A “chemical reaction” is a process (including a biochemical process) which results in a molecule with a new structure by breaking intramolecular bonds and by forming new intramolecular bonds, or by altering the spatial arrangement of atoms in a molecule. The following are not considered to be chemical reactions for purposes of this note:
(A) dissolving in water or other solvents;
(B) the elimination of solvents including solvent water; or
(C) the addition or elimination of water of crystallization.
(vi) A good of heading in chapters 28 through 40 that satisfies one or more of the provisions enumerated in this subdivision shall be treated as an originating good for purposes of this note, except as otherwise specified in such provisions. Notwithstanding the preceding sentence, a good is an originating good if it meets the applicable change in tariff classification or satisfies the applicable value content requirement specified in the rules of origin in subdivision (o) for such chapters.
(A) A good of chapters 28 through 40 that is subject to purification shall be treated as an originating good provided that the purification occurs in the territory of Panama or of the United States, or both and results in the following:
(1) the elimination of not less than 80 percent of the impurities; or
(2) the reduction or elimination of impurities resulting in a good suitable:
(I) as a pharmaceutical, medicinal, cosmetic, veterinary, or food grade substance;
(II) as a chemical product or reagent for analytical, diagnostic, or laboratory uses;
(III) as an element or component for use in micro-elements;
(IV) for specialized optical uses;
(V) for non-toxic uses for health and safety;
(VI) for biotechnical use;
(VII) as a carrier used in a separation process; or
(VIII)for nuclear grade uses.
(B) A good of chapters 30, 31 or 33 through 40 (except for heading 3808) shall be treated as an originating good if the deliberate and proportionally controlled mixing or blending (including dispersing) of materials to conform to predetermined specifications, resulting in the production of a good having different essential physical or chemical characteristics that are relevant to the purposes or uses of the good and are different from the input materials, occurs in the territory of Panama or of the United States, or both.
(C) A good of chapters 30, 31, 33 or 39 shall be treated as an originating good if the deliberate and controlled modification in particle size of the good, including micronizing by dissolving a polymer and subsequent precipitation, other than by merely crushing or pressing, resulting in a good having a defined particle size, defined particle size distribution, or defined surface area, which is relevant to the purposes of the resulting good and having different essential physical or chemical characteristics from the input materials, occurs in the territory of Panama or of the United States, or both.
(D) A good of chapters 28 through 38 shall be treated as an originating good if the production of standards materials occurs in the territory of Panama or of the United States, or both. For the purposes of this subdivision, “standards materials” (including standard solutions) are preparations suitable for analytical, calibrating, or referencing uses, having precise degrees of purity or proportions that are certified by the manufacturer.
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(E) A good of chapters 28 through 39 shall be treated as an originating good if the isolation or separation of isomers from mixtures of isomers occurs in the territory of Panama or of the United States, or both.
(F) A good of chapters 28 through 38 that undergoes a change from one classification to another in the territory of Panama or of the United States, or both, as a result of the separation of one or more materials from a man-made mixture shall not be treated as an originating good unless the isolated material underwent a chemical reaction in the territory of Panama or of the United States, or both.
(vii) With respect to textile and apparel goods imported under heading 9822.09.62, the following provisions shall apply:
(A) A textile good of chapters 50 through 60 of the tariff schedule shall be considered to be an originating good under this note if it is wholly formed in the territory of Panama or of the United States, or both, from–
(1) one or more of the fibers, yarns and fabrics listed in U.S. note 39 to subchapter XXII of chapter 98 of the tariff schedule; or
(2) a combination of any of the fibers, yarns and fabrics listed in such U.S. note 39 and one or more fibers, yarns and fabrics that are originating goods under the terms of this note.
The originating fibers and yarns referred to in subdivision (A)(2) may contain up to 10 percent by weight of fibers and yarns that do not undergo an applicable change in tariff classification set out in subdivision (o) of this note. Any elastomeric yarn contained in such originating yarns referred to in subdivision (A)(2) must be formed in the territory of Panama or of the United States, or both.
(B) An apparel good of chapters 61 or 62 of the tariff schedule shall be considered to be an originating good under this note if it is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of Panama or of the United States, or both, and if the fabric of the outer shell, exclusive of collars and cuffs where applicable, is wholly of–
(1) one or more fabrics listed in U.S. note 39 to subchapter XXII of chapter 98 of the tariff schedule; or
(2) one or more fabrics or knit to shape components formed in the territory of Panama or of the United States, or both, from one or more of the yarns listed in such U.S. note 39; or
(3) any combination of the fabrics referred to in subdivision (B)(1), the fabrics or knit to shape components referred to in subdivision (B)(2) or one or more fabrics or knit to shape components that are originating goods under the terms of this note.
The originating fabrics referred to in subdivision (B)(3) may contain up to 10 percent by weigh tof fibers or yarns that do not undergo an applicable change in tariff classification set out in subdivision (o) of this note. Any elastomeric yarn contained in such originating yarns referred to in subdivision (B)(3) must be formed in the territory of Panama or of the United States, or both.
(C) A textile good of chapter 63 or subheading 9404.90 of the tariff schedule shall be considered to be an originating good if it is cut or knit to shape, or both, and sewn or otherwise assembled in the territory of Panama or of the United States, or both, and if the component that determines the tariff classification of the good is wholly of–
(1) one or more of the fabrics listed in U.S. note 39 to subchapter XXII of chapter 98 of the tariff schedule;
(2) one or more fabrics or knit to shape components formed in the territory of Panama or of the United States, or both, from one or more of the yarns listed in such U.S. note 39; or
(3) any combination of the fabrics referred to in subdivision (C)(1), the fabrics or knit to shape components referred to in subdivision (C)(2) or one ore more fabrics or knit to shape components that are originating goods under the terms of this note.
The originating fabrics referred to in subdivision (C)(3) may contain up to 10 percent by weight of fibers or yarns that do not undergo an applicable change in tariff classification set out in subdivision (o) of this note. Any elastomeric yarn contained in such originating yarns referred to in subdivision (C)(3) must be formed in the territory of Panama or of the United States, or both.