Interpretation ID: Barbara Y
Barbara Y. Wierbicki, Esq.
Tompkins & Davidson, LLP
5 Hanover Square
15th Floor
New York, NY 10004
Dear Ms. Wierbicki:
This responds to your letter requesting clarification about the requirements of Part 583, Motor Vehicle Content Labeling. You asked about the provisions of 583.6. The issues raised by your letter are addressed below.
In your first question, you asked about the calculation of U.S./Canadian content in a situation where an outside supplier may be forced by economic conditions to sell its product to a manufacturer at a price that is less than its costs to produce. For purposes of this letter and simplicity (including avoiding references to allied suppliers), we will assume that the equipment at issue is delivered by the outside supplier to the final assembly point.
The procedures for calculating the U.S./Canadian content of equipment supplied by outside suppliers are set forth, along with other things, in 583.6. Paragraph (b) provides the procedure for determining the value of items of equipment. Under (b)(1), the value of the equipment received at the final assembly point is the price paid by the manufacturer for the equipment as delivered to the final assembly point.
Paragraph (c) provides the procedures for determining the U.S./Canadian percentage of the value of items of equipment. Under (c)(4)(i), value added in the United States and/or Canada by an outside supplier includes: (1) the value added in the U.S. and/or Canada for materials used by the supplier (determined according to (c)(4)(ii)), plus (2) for passenger motor vehicle equipment assembled or produced in the U.S. or Canada, the value of the difference between the price paid by the manufacturer for the equipment, as delivered to its factory or plant, and the total value of the materials in the equipment.
Using the total value of the equipment and the amount of that value which is added in the United States or Canada, one can calculate the percentage of the equipments value that was added in the United States or Canada. Under (c)(1) (the subject of your second question), of course, equipment supplied by an outside supplier to a manufacturer is considered 100 percent U.S./Canadian if 70 percent or more of its value is added in the United States and/or Canada, and to otherwise have the actual percent of its value added in the United States and/or Canada, rounded to the nearest five percent.
In determining the U.S./ Canadian percentage of the value of items of equipment, the value used is thus the price paid by the manufacturer for the equipment. There are no special procedures for a situation where an outside supplier sells its product to a manufacturer at a price that is less than it costs to produce.
As indicated above, your second question concerns 583.6(c)(1), which reads as follows:
(c) Determining the U.S./Canadian percentage of the value of items of equipment.
(1) Equipment supplied by an outside supplier to a manufacturer or allied supplier is considered:
(i) 100 percent U.S./Canadian, if 70 percent or more of its value is added in the United States and/or Canada; and
(ii) To otherwise have the actual percent of its value added in the United States and/or Canada, rounded to the nearest five percent.
You asked about a situation where the actual percent added in the U.S. and/or Canada is 68 or 69 percent. You stated that rounding to the nearest five percent under (c)(1)(ii) leads to 70 percent, and suggested that it should then be considered 100 percent under (c)(1)(i). We disagree with your suggested interpretation.
Under section (c)(1), equipment supplied by an outside supplier is, per subsection (i), considered 100 percent U.S./Canadian if 70 percent or more of its value is added in the United States and/or Canada; and, per subsection (ii), (t)o otherwise have the actual percent of its value added in the United States and/or Canada, rounded to the nearest five percent. (Emphasis added.) If the actual percent added in the U.S. and/or Canada is 68 or 69 percent, it does not come within the provision in subsection (i) for being considered 100 percent. It instead comes within the otherwise provision of subsection (ii) and would be rounded up to 70 percent.
In your letter, you requested guidance on how a U.S. based outside supplier should respond to a manufacturer with respect to the above when requested to supply information in accordance with 49 CFR Part 583. We note that we do not know the exact way in which the manufacturer would request this information. However, in order to enable the manufacturer to make the correct calculations, the outside supplier should make it clear that the U.S./Canadian content of the equipment at issue is a value that has been rounded up to 70 percent (pursuant to (c)(1)(ii)), rather than an actual 70 percent figure subject to being considered 100 percent under (c)(1)(i).
I hope this information is helpful. If you have further questions, please feel free to call Edward Glancy of my staff at (202) 366-2992.
Sincerely yours,
O. Kevin Vincent
Chief Counsel
ref:583
d.8/6/09