h. are from the same family (children, siblings, parents, grandparents or spouses);
generally accepted accounting principles: the consensus recognized to the substantial support authorized in the territory of a Party, with respect to the recording of revenues, expenses, costs, assets and liabilities; disclosure of information; and preparation of financial statements. These standards may be broad guidelines of general application, as well as detailed practical rules and procedures;
production: the growing, raising, extracting, harvesting, fishing, hunting, manufacturing, processing, or assembling of a good;
producer: a person who cultivates, raises, extracts, harvests, fishes, hunts, manufactures, processes or assembles a good; producer: a person who cultivates, raises, extracts, harvests, fishes, hunts, manufactures, processes or assembles a good;
royalties: payments made for the exploitation of intellectual property rights;
used: employed or consumed in the production of goods;
transaction value of a good: the price actually paid or payable for a good related to the transaction of the producer of the good in accordance with the principles of Article 1 of the Customs Valuation Code, adjusted in accordance with the principles of Article 8.1, 8.3 and 8.4 thereof, without considering that the good is sold for export. For the purposes of this definition, the seller referred to in the Customs Valuation Code shall be the producer of the good; and
transaction value of a material: the price actually paid or payable for a transaction-related material by the producer of the good in accordance with the principles of Article 1 of the Customs Valuation Code, adjusted in accordance with the principles of Article 8.1, 8.3 and 8.4 thereof, without regard to whether the material is sold for export. For the purposes of this definition, the seller referred to in the Customs Valuation Code shall be the supplier of the material and the buyer referred to in the Customs Valuation Code shall be the producer of the good.
Article 6-02. Implementation Tools
For purposes of this chapter:
a) The basis for tariff classification is the Harmonized System;
b) The determination of the transaction value of a good or a material shall be made in accordance with the principles of the Customs Valuation Code; and
c) All costs referred to in this chapter shall be recorded and maintained in accordance with generally accepted accounting principles applicable in the territory of the Party where the good is produced.
Article 6-03. Originating Goods
1. A good shall be originating if:
a) Is wholly obtained or produced entirely in the territory of one or both parties, according to the definition in article 6-01;
b) Is produced in the territory of one or both parties exclusively from materials that qualify as originating under this chapter;
c) Is produced in the territory of one or both parties using non-originating materials that conform to a change in tariff classification and other requirements as specified in the annex to this article, and the good complies with the other applicable provisions of this chapter;
d) Is produced in the territory of one or both parties using non-originating materials that conform to a change in tariff classification and other requirements, and the good satisfies a regional value content, as specified in the annex to this article and with the other applicable provisions of this chapter;
e) Is produced in the territory of one or both parties and complies with a regional value content, as specified in the annex to this article, and meets the other applicable provisions of this chapter; or
f) Except for the goods covered in Chapters 61 to 63 of the Harmonized System; the good is produced in the territory of one or both of the Parties but one or more of the non-originating materials used in the production of the good does not satisfy a change in tariff classification because:
i) The good was imported into the territory of a party without assembling or desensamblado but has been classified as an assembled good pursuant to rule 2 (a) of the general rules for the interpretation of the Harmonized System; or
ii) The heading for the good is the same for both the good and for parts and that its heading is not divided into subheadings subheading or is the same for both the good and for its parts;
Provided that the regional value content of the good determined in accordance with article 6-04, is not less than, unless otherwise specified in articles 6 and 15 620, or to 50 per cent is used where the transaction value method or the 41.66 per cent where the net cost method used, and the good complies with the other applicable provisions of this chapter.
2. For purposes of this chapter, the production of a good from non-originating materials that conform to a change in tariff classification and other requirements as specified in the annex to this article shall be done entirely in the territory of one or both of the parties and each of the regional value content of a good shall be met entirely in the territory of one or both parties.
Article 6-04. 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 the producer of the good in accordance with the transaction value method set out in paragraph 2 or the net cost method set out in paragraph 4.
2. For the purposes of calculating the regional value content of a good on the basis of the transaction value method shall apply to the following formula:
VCR = VT-VMN x 100
VT
Where:
VCR: regional value content expressed as a percentage.
