19 USC 4531 - Rules of origin

View all text of Subchapter II [§ 4531 - § 4535]

§ 4531. Rules of origin

(a) DefinitionsIn this section:

(1) Aquaculture

(2) Customs Valuation Agreement

(3) Fungible good or fungible material

(4) Good wholly obtained or produced entirely in the territory of one or more USMCA countriesThe term “good wholly obtained or produced entirely in the territory of one or more USMCA countries” means any of the following:

(A) A mineral good or other naturally occurring substance extracted or taken from the territory of one or more USMCA countries.

(B) A plant, plant good, vegetable, or fungus grown, cultivated, harvested, picked, or gathered in the territory of one or more USMCA countries.

(D) A good obtained in the territory of one or more USMCA countries from a live animal.

(E) An animal obtained by hunting, trapping, fishing, gathering, or capturing in the territory of one or more USMCA countries.

(F) A good obtained in the territory of one or more USMCA countries from aquaculture.

(G) A fish, shellfish, or other marine life taken from the sea, seabed, or subsoil outside the territory of one or more USMCA countries and outside the territorial sea of any country that is not a USMCA country by—

(i) a vessel that is registered or recorded with a USMCA country and flying the flag of that country; or

(ii) a vessel that is documented under the laws of the United States.

(H) A good produced on board a factory ship from goods referred to in subparagraph (G), if such factory ship—

(i) is registered or recorded with a USMCA country and flies the flag of that country; or

(ii) is a vessel that is documented under the laws of the United States.

(I) A good, other than a good referred to in subparagraph (G), that is taken by a USMCA country, or a person of a USMCA country, from the seabed or subsoil outside the territory of a USMCA country, if that USMCA country has the right to exploit such seabed or subsoil.

(J) Waste and scrap derived from—

(i) production in the territory of one or more USMCA countries; or

(ii) used goods collected in the territory of one or more USMCA countries, if such goods are fit only for the recovery of raw materials.

(K) A good produced in the territory of one or more USMCA countries exclusively from goods referred to in any of subparagraphs (A) through (J), or from their derivatives, at any stage of production.

(5) Indirect materialThe term “indirect material” means a material used or consumed in the production, testing, or inspection of a good but not physically incorporated into the good, or a material used or consumed in the maintenance of buildings or the operation of equipment associated with the production of a good, including—

(A) fuel and energy;

(B) tools, dies, and molds;

(D) lubricants, greases, compounding materials, and other materials used or consumed in production or to operate equipment or buildings;

(E) gloves, glasses, footwear, clothing, safety equipment, and supplies;

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

(G) catalysts and solvents; and

(H) any other material that is not incorporated into the good, if the use of the material in the production of the good can reasonably be demonstrated to be a part of that production.

(6) Intermediate material

(7) Material

(8) Net cost

(9) Net cost of a good

(10) Nonallowable interest costs

(11) Nonoriginating good or nonoriginating material

(12) Originating good; originating material

(13) Packaging materials and containers

(14) Packing materials and containers

(15) Producer

(16) ProductionThe term “production” means—

(A) growing, cultivating, raising, mining, harvesting, fishing, trapping, hunting, capturing, breeding, extracting, manufacturing, processing, or assembling a good; or

(B) the farming of aquatic organisms through aquaculture.

(17) Reasonably allocate

(18) Recovered materialThe term “recovered material” means a material in the form of individual parts that are the result of—

(A) the disassembly of a used good into individual parts; and

(B) the cleaning, inspecting, testing, or other processing that is necessary for improvement to sound working condition of such individual parts.

(19) Remanufactured goodThe term “remanufactured good” means a good classified in the HTS under any of chapters 84 through 90 or under span 9402, other than a good classified under span 8418, 8509, 8510, 8516, or 8703 or subspan 8414.51, 8450.11, 8450.12, 8508.11, or 8517.11, that—

(A) is entirely or partially composed of recovered materials;

(B) has a life expectancy similar to, and performs in a manner that is the same as or similar to, such a good when new; and

(20) RoyaltiesThe term “royalties” means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use of, or right to use, a copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, or secret formula or secret process, excluding payments under technical assistance or similar agreements that can be related to a specific service such as—

(A) personnel training, without regard to where the training is performed; or

(B) if performed in the territory of one or more USMCA countries, engineering, tooling, die-setting, software design and similar computer services, or other services.

(21) Sales promotion, marketing, and after-sales service costs

(A) Sales and marketing promotion, media advertising, advertising and market research, promotional and demonstration materials, exhibits, sales conferences, trade shows, conventions, banners, marketing displays, free samples, sales, marketing, and after-sales service literature (product brochures, catalogs, technical literature, price lists, service manuals, and sales aid information), establishment and protection of logos and trademarks, sponsorships, wholesale and retail charges, and entertainment.

