USAco manufactures widgets and owns an IC-DISC. USAco incurs 25% of its labor and material costs in the United States, 35% of its labor and material costs in Canada, and 40% of its labor and material costs in Mexico. Do the widgets constitute qualifying production property?

1 No, because less than half of the labor and material costs are incurred in theUnited States.

2 No, because the labor and material costs incurred in the United States are not substantial.

3 Yes, because the labor and material costs incurred in the United States satisfy the safe harbor.

4 Yes, because 100% of labor and material costs are incurred in North America.