CUSMA PART 5 Flashcards
CUSMA Agreement text is divided into the following 34 chapters and 4 annexes.
Chapter 1 Initial Provisions and General Definitions
Chapter 2 National Treatment and Market Access for Goods
Chapter 3 Agriculture
Chapter 4 Rules of Origin
Chapter 5 Origin Procedures
Chapter 6 Textile and Apparel Goods
Chapter 7 Customs Administration and Trade Facilitation
Chapter 8 Recognition of the Mexican State’s Direct, Inalienable, and Imprescriptible Ownership of Hydrocarbons
Chapter 9 Sanitary and Phytosanitary Measures
Chapter 10 Trade Remedies
Chapter 11 Technical Barriers to Trade
Chapter 12 Sectoral Annexes
Chapter 13 Government Procurement
Chapter 14 Investment
Chapter 15 Cross-Border Trade in Services
Chapter 16 Temporary Entry for Business Persons
Chapter 17 Financial Services
Chapter 18 Telecommunications
Chapter 19 Digital Trade
Chapter 20 Intellectual Property Rights
Chapter 21 Competition Policy
Chapter 22 State-Owned Enterprises and Designated Monopolies
Chapter 23 Labour
Chapter 24 Environment
Chapter 25 Small and Medium-Sized Enterprises
Chapter 26 Competitiveness
Chapter 27 Anticorruption
Chapter 28 Good Regulatory Practices
Chapter 29 Publication and Administration
Chapter 30 Administrative and Institutional Provisions
Chapter 31 Dispute Settlement
Chapter 32 Exceptions and General Provisions
Chapter 33 Macroeconomic Policies and Exchange Rate Matters
Chapter 34 Final Provisions
Annex I Investment and Services Non-Conforming Measures
Annex II Investment and Services Non-Conforming Measures
Annex III Financial Services Non-Conforming Measures
Annex IV State-Owned Enterprises and Designated Monopolies Non-Conforming Activities
What does ORIGINATING mean?
qualifying under the rules of origin set out in Chapter 4 (Rules of Origin) or Chapter 6 (Textile and Apparel Goods).
This means that in order for a good to be considered originating and eligible for the preferential duty rates under the CUSMA, that good must meet the requirements or rules of Chapters 4 or 6.
What does TERRITORY mean for Canada?
(i) the land territory, air space, internal waters, and territorial sea of Canada,
(ii) the exclusive economic zone of Canada, and
(iii) the continental shelf of Canada, as determined by its domestic law and consistent with international law.
What does TERRITORY mean for Mexico?
(i) the land territory, including the states of the Federation and Mexico City,
(ii) the air space, and
(iii) the internal waters, territorial sea, and any areas beyond the territorial seas of Mexico within which Mexico may exercise sovereign rights and jurisdiction, as determined by its domestic law, consistent with the United Nations Convention on the Law of the Sea, done at Montego Bay on December 10, 1982; and
What does TERRITORY mean for US?
(i) the customs territory of the United States, which includes the 50 states, the District of Columbia, and Puerto Rico,
(ii) the foreign trade zones located in the United States and Puerto Rico, and
(iii) the territorial sea and air space of the United States and any area beyond the territorial sea within which, in accordance with customary international law as reflected in the United Nations Convention on the Law of the Sea, the United States may exercise sovereign rights or jurisdiction.
The CUSMA Rules of Origin Criteria A
Criterion A indicates that the goods are “wholly obtained or produced entirely in the territory of one or more of the Parties, as defined in Article 4.3 (Wholly Obtained or Produced Goods).”
“Wholly obtained” means that the goods contain no foreign materials or parts from outside Canada, the United States or Mexico.
Goods wholly obtained or produced entirely in the territory of one or more of the Parties means:
(a) a mineral good or other naturally occurring substance extracted or taken from there;
(b) a plant, plant good, vegetable, or fungus, grown, cultivated, harvested, picked, or gathered there;
(c) a live animal born and raised there;
(d) a good obtained from a live animal there;
(e) an animal obtained by hunting, trapping, fishing, gathering, or capturing there;
(f) a good obtained from aquaculture there;
(g) fish, shellfish, or other marine life taken from the sea, seabed or subsoil outside the territories of the Parties and, under international law, outside the territorial sea of non-Parties, by vessels that are registered, listed, or recorded with a Party and entitled to fly the flag of that Party;
(h) a good produced from goods referred to in subparagraph (g) on board a factory ship that is registered, listed, or recorded with a Party and entitled to fly the flag of that Party;
(i) a good other than fish, shellfish, and other marine life taken by a Party or a person of a Party from the seabed or subsoil outside the territories of the Parties, provided that Party has the right to exploit that seabed or subsoil;
(j) waste and scrap derived from:
(i) production there, or
(ii) used goods collected there, provided the goods are fit only for the recovery of raw materials; and
(k) a good produced there, exclusively from goods referred to in subparagraphs (a) through (j), or from their derivatives, at any stage of production.