VT: the transaction value of the good f.o.b adjusted on the basis, except as provided in paragraph
VMN: the value of the non-originating materials used by the producer in the production of the good; determined in accordance with article 6-05.
3. For purposes of paragraph 2, when the producer of the good does not export directly, the transaction value shall be adjusted to the point at which the buyer receives the good within the territory where the producer is located.
4. For the purposes of calculating the regional value content of a good on the basis of the net cost method is applied to the following formula:
VCR = CN - VMN x 100
CN
Where:
VCR: regional value content expressed as a percentage.
CN: net cost of the good.
VMN: the value of the non-originating materials used by the producer in the production of the good; determined in accordance with article 6-05.
5. Each Party shall provide that an exporter or producer calculate the regional value content of a good solely on the basis of the net cost method set out in paragraph 4, when:
a) No transaction value because the good is not a sale;
b) The transaction value of a good cannot be determined by any restrictions on the use of the assignment or good by the buyer except that:
i) Imposed or required by law or by the authorities of the Party in which the buyer of the good is located;
ii) Limit the geographical territory where the goods may be resold; or
iii) Not substantially affect the value of the good;
c) The sale price or any condition or consideration of whose value cannot be determined in relation to the good;
d) Will accrue directly or indirectly to the seller any share of the proceeds of the sale of or any subsequent assignment or use of the good by the buyer, unless an appropriate adjustment can be made in accordance with article 8 of the Customs Valuation Code;
e) The buyer and seller are related persons and the relationship between them influences the price, except as provided in Article 1.2 of the Customs Valuation Code;
f) The good is sold by the producer to a related person and the sales volume in units of a number of identical or similar goods sold to related persons during the six-month period immediately preceding the month in which the good is sold by the producer, exceeds 85 per cent of the producer's total sales of such goods during that period;
g) The exporter or producer chooses to accumulate the regional value content of the good in accordance with article 6-08;
h) The either:
i) Either a motor vehicle falling under heading 87.01 or 87.02, subheading 8703.21 through 8703.90, or the heading 87.04 87.05 or 87.06; or
ii) Is identified in annex 1 to article 6 and 15 or in Annex 2 to the arts and is for use in a motor vehicle falling within heading 87.01 or 87.02, subheading 8703.21 through 8703.90, or the heading 87.04 87.05 or 87.06; or
i) An intermediate material is subject to a regional value content.
Article 6-05. Value of the Materials
1. The value of a material:
a) It shall be the transaction value of the material; or
b) In the event that there is no transaction value or the transaction value of the material cannot be determined according to the principles of article 1 of the Customs Valuation Code shall be calculated in accordance with the principles of articles 2 to 7 of this Code.
2. When they are not classified in subparagraphs (a) or (b) of paragraph 1, the value of a material shall include:
a) The freight and insurance costs, packing and all other costs incurred
In transporting the material importation to the port in the Party where the producer of the good is located, except as provided in paragraph 3; and
b) The cost of waste and scrap resulting from the use of the material in the production of the good, minus any recovery of these costs, provided the recovery does not exceed 30% of the value of the material determined in accordance with paragraph 1.
3. When the producer of a good acquires non-originating materials within the territory of the party where it is located, the value of a material shall not include freight and insurance costs, packing and all other costs incurred in transporting the material from the warehouse of the supplier to the place where the producer is located.
4. For purposes of calculating the regional value content under article 6-04, except as provided in paragraph 2 of Article 6 and 15, for a motor vehicle identified in paragraph 3 of Article 6 and 15, or a component identified in annex 2 to the arts, the value of the non-originating materials used by the producer in the production of a good shall not include the value of non-originating materials used by:
a) Another producer in the production of an originating material that is acquired and used by the producer of the good in the production of that good; or
b) The producer of the good in the production of an originating intermediate material.
