(b) the value of any other non-originating material used by the producer of the good, which is not included in Annex 2 to this Article, determined in accordance with Article 6-05 or paragraph 3 of Article 6-07.
4. For purposes of calculating the regional value content of a motor vehicle identified in paragraph 2 or 3, the producer may average the calculation over its fiscal year or period using any of the following categories, either by taking as a basis all motor vehicles in that category or only motor vehicles in that category that are exported to the territory of the other Party:
a. the same model line in motor vehicles of the same class of vehicles produced in the same plant in the territory of a Party;
b. the same class of motor vehicles produced in the same plant in the territory of a Party; or
c. the same model line in motor vehicles produced in the territory of a Party.
5. For purposes of calculating the regional value content of one or all of the goods covered by a tariff classification listed in Annex 1 to this Article or of a component or material listed in Annex 2 to this Article that are produced in the same plant, the producer of the good may:
a. average its calculation:
(i) in the fiscal year or period of the producer of the motor vehicle to whom the good is sold;
ii) in any quarterly or monthly period; or
iii) in its own fiscal year or period, if the good is sold as a spare or replacement part;
b. to calculate the average referred to in subparagraph a) separately for any or all of the goods sold to one or more producers of motor vehicles; or
c. in respect of any calculation made under this paragraph, calculate separately the regional value content of the goods being exported to the territory of the other Party.
6. Notwithstanding the Annex to Article 6-03, the regional value content shall be:
a. for goods that are motor vehicles covered by heading 87.01, Mexican tariff item 8702.10.03 or 8702.90.04 or, in the case of Nicaragua, subheading 8702.10 or 8702.90, when they are motor vehicles designed for the transport of 16 persons or more, or subheading 8704. 10, 8704.22, 8704.23, 8704.32 or 8704.90 or heading 87.05 or 87.06, 35%, according to the net cost method, for a producer's fiscal year or period beginning on the date nearest July 1, 1998 through the fiscal year or period ending on the date nearest July 1, 2000; and
b. for the goods listed in Annex 1 to this article, subject to a regional value content and intended for use in the motor vehicles covered by paragraphs 2 and 3, except for goods of heading 84.07, 84.08 or subheading 8708. 40, when they are intended for use in the motor vehicles included in paragraphs 2 and 3, in which case the regional content defined in footnotes 4 and 32 of section B of the annex to article 6-03 shall apply, and except for heading 87.06, in which case the provisions of subparagraph (a) shall apply:
(i) 40%, under the net cost method, for a producer's fiscal year or period beginning on the earlier of July 1, 1998 through the fiscal year or period ending on the earlier of July 1, 2003; and
ii) 50%, under the net cost method, for the fiscal year or period of a producer beginning on the earlier of July 1, 2003 through the fiscal year or period of a producer ending on the earlier of July 1, 2008.
Article 6-16. Operations and Practices That Do Not Confer Origin
1. A good shall not be considered as originating only by:
a) With water dilution or another substance that does not materially alter the characteristics of the good;
b) Simple operations to ensure the preservation of goods during transportation or storage, such as air, refrigeration, removal of damaged parts, drying or addition of substances;
c) Sifting, screening, sorting, classifying, washing or cutting;
d) Packaging, repacking or packaging for retail sale;
e) The collection of goods to form or matching sets;
f) The implementation of marks or labels, similar distinctive signs;
g) Cleaning, including the removal of oxide fat, paint or other coverings; and
h) The simple collection of parts and components classified as a good pursuant to rule 2 (a) of the general rules for the interpretation of the Harmonized System. this shall not apply to goods that have been assembled and subsequently desensamblados for convenience of packaging, handling or transport.
2. A good shall not give rise to any activity or pricing practice in respect of which it can be demonstrated, on the basis of sufficient evidence, that its objective is to evade compliance with the provisions of this chapter.
3. The provisions of this article shall prevail over the specific rules established in the annex to article 6-03.
Article 6-17. Transhipment and Direct Consignment
1. A good shall not be considered as originating even if it has been produced in accordance with the requirements of article 6-03, if the production of the good undergoes further or any other operation outside the territories of the Parties other than reloading unloading, or any other movement necessary to preserve it in good condition or to transport it to the territory of the other party.
2. A good shall not lose its originating status when, while in transit through the territory of one or more non- parties with or without trans-shipment or temporary storage under the surveillance of the competent customs authority in those countries:
a) The transit is justified by reasons or by geographical considerations related to transport requirements;
b) It is not intended to use or trade, employment or transit countries; and
c) During transport and storage does not undergo operations other than packaging, handling, packaging or manipulation to ensure its preservation.
