CUSMA Rules of Origin Regulations (SOR/2020-155)
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Regulations are current to 2024-04-01 and last amended on 2020-07-01. Previous Versions
APPENDIX BExamples Illustrating the Application of the Inventory Management Methods to Determine the Origin of Fungible Goods
The following examples are based on the figures set out in the table below and on the assumption that Exporter A acquires originating Good A and non-originating Good A that are fungible goods and physically combines or mixes Good A before exporting those goods to the buyer of those goods.
| Finished Goods Inventory | Sales | |
|---|---|---|
| (Receipts of Good A) | (Shipments of Good A) | |
| Date | Quantity | Quantity |
| (m/d/y) | (units) | (units) |
| 12/18/20 | 100 (OFootnote for 1) | |
| 12/27/20 | 100 (NFootnote for 2) | |
| 01/01/21 | 200 (OIFootnote for 3) | |
| 01/01/21 | 1,000 (O) | |
| 01/05/21 | 1,000 (N) | |
| 01/10/21 | 100 | |
| 01/10/21 | 1,000 (O) | |
| 01/15/21 | 700 | |
| 01/16/21 | 2,000 (N) | |
| 01/20/21 | 1,000 | |
| 01/23/21 | 900 | |
Return to footnote 1“O” denotes originating goods.
Return to footnote 2“N” denotes non-originating goods.
Return to footnote 3“OI” denotes opening inventory.
Example 1: FIFO method
By applying the FIFO method,
- (1)the 100 units of originating Good A in opening inventory that were received in finished goods inventory on 12/18/20 are considered to be the 100 units of Good A shipped on 01/10/21;
- (2)the 100 units of non-originating Good A in opening inventory that were received in finished goods inventory on 12/27/20 and 600 units of the 1,000 units of originating Good A that were received in finished goods inventory on 01/01/21 are considered to be the 700 units of Good A shipped on 01/15/21;
- (3)the remaining 400 units of the 1,000 units of originating Good A that were received in finished goods inventory on 01/01/21 and 600 units of the 1,000 units of non-originating Good A that were received in finished goods inventory on 01/05/21 are considered to be the 1,000 units of Good A shipped on 01/20/21; and
- (4)the remaining 400 units of the 1,000 units of non-originating Good A that were received in finished goods inventory on 01/05/21 and 500 units of the 1,000 units of originating Good A that were received in finished goods inventory on 01/10/21 are considered to be the 900 units of Good A shipped on 01/23/21.
Example 2: LIFO method
By applying the LIFO method,
- (1)100 units of the 1,000 units of non-originating Good A that were received in finished goods inventory on 01/05/21 are considered to be the 100 units of Good A shipped on 01/10/21;
- (2)700 units of the 1,000 units of originating Good A that were received in finished goods inventory on 01/10/21 are considered to be the 700 units of Good A shipped on 01/15/21;
- (3)1,000 units of the 2,000 units of non-originating Good A that were received in finished goods inventory on 01/16/21 are considered to be the 1,000 units of Good A shipped on 01/20/21; and
- (4)900 units of the remaining 1,000 units of non-originating Good A that were received in finished goods inventory on 01/16/21 are considered to be the 900 units of Good A shipped on 01/23/21.
Example 3: Average method
Exporter A chooses to determine the origin of Good A on a monthly basis. Exporter A exported 3,000 units of Good A during the month of February 2021. The origin of the units of Good A exported during that month is determined on the basis of the preceding month, that is, January 2021.
By applying the average method,
the ratio of originating goods to all goods in finished goods inventory for the month of January 2021 is 40.4% (2,100 units ÷ 5,200 units);
based on that ratio, 1,212 units (3,000 units × 0.404) of Good A shipped in February 2021 are considered to be originating goods and 1,788 units (3,000 units − 1,212 units) of Good A are considered to be non-originating goods; and
that ratio is applied to the units of Good A remaining in finished goods inventory on January 31, 2021: 1,010 units (2,500 units × 0.404) are considered to be originating goods and 1,490 units (2,500 units − 1,010 units) are considered to be non-originating goods.
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