(d) Cost or value of materials—(1) “Materials produced in a beneficiary country or countries” defined. For purposes of paragraph (a) of this section, the words materials produced in a beneficiary country or countries refer to those materials incorporated in an article which are either:

1. (i) Wholly the growth, product, or manufacture of a beneficiary country or two or more beneficiary countries; or
2. (ii) Substantially transformed in any beneficiary country or two or more beneficiary countries into a new or different article of commerce which is then used in any beneficiary country as defined in § 10.202(a) in the production or manufacture of a new or different article which is imported directly into the United States. For purposes of this paragraph (d)(1)(ii), no material shall be considered to be substantially transformed into a new or different article of commerce by virtue of having merely undergone simple (as opposed to complex or meaningful) combining or packaging operations, or mere dilution with water or mere dilution with another substance that does not materially alter the characteristics of the article. The examples set forth in § 10.196(a) of this part, and the principles and examples set forth in § 10.195(a)(2) of this part, shall apply for purposes of the corresponding context under paragraph (d)(1) of this section.
3. (2) Questionable origin. When the origin of a material either is not ascertainable or is not satisfactorily demonstrated to the appropriate Center director, the material shall not be considered to have been grown, produced, or manufactured in a beneficiary country or in the customs territory of the United States.

4. (3) Determination of cost or value of materials.

   1. (i) The cost or value of materials produced in a beneficiary country or countries or in the customs territory of the United States includes:

      1. (A) The manufacturer's actual cost for the materials;
      2. (B) When not included in the manufacturer's actual cost for the materials, the freight, insurance, packing, and all other costs incurred in transporting the materials to the manufacturer's plant;
      3. (C) The actual cost of waste or spoilage, less the value of recoverable scrap; and
      4. (D) Taxes and/or duties imposed on the materials by any beneficiary country or by the United States, provided they are not remitted upon exportation.

   2. (ii) Where a material is provided to the manufacturer without charge, or at less than fair market value, its cost or value shall be determined by computing the sum of:

      1. (A) All expenses incurred in the growth, production, or manufacture of the material, including general expenses;
      2. (B) An amount for profit; and
      3. (C) Freight, insurance, packing, and all other costs incurred in transporting the material to the manufacturer's plant.
   3. (iii) If the pertinent information needed to compute the cost or value of a material is not available, the appraising officer may ascertain or estimate the value thereof using all reasonable ways and means at his disposal.

(e) Direct costs of processing operations—(1) Items included. For purposes of paragraph (a) of this section, the words direct costs of processing operations mean those costs either directly incurred in, or which can be reasonably allocated to, the growth, production, manufacture, or assembly of the specific merchandise under consideration. Such costs include, but are not limited to the following, to the extent that they are includable in the appraised value of the imported merchandise:

1. (i) All actual labor costs involved in the growth, production, manufacture, or assembly of the specific merchandise, including fringe benefits, on-the-job training, and the cost of engineering, supervisory, quality control, and similar personnel;
2. (ii) Dies, molds, tooling, and depreciation on machinery and equipment which are allocable to the specific merchandise;
3. (iii) Research, development, design, engineering, and blueprint costs insofar as they are allocable to the specific merchandise; and
4. (iv) Costs of inspecting and testing the specific merchandise.

5. (2) Items not included. For purposes of paragraph (a) of this section, the words “direct costs of processing operations” do not include items which are not directly attributable to the merchandise under consideration or are not costs of manufacturing the product. These include, but are not limited to:

   1. (i) Profit; and
   2. (ii) General expenses of doing business which either are not allocable to the specific merchandise or are not related to the growth, production, manufacture, or assembly of the merchandise, such as administrative salaries, casualty and liability insurance, advertising, and salesmen's salaries, commissions, or expenses.