3. The terms “re-entered its territory” referred to in paragraph 1, and “imported temporarily”referred to in paragraph 2, shall be understood under the respective laws of the Parties.
Article 3.08. Customs Valuation
Upon the entry into force of this Agreement, the principles of customs valuation applied to regulating trade between the Parties shall be that established in the Customs Valuation Agreement, including its annexes. Besides, the Parties shall not determine the customs value of the goods based on the officially established minimum value.
Section D. Non-Tariff Measures
Article 3.09. Domestic Supports
1. The Parties recognize that domestic support measures may be of crucial importance to their agriculture sectors, but it may also distort trade and affect production. In this sense the Parties shall apply domestic supports in accordance with the Agreement on Agriculture of the WTO, and any other successor agreements to which the Parties are party. Where a Party decides to support its agriculture producers, it shall endeavor to work toward the domestic support policy that:
(a) has minimal or no trade distorting or production effects; or
(b) is in accordance with its respective commitments in the WTO.
2. In order to ensure the transparency of the support policy to agriculture, the Parties agree to carry out continuous and permanent analysis of such policy. For these purposes, the acquired information shall be used as principal reference in these respective annual notifications to the WTO Committee on Agriculture, and the copies of the notifications may be exchanged upon the request of a Party. Without prejudice to the aforementioned, each Party may request the other Party for additional information and explanations. Such request shall be responded immediately. The information and the resulting evaluations may be subject to consultations, at the request of the other Party, in the Committee on Trade in Goods.
Article 3.10. Export Subsidies
1. The Parties share the objective of the elimination of export subsidies for agricultural and non-agricultural products as required under the WTO Agreement, and upon the entry into force of this Agreement, shall cooperate to achieve such objectives.
2. The Parties are also committed not to re-introducing any export subsidies notwithstanding the result of future multilateral negotiations on the Agreement on Subsidies and Countervailing Measures and the Agreement o n Agriculture.
Article 3.11. Import and Export Restrictions
1. The Parties agree to eliminate non-tariff barriers immediately, with exception of the Parties’ rights in accordance with Article XX and XXI of GATT 1994, and those regulated in Chapter 8 (Sanitary and Phytosanitary Measures) and Chapter 9 (Standard, Metrology-related Measures and Authorization Procedures)
2. Except as otherwise provided in this Agreement, neither Party may adopt or maintain any prohibition or restriction on the importation of any goods of the other Party or on the exportation or sale for export of any goods destined for the territory of the other Party, except in accordance with Article XI of GATT 1994, including its interpretative notes, and to this end Article XI of GATT 1994 and its interpretative notes, are incorporated into and form part of this Agreement.
3. In any circumstances in which any other form of restriction is prohibited, the Parties understand that the GATT 1994 rights and obligations incorporated by paragraph 2 prohibit export price requirements and, except as permitted in enforcement of countervailing and antidumping orders and undertakings, import price requirements.
4. In the event that a Party adopts or maintains a prohibition or restriction on the importation or exportation of goods from or to a non-Party, nothing in this Agreement shall:
(a) be construed to prevent the Party from limiting or prohibiting the importation of goods of that non-Party from the territory of the other Party; or
(b) allow the Party requiring as a condition of export of such goods of the Party to the territory of the other Party, that the goods not be re-exported to a non-Party country, directly or indirectly, without being consumed in the territory of the other Party.
5. In the event that a Party adopts or maintains a prohibition or restriction on the importation of goods from a non-Party, the Parties, on request of any Party, shall consult with a view to avoiding undue interference with or distortion of pricing, marketing and distribution arrangements in the other Party.
6. Paragraphs 1 through 4 shall not apply to the measures set in Annex 3.11(6).
Article 3.12. Customs Processing Fees and Consular Fees
1. After two years of the entry into force of this Agreement, neither Party shall apply an existing customs processing fee, nor shall adopt new customs processing fees on originating goods.
2. Upon the entry into force of this Agreement, neither Party shall collect consular fees or charges, nor shall require consular transactions on originating goods.
Article 3.13. Country of Origin Marking
1. Each Party shall apply to the goods of the other Party, while appropriate, its laws related to country of origin marking, according to Article IX of GATT 1994. For this purpose, Article IX of GATT 1994 is incorporated into and forms part of this Agreement.
2. Each Party shall accord to the goods from the other Party a treatment no less favorable than that it accords to the goods from a non-Party, regarding the application of rules on marks of origin, according to Article IX of GATT 1994.
3. Each Party shall ensure that the establishment and implementation of their laws on country of origin marking does not have the purpose or effect of creating unnecessary barriers to trade between the Parties.
Article 3.14. Export Taxes
Neither Party may adopt or maintain any duty, tax or other charge on the export of any good to the territory of the other Party, unless such duty, tax or charge is adopted or maintained on any such good when destined for local consumption.