Article 6-18. Consultations and Amendments
1. The parties establish a Committee on Rules of Origin, comprising representatives of each, which shall meet at least twice a year and at the request of any party.
2. The Committee shall:
a) To ensure the effective implementation and administration of this chapter;
b) To agree on the interpretation and implementation and administration of this chapter;
c) Review annually, in relation to the costs of interests not admissible, the percentage points on the highest rate of interest obligations of debt issued by the federal or central, as appropriate; and
d) Address any other matter that may be agreed by the parties.
3. The Parties shall regularly consult and cooperate to ensure that this chapter is applied in an effective and uniform and in accordance with the spirit and objectives of this Treaty.
4. Any Party which considers that this chapter requires to be amended due to changes in production processes or other matters may submit a proposed modification to the Committee for its consideration and the rationale and studies that support. the Committee shall submit a report to the Commission to make appropriate recommendations to the parties.
Article 6-19. Interpretation
For purposes of this chapter, in applying the customs valuation code to determine the origin of a good:
a) The principles of this Code shall apply to domestic transactions with such modifications as circumstances require, as would apply to international standards; and
b) The provisions of this chapter shall prevail over this Code in matters that may be incompatible.
Article 6-20. Transitional Provisions on Regional Value Content
1. For purposes of calculating regional value content of the goods which are subject to that requirement, a good produced in the territory of one or both parties shall comply with a regional value content of not less than:
a) 45 per cent under the transaction value method or 37.5 per cent under the net cost method, from 1 July 1998 to 30 June 2001;
b) 46 per cent under the transaction value method or 38.5 per cent under the net cost method, from 1 July 2001 to 30 June 2002; and
c) 47.5 per cent under the transaction value method or 40 per cent under the net cost method for the period 1 July 2002 to 30 June 2003.
2. From 1 July 2003, the percentage of regional content is set out in the annex to article 6-03.
3. The provisions of this article shall not apply for the purposes of calculating the regional value content of the goods referred to in articles 6 and 15.
Chapter VII. Customs Procedures
Article 7-01. Definitions
1. For purposes of this Chapter, the following definitions shall apply:
competent authority: the authority which, under the law of each Party, is responsible for the administration of its customs and tax laws and regulations;
identical goods: "identical goods", as defined in the Customs Valuation Code;
determination of origin ruling: a ruling issued as a result of a verification conducted pursuant to Article 7-07 that establishes whether a good qualifies as originating; and
preferential tariff treatment: the application of the tariff rate corresponding to an originating good under the Tariff Relief Program.
2. This chapter are incorporated into the definitions established in chapter IV (rules of origin).
Article 7-02. Statement and Certification of Origin
1. For purposes of this chapter, before the Entry into Force of this Treaty, the Parties shall develop a single form for the certificate or declaration of origin.
2. The certificate of origin referred to in paragraph 1 shall serve to certify that a good being exported from the territory of one party to the territory of the other party qualifies as originating.
3. Each Party shall provide its exporters that complete and sign a certificate of origin for the exportation of a good for which an importer may claim preferential tariff treatment.
4. Each Party shall provide that:
a) Where an exporter is not the producer of the good, complete and sign the certificate of origin on the basis of the declaration of origin referred to in paragraph 1; and
b) The declaration of origin that covers the good to be exported is filled out and signed by the producer of the good voluntarily provided to the exporter.
5. Each Party shall provide that a Certificate of Origin filled and signed by the exporter, cover:
a) A single importation of goods or one or more;
b) Several importations of identical goods within a period to be established by the
Exporter in the certificate of origin, which shall not exceed the period established in Paragraph 6.
6. Each Party shall provide that a certificate of origin is accepted by the competent authority of the importing party for one year from the date of its signature.
Article 7-03. Duties on Imports
1. Each Party shall require an importer claiming preferential tariff treatment for a good imported into its territory from the territory of the other party that:
a) A written declaration in the importation document required by its laws, based on a valid certificate of origin, that the good qualifies as originating;
b) The certificate of origin in its possession at the time the declaration is made;
c) Provide a copy of the certificate of origin if requested by the competent authority; and
d) This declaration and a corrected pay the corresponding tariff, if it has reason to believe that the certificate of origin in its import declaration contains incorrect information. where the importer presents the declaration referred to above authorities initiate a review, shall not be punished.
2. Each Party shall provide that where the importer fails to comply with any of the requirements established in paragraph 1, shall deny preferential tariff treatment to goods imported from the territory of the other party for which preference is sought.
