CCRFTA Rules of Origin Regulations (SOR/2002-395)
Enabling Statute: Customs Tariff Regulation current to January 25th, 2011 Attention: See coming into force provision and notes, where applicable.
CCRFTA Rules of Origin Regulations
SOR/2002-395 Registration October 31, 2002
CUSTOMS TARIFF
CCRFTA Rules of Origin Regulations
P.C. 2002-1859 October 31, 2002
Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to paragraph 16(2)(a)a of the Customs Tariffb, hereby makes the annexed CCRFTA Rules of Origin Regulations. a S.C. 2001, c. 28, ss. 34(1) b S.C. 1997, c. 36
CCRFTA RULES OF ORIGIN REGULATIONS
PART 1 INTERPRETATION
1. (1) The following definitions apply in these Regulations.
“Agreement” means the Canada — Costa Rica Free Trade Agreement. (Accord)
“CCRFTA country” means Canada or Costa Rica. (pays ALÉCCR)
“Customs Valuation Agreement” means the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 set out in Annex 1A of the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations. (Accord sur la valeur en douane)
“excluded costs” means sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs and non-allowable interest costs; (coûts exclus)
“fungible goods” means goods that are interchangeable for commercial purposes and the properties of which are essentially identical. (produits fongibles)
“fungible materials” means materials that are interchangeable for commercial purposes and the properties of which are essentially identical. (matières fongibles)
“identical goods” means, with respect to a good, goods that - (a)
- are the same as that good in all respects, including physical characteristics, quality and reputation but excluding minor differences in appearance;
- (b)
- were produced in the same country as that good; and
- (c)
- were produced
- (i)
- by the producer of that good, or
- (ii)
- by another producer, where no goods that satisfy the requirements of paragraphs
- (a)
- and (b) were produced by the producer of that good. (produits identiques)
“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, and includes - (a)
- fuel and energy;
- (b)
- tools, dies and moulds;
- (c)
- spare parts and materials used in the maintenance of equipment and buildings;
- (d)
- lubricants, greases, compounding materials and other materials used in production or used to operate equipment and buildings;
- (e)
- gloves, glasses, footwear, clothing, safety equipment and supplies;
- (f)
- equipment, devices and supplies used for testing or inspecting the other goods;
- (g)
- catalysts and solvents; and
- (h)
- 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 part of that production; (matière indirecte)
“intermediate material” means a material that is produced by a producer of a good and is used in the production of that good. (matière intermédiaire)
“material” means a good that is used in the production of another good, and includes a part or ingredient. (matière)
“net cost” means the total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the total cost. (coût net)
“net cost of a good” means the net cost that can be reasonably allocated to a good using one of the methods set out in subsection 4(6). (coût net d’un produit)
“non-allowable interest costs” means interest costs incurred by a producer that are more than 700 basis points above the applicable national government interest rate identified for comparable maturities. (frais d’intérêt non admissibles)
“non-originating good” means a good that does not qualify as originating under these Regulations. (produit non originaire)
“non-originating material” means a material that does not qualify as originating under these Regulations. (matière non originaire)
“originating good” means a good that qualifies as originating under these Regulations. (produit originaire)
“originating material” means a material that qualifies as originating under these Regulations. (matière originaire)
“producer” means a person who grows, mines, harvests, fishes, hunts, manufactures, processes or assembles a good. (producteur)
“production” means growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good. (production)
“royalties” means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use or right to use any copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, secret formula or process, excluding those payments under technical assistance or similar agreements that can be related to specific services such as - (a)
- personnel training, without regard to where performed; and
- (b)
- if performed in the territory of one or both of the CCRFTA countries, engineering, tooling, die-setting, software design and similar computer services, or other services. (redevances)
“sales promotion, marketing and after-sales service costs”, means the following costs related to sales promotion, marketing and after-sales service:
- (a)
- sales and marketing promotion, media advertising, advertising and market research, promotional and demonstration materials, exhibits, sales conferences, trade shows and conventions; banners, marketing displays, free samples, sales, marketing and after-sales service literature (product brochures, catalogues, technical literature, price lists, service manuals, sales aid information), establishment and protection of logos and trademarks, sponsorships, wholesale and retail restocking charges, entertainment;
- (b)
- sales and marketing incentives, consumer, retailer or wholesaler rebates; merchandise incentives;
- (c)
- salaries and wages, sales commissions, bonuses, benefits (for example, medical, insurance, pension), travelling and living expenses, membership and professional fees, for sales promotion, marketing and after-sales service personnel;
- (d)
- recruiting and training of sales promotion, marketing and after-sales service personnel, and after-sales training of customers’ employees, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
- (e)
- product liability insurance;