Article 6-06. De Minimis
1. A good originating shall be considered if the value of all the non-originating materials used in the production of the good that do not satisfy the applicable change in tariff classification established in the annex to article 6-03 does not exceed 7 percent of the transaction value of the good adjusted on the basis indicated in paragraph 2 or 3 as the case may be, article 6-04 or, in the cases referred to in subparagraphs (a) to (e) of paragraph 5 of Article 6-04, if the value of all the non-originating materials referred to above does not exceed 7 percent of the total cost of the good.
2. If the good is subject to a regional value content, the value of such non-originating materials shall be taken into account in calculating the regional value content of the good and the good must satisfy all other applicable requirements of this chapter.
3. A good that is subject to a regional value content established in the annex to article 6-03 does not meet, if the value of all the non-originating materials does not exceed 7 percent of the transaction value of the good adjusted on the basis indicated in paragraph 2 or 3 as the case may be, article 604, or in the cases referred to in subparagraphs (a) to (e) of paragraph 5 of Article 6-04, if the value of all the non-originating materials referred to above does not exceed 7 percent of the total cost of the good.
4. Paragraph 1 does not apply to:
a) Goods covered in Chapters 50 to 63 of the Harmonized System; or
b) A non-originating material used in the production of goods falling within chapters 01 to 24 of the Harmonized System unless the non-originating material is included in a different subheading than the good for which the origin is being determined under this article.
5. A good falling within 50 chapters to 63 of the harmonized system that is not because originating fibres or yarns used in the production of the material that determines the tariff classification of the good do not meet the change in tariff classification set out in the annex to article 6-03, shall be considered as originating if the total weight of fibers or yarns in material that does not exceed 7 percent of the total weight of that material.
Article 6-07. Intermediate Material
1. For purposes of calculating the regional value content under article 6-04, the producer of a good may designate as an intermediate material, except the elements listed in Annex 2 to the arts and the goods falling within heading 87.06, intended for use in a motor vehicles covered under paragraph 3 of Article 6 and 15, of his own manufacture any material that is used in the production of a good provided that such material satisfies the requirements in article 6-03.
2. Where an intermediate material is subject to a regional value content in accordance with the annex to article 6-03, it shall be calculated on the basis of the net cost method set out in article 6 -
3. For purposes of calculating the regional value content of the good or the value of an intermediate material shall be the total cost that can reasonably be allocated to that intermediate material in accordance with the annex to article 6-04.
4. If a material designated as an intermediate material is subject to a regional value content, any other material of his own that manufacture is subject to a regional value content, used in the production of intermediate material that may itself be designated by the producer as an intermediate material.
5. Where there is a good referred to in paragraph 2 of Article 6 and 15 as an intermediate material, such designation shall only apply to the calculation of the net cost of the good; and the value of the non-originating materials shall be determined in accordance with paragraph 2 of Article 6 and 15.
Article 6-08. Cumulation
For purposes of determining whether a good is originating, an exporter or producer may accumulate its production with that of one or more producers in the territory of one or both parties, of materials that are incorporated into the good so that the production of the materials is considered as done by that exporter or producer provided that it complies with the provisions of article 6-03.
Article 6-09. Fungible Goods and Materials
1. For purposes of determining whether a good is originating, when used in the production of originating fungible and non-originating materials are physically combined in mixed or inventory, the origin of the materials may be determined by one of the inventory management methods set out in paragraph 3.
2. Where originating and non-originating fungible goods are physically combined in mixed or inventory, and prior to their exportation do not undergo any production process or any other operation in the territory of the Party in which they were physically mixed or combined, other than reloading unloading, or any other movement necessary to maintain the goods in good condition or to transport them to the territory of the other party, the origin of the good may be determined by one of the inventory management methods set out in paragraph 3.
3. The inventory management methods applicable for fungible goods or materials shall be:
a. "FIFO" (first-in-first-out) is the method of inventory management whereby the origin of the number of units of materials or consumables first received into inventory is considered to be the origin, in equal number of units, of the materials or consumables first removed from inventory;
b. "LIFO" (last-in-first-out) is the method of inventory management whereby the origin of the number of units of the materials or consumables last received into inventory is considered as the origin, in equal number of units, of the materials or consumables first removed from inventory; or
c. "averaging" is the method of inventory management whereby, except as provided in paragraph 4, the determination of whether materials or consumables are originating shall be made through the application of the following formula:
PMN = TMO x 100
TMOYN
Where:
PMN: average of the fungible materials or goods originating.
