Fungible Goods (Origin)

Fungible Goods (or fungible materials) are goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical. Under most FTA rules of origin — including USMCA Article 4.13 — fungible goods may be tracked using inventory management methods rather than physical segregation, simplifying origin accounting.

Examples of fungible materials:

• Bulk chemicals stored in a single tank (originating and non-originating polymer pellets)
• Identical fasteners purchased from multiple suppliers
• Identical steel coils from originating and non-originating mills
• Bulk grain, sugar, oil, and other commodities

Permitted inventory methods (under USMCA and most FTAs) include:

• FIFO (First In, First Out) — earliest acquired materials are deemed used first
• LIFO (Last In, First Out) — most recently acquired materials are deemed used first
• Average method — origin status is averaged across the inventory pool
• Specific identification — track each unit (rare, defeats the point of using fungibility rules)

The chosen method must be:

1. Used consistently throughout the producer's fiscal year
2. Consistent with the producer's GAAP-compliant accounting
3. Documented and available for CBP verification

Once a method is chosen for a given material in a given fiscal year, the producer cannot switch mid-year. The method election applies separately to each fungible material category.

Fungible-goods rules are critical for products like steel, aluminum, plastics, and electronics where bulk inputs from multiple origins are commingled before production. Without inventory accounting, the producer would need to physically segregate originating and non-originating inputs — typically impractical.

For non-preferential origin and substantial transformation analysis, similar fungibility principles apply but are not codified — CBP applies the FTA-style rules by analogy in audit settings.