- (f)
- office supplies for sales promotion, marketing and after-sales service of goods, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
- (g)
- telephone, mail and other communications, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
- (h)
- rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centres;
- (i)
- property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centres, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer; and
- (j)
- payments by the producer to other persons for warranty repairs. (frais de promotion des ventes, de commercialisation et de service après-vente)
“shipping and packing costs” means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding the costs of preparing and packaging the good for retail sale. (frais d’expédition et d’emballage)
“similar goods” means with respect to a good, goods that - (a)
- although not alike in all respects to that good, have similar characteristics and component materials that enable the goods to perform the same functions and to be commercially interchangeable with that good;
- (b)
- were produced in the same country as that good; and
- (c)
- were produced
- (i)
- by the producer of that good, or
- (ii)
- by another producer, where no goods that satisfy the requirements of paragraphs
- (a)
- and (b) were produced by the producer of that good. (produits similaires)
“tariff provision” means a heading or subheading. (poste tarifaire)
“territory” has the meaning assigned in subsection 2(1) of the Canada — Costa Rica Free Trade Implementation Act. (territoire) “total cost” means the total of all product costs, period costs and other costs incurred in the territory of one or both of the CCRFTA countries. (coût total)
“transaction value” means - (a)
- the price actually paid or payable for a good or material with respect to a transaction of the producer of the good, adjusted in accordance with the principles of paragraphs 1, 3 and 4 of Article 8 of the Customs Valuation Agreement, regardless of whether the good or material is sold for export; or
- (b)
- where there is no transaction value or the transaction value is unacceptable under Article 1 of the Customs Valuation Agreement, the value determined in accordance with Articles 2 through 7 of the Customs Valuation Agreement. (valeur transactionnelle)
“used” means used or consumed in the production of a good. (utilisé)
- (2)
- In these Regulations,
- (a)
- “chapter”, unless otherwise indicated, refers to a chapter of the Harmonized System;
- (b)
- “heading” refers to any four-digit number in the Harmonized System; and
- (c)
- “subheading” refers to any six-digit number in the Harmonized System.
- (3)
- For purposes of applying the Customs Valuation Agreement under these Regulations, the principles of the Customs Valuation Agreement shall apply to domestic transactions, with such modifications as the circumstances may require.
- (4)
- All costs referred to in these Regulations shall be recorded and maintained in accordance with the Generally Accepted Accounting Principles applicable in the territory of the CCRFTA country in which the good is produced.
PART 2 ORIGINATING GOODS
General
2. (1) Except as otherwise provided in these Regulations, a good originates in the territory of a CCRFTA country where the good is - (a)
- a mineral good or other non-living natural resource extracted in or taken from the territory of one or both of the CCRFTA countries;
- (b)
- a vegetable harvested in the territory of one or both of the CCRFTA countries;
- (c)
- a live animal born and raised entirely in the territory of one or both of the CCRFTA countries;
- (d)
- a good obtained from a live animal in the territory of one or both of the CCRFTA countries;
- (e)
- a good obtained from hunting or fishing in the territory of one or both of the CCRFTA countries;
- (f)
- fish, shellfish or other marine life taken from the sea, seabed or subsoil outside the territory of one or both of the CCRFTA countries by a vessel registered, recorded or listed with a CCRFTA country, or leased by a company established in the territory of a CCRFTA country, and entitled to fly its flag, or by a vessel not exceeding 15 tons gross tonnage that is licensed by a CCRFTA country;
- (g)
- a good produced on board a factory ship from a good referred to in paragraph (f), if the factory ship is registered, recorded or listed with a CCRFTA country, or leased by a company established in the territory of a CCRFTA country, and entitled to fly its flag;
- (h)
- a good, other than fish, shellfish or other marine life, taken or extracted from the seabed or the subsoil of the continental shelf or the exclusive economic zone of either of the CCRFTA countries;
- (i)
- a good, other than fish, shellfish or other marine life, taken or extracted from the seabed or the subsoil, in the area outside the continental shelf and the exclusive economic zone of either of the CCRFTA countries or of any other State as defined in
the United Nations Convention on the Law of the Sea, by a vessel registered, recorded or listed with a CCRFTA country and entitled to fly its flag, or by a CCRFTA country or person from a CCRFTA country;
- (j)
- a good taken from outer space, where the good is obtained by a CCRFTA country or a person of a CCRFTA country and is not processed outside the territories of the CCRFTA countries;
- (k)
- waste and scrap derived from
- (i)
- production in the territory of one or both of the CCRFTA countries, or
- (ii)
- waste and scrap derived from used goods collected in the territory of one or both of the CCRFTA countries, where that waste and scrap is fit only for the recovery of raw materials; or
- (l)
- a good produced in the territory of one or both of the CCRFTA countries exclusively from a good referred to in any of paragraphs (a) through (k), or from the derivatives of such a good, at any stage of production.
