Uniform Regulations for Chapters Three and Five

Article VI, Origin Verifications: after paragraph 31, add a new paragraph 32 as follows:

32. Each Party shall, through its customs administration when conducting a verification of origin to which Generally Accepted Accounting Principles may be relevant, apply and accept the Generally Accepted Accounting Principles applicable in the territory of the Party in which the good is produced or in which the exporter is located, as the case may be.

Uniform Regulations for Chapter Four

Section 2, Definitions: delete the term "and" at the end of paragraph(6)(d), delete the period and add the term "; and" at the end of paragraph (6)(e) and add a new paragraph (6)(f) as follows:

6. total cost includes the impact of inflation as recorded on the books of the producer, if recorded in accordance with the Generally Accepted Accounting Principles of the producer's country.

Section 7, Materials: delete the existing subsection 16 and replace with the following:

16. Subject to subsection (16.1), for purposes of determining whether a good is an originating good,

    1. where originating materials and non-originating materials that are fungible materials

       1. are withdrawn from an inventory in one location and used in the production of the good, or

       2. are withdrawn from inventories in more than one location in the territory of one or more of the NAFTA countries and used in the production of the good at the same production facility, 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 X; and

2. 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 NAFTA 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 another NAFTA 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 X.

(16.1) Where fungible materials referred to in paragraph (16) (a) and fungible goods referred to in paragraph (16)(b) are withdrawn from the same inventory, the inventory management method used for the materials must be the same as the inventory management method used for the goods, and where the averaging method is used, the respective averaging periods for fungible materials and fungible goods are to be used.

(16.2) A choice of inventory management methods under subsection (16) shall be considered to have been made when the customs administration of the NAFTA country into which the good is imported is informed in writing of the choice during the course of a verification of the origin of the good.

Section 12, Automotive Parts Averaging: in subsection (5), delete the existing paragraphs (a) and (b) and replace with the following:

1. with respect to goods referred to in paragraph (4)(a), (b) or (d), or paragraph 4(e) or (f) where the goods in that category are in a category referred to in paragraph 4(a) or (b), any month, any consecutive three month period that is evenly divisible into the number of months of the producer's fiscal year, or of the fiscal year of the motor vehicle producer to whom those goods are sold, remaining at the beginning of that period, or the fiscal year of that motor vehicle producer to whom those goods are sold; and

2. with respect to goods referred to in paragraph (4)(c), or paragraph (4)(e) or (f) where the goods in that category are in a category referred to in paragraph (4)(c), any month, any consecutive three month period that is evenly divisible into the number of months of the producer's fiscal year, or of the fiscal year of the motor vehicle producer to whom those goods are sold, remaining at the beginning of that period, or the fiscal year of that producer or of that motor vehicle producer to whom those goods are sold.

Schedule VII, Reasonable Allocation of Costs: after section 4, add a new section 4.1 and amend section 5 as follows:

4.1 Notwithstanding section 3 and 7, where a producer allocates, for an internal management purpose, costs to a good that is not produced in the period in which the costs are expensed on the books of the producer (such as costs with respect to research and development, and obsolete materials), those costs shall be considered reasonably allocated if

1. for purposes of subsection 6(11), they are allocated to a good that is produced in the period in which the costs are expensed, and

2. the good produced in that period is within a group or range of goods, including identical goods or similar goods, that is produced by the same industry or industry sector as the goods to which the costs are expensed.

5. Any cost allocation method referred to in section 3, 4 or 4.1 that is used by a producer for the purposes of these Regulations shall be used throughout the producer's fiscal year.

Schedule VII, Reasonable Allocation of Costs: delete the existing subsection 6(b) and replace with the following:

2. gains or losses resulting from the disposition of a discontinued operation, except gains or losses related to the production of the good;

Schedule X, Inventory Management Methods: delete the existing section 3 and replace with the following:

3. A producer of a good, or a person from whom the producer acquired the fungible materials that are used in the production of the good, may choose only one of the inventory management methods referred to in section 2, and, if the averaging method is chosen, only one averaging period in each fiscal year of that producer or person for the materials inventory.

Schedule X, Inventory Management Methods: delete the existing section 12 and replace with the following:

12. An exporter of a good, or a person from whom the exporter acquired the fungible good, may choose only one of the inventory management methods referred to in section 11, including only one averaging period in the case of the average method, in each fiscal year of that exporter or person for each finished goods inventory of the exporter or person.