Article 3.15. Measures Under Intergovernmental Agreements
Before adopting a measure under any intergovernmental agreement on goods, pursuant to subparagraph (h) of Article XX of GATT 1994, that may affect the trade in basic commodities between the Parties, a Party shall consult with the other Party to prevent the nullification or impairment of a concession granted by the Party according to Article 3.04.
Article 3.16. Committee on Trade In Goods
1. The Parties hereby establish the Committee on Trade in Goods, as set out in Annex 3.16.
2. The Committee shall consider matters relevant to this Chapter, Chapter 4 (Rules of Origin), Chapter 5 (Customs Procedures), and Uniform Regulations.
3. Without prejudice to the provisions of Article 18.05(2) (Committees), the Committee shall have the following functions:
(a) to submit to the Commission for its consideration of the matters that impede the access of goods to the territory of the Parties, especially the implementation of non-tariff measures; and
(b) to promote trade in goods between the Parties through consultations and studies intended to modify the period established in Annex 3.04, in order to accelerate the tariff reduction.
Chapter 4. RULES OF ORIGIN
Article 4.01. Definitions
For purposes of this Chapter, the following terms shall be understood as:
CIF: the value of imported goods including the costs of insurance and freight to the port or place in the importing country;
FOB: free on board, regardless of the mode of transportation, at the point of direct shipment by the seller to the buyer;
fungible goods: goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical and which are impossible to tell apart from visual examination alone;
generally accepted accounting principles: principles applied in the territories of each Party which give a substantial and authorised support to the registration of income, costs, expenditures, assets and liabilities related to the information and preparation of financial statements. These indicators, practical rules and procedures used generally in accounting can become a comprehensive guide with general applicability;
goods wholly obtained or produced entirely in a Party:
(a) mineral goods extracted or taken in the territory of that Party;
(b) plants and plant products harvested, picked or gathered in the territory of that Party;
(c) live animals born and raised in the territory of that Party;
(d) goods obtained by hunting, trapping, fishing, gathering or capturing in the territory of that Party;
(e) goods obtained from live animals in the territory of that Party;
(f) fish, shellfish and other marine life taken outside the territorial sea of the Parties by fishing vessels registered or recorded with that Party and owned by a person of that Party and flying its flag, or by rented fishing vessels of a company established in the territory of that Party;
(g) goods obtained or produced on board factory ships from the goods referred to in subparagraph (f) provided such factory ships are registered or recorded with that Party and flying its flag, or on rented board factory ships of a company established in the territory of that Party;
(h) goods taken by that Party or a person of that Party from the seabed or beneath the seabed outside the territorial sea of that Party, provided that Party has rights to exploit such seabed;
(i) waste and scrap derived from manufacturing or processing operations or from consumption in the territory of that Party and fit only for disposal or for the recovery of raw materials;
(j) articles collected in the territory of that Party which can no longer perform their original purpose in its territory, nor are capable of being restored or repaired and which are fit only for disposal or for the recovery of parts or raw materials; or
(k) goods produced in the territory of one or both of the Parties exclusively from goods referred to in subparagraphs (a) through (j) above;
indirect material: a good used in the production, testing or inspection of another good but not physically incorporated into that good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of another good, including:
(a) fuel, energy, catalysts and solvents;
(b) equipment, devices, and supplies used for testing or inspecting goods;
(c) gloves, glasses, footwear, clothing, safety equipment and supplies;
(d) tools, dies and molds;
(e) spare parts and materials used in the maintenance of equipment and buildings;
(f) lubricants, greases, compounding materials and other materials used in production or used to operate equipment or maintain buildings; and
(g) any other materials or products that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production;
material: a good that is used in the production of another good including ingredients, parts, components, subassemblies and goods that were physically incorporated into another good or were subject to a process in the production of another good;
producer: a “producer” according to Article 2.01 (Definitions of General Application);
production: methods of obtaining goods including manufacturing, producing, assembling, processing, raising, growing, breeding, mining, extracting, harvesting, fishing, trapping, gathering, collecting, hunting, and capturing;
transaction value of a good: the price actually paid or payable for a good related to the transaction done by the producer of the good, according to the principles of Article 1 of the Customs Valuation Agreement, adjusted in accordance with the principle of paragraphs 1, 3 and 4 of its Article 8, regardless whether the good is sold for export. For purposes of this definition, the seller referred to in the Customs Valuation Agreement shall be the producer of the good;
transaction value of a material: the price actually paid or payable for a material related to the transaction done by the producer of the good, according to the principles of Article1 of the Customs Valuation Agreement, adjusted in accordance with paragraphs 1, 3 and 4 of its Article 8, regardless whether the material be sold for export. For purposes of this definition the seller referred to in the Customs Valuation Agreement shall be the supplier of the material, and the buyer referred to in the Customs Valuation Agreement shall be the producer of the good; and
value: the value of a good or a material according to the rules of the Customs Valuation Agreement.