- (2)
- A good originates in the territory of a CCRFTA country if each of the non-originating materials used in the production of the good undergoes the applicable change in tariff classification as a result of production that occurs entirely in the territory of one or both of the CCRFTA countries and if the applicable rule in Schedule I for the tariff provision under which the good is classified specifies
- (a)
- only a change in tariff classification, and the good satisfies all other applicable requirements of these Regulations; or
- (b)
- both a change in tariff classification and a regional value-content requirement and the good satisfies all other applicable requirements of these Regulations.
- (3)
- A good originates in the territory of a CCRFTA country where the good is produced entirely in the territory of one or both of the CCRFTA countries exclusively from originating materials.
- (4)
- A good originates in the territory of a CCRFTA country where, except in the case of a good of any of Chapter 39 or Chapters 50 through 63,
- (a)
- the good is produced entirely in the territory of one or both of the CCRFTA countries;
- (b)
- one or more of the non-originating materials used in the production of the good do not undergo an applicable change in tariff classification because both the good and the non-originating materials are classified in the same subheading, or heading that is not further subdivided into subheadings;
- (c)
- each of the non-originating materials that is used in the production of the good and is not referred to in subparagraph (b) undergoes an applicable change in tariff classification or satisfies any other applicable requirement set out in Schedule I;
- (d)
- the regional value content of the good, calculated in accordance with section 4, is not less than 35 per cent where the transaction value method is used, or is not less than 25 per cent where the net cost method is used, unless the applicable rule in Schedule I for the tariff provision under which the good is classified specifies a different regional value-content requirement, in which case that regional value-content requirement shall apply; and
- (e)
- the good satisfies all other applicable requirements of these Regulations.
- (5)
- For purposes of paragraph (4)(b), the determination of whether a heading or subheading for both a good and the materials that are used in the production of the good shall be made on the basis of the nomenclature of the heading or subheading and the relevant Section of Chapter Notes in accordance with the General Rules for the Interpretation of the Harmonized System.
De Minimis
3. (1) A good shall be considered to originate in the territory of a CCRFTA country where the value of all non-originating materials that are used in the production of the good and that do not undergo an applicable change in tariff classification as a result of production occurring entirely in the territory of one or both of the CCRFTA countries is not more than 10 per cent of the transaction value of the good, adjusted to an F.O.B. basis, provided that - (a)
- if the good is subject to a regional value-content requirement, the value of those non-originating materials shall be taken into account in calculating the regional value content of the good; and
- (b)
- the good satisfies all other applicable requirements of these Regulations.
- (2)
- Except as provided in Schedule I, subsection (1) does not apply to a non-originating material that is used in the production of a good of any of Chapters 1 through 21, unless the non-originating material is of a different subheading than the good for which origin is being determined under this section.
- (3)
- A good of any of Chapters 50 through 63 that does not originate in the territory of a CCRFTA country because certain fibres or yarns that are 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 as a result of production occurring entirely in the territory of one or both of the CCRFTA countries shall be considered to originate in the territory of a CCRFTA country if
- (a)
- the total weight of all those fibres or yarns is not more than 10 per cent of the total weight of that component; and
- (b)
- the good satisfies all other applicable requirements of these Regulations.
- (4)
- For purposes of subsection (3),
- (a)
- the component of a good that determines the tariff classification of that good shall be identified in accordance with the General Rules for the Interpretation of the Harmonized System; and
- (b)
- where the component of the good that determines the tariff classification of the good is a blend of two or more yarns or fibres, all yarns and fibres used in the production of the component shall be taken into account in determining the weight of fibres and yarns in that component.
PART 3 REGIONAL VALUE CONTENT
4. (1) Except as provided in subsections (2) and (3), the regional value content of a good shall be calculated on the basis of the following transaction value method:
RVC = TV - VNM /TV × 100
where RVCis the regional value content of the good, expressed as a percentage; TVis the transaction value of the good, adjusted to an F.O.B. basis; and VNMis the value of non-originating materials used by the producer in the production of the
good, determined in accordance with section 5.