3. Each Party shall provide that where it has not been requested preferential tariff treatment for a good imported into its territory that is qualified as an originating good of the importer may apply for a refund of any excess duties paid in accordance with the legislation of each party, by not having been granted preferential tariff treatment to the good if the application is accompanied by:
a) A written declaration stating that the good qualified as originating at the time of importation;
b) A copy of the certificate of origin; and
c) Any other documentation relating to the importation of the goods as required by the competent authority.
Article 7-04. Duties on Exports
1. Each Party shall provide that its exporter or producer that has completed and signed a declaration or certificate of origin shall deliver a copy of the certificate of origin or declaration to its competent authority upon request.
2. Each Party shall provide that its exporter or producer that has completed and signed a declaration or certificate of origin and has reason to believe that the certificate or declaration contains incorrect information, and without delay notify in writing of any change that could affect the accuracy or validity of the Declaration or certificate of origin to all persons to whom the certificate or declaration was re-delivered and, in accordance with its laws, to its competent authority, in which case it shall not be liable for having submitted an incorrect certificate or declaration.
3. The competent authority of the exporting Party shall inform the competent authority of the importing Party the notification of the exporter or producer referred to in paragraph 2.
4. Each Party shall provide that the certificate of origin or false declaration made by its exporter or producer that a good to be exported to the territory of the other party qualifies as originating, shall have the same legal consequences, with such modifications as circumstances require that those that would apply to an importer that makes a false declarations or statements in contravention of its customs laws and regulations.
Article 7-05. Exceptions
Provided that they do not form part of one or more importations carried out or planned for the purpose of avoiding the certification requirements of articles 7-02 7-03 and shall not require a certificate of origin for the importation of goods in the following cases:
a) For commercial purposes of the importing goods whose customs value does not exceed 1,000 United States dollars ($) or the equivalent in national currency, but may require that the invoice contain a statement from the importer or exporter of the good qualifies as originating;
b) A non-commercial importation of goods whose customs value does not exceed US $1,000 or its equivalent in national currency; and
c) The importation of a good for which the importing Party has waived the requirement for a certificate of origin.
Article 7-06. Accounting Records
Each Party shall provide that:
a) The exporter or producer who filled and signed a declaration or certificate of origin retained for a minimum of five years after the date of signature or certificate of this Declaration, all records and documents related to the origin of the good, including those relating to:
i) The acquisition, costs, the value and payment for the good that is exported from its
ii) The acquisition, costs, the value and payment of all the materials used in the production of the good that is exported from its territory; and
iii) The production of the good in the form in which it was exported from its territory;
b) For purposes of the verification procedure laid down in article 7-07, the exporter or producer to provide the competent authority of the importing Party, the records and documents referred to in subparagraph (a). where the records and documents are not in the possession of the exporter or producer, it may request the producer or supplier of the materials the records and documents so that they are delivered through the competent authority of the verification; and
c) An importer claiming preferential tariff treatment for a good imported into its territory from the territory of the other party, retained for a minimum of five years from the date of importation, the certificate of origin and all other documentation relating to the importation required by the importing Party.
Article 7-07. Procedures to Verify the Origin
1. The importing Party may request the exporting Party information relating to the origin of the good through its competent authority.
2. In determining whether a good imported into its territory from the territory of the other party qualifies as originating, each Party may, through its competent authority to verify the origin of the good through:
a) Written questionnaires to exporters or producers in the territory of the other party; or
b) Verification visits to an exporter or producer in the territory of the other party to review the records and documents relating to the implementation of the rules of origin in accordance with article 7-06, and inspect the facilities used in the production of the good and, where appropriate, which are used in the production of the materials.
3. Nothing in paragraph 2 shall be without prejudice to the revision may make the importing Party on its own importers, exporters or producers.
4. The exporter or producer who receives a questionnaire pursuant to subparagraph 2 (a), shall respond to the questionnaire and return within 30 days from the date of its receipt. during this period the exporter or producer may request in writing to the importing Party for an extension, where appropriate, which may not exceed 30 days. this request shall not result in the denial of preferential tariff treatment.
5. In case the exporter or producer does not return the questionnaire or respond within the deadline, the importing Party may deny preferential tariff treatment upon resolution in terms of paragraph 11.
6. Prior to conducting a verification visit pursuant to subparagraph (b) of paragraph 2, the importing Party shall be bound, through its competent authority to notify in writing of its intention to conduct the visit. the notification shall be sent to the exporter or producer to be visited, the competent authority of the Party in whose territory the visit and, if so requested, to the embassy of that Party in the territory of the importing Party. the competent authority of the importing Party shall request the written consent of the exporter or producer who seeks to visit.
7. The notification referred to in paragraph 6 shall contain:
a) The identification of the competent authority making the notification;
b) The name of the exporter or producer to be visited;
c) The date and place of the proposed verification visit;
d) The object and scope of the proposed verification visit, with specific reference period and the good or goods subject to verification referred to in the certificate of origin; or
e) Personal data, the names and titles of the officials who shall carry out the verification visit; and
f) The legal authority for the verification visit.
8. Any modification of the information referred to in subparagraph (e) of paragraph 7 shall be notified in writing to the exporter or producer and the competent authority of the exporting Party before the verification visit. any modification of the information referred to in subparagraphs (a), (b), (c), (d) and (f) of paragraph 7 shall be notified pursuant to paragraph 6.
9. If within 30 days of receiving notification of the proposed verification visit according to paragraph 6, the exporter or producer has not given its written consent for the same, the importing Party may deny preferential tariff treatment to the good or goods that would have been the subject of the verification visit.
10. Each Party shall provide that where its competent authority receives a notification pursuant to paragraph 6 shall within 15 days following the date of receipt of the notification postpone the proposed verification visit for a period not exceeding 60 days from the date on which the notification was received, or for a longer period as may be agreed by the parties.
11. A Party shall not deny preferential tariff treatment based solely on the postponement of a verification visit pursuant to paragraph 10.
12. Each Party shall permit the exporter or producer whose goods are the subject of a verification visit to designate two observers to be present during the visit provided solely to intervene in that capacity. if there is no designate observers by the exporter or producer, this omission shall not result in the postponement of the visit.
13. Within 120 days after the conclusion of the verification, the competent authority shall provide a written decision to the exporter or producer whose good or goods have been the subject of the verification, in determining whether or not the good qualifies as originating, including findings of fact and the legal basis for the determination.
14. Where a verification by a party establishes that the exporter or producer has certified or certified more than once in a false or unfounded, that a good qualifies as originating, the importing party may suspend preferential tariff treatment to identical goods produced or exported by the same until such person proves that complies with the provisions in chapter IV (rules of origin).
15. Each Party shall maintain the confidentiality of the information collected in the process of verification of origin in accordance with its legislation.
Article 7-08. Review and Challenge
1. Each Party shall grant the same rights of appeal and review of determinations of origin and advance rulings referred to its importers, exporters or producers of the other party that:
a) Complete and sign a declaration or certificate of origin for a good that has been the subject of a determination of origin; or
b) Has received an advance ruling pursuant to article 7-10.
2. The rights referred to in paragraph 1 shall include access to at least one level of administrative review of the independent office or official responsible for the determination or ruling subject to review and access to a judicial or quasi-judicial review of the determination or decision taken at the final level of administrative review, in accordance with the legislation of each party.
Article 7-09. Sanctions
Each Party shall establish or maintain criminal, civil or administrative penalties for violations of its laws and regulations relating to the provisions of this chapter.
Article 7-10. Advance Rulings
1. Each Party shall provide that, through its competent authority shall grant expeditiously advance written rulings prior to the importation of a good into its territory. the advance rulings shall be issued to the importer or exporter or producer in the territory of the other Party on the basis of the facts and circumstances expressed by the same, in relation to the origin of the goods.
2. The advance rulings shall include:
a) If the non-originating materials used in the production of a good satisfy the applicable change in tariff classification set out in the annex to article 603;
b) If the good complies with the regional value content established in chapter IV (rules of origin);
c) Whether the method applied by an exporter or producer in the territory of the other party, in accordance with the principles of the Customs Valuation Code, for calculating the transaction value of the good or of the materials used in the production of a good for which an advance ruling is requested, is suitable for determining whether the good complies with the regional value content under chapter IV (rules of origin);
d) Whether the method applied by an exporter or producer in the territory of the other party for the reasonable allocation of costs, in accordance with the annex to article 6-04 is suitable for determining whether the good complies with the regional value content under chapter IV (rules of origin);
e) If the country of origin marking or proposed for a good satisfies the requirements in article 3-12;
f) If the good as originating qualifies under chapter IV (rules of origin); and
g) Other matters as the parties may agree.
3. Each Party shall adopt or maintain procedures for the issuance of advance rulings prior publication thereof, including:
a) The information reasonably required to process an application;
b) The authority of its competent authority at any time to request additional information from the person requesting the advance ruling during the process of evaluating the application;
c) Within 120 days, to the competent authority issuing the advance ruling after it has obtained all necessary information from the requesting person; and
d) The obligation to provide full and reasoned founded to the applicant, the advance ruling.