NAFTA (North American Free Trade Agreement)
> Definitions - Article 415

back to NAFTA (North American Free Trade Agreement)

For purposes of this Chapter:

class of motor vehicles means any one of the following categories of motor vehicles:

a. motor vehicles provided for in subheading 8701.20, tariff item 8702.10.aa or 8702.90.aa (vehicles for the transport of 16 or more persons), subheading 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or heading 87.05 or 87.06;

b. motor vehicles provided for in subheading 8701.10or 8701.30 through 8701.90;

c. motor vehicles provided for in tariff item 8702.10.bb or 8702.90.bb (vehicles for the transport of 15 or fewer persons), or subheading 8704.21 or 8704.31; or

d. motor vehicles provided for in subheading 8703.21 through 8703.90;

F.O.B. means free on board, regardless of the mode of transportation at the point of direct shipment by the seller to the buyer;

fungible goods or fungible materials means goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical;

goods wholly obtained or produced territory in the territory of one or more of the Parties means:

a. mineral goods extracted in the territory of one or more of the Parties;

b. vegetable goods, as such goods are defined in the Harmonized System, harvested in the territory of one or more of the Parties;

c. live animals born and raised in the territory of one or more of the Parties;

d. goods obtained from hunting, trapping or fishing in the territory of one or more of the Parties;

e. goods (fish, shellfish and other marine life) taken from the sea by vessels registered or recorded with a Party and flying its flag;

f. goods produced on board factory ships from the goods referred to in subparagraph (e) provided such factory ships are registered or recorded with that Party and fly its flag;

g. goods taken by a Party or a person of a Party from the seabed or beneath the seabed outside territorial waters, provided that a Party has rights to exploit such seabed;

h. goods taken from outer space, provided they are obtained by a Party or a person of a Party and not processed in a non-Party;

i. waste and scrap derived from:

1. production in the territory of one or more Parties; or

2. used goods collected in the territory of one or more of the Parties, provided such goods are fit only for the recovery of raw materials; and

j. goods produced in the territory of one or more of the Parties exclusively from goods referred to in subparagraphs (a) through (j) or from their derivatives, at any stage of production;
identical or similar goods means "identical goods" and "similar goods", respectively, as defined in the Customs Valuation Code;

indirect material means a good used in the production, testing or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including:

a. fuel and energy;

b. tools, dies and molds;

c. spare parts and materials used in the maintenance of equipment and buildings;

d. lubricants, greases, compounding materials and other materials used in production or used to operate equipment and buildings;

e. gloves, glasses, footwear, clothing, safety equipment and supplies;

f. equipment, devices, and supplies used for testing or inspecting the goods;

g. catalysts and solvents; and

h. any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production;

intermediate material means a material that is self-produced and used in the production of a good, and designated pursuant lo Article 402(10);

marque means the trade name used by a separate marketing division of a motor vehicle assembler;

material means a good that used in the production of another good, and includes a part or an ingredient;

model line means a group of motor vehicles having the same platform or model name;

motor vehicle assembler means a producer of motor vehicles and any related persons or joint ventures in which the producer participates;

new building means a new construction, including at least the pouring or construction of new foundation and floor, the erection of a new structure and roof, and installation of new plumbing, electrical and other utilities lo house a complete vehicle assembly process;

net cost means total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-aUowable interest costs that are included in the total cost;

net cost of a good means the net cost that can be reasonably allocated to a good using one of the methods set out in Article 402(8);

non-allowable interest costs means interest costs incurred by a producer that exceed 700 basis points above the applicable federal government interest rate identified in the Uniform Regulations for comparable maturities;

non-originating good or non-originating material means a good or material that does not qualify as originating under this Chapter;

producer means a person who grows, mines, harvests, fishes, traps, hunts, manufactures, processes or assembles a good;

production means growing, mining, harvesting, fishing, trapping, hunting manufacturing, processing or assembling a good;
reasonably allocate means to apportion in a manner appropriate to the circumstances;

refit means a plant closure, for purposes of plant conversion or retooling, that lasts at least three months;

related person means a person related to another person on the basis that:

a. they are officers or directors of one another’s businesses;

b. they are legally recognized partners in business;

c. they are employer and employee;

d. any person directly or indirectly owns, controls or holds 25 percent or more of they outstanding voting stock or shares of each of them;

e. one of them directly or indirectly controls the other;

f. both of them are directly or indirectly controlled by a third person; or

g. they are members of the same family (members of the same family are natura1 or adoptive children, brothers, sisters, parents, grandparents, or spouses);

royalties means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use or right to use any copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, secret formula or process, e excluding those payments under technical assistance or similar agreements that can be related to specific ser ices such as:

a. personnel training, without regard to where performed; and

b. if performed in the territory of one or more of the Parties, engineering, tooling, die-setting, software design and similar computer services, or other services
sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and after-sales service:

c. sales and marketing promotion; media advertising; advertising and market research promotiona1 and demonstration materials; exhibits; sales conferences, trade shows and conventions; banners; marketing displays; free samples; sales, marketing and after-sales service literature (product brochures, catalogs, technical literature, price lists service manuals, sales aid information); establishment and protection of logos and trademarks; sponsorships; wholesale and retail restocking charges entertainment;

d. sales and marketing incentives; consumer, retailer or wholesaler rebates; merchandise incentives;

e. salaries and wages, sales commissions, bonuses, benefits (for example, medical, insurance, pension), traveling and living expenses, membership and professional fees, for sales promotion, marketing and after-sales service personnel;

f. recruiting and training of sales promotion, marketing and after-sales service personne1, and after-sales training of customers’ employees, where such costs are identified separately for sales promotion marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
g. product liability insurance;

h. office supplies for sales promotion, marketing and after-sales service of goods, here such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer

i. telephone, mail and other communications, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

j. rent and depreciation of sales promotion marketing and after sales service offices and distribution centers;

k. property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centers, where such costs are identified separately for sates promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer; and

j. payments by the producer to other persons for warranty repairs;
self-produced material means a material that is produced by the producer of a good and used in the production of that good;
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 costs of preparing and packaging the good for retail sale;
size category means for a motor vehicle identified in Article 403(l)(a):

k. 85 or less cubic feet of passenger and luggage interior volume,

l. between 85 and 100 cubic feet of passenger and luggage interior volume,

m. 100 to I 10 cubic feet of passenger and luggage interior volume,

n. between 110 and 120 cubic feet of passenger and luggage interior volume, and

o. 120 and more cubic feet of passenger and luggage interior volume;
total cost means al1 product costs, period costs and other costs incurred in the territory of one or more of the Parties;
transaction value means the price actually paid or payable for a good or material with respect to a transaction of, e*cept for the application of Article 403(1) or 403(2)(a), the producer of the good, adjuster! in accordance with the principles of paragraphs 1, 3 and 4 of Article 8 of the Customs Valuation Code, regardless of whether the good or material is sold for export;
used means used or consumed in the production of goods; and
underbody means the floor pan of a motor vehicle.