(2) For an automotive good of headings 87.01 through 87.02, subheadings 8703.21 through 8703.90 or headings 87.04 through 87.08, the regional value content shall be calculated on the basis of the following net cost method:
RVC = TV - VNM /TV × 100
where RVCis the regional value content of the good, expressed as a percentage; NCis the net cost of the good calculated in accordance with subsection (6); and VNMis the value of non-originating materials used by the producer in the production of the
good, determined in accordance with section 5. - (3)
- For an automotive good of subheadings 8407.31 through 8407.34 or subheading 8703.10, 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 subsection (1) or the net cost method set out in subsection (2).
- (4)
- For purposes of calculating the regional value content of a good under subsection
- (1)
- or (2), the value of non-originating materials used by a producer in the production of the good shall not include
- (a)
- the value of any non-originating materials used by another producer in the production of originating materials that are subsequently acquired and used by the producer of the good in the production of that good; or
- (b)
- the value of any non-originating materials used by the producer in the production of an originating intermediate material.
- (5)
- For purposes of subsection (4), where an originating intermediate material is used by the producer of the good with non-originating materials (whether or not those non-originating materials are produced by that producer) in the production of the good, the value of those non-originating materials shall be included in the value of non-originating materials.
- (6)
- For purposes of subsection (2), the net cost of a good may be calculated, at the choice of the producer of the good, by
- (a)
- calculating the total cost incurred with respect to all goods produced by that producer, subtracting any excluded costs that are included in that total cost and reasonably allocating the remainder to the good;
- (b)
- calculating the total cost incurred with respect to all goods produced by that producer, reasonably allocating that total cost to the good and subtracting any excluded costs that are included in the amount allocated to that good; or
- (c)
- reasonably allocating each cost that forms part of the total cost incurred with respect to the good so that the aggregate of those costs does not include any excluded costs.
- (7)
- For purposes of calculating net cost under subsection (6), excluded costs that are included in the value of a material that is used in the production of the good shall not be subtracted from or otherwise excluded from the total cost.
PART 4 MATERIALS
General
5. (1) Except in the case of intermediate materials, for purposes of calculating the regional value content of a good, the value of a material that is used in the production of the good shall be - (a)
- the transaction value, determined in accordance with Article 1 of the Customs Valuation Agreement;
- (b)
- the value determined in accordance with Articles 2 through 7 of the Customs Valuation Agreement, where, with respect to the transaction in which the producer acquired the material, there is no transaction value under, or the transaction value is unacceptable, under Article 1 of the Customs Valuation Agreement.
- (2)
- The value of a material referred to in subsection (1) shall
- (a)
- include the costs of freight, insurance and packing and all other costs incurred in transporting the material to the place of importation if they are not included under paragraph (1)(a) or (b); and
- (b)
- in the case of a domestic transaction, be determined in accordance with the principles of the Customs Valuation Agreement in the same manner as an international transaction, with such modifications as the circumstances may require.
Intermediate Materials
- (3)
- The value of an intermediate material shall be, at the choice of the producer of the good,
- (a)
- the total cost incurred with respect to all goods produced by the producer that can be reasonably allocated to that intermediate material; or
- (b)
- the sum of all costs that comprise the total cost incurred with respect to that intermediate material that can be reasonably allocated to that intermediate material.
Indirect Materials
- (4)
- For purposes of determining whether a good is an originating good, an indirect material that is used in the production of the good shall be considered to be an originating material, regardless of where that indirect material is produced.
Packaging Materials and Containers for Retail Sale
- (5)
- Packaging materials and containers in which a good is packaged for retail sale, if classified under the Harmonized System with the good that is packaged therein, shall be disregarded for purposes of determining whether all of the non-originating materials used in the production of the good undergo an applicable change in tariff classification.
- (6)
- Where packaging materials and containers in which a good is packaged for retail sale are classified under the Harmonized System with the good that is packaged therein and that good is subject to a regional value-content requirement, the value of those packaging materials and containers shall be taken into account as originating materials or non-originating materials, as the case may be, for purposes of calculating the regional value content of the good.
Packing Materials and Containers for Shipment
- (7)
- Packing materials and containers in which the good is packed for shipment shall be disregarded for purposes of determining whether
- (a)
- the non-originating materials used in the production of the good undergo an applicable change in tariff classification, and
- (b)
- the good satisfies a regional value-content requirement.
Fungible Goods and Fungible Materials
- (8)
- For purposes of determining whether a good is an originating good,
- (a)
- where originating materials and non-originating materials that are fungible materials are used in the production of the good, the determination of whether the materials are originating materials may be made on the basis of any of the applicable inventory management methods set out in Schedule 2; and
- (b)
- where originating goods and non-originating goods that are fungible goods are physically combined or mixed in inventory and prior to exportation do not undergo production or any other operation in the territory of the CCRFTA country in which they were physically combined or mixed in inventory, other than unloading, reloading or any other operation necessary to preserve the goods in good condition or to transport the goods for exportation to the territory of the other CCRFTA country, the determination of whether the good is an originating good may be made on the basis of any of the applicable inventory management methods set out in Schedule 2.
