H351139

H351139 March 3, 2026 OT:RR:CTF:VS H351139 RMC CATEGORY: Origin Minhee Kim PIE Consulting 2224 Av. Lazaro Cardenas Monterrey, N.L. Mexico 66266 RE: USMCA Fungible Goods and Materials; RVC Averaging; Automotive Engines Dear Ms. Kim: This is in response to your inquiry of July 25, 2025, in which you ask U.S. Customs and Border Protection (“CBP”) to determine the applicability of the fungible materials and inventory management provisions, including the average method, to certain automotive engines under the United States-Mexico-Canada Agreement (“USMCA”) and ask whether various engine models qualify as “identical goods” or “similar goods” for purposes of USMCA regional value content (“RVC”) averaging. Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for response. FACTS: The merchandise at issue consists of various automotive engines that your client, Hyundai Mobis Mexico S. de R.L. de C.V., will manufacture in Mexico using originating and non-originating fungible materials. You state that the goods are classified in subheading 8407.34.14, Harmonized Tariff Schedule of the United States (“HTSUS”), and are intended for use as replacement engines for passenger vehicles in the United States. The engines are described as part of the Gamma and Nu families, which share a common core design platform, including using shared engine block and cylinder head architecture. According to the information provided, differences between models within each engine family “generally relate to performance configuration and vehicle application” and may include: • Differences in displacement, bore and stroke, or compression ratio within sub-models of the same engine family; • Component-level differences, such as intake and exhaust configurations, injector specifications, turbocharger presence or absence, manifold design, and cooling or lubrication system configuration; • Variations in engine control calibration, including electronic control unit integration affecting output, fuel efficiency, or emissions performance; and • Differences in auxiliary mounting brackets, harnesses, or accessory interfaces driven by vehicle packaging requirements. You have asked CBP to determine the applicability of the USMCA fungible materials provisions to the production of the goods in Mexico, including the average method of inventory management, and whether the different engine models qualify as “identical goods” or “similar goods” for purposes of USMCA RVC averaging. ISSUES: I. Whether the USMCA inventory management provisions may be applied when originating and non-originating fungible materials are used in the production of the engines. II. Whether the average method of inventory management under the USMCA may be used for purposes of accounting for originating and non-originating fungible materials used in the production of the engines. III. Whether the different engine models are “identical goods” or “similar goods” for purposes of USMCA RVC averaging. LAW AND ANALYSIS: I. USMCA Inventory Management for Fungible Materials The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the Harmonized Tariff Schedule of the United States (“HTSUS”) implements the USMCA. GN 11(f) relates to fungible goods and materials. It states: (i) Fungible materials used in production.—Subject to subparagraph (f)(iii) below, if originating and nonoriginating fungible materials are used or consumed in the production of a good, the determination of whether the materials are originating may be made on the basis of any of the inventory management methods set forth in regulations implementing this note. (ii) Fungible goods commingled and exported.—Subject to subparagraph (f)(iii) below, if originating and nonoriginating fungible goods are commingled and exported in the same form, the determination of whether the goods are originating may be made on the basis of any of the inventory management methods set forth in regulations implementing this note. An importer may claim that a fungible material or good is originating if the importer, producer, or exporter has physically segregated each fungible material or good as to allow their specific identification. 2 (iii) Use of inventory management method.—A person that selects an inventory management method for purposes of paragraph (f)(i) or (f)(ii) of this subdivision shall use that inventory management method throughout the fiscal year of the person. A portion of the regulations implementing GN 11, HTSUS, the USMCA Rules of Origin Regulations are found in the appendix to Customs Regulations 19 C.F.R. Part 182 (“UR”). UR Part IV Section 8. Materials, (18) states that a fungible material or good is originating if: (a) when originating and non-originating fungible materials (i) are withdrawn from an inventory in one location and used in the production of the good, or (ii) are withdrawn from inventories in more than one location in the territory of one or more of the USMCA countries and used in the production of the good at the same production facility, the determination of whether the materials are originating is made on the basis of an inventory management method recognized in the Generally Accepted Accounting Principles of, or otherwise accepted by, the USMCA country in which the production is performed or an inventory management method set out in Schedule VIII; or (b) when originating and non-originating fungible goods are commingled and exported in the same form, the determination of whether the goods are originating is made on the basis of an inventory management method recognized in the Generally Accepted Accounting Principles of, or otherwise accepted by, the USMCA country from which the good is exported or an inventory management method set out in Schedule VIII. Emphasis added. Accordingly, the USMCA permits the use of an inventory management method recognized in the Generally Accepted Accounting Principles to determine whether a fungible good or material is originating or non-originating for purposes of determining USMCA preference eligibility. Here, provided that all applicable requirements are met, an authorized inventory management method may be applied to determine whether a fungible good or material is originating or non-originating for purposes of USMCA preferential tariff treatment. II. Average Method of Inventory Management Schedule VIII of the UR provides further guidance on inventory management methods. The various inventory management methods set out in the UR (Schedule VIII, Part 1, Section 2, and Part 2, Section 11) include: (a) specific identification method; (b) FIFO method; (c) LIFO method; and (d) average method. For both fungible goods and materials, Schedule VIII of the UR states that under the average method, originating status of fungible goods and materials may be determined based on the ratio of originating and non-originating goods or materials in inventory. Accordingly, provided that all applicable requirements are met, the average method of inventory management may be applied here to determine the originating and non-originating status of goods and materials under USMCA. 3 III. Averaging of RVC Calculation Across Engine Models With respect to RVC averaging, Section 7(15) provides that: For the purposes of the net cost method, the regional value content of the good, other than a good with respect to which an election to average may be made under subsection 16(1) or (10), may be calculated, if the producer elects to do so, by (a) calculating the sum of the net costs incurred and the sum of the values of non- originating materials used by the producer of the good with respect to th

I. USMCA Inventory Management for Fungible Materials The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the Harmonized Tariff Schedule of the United States (“HTSUS”) implements the USMCA. GN 11(f) relates to fungible goods and materials. It states: (i) Fungible materials used in production.—Subject to subparagraph (f)(iii) below, if originating and nonoriginating fungible materials are used or consumed in the production of a good, the determination of whether the materials are originating may be made on the basis of any of the inventory management methods set forth in regulations implementing this note. (ii) Fungible goods commingled and exported.—Subject to subparagraph (f)(iii) below, if originating and nonoriginating fungible goods are commingled and exported in the same form, the determination of whether the goods are originating may be made on the basis of any of the inventory management methods set forth in regulations implementing this note. An importer may claim that a fungible material or good is originating if the importer, producer, or exporter has physically segregated each fungible material or good as to allow their specific identification. 2 

(iii) Use of inventory management method.—A person that selects an inventory management method for purposes of paragraph (f)(i) or (f)(ii) of this subdivision shall use that inventory management method throughout the fiscal year of the person. A portion of the regulations implementing GN 11, HTSUS, the USMCA Rules of Origin Regulations are found in the appendix to Customs Regulations 19 C.F.R. Part 182 (“UR”). UR Part IV Section 8. Materials, (18) states that a fungible material or good is originating if: (a) when originatin