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(1) a motor vehicle for the transport of 15 or fewer persons of subheading 8702.10 or 8702.90; a passenger vehicle with a compression-ignition engine as the primary motor of propulsion of subheading 8703.21 through 8703.90, a three or four-wheeled motorcycleof subheading 8703.21 through 8703.90, a motorhome or entertainer coach of [subheading] 8703.21 through 8703.90, an ambulance, hearse, or prison van of subheading 8703.21 through 8703.90, a vehicle solely or principally for off-road use of subheading 8703.21 through 8703.90; or a vehicle of subheading 8704.21 or 8704.31 that is solely or principally for off-road use; and
(2) a good of heading 8407 or 8408, or subheading 8708.40, that is for use in a motor vehicle in subparagraph (1) above.
(B) Notwithstanding the provisions of subdivision (o) of this note, the regional value content requirement is 60 percent under the net cost method for:
(1) a good that is a motor vehicle of heading 8701, except for subheading 8701.20; a motor vehicle for the transport of 16 or more persons of subheading 8702.10 or 8702.90; a motor vehicle of subheading 8704.10; a motor vehicle of subheading 8704.22, 8704.23, 8704.32 or 8704.90 that is solely or principally for off-road use; a motor vehicle of heading 8705; or a good of heading 8706 that is not for use in a passenger vehicle, light truck or heavy truck;
(2) a good of heading 8407 or 8408, or subheading 8708.40, that is for use in a motor vehicle in subparagraph (1) above; or
(3) except for a good in paragraph (2) above or of subheading 8482.10 through 8482.80, 8483.20 or 8483.30, a good in Table F of the automotive appendix that is subject to a regional value content requirement and that is for use in a motor vehicle in subparagraph (1) or (2) above.
(C) For the purposes of calculating the regional value content under the net cost method for a good that is a motor vehicle provided for in paragraph (A) or (B) above, a good listed in Table F of the automotive appendix for use as original equipment in the production of a good in paragraph (A)(1), or a component listed in Table G ofsuch appendix for use as original equipment in the production of the motor vehicle in paragraph (B)(1) above,the value of non-originating materials used by the producer in the production of the good shall be the sum of:
(1) for each material used by the producer listed in Table F or Table G of such appendix, whether or not produced by the producer, at the choice of the producer and determined in accordance with applicable provisions of this note on regional value content, either
(I) the value of such material that is non-originating, or
(II) the value of non-originating materials used in the production of such material; and
(2) the value of any other non-originating material used by the producer that is not listed in Table F or Table G of the automotive appendix, determined in accordance with applicable provisions of this note on regional value content.
(D) For purposes of calculating the regional value content of a motor vehicle covered by paragraph (A) or (B) above, the producer may average its calculation over its 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 inthe 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; or
(3) the same model line of motor vehicles produced in the territory of a USMCA country.
(E) For purposes of calculating the regional value content for a good listed in Table F of the automotive appendix, or a component or material listed in Table G of such appendix, produced in the same plant, the producer of the good may:
(1) average its calculation:
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(I) over the fiscal year of the motor vehicle producer to whom the good is sold,
(II) over any quarter or month, or
(III) over its fiscal year, if the good is sold as an aftermarket part;
(2) calculate the average referred to in subparagraph (1) separately for a good sold to one or more motor vehicle producers; or
(3) with respect to any calculation under this paragraph, calculate the average separately for goods that are exported to the territory of one or more of the USMCA countries.
(F) The regional value content requirement for a motor vehicle identified in paragraph (A) or (B) above shall be:
(1) 50 percent for five years after the date on which the first motor vehicle prototype is produced in a plant by a motor vehicle assembler, if:
(I) it is a motor vehicle of a class, or marque, or, except for a motor vehicle identified in paragraph (B) above, size category and underbody, not previously produced by the motor vehicle assembler in the territory of any of the USMCA countries,
(II) the plant consists of a new building in which the motor vehicle is assembled, and
(III) the plant contains substantially all new machinery that is used in the assembly of the motor vehicle; or
(2) 50 percent for two years after the date on which the first motor vehicle prototype is produced at a plant following a refit, if it is a different motor vehicle of a class, or marque, or, except for a motor vehicle identified in paragraph (B), size category and underbody, than was assembled by the motor vehicle assembler in the plant before the refit.
(l) Definitions. In this note:
(i) Aquaculture.—The term “aquaculture” means the farming of aquatic organisms, including fish, molluscs, crustaceans, other aquatic invertebrates and aquatic plants from seed stock such as eggs, fry, fingerlings or larvae, by intervention in the rearing or growth processes to enhance production such as regular stocking, feeding or protection from predators.
(ii) Customs Valuation Agreement.—The term “Customs Valuation Agreement” means the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 referred to in section 101(d)(8) of the Uruguay Round Agreements Act (19 U.S.C. 3511(d)(8)).
(iii) Fungible good or fungible material.—The term “fungible good” or “fungible material” means a good or material, as the case may be, that is interchangeable with another good or material for commercial purposes and the properties of which are essentially identical to such other good or material.
