Herbert Y. C. Choy and Stephen Reinhardt, Circuit Judges, and Jane A. Restani, International Court of Trade Judge.*fn1
The opinion of the court was delivered by: Reinhardt, Circuit Judge
Appeal from the United States District Court for the District of Arizona Stephen M. McNamee, District Judge, Presiding
Argued and Submitted March 11, 1998--San Francisco, California
Opinion by Judge Reinhardt
Harold Dawavendewa, a Native American, alleges that because he is a Hopi and not a Navajo, he was not considered for a position with a private employer operating a facility on the Navajo reservation. He contends that the employer's conduct constitutes unlawful employment discrimination under Title VII of the Civil Rights Act of 1964. To determine whether Dawavendewa's Title VII complaint may proceed, we address, first, whether discrimination based on tribal affiliation constitutes "national origin" discrimination, and, second, whether such discrimination is permitted under a Title VII provision that allows preferential treatment of Indians in certain specified circumstances.*fn2
Salt River Project Agricultural Improvement and Power District ("Salt River"), an Arizona corporation, entered into a lease agreement with the Navajo Nation in 1969. The agreement allows Salt River to operate a generating station on Navajo land provided that it, among other things, grants employment preferences to members of the Navajo tribe living on the reservation, or, if none are available, to other members of the Navajo tribe.*fn3 This preference policy is consistent with Navajo tribal law. See 15 Navajo Nation Code S 604 (1995).
Dawavendewa, a member of the Hopi tribe, lives in Arizona less than three miles from the Navajo Reservation.*fn4 In 1991 he unsuccessfully applied for one of seven Operator Trainee positions at the Salt River generating station. He then filed a complaint alleging that Salt River was engaging in national origin discrimination in violation of Title VII. The complaint alleges that he took and passed a test for the position, ranking ninth out of the top twenty applicants, but was neither interviewed nor considered further for it because he was not a member of, or married to a member of, the Navajo Nation.
Salt River moved to dismiss the complaint on the grounds that discrimination on the basis of tribal membership (as opposed to discrimination on the basis of status as a Native American) does not constitute "national origin " discrimination and that Title VII expressly exempts tribal preferences under S 703(i), 42 U.S.C. S 2000e-2 (i) (the "Indian Preferences exemption"). The district court granted the motion to dismiss. It held that Title VII exempts tribal preference policies, and therefore found it unnecessary to decide whether discrimination on the basis of tribal membership constitutes national origin discrimination under Title VII. Dawavendewa appeals.
 We first address the issue whether discrimination on the basis of tribal membership constitutes "national origin" discrimination for purposes of Title VII. Title VII prohibits employers from discriminating on the basis of "race, color, religion, sex, or national origin." Civil Rights Act of 1964, S 703 (a), 42 U.S.C. S 2000e-2 (a). *fn5 Although Title VII fails to define "national origin," we have observed that "the legislative history and the Supreme Court both recognize that `national origin' includes the country of one's ancestors." Pejic v. Hughes Helicopters, Inc., 840 F.2d 667, 673 (9th Cir. 1988); see Espinoza v. Farah Mfg. Co., 414 U.S. 86, 88 (1973) (noting that "[t]he term `national origin' on its face refers to the country where a person was born, or, more broadly, the country from which his or her ancestors came"). Further, the regulations implementing Title VII provide that discrimination on the basis of one's ancestor's "place of origin" -- not nation of origin -- is sufficient to come within the scope of the statute. See 29 C.F.R.S 1606.1.*fn6 Accordingly, a claim arises when discriminatory practices are based on the place in which one's ancestors lived.
 Consistent with the regulations, we have held that the current political status of the nation or "place " at issue makes no difference for Title VII purposes. In Pejic v. Hughes Helicopters, Inc., we considered the issue whether discrimination against Serbians constituted "national origin " discrimination. 840 F.2d 667, 673 (9th Cir. 1988). The employer in Pejic contended that a Serbian employee could not bring a discrimination claim because ...