Simply purchasing the good in one of the CUSMA countries does not render it “wholly produced or obtained”.
Although Criterion A is the most straightforward criterion, it is the one most often misused.
You should be aware that goods such as machinery and electronic items would almost never qualify under Criterion A.
The CUSMA Rules of Origin CriteriaB
Criterion B indicates that the goods are produced entirely in Canada, Mexico, or the United States, and satisfy a specific CUSMA rule of origin based on the tariff classification of the finished good and any non-originating parts or materials that were incorporated into the finished good.
Use of Criterion B on the CUSMA certification of origin indicates that one of the specific CUSMA rules of origin listed in Annex 4 –B Product Specific Rules of Origin was met. These rules of origin may include a tariff shift, a Regional Value Content (RVC) requirement, or a combination of the two.
Tariff shift and RVC were reviewed in Module 4.4, Lesson 1.
Example of a Tariff Shift
Have a look at headings 73.09 to 73.11 in the CUSMA product specific rules of origin listed in Annex 4 - B and reproduced below:
73.09 - 73.11 A change to heading 73.09 through 73.11 from any heading outside that group.
This means that goods classified in headings 73.09 to 73.11 may contain parts or materials from a non-CUSMA country and still qualify for entry under the CUSMA, as long as the non-CUSMA parts or materials are themselves classified under any heading other than headings 73.09 to 73.11.
It is important to keep in mind that each non-CUSMA part or material must undergo the tariff shift or shift, indicated as a result of production occurring entirely in the territory of Canada, the United States, or Mexico.
goods may qualify under the first part of the rule of origin, a tariff shift rule. However, if the tariff shift rule does not apply, the producer may attempt to qualify goods under the second part of the rule. In the second part of this rule, no tariff classification change, or shift, is required as long as the RVC requirement is met.
The CUSMA Rules of Origin Criteria C
Criterion C requires that the goods be produced entirely in the territory of one or more of the CUSMA countries exclusively from originating materials. A non-originating material may be allowed, provided that it undergoes transformation in a CUSMA country and originates under one of the CUSMA rules of origin.
The difference between Criterion B and C is:
Criterion B is used when goods are produced in a CUSMA country partly or completely with non-CUSMA materials and one of the product specific CUSMA Rules of Origin is met.
Criterion C is used when all materials used to produce the final product are originating. Each component must originate under CUSMA.
The CUSMA Rules of Origin Criteria C
Criterion D covers goods that are produced in the territory of one or more of the CUSMA countries but that do not meet the applicable rule of origin due to non-originating materials not undergoing the required tariff shift because of one of the following reasons:
the goods were imported into a CUSMA country in an unassembled or disassembled form but were classified pursuant to General Interpretive Rule 2(a) as an assembled good, or
the goods incorporate one or more non-originating materials, classified as “parts” under the HS and therefore could not undergo a tariff classification change because the heading or subheading used provides for both the good and its parts.
In both instances, the Regional Value Content (RVC) of the good cannot be less than 60% when the transaction value method is used or 50% when the net cost method is used.
Criterion D is rarely used. As well, it cannot be used for wearing apparel of Chapters 61 and 62 or for textile articles of Chapter 63.
What does the De Minimis rule allow for?
the De Minimis rule allows goods to qualify as originating, as long as the non-originating parts and materials that do not undergo the required tariff shift, are not more than a certain percentage;
What are fungible goods?
fungible goods are goods that are interchangeable for commercial purposes and have essentially identical properties
Are spare parts and tool considered originating?
under certain conditions, accessories, spare parts, tools or instructional or other information materials that are delivered with goods and form part of the good’s standard accessories, spare parts, or tools, are considered originating if the good originates;
if US and Mexico parts are included in the finished product how is is UST or MXT Tariff Treatment applied?
if US and Mexico parts and materials are included in a finished product, the country of last production determines if UST or MXT applies.
Sets under GIR 3
sets of goods classified under GIR 3 may have a 10% De Minimis rule applied