(iv) Good wholly obtained or produced entirely in the territory of one or more USMCA countries.—The term “good wholly obtained or produced entirely in the territory of one or more USMCA countries” means any of the following:
(1) a mineral good or other naturally occurring substance extracted or taken from the territory of one or more USMCA countries;
(2) a plant, plant good, vegetable or fungus grown, cultivated, harvested, picked or gathered in the territory of one or more USMCA countries;
(3) a live animal born and raised in the territory of one or more USMCA countries;
(4) a good obtained in the territory of one or more USMCA countries from a live animal;
(5) an animal obtained by hunting, trapping, fishing, gathering or capturing in the territory of one or more USMCA countries;
(6) a good obtained in the territory of one or more USMCA countries from aquaculture;
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(7) 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—
(A) a vessel that is registered or recorded with a USMCA country and flying the flag of that country; or
(B) a vessel that is documented under the laws of the United States;
(8) a good produced on board a factory ship from goods referred to in subparagraph (7) above, if such factory ship—
(A) is registered or recorded with a USMCA country and flies the flag of that country; or
(B) is a vessel that is documented under the laws of the United States;
(9) a good, other than a good referred to in subparagraph (7) above, 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;
(10) waste and scrap derived from—
(A) production in the territory of one or more USMCA countries; or
(B) used goods collected in the territory of one or more USMCA countries, if such goods are fit only for the recovery of raw materials;
(11) a good produced in the territory of one or more USMCA countries exclusively from goods referred to in any of subparagraphs (1) through (10), inclusive, of this subdivision, or from their derivatives, at any stage of production.
(v) Indirect material.—The 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—
(1) fuel and energy;
(2) tools, dies and molds;
(3) spare parts and materials used or consumed in the maintenance of equipment or buildings;
(4) lubricants, greases, compounding materials and other materials used or consumed in production or to operate equipment or buildings;
(5) gloves, glasses, footwear, clothing, safety equipment and supplies;
(6) equipment, devices and supplies used for testing or inspecting the good;
(7) catalysts and solvents; and
(8) 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.
(vi) Intermediate material.—The term “intermediate material” means a material that is self-produced, used or consumed in the production of a good, and designated as an intermediate material pursuant to subdivision (c)(ix) of this note.
(vii) Material.—The term “material” means a good that is used or consumed in the production of another good and includes a part or an ingredient.
(viii) Net cost.—The term “net cost” means total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs and nonallowable interest costs that are included in the total cost.
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(ix) Net cost of a good.—The term “net cost of a good” means the net cost that can be reasonably allocated to a good using one of the methods set forth in subdivision (c)(vii) above.
(x) Nonallowable interest costs.—The term “nonallowable interest costs” means interest costs incurred by a producer that exceed 700 basis points above the applicable official interest rate for comparable maturities of the country in which the producer is located.
(xi) Nonoriginating good or nonoriginating material.—The term “nonoriginating good” or “nonoriginating material” means a good or material, as the case may be, that does not qualify as originating under this note.
(xii) Originating good; originating material.—The term “originating good” or “originating material” means a good or material, as the case may be, that qualifies as originating under this note.
(xiii) Packaging materials and containers.—The term “packaging materials and containers” means materials and containers in which a good is packaged for retail sale.
(xiv) Packing materials and containers.—The term “packing materials and containers” means materials and containers thatare used to protect a good during transportation.
(xv) Producer.—The term “producer” means a person who engages in the production of a good.
(xvi) Production.—The term “production” means—
(1) growing, cultivating, raising, mining, harvesting, fishing, trapping, hunting, capturing, breeding, extracting, manufacturing, processing or assembling a good; or
(2) the farming of aquatic organisms through aquaculture.
(xvii) Reasonably allocate.—The term “reasonably allocate” means to apportion in a manner appropriate to the circumstances.
(xviii)Recovered material.—The term “recovered material” means a material in the form of individual parts that are the result of—
(1) the disassembly of a used good into individual parts; and
(2) the cleaning, inspecting, testing or other processing that is necessary for improvement to sound working condition of such individual parts.
(xix) Remanufactured good.—The term “remanufactured good” means a good classified in the tariff schedule under any of chapters 84 through 90 or under heading 9402, other than a good classified under heading 8418, 8509, 8516 or 8703 or subheading 8414.51, 8450.11. 8450.12, 8508.11 or 8517.11, that—
(1) is entirely or partially composed of recovered materials;
(2) 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
(3) has a factory warranty similar to that applicable to such a good when new.
(xx) Royalties.—The 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—
(1) personnel training, without regard to where the training is performed; or
(2) if performed in the territory of one or more USMCA countries, engineering, tooling, die-setting, software design and similar computer services, or other services.
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(xxi) Sales promotion, marketing and after-sales service costs.—The term “sales promotion, marketing and after-sales service costs” means the costs related to sales promotion, marketing and after-sales service for the following:
(1) 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;
(2) sales and marketing incentives, consumer, retailer or wholesaler rebates and merchandise incentives;
(3) 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 services personnel;
(4) product liability insurance;
(5) rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centers;
(6) payments by the producer to other persons for warranty repairs;
(7) if the costs are identified separately for sales promotion, marketing or after-sales services of goods on the financial statements or cost accounts of the producer, the following:
(A) property insurance premiums, taxes utilities and repair and maintenance of sales promotion, marketing andafter-sales service offices and distribution centers;
(B) recruiting and training of sales promotion, marketing and after-sales service personnel, and after-sales training of customers’ employees;
(C) office supplies for sales promotion, marketing and after-sales service of goods;
(D) telephone, mail and other communications.
(xxii) Self-produced material.—The term “self-produced material” means a material that is produced by the producer of a good and used in the production of that good.
(xxiii)Shipping and packing costs.—The term “shipping and packing costs” means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding the costs of preparing and packaging the good for retail sale.
(xxiv)Territory.—The term “territory” with respect to a USMCA country, has the meaning given that term in section C of chapter 1 of the USMCA, as further defined in subdivision (n) of this note.
(xxv)Total cost.—The term “total cost”—
(1) In general.—The term “total cost”—
(A) means all product costs, period costs and other costs for a good incurred in the territory of one or more USMCA countries; and
(B) 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.