Sets or Assortments of Goods
- (9)
- Except as provided in Schedule 1, a set or assortment, as defined in Rule 3 of the General Rules for the Interpretation of the Harmonized System, shall be considered as originating, provided that:
- (a)
- all the component products, including packaging materials and containers, are originating; or
- (b)
- where the set or assortment contains non-originating component products, including packaging materials and containers,
- (i)
- at least one of the component products, or all the packaging materials and containers for the set, is originating, and
- (ii)
- the regional value content of the set or assortment is not less than 50 per cent under the transaction value method.
- (10)
- For purposes of paragraph (9)(b), the value of packaging materials and containers for the set shall be taken into account as originating materials or non-originating materials, as the case may be, for purposes of calculating the regional value content of the set.
Accessories, Spare Parts and Tools
- (11)
- Accessories, spare parts or tools that are delivered with a good and form part of the good’s standard accessories, spare parts or tools are originating materials if the good is an originating good, and shall be disregarded for purposes of determining whether all the non-originating materials used in the production of the good undergo an applicable change in tariff classification provided that
- (a)
- the accessories, spare parts or tools are not invoiced separately from the good, whether or not each is listed or detailed on the invoice; and
- (b)
- the quantities and value of the accessories, spare parts or tools are customary for the good.
- (12)
- Where a good is subject to a regional value-content requirement, the value of accessories, spare parts or tools that are delivered with that good and form part of the good’s standard accessories, spare parts or tools shall be taken into account as originating materials or non-originating materials, as the case may be, in calculating the regional value content of the good.
PART 5 OTHER PROVISIONS
Accumulation
6. For purposes of determining whether a good is an originating good, an exporter or producer of a good may choose to accumulate the production, by one or more producers in the territory of one or both of the CCRFTA countries, of materials that are incorporated into that good so that the production of the materials shall be considered to have been performed by that exporter or producer provided that - (a)
- all non-originating materials used in the production of the good undergo the applicable change in tariff classification specified in Schedule 1 and the good satisfies any applicable regional value-content requirement entirely in the territory of one or both of the CCRFTA countries; and
- (b)
- the good satisfies all other applicable requirements of these Regulations.
Transshipment
7. A good is not an originating good by reason of having undergone production that occurs entirely in the territory of one or both of the CCRFTA countries that would enable the good to qualify as an originating good if, subsequent to that production, - (a)
- the good does not remain under customs control while outside the territories of the CCRFTA countries;
- (b)
- the good enters into trade or consumption in the territory of a country other than a CCRFTA country; or
- (c)
- the good undergoes further production or any other operation outside the territories of the CCRFTA countries, other than unloading, reloading or any other operation necessary to preserve the good in good condition or to transport the good to the territory of a CCRFTA country.
Non-qualifying Operations
8. Except in the case of sets or as provided in Schedule 1, a good is not an originating good merely by reason of - (a)
- a disassembly of the good into parts;
- (b)
- a change in the end use of the good;
- (c)
- the mere separation of one or more individual materials or components from an artificial mixture;
- (d)
- the mere dilution with water or another substance that does not materially alter the characteristics of the good;
- (e)
- the removal of dust or damaged parts from, oiling, or applying anti-rust paint or protective coatings to, the good;
- (f)
- any testing or calibration, division of loose shipments, grouping into packages or attaching identifying labels, markings or signs to the good or its packaging; or
- (g)
- the packaging or repackaging of the good.
PART 6 COMING INTO FORCE
*
9. These Regulations come into force on the day on which subsection 34(1) of the Canada — Costa Rica Free Trade Agreement Implementation Act, chapter 28 of the Statutes of Canada, 2001, comes into force.
* [Note: Regulations in force November 1, 2002, see SI/2002-146.]
SCHEDULE I
SPECIFIC RULES OF ORIGIN
1.
(1) The following definitions apply in this Schedule.
“fry” means immature fish at a post-larval stage and includes fingerlings, parr, smolts and elvers. (alevin)
“voile” means fabric, solely of polyester, of single yarns measuring not less than 75 decitex but not more than 80 decitex (prior to twisting/ in the untwisted state), having 24 filaments per yarn and with a twist of 900 or more turns per metre, of subheading 5407.61. (voile)
(2) For the purposes of this Schedule, - (a