TMO: total of units of the fungible materials or goods originating forming part of inventory prior to departure.
TMOYN: the total amount of units of the fungible materials or goods originating and non-originating forming part of the inventory prior to departure.
4. If the good is subject to a regional value content, the determination of the non-originating fungible materials shall be conducted through the application of the following formula:
PMN = TMN x 100
TMOYN
where:
PMN: average of non-originating materials.
TMN: total value of non-originating consumables forming part of the pre-departure inventory.
TMOYN: total value of originating and non-originating consumables forming part of the pre-departure inventory.
5. Selected once one of the inventory management methods set out in paragraph 3, it shall be used through all the fiscal year or period.
Article 6-10. Sets or Assortments
1. The sets or assortments of goods that are classified pursuant to rule 3 of the general rules for the interpretation of the Harmonized System. as well as goods whose description according to the nomenclature of the Harmonized System is specifically that of a set or assortment, calificarán as originating, provided that each of the goods in the set or assortment complies with the rule of origin that has been established for each of the goods in this chapter.
2. Notwithstanding paragraph 1. a set or assortment of goods originating shall be considered if the value of all non-originating goods used in the training of the Set assortment or does not exceed 7 percent of the transaction value of the Set or assortment, adjusted on the basis indicated in paragraph 2 or 3 as the case may be, article 6-04, or in the cases referred to in subparagraphs (a) to (e) of paragraph 5 of Article 6-04, if the value of all the non-originating goods referred to above does not exceed 7 percent of the total cost of the Set or assortment.
3. The provisions of this article shall prevail over the specific rules established in the annex to article 6-03.
Article 6-11. Indirect Materials
Indirect materials shall be treated as originating without taking into account the place of production and the value of such materials shall be the cost of the same place in the accounting records of the producer of the good.
Article 6-12. Spare Parts and Accessories, Tools or Alterations
1. The renovation or accessories, spare parts and tools with the good delivered as part of spare parts and accessories, tools or usual renovation good shall not be taken into account in determining whether all the non-originating materials used in the production of the good satisfy the applicable change in tariff classification established in the annex to article 6-03, provided that:
a) Renovation or accessories, spares and tools are not invoiced separately from the good regardless of whether they are separately itemized breakdown or in the invoice; and
b) The quantity and value of spares or the accessories, tools and alterations are customary for the good.
2. If the good is subject to a regional value content, the value of the renovation or accessories, spare parts and tools shall be taken into account as originating or non-originating materials as the case may be in calculating the regional value content of the good.
Article 6-13. Packages and Packing Materials for Retail Sale.
1. Containers and packaging materials in which a good is presented for retail sale, when classified with the good they contain, shall not be taken into account in deciding whether all non-originating materials used in the production of the good comply with the corresponding change in tariff classification set out in the Annex to Article 6-03.
2. Where the good is subject to a regional value content, the value of the retail containers and packaging materials shall be considered as originating or non-originating, as the case may be, in calculating the regional value content of the good.
Article 6-14. Packing Materials and Containers for Shipment
1. Containers and packing materials for the transport of goods shall not be taken into account in determining whether all the non-originating materials used in the production of the good satisfy the applicable change in tariff classification established in the annex to article 6-03.
2. If the good is subject to a regional value content, the value of the packaging materials for the transport of goods shall be considered as originating or non-originating, as the case may be in calculating the regional value content of the good and the value of such materials shall be responsible for the costs of the same place in the accounting records of the producer of the good.