(B) Sales and marketing incentives, consumer, retailer, or wholesaler rebates, and merchandise incentives.

(C) Salaries and wages, sales commissions, bonuses, benefits (such as medical, insurance, and pension benefits), traveling and living expenses, and membership and professional fees for sales promotion, marketing, and after-sales service personnel.

(D) Product liability insurance.

(E) Rent and depreciation of sales promotion, marketing, and after-sales service offices and distribution centers.

(F) Payments by the producer to other persons for warranty repairs.

(G) If the costs are identified separately for sales promotion, marketing, or after-sales service of goods on the financial statements or cost accounts of the producer, the following:

(i) Property insurance premiums, taxes, utilities, and repair and maintenance of sales promotion, marketing, and after-sales service offices and distribution centers.

(ii) Recruiting and training of sales promotion, marketing, and after-sales service personnel, and after-sales training of customers’ employees.

(iii) Office supplies for sales promotion, marketing, and after-sales service of goods.

(iv) Telephone, mail, and other communications.

(22) Self-produced material

(23) Shipping and packing costs

(24) Territory

(25) Total cost

(A) In generalThe term “total cost”—

(i) means all product costs, period costs, and other costs for a good incurred in the territory of one or more USMCA countries; and

(ii) does not include—(I) profits that are earned by the producer of the good, regardless of whether the costs are retained by the producer or paid out to other persons as dividends; or(II) taxes paid on those profits, including capital gains taxes.

(B) Other definitionsIn this paragraph:

(i) Other costs

(ii) Period costs

(iii) Product costs

(26) Transaction valueThe term “transaction value” means the price—

(A) actually paid or payable for a good or material with respect to a transaction of a producer; and

(B) adjusted in accordance with the principles set forth in paragraphs 1, 3, and 4 of article 8 of the Customs Valuation Agreement.

(27) USMCA country

(28) Value

(b) Application and interpretationIn this section:

(1) Tariff classification

(2) Reference to HTS

(3) Cost or value

(1) In generalFor purposes of this Act and for purposes of implementing the preferential tariff treatment provided for under the USMCA, except as otherwise provided in this section, a good is an originating good if—

(A) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;

(B) the good is produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in Annex 4–B of the USMCA; or

(C) the good is produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;

(D) except for a good provided for under any of chapters 61 through 63—

(i) the good is produced entirely in the territory of one or more USMCA countries;

(ii) one or more of the nonoriginating materials provided for as parts under the HTS and used in the production of the good do not satisfy the requirements set forth in Annex 4–B of the USMCA because—(I) both the good and its materials are classified under the same subspan or under the same span that is not further subdivided into subheadings; or(II) the good was imported into the territory of a USMCA country in an unassembled form or a disassembled form but was classified as an assembled good pursuant to rule 2(a) of the General Rules of Interpretation of the HTS; and

(iii) the regional value span of the good is not less than 60 percent if the transaction value method is used, or not less than 50 percent if the net cost method is used and the good satisfies all other applicable requirements of this section; or

(E) the good itself, as imported, is listed in table 2.10.1 of the USMCA and is imported into the territory of the United States from the territory of a USMCA country.

(2) Remanufactured goods

(3) Special rule for foreign-trade zones

(d) Regional value span

(1) In generalExcept as provided in paragraph (5), for purposes of subparagraphs (B) and (D) of subsection (c)(1), the regional value span of a good shall be calculated, at the choice of the importer, exporter, or producer of the good, on the basis of—

(A) the transaction value method described in paragraph (2); or

(B) the net cost method described in paragraph (3).

(2) Transaction value method

(A) In general

(B) DefinitionsIn this paragraph:

(i) RVC

(ii) TV

(iii) VNM

(3) Net cost method

(A) In general

(B) DefinitionsIn this paragraph:

(i) NC

(ii) RVC

(iii) VNM

(4) Value of nonoriginating materials

(A) In general

(B) Special rule for certain componentsThe following components of the value of nonoriginating materials used by the producer in the production of a good may be counted as originating span for purposes of determining whether the good meets the regional value span requirement set forth in Annex 4–B of the USMCA:

(i) The value of processing the nonoriginating materials undertaken in the territory of one or more USMCA countries.

(ii) The value of any originating materials used or consumed in the production of the nonoriginating materials undertaken in the territory of one or more USMCA countries.

