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(F) For the purposes of calculating the regional value content under paragraphs (A) through (E) of this subdivision, the provisions of subdivision (c)(i) (regional value content), (c)(viii) (value of materials used in production), (c)(x)(further adjustments to the value of materials) and (c)(ix) (intermediate materials) and subdivision (N) on averaging apply.
(G) For the purposes of this note, a passenger vehicle or light truck is originating only if the parts listed in column 1 of Table A.2 of the automotive appendix, as may be further described in applicable regulations, including provisions of the Uniform Regulations, used in the production of a passenger vehicle or light truck are originating. Such a part is originating only if it satisfies the regional value content requirement in subdivision (B), except for an advanced battery.
(H) For the purposes of calculating the regional value content under subdivision (c)(i) of this note, for a part under column 1 of Table A.2 of the automotive appendix, the value of nonoriginating materials (VNM) is, at the vehicle producer’s option:
(1) the value of all non-originating materials used in the production of the part; or
(2) the value of any non-originating components used in the production of the part that are listed under Column 2 of Table A.2 of such appendix.
(I) Further to subparagraph (H) above, the regional value content may also be calculated, at the producer’s option, for all parts under column 1 of Table A.2 of the automotive appendix as a single part, using the sum of the net cost of each part listed under Column 1 of Table A.2 of such appendix, and when calculating the VNM, at the producer’s option:
(1) the sum of the value of all non-originating materials used in the production of the parts listed under Column 1; or
(2) the sum of the value of only those non-originating components under Column 2 of Table A.2 of the automotive appendix, used in the production of the parts listed under Column 1 of such table.
If this regional value content meets the required threshold under subparagraph (I)(2), all parts under Table A.2 of such appendix are originating and the passenger vehicle or light truck will be considered to have met the requirement under subparagraph (H), above.
(J) Notwithstanding any other provision of this note, the regional value content requirement for a heavy truck is:
(1) 60 percent under the net cost method, beginning on July 1, 2020;
(2) 64 percent under the net cost method, beginning on July 1, 2024; or
(3) 70 percent under the net cost method, beginning on July 1, 2027, and thereafter.
(K) Notwithstanding any other provision of this note, the regional value content requirement for a part listed in Table D of the automotive appendix that is for use in a heavy truck is:
(1) 60 percent under the net cost method or 70 percent under the transaction value method, if the corresponding rule in subdivision (o) of this note includes a transaction value method, beginning on July 1, 2020;
(2) 64 percent under the net cost method or 74 percent under the transaction value method, if the corresponding rule in subdivision (o) of this note includes a transaction value method, beginning on July 1, 2024; and
(3) 70 percent under the net cost method or 80 percent under the transaction value method, if the corresponding rule in subdivision (o) of this note includes a transaction value method, beginning on July 1, 2027, andthereafter.
(L) Notwithstanding subdivision (o) of this note, the regional value content requirement for a part listed in Table E of the automotive appendix that is for use in a heavy truck is:
(1) 50 percent under the net cost method or 60 percent under the transaction value method, if the corresponding rule in subdivision (o) includes a transaction value method, beginning on July 1, 2020;
(2) 54 percent under the net cost method or 64 percent under the transaction value method, if the corresponding rule in subdivision (o) includes a transaction value method beginning on July 1, 2024; and
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(3) 60 percent under the net cost method or 70 percent under the transaction value method, if the corresponding rule in subdivision (o) includes a transaction value method, beginning on July 1, 2027, and thereafter.
(M) Notwithstanding any other provision of this note, a part of heading 8407 or 8408 or subheading 8708.40, or a chassis classified in subheading 8708.99, that is for use in a heavy truck, is originating only if it satisfies the applicable regional value content requirement in subdivision (B) above.
(iv) Averaging.—
(A) For the purposes of calculating the regional value content of a passenger vehicle, light truck or heavy truck, the calculation may be averaged over the producer’s fiscal year, using any one of the following categories, on the basis of either all motor vehicles in the category or only those motor vehicles in the category that are exported to the territory of one or more of the other USMCA countries:
(1) the same model line of motor vehicles in the same class of vehicles produced in the same plant in the territory of a USMCA country;
(2) the same class of motor vehicles produced in the same plant in the territory of a USMCA country;
(3) the same model line or same class of motor vehicles produced in the territory of a USMCA country; or
(4) any other category as the USMCA countries may decide and provide for in the Uniform Regulations or other appropriate instrument.
(B) For the purposes of calculating the regional value content for an automotive good listed in Tables A.1, B, C, D or E of the automotive appendix, produced in the same plant, or a super-core for a passenger vehicle or light truck, the calculation may be averaged:
(1) over the fiscal year of the motor vehicle producer to whom the good is sold;
(2) over any quarter or month;
(3) over the fiscal year of the producer of the automotive material; or
(4) over any of the categories in subdivision (A)(1) through (A)(4) above,
provided that the good was produced during the fiscal year, quarter, or month forming the basis for the calculation, in which:
(I) the average in subparagraph (A) is calculated separately for those goods sold to one or more motor vehicle producers, or
(II) the average in subparagraph (A) or (B) is calculated separately for those goods that are exported to the territory of another USMCA country.
