Part of the lecture series preparing examinees to pass Customs Broker License Examination (CBE Exam). To enroll in the forthcoming U.S. Customs Broker License Examination Preparation Course, please visit us at https://www.lawcustoms.com/live/

Discussed here is the Question 57 from April 2003 U.S. Customs Broker License Examination.

QUESTION:

The Cleveland Lock Co. has placed an order from an unrelated padlock vendor, Fleur de Lis Locks Ltd., of Montreal, Canada. Fleur de Lis Locks has agreed to sell the locks at US $5.10 each, FOB Montreal. Fleur de Lis Locks, however, contracts the order to Sécurité Ltee, a producer of locks also located in Montreal. Sécurité sells the product arms length to Fleur de Lis Locks at US $3.75 each, F.O.B., and ships the locks direct to Cleveland Lock Co. The record shows that Fleur de Lis provided, at no charge to Sécurité, certain Canadian-made retail packaging bearing Cleveland Lock’s name and mark. The value of the packaging is US $0.20 each.
After being informed by Sécurité Ltee that the lock includes a total of $1.75 each in non-originating materials, exporter Fleur de Lis Locks completes a NAFTA Certificate of Origin for the benefit of its customer.
The instant locks are classified as HTS 8301.10.
The specific NAFTA rules of origin that apply to goods of this classification are Rules GN12(t) 83.1(A) and GN12(t) 83.1(B). They read:
(A) A change to subheadings 8301.10 through 8301.50 from any other chapter; or
(B) A change to subheadings 8301.10 through 8301.50 from subheading 8301.60, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than:
(1) 60 percent where the transaction value method is used, or
(2) 50 percent where the net cost method is used.



Based SOLELY upon the information provided above, which ONE of the following statements is correct?

A. The lock qualifies as originating under both the transaction value method and net cost methods.
B. The lock qualifies as originating under the transaction value method, at a regional value content of 65.69 percent.
C. The lock fails to qualify as originating under the transaction value method, at a regional value con-tent of 53.33 percent.
D. The lock fails to qualify as originating under the transaction value method, at a regional value con-tent of 55.70 percent.
E. The lock qualifies as originating under the net cost method, at a regional value content of 55.70 percent.

Correct Answer: (D).

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