(5) Net cost method required in certain cases

(6) Net cost method allowed for adjustments

(A) In general

(B) Review of adjustmentNothing in subparagraph (A) shall be construed to prevent any review or appeal available in accordance with article 5.15 of the USMCA with respect to an adjustment to or a rejection of—

(i) the transaction value of a good; or

(ii) the value of any material used in the production of a good.

(7) Calculating net costThe producer of a good may, consistent with regulations implementing this section, calculate the net cost of the good under paragraph (3) by—

(A) calculating the total cost incurred with respect to all goods produced by that producer, subtracting any sales promotion, marketing, and after-sales services costs, royalties, shipping and packing costs, and nonallowable interest costs that are included in the total cost of those goods, and then reasonably allocating the resulting net cost of those goods to the good;

(B) calculating the total cost incurred with respect to all goods produced by that producer, reasonably allocating the total cost to the good, and 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 good; or

(C) reasonably allocating each cost that is part of the total cost incurred with respect to the good so that the aggregate of those costs does not include any sales promotion, marketing, and after-sales service costs, royalties, shipping and packing costs, and nonallowable interest costs.

(8) Value of materials used in productionFor purposes of calculating the regional value span of a good under this subsection, applying the de minimis rules under subsection (f), and calculating the value of nonoriginating components in a set under subsection (m), the value of a material used in the production of a good is—

(A) in the case of a material that is imported by the producer of the good, the transaction value of the material at the time of importation, including the costs incurred in the international shipment of the material;

(B) in the case of a material acquired in the territory in which the good is produced—

(i) the price paid or payable by the producer in the USMCA country where the producer is located;

(ii) the value as determined under subparagraph (A), as set forth in regulations prescribed by the Secretary of the Treasury providing for the application of transaction value in the absence of an importation by the producer; or

(iii) the earliest ascertainable price paid or payable in the territory of the country; or

(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 or equal to the profit that is usually reflected in the sale of goods of the same class or kind as the material.

(9) Intermediate materials

(A) In general

(B) Materials used in production of intermediate materials

(10) Further adjustments to value of materialsThe following expenses, if included in the value of a nonoriginating material calculated under paragraph (8), may be deducted from the value of the nonoriginating material:

(A) The costs of freight, insurance, packing, and all other costs incurred in transporting the material to the location of the producer.

(B) Duties, taxes, and customs brokerage fees on the material paid in the territory of one or more USMCA countries, other than duties or taxes that are waived, refunded, refundable, or otherwise recoverable, including credit against duty or tax paid or payable.

(C) 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.

(e) Accumulation

(1) Producers

(2) Originating materials used in production of goods of a USMCA country

(3) Production undertaken on nonoriginating materials used in the production of goods

(f) De minimis amounts of nonoriginating materials

(1) In generalExcept as provided in paragraphs (2) through (4), a good that does not undergo a change in tariff classification or satisfy a regional value span requirement set forth in Annex 4–B of the USMCA is an originating good if—

(A) the value of all nonoriginating materials that are used in the production of the good, and do not undergo the applicable change in tariff classification set forth in Annex 4–B of the USMCA—

(i) does not exceed 10 percent of the transaction value of the good, adjusted to exclude any costs incurred in the international shipment of the good; or

(ii) does not exceed 10 percent of the total cost of the good;

(B) the good meets all other applicable requirements of this section; and

(C) the value of such nonoriginating materials is included in the value of nonoriginating materials for any applicable regional value span requirement for the good.

(2) Exceptions for dairy and other productsParagraph (1) does not apply to the following:

(A) A nonoriginating material of headings 0401 through 0406, or a nonoriginating dairy preparation containing over 10 percent by dry weight of milk solids of subspan 1901.90 or 2106.90, used or consumed in the production of a good of headings 0401 through 0406.

(B) A nonoriginating material of headings 0401 through 0406, or nonoriginating dairy preparation containing over 10 percent by dry weight of milk solids of subspan 1901.90 or 2106.90, used or consumed in the production of any of the following goods:

(i) Infant preparations containing over 10 percent by dry weight of milk solids, of subspan 1901.10.

(ii) Mixes and doughs containing over 25 percent by dry weight of butterfat, not put up for retail sale, of subspan 1901.20.

(iii) A dairy preparation containing over 10 percent by dry weight of milk solids, of subspan 1901.90 or 2106.90.

(iv) A good of span 2105.

(v) Beverages containing milk of subspan 2202.90.

(vi) Animal feeds containing over 10 percent by dry weight of milk solids of subspan 2309.90.