(v) Steel and aluminum rules.
(A) In addition to the provisions of subdivisions (c) and (o) of this note and other requirements in the automotive appendix, a passenger vehicle, light truck, or heavy truck is originating only if, during a time period provided for in subdivision (v)(B) below, at least 70 percent of:
(1) the vehicle producer’s purchases of steel by value in the territories of the USMCA countries; and
(2) the vehicle producer’s purchases of aluminum by value in the territories of the USMCA countries,
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are of originating goods.
The requirement in this paragraph applies to a vehicle producer’s corporate purchases throughout the territories of the USMCA countries, including if the producer has more than one location in a USMCA country where steel and aluminum is purchased. Such purchases of steel and aluminum include direct purchases, purchases through a services center, and purchases contracted through a supplier. Notwithstanding any other provision of this note, beginning on July 1, 2027, for steel to be considered as originating under this note, all steel manufacturing processes must occur in one or more of the USMCA countries, except for metallurgical processes involving the refinement of steel additives. Such processes include the initial melting and mixing and continues through the coating stage. This requirement does not apply to raw materials used in the steel manufacturing process, including steel scrap; iron ore; pig iron; reduced, processed or pelletized iron ore; or raw alloys.
(B) For the purposes of determining the vehicle producer’s purchases of steel or aluminum in paragraph (v)(A) above, the producer may calculate the purchases:
(1) over the previous fiscal year of the producer;
(2) over the previous calendar year;
(3) over the quarter or month to date in which the vehicle is exported;
(4) over the producer’s fiscal year to date in which the vehicle is exported; or
(5) over the calendar year to date in which the vehicle is exported.
(C) A steel or aluminum calculation based on the producer’s previous fiscal year is valid for the duration of the producer’s current fiscal year.
A steel or aluminum calculation based on the previous calendar year is valid for the duration of the current calendar year.
(D) Regulations, including provisions of the Uniform Regulations, may provide additional descriptions for steel and aluminum subject to paragraph (v)(A) above, such as by tariff provisions or product descriptions, to facilitate implementation of this requirement.
(vi) Labor value content.
(A) In addition to the provisions of subdivision (o) and any other applicable provision of this note, and subject to regulations issued by the Secretary of the Treasury, in consultation with the Secretary of Labor, a passenger vehicle is originating only if the vehicle producer certifies that its production meetsa Labor Value Content (LVC) requirement of:
(1) 30 percent, consisting of at least 15 percentage points of high-wage material and manufacturing expenditures, no more than 10 percentage points of high-wage technology expenditures and no more than 5 percentage points of high-wage assembly expenditures, beginning on July 1, 2020;
(2) 33 percent, consisting of at least 18 percentage points of high-wage material and manufacturing expenditures, no more than 10 percentage points of technology expenditures, and no more than 5 percentage points of high-wage assembly expenditures, beginning on July 1, 2021;
(3) 36 percent, consisting of at least 21 percentage points of high-wage material and manufacturing expenditures, no more than 10 percentage points of technology expenditures, and no more than 5 percentage points of high-wage assembly expenditures, beginning on July 1, 2022; or
(4) 40 percent, consisting of at least 25 percentage points of high-wage material and manufacturing expenditures, no more than 10 percentage points of technology expenditures, and no more than 5 percentage points of high-wage assembly expenditures, beginning on July 1, 2023, and thereafter.
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(B) In addition to the provisions of subdivision (o) and any other requirement in this note, a light truck or heavy truck is originating only if the vehicle producer certifies that its production meets an LVC requirement of 45 percent, consisting of at least 30 percentage points of high-wage material and manufacturing expenditures, no more than 10 percentage points of high-wage technology expenditures and no more than 5 percentage points of high-wage assembly expenditures.
(C) High-wage material or manufacturing expenditures, high-wage technology expenditures and high-wage assembly expenditures described under paragraphs (vi)(A) and (v)(B) above are calculated as follows:
(1) for high-wage material and manufacturing expenditures, the Annual Purchase Value (APV) of purchased parts or materials produced in a plant or facility, and, if the producer elects, any labor costs in the vehicle assembly plant or facility, that is located in North America with a production wage rate that is at least US$16/hour as a percentage of the net cost of the vehicle, or the total vehicle plant assembly APV, including, if the producer elects, any labor costs in the vehicle assembly plant or facility;
(2) for high-wage technology expenditures, the annual vehicle producer expenditures in North America on wages for research and development (R&D) or information technology (IT) as a percentage of total annual vehicle producer expenditures on production wages in North America; and
(3) for high-wage assembly expenditures, a single credit of no more than 5 percentage points if the vehicle producer demonstrates that it has an engine assembly, transmission assembly, or an advanced battery assembly plant, or has long term contracts with such a plant, located in North America with an average production wage of at least US$16 per hour.