Article 4.02. Application Instruments and Interpretation
1. For purposes of this Chapter:
(a) The Harmonized System shall be the basis for the tariff classification of goods; and
(b) The principles and rules of the Customs Valuation Agreement shall be applied to determine the value of a good or material.
2. For purposes of this Chapter, when applying the Customs Valuation Agreement
to determine the origin of a good:
(a) the principles and rules of the Customs Valuation Agreement shall apply to domestic transactions, with such modifications as may be required by the circumstances as would apply to international transactions; and
(b) the provisions of this Chapter shall prevail over the provisions of the Customs Valuation Agreement to the extent of any inconsistency.
Article 4.03. Originating Goods
1. Except as otherwise provided in this Chapter, a good shall be regarded as originating in the territory of a Party where:
(a) the good is wholly obtained or produced entirely in the territory of that Party;
(b) the good is produced entirely in the territory of one or both Parties exclusively from originating materials according to this Chapter;
(c) the good is produced in the territory of one or both Parties from non- originating materials that complying with the change in tariff classification, regional value content or other requirements, according to the specifications stated in Annex 4.03, and the good satisfies all the other applicable requirements of this Chapter; or
(d) the good is produced in the territory of one or both of the Parties but one or more of the non-originating materials that are used in the production of the good does not undergo a change in tariff classification due to :
(i) the good was imported into the territory of a Party in an unassembled or a disassembled form and was classified as an assembled good pursuant to General Rule of Interpretation 2(a) of the Harmonized System,
(ii) the tariff heading for the good provides for and specifically describes both the good itself and its parts and is not further subdivided into subheadings, or
(iii) the tariff subheading for the good provides for and specifically describes both the good itself and its parts;
provided that the regional value content of the good, determined in accordance with Article 4.07 is not less than thirty five (35%) percent and the good satisfies the other provisions applicable in this Chapter, unless the applicable rule of Annex 4.03, under which the good is classified, specified a different requirement of regional value content, in which case such requirement has to be met.
The rules provided for in this subparagraph do not apply to the goods in Chapters 61 through 63 of the Harmonized System.
2. If a good of a Party satisfies the rules of origin specified in Annex 4.03, there is no need to require additional compliance with the regional value content established in paragraph 1(d).
3. For purposes of this Chapter, the production of a good from non-originating materials that satisfies a change in tariff classification and other requirements, as set out in Annex 4.03, shall be done entirely in the territory of one or both Parties, and the good has to satisfy any applicable regional value-content requirement in the territory of one or both Parties.
4. Notwithstanding other provisions of this Article, goods shall not be considered originating, if they are exclusively the outcome of the operations set out in Article 4.04 and carried out in the territory of the Parties that gives their final form for marketing, where non-originating materials are used in such operations, unless the specific rules of origin of Annex 4.03 state the opposite.
Article 4.04. Minimal Operations or Processes
The minimal operations or processes that by themselves or in combination do not confer origin to a good are:
(a) operations necessary for the preservation of goods during the transportation or storage (including airing, ventilation, drying, refrigeration, freezing, elimination of damaged part, application of oil, antirust paint or protective coating, placing in salt, sulphur dioxide or other aqueous solution);
(b) simple operations consisting of cleaning, washing, sieving, sifting or straining, selection, classification or grading, culling; peeling, shelling or striping, grain removal, pitting, pressing or crushing, soaking, elimination of dust or of spoiled, sorting, division of consignments in bulk, grouping in packages, placing of marks, labels or distinctive signs on products and their packages, packing, unpacking or repackaging;
(c) combination or mixing operations of goods which have not resulted in any important difference in the characteristics of the goods before and after such combination or mixing;
(d) simple joining or assembling of parts of products to make a complete good, formation of set or assortments of goods;
(e) simple diluting operations or ionization and salting, which have not changed the nature of the goods; and
(f) slaughter of animals.
Article 4.05. Indirect Materials
Indirect materials shall be considered to be originating materials regardless of their place of manufacturing or production and the value of these materials shall be the costs as indicated in the accounting records of the producer of the good.
Article 4.06. Accumulation
1. A Party may only accumulate origin with goods originating from the territories of the Parties.
2. Originating materials or originating goods from the territory of a Party, incorporated into a good in the territory of the other Party shall be considered originating from the territory of the latter.
3. For purposes of determining whether a good is an originating good, the producer of such good may accumulate its production with that of other producer or producers in the territory of one or both Parties, of materials incorporated into the good, so that the production of these materials is considered as done by such producer, provided that the good satisfies the requirements of Article 4.03.
