(a) Calculating the value of materials. For purposes of calculating the regional value content of a good under General Note 28(n), HTSUS, and for purposes of applying the de minimis (see Sec. 10.732 of this subpart) provisions of General Note 28(n), HTSUS, the value of a material is:
(1) In the case of a material imported by the producer of the good, the adjusted value of the material;
(2) In the case of a material acquired by the producer in the territory where the good is produced, the value, determined in accordance with Articles 1 through 8, Article 15, and the corresponding interpretative notes of the Customs Valuation Agreement, of the material with reasonable modifications to the provisions of the Customs Valuation Agreement as may be required due to the absence of an importation by the producer (including, but not limited to, treating a domestic purchase by the producer as if it were a sale for exportation to the country of importation); or
(3) In the case of a self-produced material, the sum of:
(i) All expenses incurred in the production of the material, including general expenses; and
(ii) An amount for profit equivalent to the profit added in the normal course of trade.
(b) Examples. The following examples illustrate application of the principles set forth in paragraph (a)(2) of this section:
Example 1. The producer in Australia purchases material x from an unrelated seller in Australia for $100. Under the provisions of Article 1 of the Customs Valuation Agreement, transaction value is the price actually paid or payable for the goods when sold for exportation to the country of importation adjusted in accordance with the provisions of Article 8. In order to apply Article 1 to this domestic purchase by the producer, such purchase is treated as if it were a sale for export to the country of importation. Therefore, for purposes of determining the adjusted value of material x, the Article 1 transaction value is the price actually paid or payable for the goods when sold to the producer in Australia ($100), adjusted in accordance with the provisions of Article 8. In this example, it is irrelevant whether material x was initially imported into Australia by the seller (or by anyone else). So long as the producer acquired material x in Australia, it is intended that the value of material x will be determined on the basis of the price actually paid or payable by the producer adjusted in accordance with the provisions of Article 8.
Example 2. Same facts as in Example 1, except that the sale between the seller and the producer is subject to certain restrictions that preclude the application of Article 1. Under Article 2 of the Customs Valuation Agreement, the value is the transaction value of identical goods sold for exportation to the same country of importation and exported at or about the same time as the goods being valued. In order to permit the application of Article 2 to the domestic acquisition by the producer, the price paid by the producer should be modified so that the value is the transaction value of identical goods sold within Australia at or about the same time the goods were sold to the producer in Australia. Thus, if the seller of material x also sold an identical material to another buyer in Australia without restrictions, that other sale would be used to determine the adjusted value of material x.
(c) Permissible additions to, and deductions from, the value of materials--(1) Additions to originating materials. For originating materials, the following expenses, if not included under paragraph (a) of this section, may be added to the value of the originating material:
(1) Additions to originating materials. For originating materials, the following expenses, if not included under paragraph (a) of this section, may be added to the value of the originating material:
(i) The costs of freight, insurance, packing, and all other costs incurred in transporting the material within or between the territory of one or both of the Parties to the location of the producer;
(ii) Duties, taxes, and customs brokerage fees on the material paid in the territory of one or both of the Parties, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable; and
(iii) The cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of renewable scrap or byproducts.
(2) Deductions from non-originating materials. For non-originating materials, if included under paragraph (a) of this section, the following expenses may be deducted from the value of the non-originating material:
(i) The costs of freight, insurance, packing, and all other costs incurred in transporting the material within or between the territory of one or both of the Parties to the location of the producer;
(ii) Duties, taxes, and customs brokerage fees on the material paid in the territory of one or both of the Parties, other than duties and taxes that are waived, refunded, refundable or otherwise recoverable, including credit against duty or tax paid or payable;
(iii) The cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of renewable scrap or by-products;
(iv) The cost of processing incurred in the territory of one or both of the Parties in the production of the non-originating material; and
(v) The cost of originating materials used in the production of the non-originating material in the territory of one or both of the Parties.
(d) Accounting method. Any cost or value referenced in General Note 28, HTSUS, and this subpart, must be recorded and maintained in accordance with the generally accepted accounting principles applicable in the territory of the Party in which the good is produced.