Common use of Fungible Goods and Materials Clause in Contracts

Fungible Goods and Materials. 1. For the purposes of determining whether a good is anoriginating good, where originating and non-originatingfungible materials that are commingled in an inventory, areused in the production of a good, the origin of thematerials may be determined pursuant to an inventorymanagement method set out in paragraph 3 below. 2. Where originating and non- originating fungible goodsare commingled in an inventory and, prior to exportation donot undergo any production process or any operation in theArea of the Party where they were commingled other thanunloading, loading or any other operation necessary topreserve it in good condition or to transport the good tothe other Party, the origin of the good may be determinedpursuant to an inventory management method set out inparagraph 3 below. 3. The inventory management methods for fungible goods ormaterials shall be the following: (a) "FIFO method" (first in-first out) is theinventory management method by which the originof the number of fungible goods or materialsfirst received in the inventory is considered tobe the origin of the same number of fungiblegoods or materials first withdrawn from theinventory; (b) "LIFO method" (last in-first out) is theinventory management method by which the originof the number of fungible goods or materials lastreceived in the inventory is considered to be theorigin of the same number of fungible goods ormaterials first withdrawn from the inventory; or (c) "average method" is the inventory managementmethod by which, except as provided for inparagraph 4 below, the origin of fungible goodsor materials withdrawn from an inventory is basedon the ratio, calculated under the followingformula: XXX ROM= x 100 TONM where: ROM: ratio of originating fungible goods ormaterials; XXX: total units of originating fungiblegoods or materials in the inventoryprior to the shipment; and TONM: total sum of units of originating andnon-originating fungible goods ormaterials in the inventory prior tothe shipment. 4. Where a good is subject to a regional value contentrequirement, the determination of value of non-originatingfungible materials shall be made through the followingformula: TNM RNM= x 100 TONM where: RNM: ratio of value of non-originating fungiblematerials; TNM: total value of fungible non-originatingmaterials in the inventory prior to theshipment; and TONM: total value of originating and non-originatingfungible materials in the inventory prior tothe shipment. 5. Once an inventory management method set out inparagraph 3 above has been chosen, it shall be used throughall the fiscal year or period.