The production wage rate is the average hourly base wage rate, not including benefits, of employees directly involved in the production of the part or component used to calculate the LVC, and does not include salaries of management, R&D, engineering or other workers who are not involved in the direct production of the parts or in the operation of production lines.
High wage material and manufacturing expenses may also be calculated by taking the Annual Purchase Value of purchased parts of materials produced in a plant or facility located in the territories of the USMCA countries with a production wage rate that is at least US$16/hour as a percentage of total vehicle plant assembly APV, pursuant to applicable provisions of regulations, including provisions of the Uniform Regulations.
R&D expenditures include expenditures on research and development including prototype development, design, engineering, testing, or certifying operations. IT expenditures include expenditures on software development, technology integration, vehicle communications and information technology support operations.
In the case of a passenger vehicle or light truck, in order to receive the credit described in subparagraph (3), a high wage engine assembly or transmission assembly plant must have a production capacity of at least 100,000 originating engines or transmissions and an advanced battery assembly plant must have a production capacity of at least 25,000 originating assembled advanced battery packs. In the case of a heavy truck, a high-wage engine, transmission or battery assembly plant must have a production capacity of at least 20,000 originating engines, transmissions or assembled advanced battery packs to receive the credit. Engines, transmissions or advanced battery packs need not separately qualify as originating in order to meet this requirement.
(D) Passenger vehicles.--For the purposes of calculating the LVC of a passenger vehicle, light truck or heavy truck, the calculation may be averaged using any one of the following categories, on the basis of either all motor vehicles in the category or only those vehicles in the category that are exported to the territory of one or more of the other USMCA countries:
(1) the same model line of motor vehicles in the same class of vehicles produced in the same plant in the territory of a USMCA country;
(2) the same class of motor vehicles produced in the same plant in the territory of a USMCA country;
(3) the same model line of motor vehicles or same class of motor vehicles produced in the territory of a USMCA country; or
(4) any other category as the USMCA countries may decide.
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(E) For the purposes of determining the LVC in paragraphs (A) or (B) above including under any alternative staging regime described in paragraph (viii) that may be implemented, the producer may calculate the LVC over one of the following periods:
(1) the previous fiscal year of the producer;
(2) the previous calendar year;
(3) the quarter or month to date in which the vehicle is produced or exported;
(4) the producer’s fiscal year to date in which the vehicle is produced or exported; or
(5) the calendar year to date in which the vehicle is produced or exported.
An LVC calculation based on the producer’s previous fiscal year is valid for the duration of the producer’s current fiscal year.
An LVC calculation based on the previous calendar year is valid for the duration of the current calendar year.
(F) For the period ending July 1, 2027, if a vehicle producer certifies an LVC for a heavy truck that is higher than 45 percent by increasing the amount of high wage material and manufacturing expenditures above 30 percentage points, the producer may use the points above 30 percentage points as a credit towards the regional value content percentages under this note, provided that the regional value content percentage is not below 60 percent.
(vii) Certification and verification with respect to any provision of this note or of the automotive appendix, including the steel and aluminum requirements described in (v) and the labor value content requirements described in (vi), is subject to applicable regulations, including the Uniform Regulations.
(viii) Alternative staging regime.
(A) As may be further provided for in subchapter XXIII of chapter 99 of the tariff schedule, a passenger vehicle or light truck may be originating pursuant to an alternative staging regime, provided that use of the alternative staging regime has been authorized by the Office of the U.S. Trade Representative, during the period that such regime is in effect. An alternative staging regime for eligible passenger vehicles or light trucks must meet the requirements of applicable regulations, including provisions of the Uniform Regulations, and is subject to the terms of the plan as authorized by the Office of the U.S. Trade Representative.
(B) For purposes of this subparagraph, a vehicle is not eligible for preferential tariff treatment under an alternative staging regime if the Office of the United States Trade Representative (USTR)—
(1) has determined that the producer of that vehicle will not be able to meet applicable requirements after the alternative staging regime has expired; or
(2) has determined that the producer of that vehicle has failed to take the steps set forth in its request for an alternative staging regime and will not be able to meet applicable requirements after the alternative staging regime has expired as a result of such failure, has provided false or misleading information in its request, or has failed to notify the USTR of material changes in circumstances that will prevent it from meeting applicable requirements after the alternative staging regime has expired.
(ix) RVC for other motor vehicles.
(A) Notwithstanding the provisions of subdivision (o) of this note, the regional value content requirement is 62.5 percent under the net cost method for: