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ARTICLES

LEGAL RESOURSES

Exchange rate:

$ 17.14

    • Article 402. Regional Value Content

    1. Except as provided in paragraph 5, each Party shall provide that 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 either the transaction value method set out in paragraph 2 or the net cost method set out in paragraph 3.

    2. Each Party shall provide that an exporter or producer may calculate the regional value content of a good on the basis of the following transaction value method:

     

    RVC=TV-VNMTVx100

    Where

    RVC is the regional value content, expressed as a percentage;

    TV is the transaction value of the good adjusted to a F.O.B. basis; and

    VNM is the value of non-originating materials used by the producer in the production of the good.

    3. Each Party shall provide that an exporter or producer may calculate the regional value content of a good on the basis of the following net cost method:

     

    RVC=NC-VNMNCx100

    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 non-originating materials used by the producer in the production of the good.

    4. Except as provided in Article 403(1) (TLCAN: Art. 403) and for a motor vehicle identified in Article 403(2) (TLCAN: Art. 403) or a component identified in Annex 403.2 (TLCAN: Anexo 403.2), the value of non-originating 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 non-originating materials used to produce originating materials that are subsequently used in the production of the good.

    5. Each Party shall provide that an exporter or producer shall calculate the regional value content of a good solely on the basis of the net cost method set out in paragraph 3 where:

  • There is no transaction value for the good;

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  • The transaction value of the good is unacceptable under Article 1 of the Customs Valuation Code;

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  • 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;

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  • The good is

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  • A motor vehicle provided for in heading 87.01 or 87.02, subheading 8703.21 through 8703.90, or heading 87.04, 87.05 or 87.06,

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  • Identified in Annex 403.1 (TLCAN: Anexo 403.1) or 403.2 (TLCAN: Anexo 403.2) and is for use in a motor vehicle provided for in heading 87.01 or 87.02, subheading 8703.21 through 8703.90, or heading 87.04, 87.05 or 87.06,

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  • Provided for in subheading 6401.10 through 6406.10, or

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  • Provided for in tariff item 8469.10.aa (word processing machines);

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  • The exporter or producer chooses to accumulate the regional value content of the good in accordance with Article 404 (TLCAN: Art. 404); or

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  • The good is designated as an intermediate material under paragraph 10 and is subject to a regional value-content requirement.

    • 6. If an exporter or producer of a good calculates the regional value-content of the good on the basis of the transaction value method set out in paragraph 2 and a Party subsequently notifies the exporter or producer, during the course of a verification pursuant to Chapter Five (Customs Procedures), that the transaction value of the good, or the value of any material used in the production of the good, is required to be adjusted or is unacceptable under Article 1 of the Customs Valuation Code, the exporter or producer may then also calculate the regional value content of the good on the basis of the net cost method set out in paragraph 3.

    7. Nothing in paragraph 6 shall be construed to prevent any review or appeal available under Article 510 (TLCAN: Art. 510) (Review and Appeal) of an adjustment to or a rejection of:

  • The transaction value of a good; or

    •  

  • The value of any material used in the production of a good.

    • 8. For purposes of calculating the net cost of a good under paragraph 3, the producer of the good may:

  • Calculate the total cost incurred with respect to all goods produced by that producer, subtract any sales promotion, marketing and aftersales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the total cost of all such goods, and then reasonably allocate the resulting net cost of those goods to the good,
  • Calculate the total cost incurred with respect to all goods produced by that producer, reasonably allocate the total cost to the good, and then subtract any sales promotion, marketing and aftersales service costs, royalties, shipping and packing costs and non allowable interest costs that are included in the portion of the total cost allocated to the good, or

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  • Reasonably allocate each cost that forms part of the total cost incurred with respect to the good so that the aggregate of these costs does not include any sales promotion, marketing and aftersales service costs, royalties, shipping and packing costs, and non-allowable interest costs,

    • Provided that the allocation of all such costs is consistent with the provisions regarding the reasonable allocation of costs set out in the Uniform Regulations, established under Article 511 (Customs Procedures Uniform Regulations).

    9. Except as provided in paragraph 11, the value of a material used in the production of a good shall:

  • Be the transaction value of the material determined in accordance with Article 1 of the Customs Valuation Code; or

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  • In the event that there is no transaction value, or the transaction value of the material is unacceptable under Article 1 of the Customs Valuation Code, be determined in accordance with Articles 2 through 7 of the Customs Valuation Code; and

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  • Where not included under subparagraph (a) or (b), include

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  • Freight, insurance, packing and all other costs incurred in transporting the material to the location of the producer,

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  • Duties, taxes and customs brokerage fees on the material paid in the territory of one or more of the Parties, and

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  • 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 byproduct.

    • 10. Except as provided in Article 403(1) (TLCAN: Art. 403), any self-produced material, other than a component identified in Annex 403.2 (TLCAN: Anexo 403.2), 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 where the intermediate material is subject to a regional value-content requirement used in the production of that intermediate material may itself be designated by the producer as an intermediate material.

    11. The value of an intermediate material shall be:

  • The total cost incurred with respect to all goods produced by the producer of the good that can be reasonably allocated to that intermediate material; or
  • The aggregate of each cost that forms part of the total cost incurred with respect to that intermediate material that can be reasonably allocated to that intermediate material.

    • 12. The value of an indirect material shall be based on the Generally Accepted Accounting Principles applicable in the territory of the Party in which the good is produced.