(C) A nonoriginating material of span 0805, or any of subheadings 2009.11 through 2009.39, used or consumed in the production of a good of subheadings 2009.11 through 2009.39, or a fruit or vegetable juice of any single fruit or vegetable, fortified with minerals or vitamins, concentrated or unconcentrated, of subspan 2106.90 or 2202.90.

(D) A nonoriginating material of chapter 9 used or consumed in the production of instant coffee, not flavored, of subspan 2101.11.

(E) A nonoriginating material of chapter 15 used or consumed in the production of a good of any of headings 1501 through 1508 1

1 So in original. Probably should be followed by a comma.

1512, 1514, or 1515.

(F) A nonoriginating material of span 1701 used or consumed in the production of a good of any of headings 1701 through 1703.

(G) A nonoriginating material of chapter 17 or span 1805 used in the production of a good of subspan 1806.10.

(H) Nonoriginating peaches, pears, or apricots of chapter 8 or 20, used in the production of a good of span 2008.

(I) A nonoriginating single juice ingredient of span 2009 used or consumed in the production of a good of—

(i) subspan 2009.90, or tariff item 2106.90.54 (concentrated mixtures of fruit or vegetable juice, fortified with minerals or vitamins); or

(ii) tariff item 2202.99.37 (mixtures of fruit or vegetable juices, fortified with minerals or vitamins).

(J) A nonoriginating material of any of headings 2203 through 2208 used or consumed in the production of a good provided for under span 2207 or 2208.

(3) Goods provided for under chapters 1 through 27

(4) Textile or apparel goods

(A) Goods classified under chapters 50 through 60

(B) Goods classified under chapters 61 through 63

(i) Goods classified under chapters 50 through 60 or span 9619

(ii) Goods classified under chapters 61 through 63

(g) Fungible goods and materials

(1) Fungible materials used in production

(2) Fungible goods commingled and exported

(3) Use of inventory management method

(h) Accessories, spare parts, tools, and instructional or other information materials

(1) In generalSubject to paragraph (2), accessories, spare parts, tools, or instructional or other information materials delivered with a good shall—

(A) be treated as originating if the good is an originating good;

(B) be disregarded in determining whether a good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries or satisfies a process or change in tariff classification set forth in Annex 4–B of the USMCA; and

(C) be taken into account as originating or nonoriginating materials, as the case may be, in calculating any applicable regional value span of the good set forth in Annex 4–B of the USMCA.

(2) ConditionsParagraph (1) shall apply only if—

(A) the accessories, spare parts, tools, or instructional or other information materials are classified with and delivered with, but not invoiced separately from, the good; and

(B) the types, quantities, and value of the accessories, spare parts, tools, or instructional or other information materials are customary for the good.

(i) Packaging materials and containers for retail sale

(j) Packing materials and containers for shipment

(k) Indirect materials

(l) Transit and transshipmentA good that has undergone production necessary to qualify as an originating good under subsection (c) shall not be considered to be an originating good if, subsequent to that production, the good—

(1) undergoes further production or any other operation outside the territory of a USMCA country, other than—

(A) unloading, reloading, separation from a bulk shipment, storing, labeling, or marking, as required by a USMCA country; or

(B) any other operation necessary to preserve the good in good condition or to transport the good to the territory of the importing USMCA country; or

(2) does not remain under the control of customs authorities in a country other than a USMCA country.

(m) Goods classifiable as goods put up in sets

(1) Goods other than textile or apparel goods

(A) each of the goods in the set is an originating good; or

(B) the total value of the nonoriginating goods in the set does not exceed 10 percent of the value of the set.

(2) Textile or apparel goodsNotwithstanding the rules set forth in Annex 4–B of the USMCA, goods classifiable as goods put up in sets for retail sale as provided for in rule 3 of the General Rule of Interpretation of the HTS shall not be considered to be originating goods unless—

(A) each of the goods in the set is an originating good; or

(B) the total value of the nonoriginating goods in the set does not exceed 10 percent of the value of the set.

(n) Nonqualifying operationsA good shall not be considered to be an originating good merely by reason of—

(1) mere dilution with water or another substance that does not materially alter the characteristics of the good; or

(2) any production or pricing practice with respect to which it may be demonstrated, by a preponderance of the evidence, that the object of the practice was to circumvent this section.

(o) Effective date

(1) In generalThis section shall—

(A) take effect on the date on which the USMCA enters into force; and

(B) apply with respect to a good entered for consumption, or withdrawn from warehouse for consumption, on or after that date.

(2) Transition from NAFTA treatment

(Pub. L. 116–113, title II, § 202, Jan. 29, 2020, 134 Stat. 20; Pub. L. 116–260, div. O, title VI, § 601(b), Dec. 27, 2020, 134 Stat. 2150.)