Article 6-15. Goods of the Automotive Industry
1. For the purposes of this article, the following definitions shall apply:
chassis: the bottom plate of a motor vehicle;
class of motor vehicles: any of the following categories of motor vehicles:
a. motor vehicles covered by subheading 8701.20, Mexican tariff item 8702.10.03 or 8702.90.04 or, in the case of Nicaragua, subheading 8702.10 or 8702.90, when they are motor vehicles designed for the transport of 16 persons or more, or subheading 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90 or heading 87.05 or 87.06;
b. motor vehicles of subheading 8701.10 or 8701.30 through 8701.90;
c. motor vehicles falling within Mexican tariff item 8702.10.01, 8702.10.02, 8702.90.01, 8702.90.02 or 8702.90.03 or, in the case of Nicaragua, subheading 8702.10 or 8702.90, when they are motor vehicles designed for the transport of fifteen persons or less, or subheading 8704.21 or 8704.31; or
d. motor vehicles falling within subheadings 8703.21 through 8703.90;
motor vehicle assembler: a producer of motor vehicles and any related persons or joint ventures in which the producer participates;
original equipment: material that is incorporated into a motor vehicle prior to the first transfer of title or consignment of the motor vehicle to a person other than a motor vehicle assembler. Such material is:
(a) a good covered by schedule 1 to this article; or
b. an assembly of automotive components, an automotive component or a material listed in Annex 2 to this Article;
model line: a group of motor vehicles having the same platform or the same model name;
model name: the word or group of words, letter or letters, number or numbers or similar designation assigned to a motor vehicle by a marketing division of a motor vehicle assembler to:
a. differentiate the motor vehicle from other motor vehicles using the same platform design;
b. associate the motor vehicle with other motor vehicles that use a different platform design; or
c. indicate a platform design;
platform: the primary assembly of a load-bearing structural assembly of a motor vehicle that determines the basic size of that vehicle and forms the structural base that supports the powertrain and serves to join the motor vehicle in various types of frames, such as body mount, dimensional frame, and unit body;
motor vehicle: goods of heading 87.01, 87.02, 87.03, 87.04, 87.05 or 87.06.
2. For purposes of calculating the regional value content, in accordance with the net cost method set forth in article 6-04, for:
a. goods that are motor vehicles included in Mexican tariff item 8702.10.01, 8702.10.02, 8702.90.01, 8702.90.02 or 8702.90.03 or, in the case of Nicaragua, in subheading 8702.10 or 8702.90, when they are motor vehicles designed for the transportation of fifteen persons or less, or in subheadings 8703.21 through 8703.90, 8704.21 or 8704.31; or
b. goods covered by Annex 1 to this article, when they are subject to a regional value content and are intended to be used as original equipment in the production of goods that are motor vehicles covered by Mexican tariff item 8702. 10.01, 8702.10.02, 8702.90.01, 8702.90.02 or 8702.90.03 or, in the case of Nicaragua, in subheading 8702.10 or 8702.90, when they are motor vehicles designed for the transport of fifteen persons or less, or in subheadings 8703.21 through 8703.90, 8704.21 or 8704.31;
the value of the non-originating materials used by the producer in the production of those goods shall be the sum of the values of the non-originating materials, determined in accordance with paragraphs 1 and 2 of Article 6-05, imported from non-Parties covered in Annex 1 to this Article and used in the production of those goods or in the production of any materials used in the production of those goods.
3. For purposes of calculating the regional value content, in accordance with the net cost method set out in article 6-04, for goods that are motor vehicles covered by heading 87.01, Mexican tariff item 8702.10.03 or 8702.90.04 or, in the case of Nicaragua, subheading 8702.10 or 8702.90, when they are motor vehicles designed for the transport of 16 persons or more, or subheading 8704. 10, 8704.22, 8704.23, 8704.32 or 8704.90 or heading 87.05 or 87.06, or for a component identified in annex 2 to this article to be used as original equipment in the production of the motor vehicles described in this paragraph, the value of the non-originating materials used by the producer in the production of the good shall be the sum of:
(a) for each material used by the producer of the good and listed in Annex 2 to this Article, whether or not produced by that producer, at the producer's option, and determined in accordance with Article 6-05 or paragraph 3 of Article 6-07, either of the following two values:
(i) the value of the non-originating material; or
(ii) the value of the non-originating materials used in the production of that material; and (b) the value of any other non-originating materials used in the production of that material.