Article 4.07. Regional Value Content
1. The regional value content of goods shall be calculated according to the following method:
RVC = [(TV - VNM) / TV] * 100
Where:
RVC: is the regional value content, expressed as a percentage;
TV: is the transaction value of the good adjusted to a FOB basis, unless as stated in paragraph 2. In the event that there does not exist or it is not possible to determine the value in accordance with the principles and rules of Article 1 of the Customs Valuation Agreement, then this shall be calculated according to the principles and rules of Articles 2 through 7 of that Agreement; and
VNM: is the transaction value of non-originating materials adjusted to a CIF basis, unless stated in the paragraph 5. In the event that there does not exist or it is not possible to determine the value according to the principles and provisions of Article 1 of the Custom Valuation Agreement, this shall be calculated in accordance with the principles and provisions of Articles 2 through 7 of that Agreement.
2. When the producer of a good does not export directly, the value shall be adjusted to the point where the buyer receives the good in the territory where the producer is located.
3. When the origin is determined by the method of regional value content, the percentage required is specified in Annex 4.03.
4. All the records of costs considered for the calculation of regional value content shall be registered and maintained according to the generally accepted accounting principles applicable in the territory of the Party from where the good is produced.
5. When a producer of a good acquires a non-originating material in the territory of the Party where it is located, the value of non-originating material shall not include freight, insurance, packing costs and any other cost incurred in the transportation of material from the warehouse of the supplier to the place of the producer.
6. For purposes of calculating the regional value content, the value of the non- originating material used in the production of a good shall not include the value of the non-originating materials used in the production of the originating material acquired and used in the production of that good.
Article 4.08. De Minimis
1. A good shall be considered to be an originating good if the value of all non- originating materials used in the production of that good that do not satisfy the requirement of change in tariff classification set out in Annex 4.03 is not more than ten percent (10%) of the transaction value of the good as determined in Article 4.07.
2. For a good provided for in Chapters 50 through 63 of the Harmonized System, the percentage indicated in the paragraph 1 refers to the weight of fibers or yarns with respect to the weight of the good being produced.
3. Paragraph 1 does not apply to a non-originating material used in the production of goods provided for in Chapters 1 through 27 of the Harmonized System unless the non-originating material is provided for in a different subheading than the good for which origin is being determined under this Article.
Article 4.09. Fungible Goods
1. In the preparation or production of a good which uses originating or non- originating fungible goods, the origin of these goods can be determined by the application of one of the following methods of inventory management, to be selected by the producer:
(a) first in, first out (FIFO) method;
(b) last in, first out (LIFO) method; or
(c) averaging method.
2. Where originating or non-originating fungible goods are mixed or combined physically in warehouse and do not go through any production process or any operation other than unloading, reloading or any other necessary movement in the territory of the Party before the exportation to keep the good in good condition or to transport them to the territory of the other Party, the origin of the goods shall be determined by one of the inventory management methods.
3. Once the method of inventory management is selected it shall be used during the entire period or a fiscal year.
Article 4.10. Sets or Assortments of Goods
1. Sets or assortments of goods classified according to rule 3 of the General Rules of Interpretation of the Harmonized System and the goods whose description according to the Harmonized System nomenclature is specifically that of a set or assortment shall qualify as originating, provided that every good included in the set or assortment complies with the rules of origin established in this Chapter and in Annex 4.03.
2. Notwithstanding paragraph 1, a set or assortment of goods shall be considered originating if the value of all non-originating goods used in making the set or assortment does not exceed the percentage set out in Article 4.08(1) with respect to the value of the set or assortment, adjusted to the point set out in Article 4.07(1) or (2), as the case may be.
3. The provisions of this Article shall prevail over the specific rules established in Annex 4.03.
Article 4.11. Accessories, Spare Parts and Tools
1. Accessories, spare parts and tools delivered with the good that usually form part of the good shall be considered one with the good and shall be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex 4 .03, provided that:
(a) The accessories, spare parts or tools are not invoiced separately from the good; and
(b) The quantities and value of these accessories, spare parts and tools are customary for the good.
2. Where a good is subject to a regional value content requirement, its value of the accessories, spare parts or tools shall be considered as either originating or non- originating materials, as the case may be, in order to calculate the regional value content of the good.
3. For those accessories, spare parts and tools that do not satisfy the conditions mentioned above, the rules of origin shall apply to each of them respectively and separately.
Article 4.12. Containers and Packaging Materials for Retail Sale
1. Containers and packaging materials in which a good is packaged for retail sale shall, if classified with the good by Harmonized System code, be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex 4.03.
2. If the good is subject to a regional value content requirement, the value of such containers and packaging materials shall be taken into account as originating or non- originating materials, as the case may be, i n calculating the regional value content of the good.
Article 4.13. Containers and Packing Materials for Shipment
Containers and packing materials in which the good is packed for shipment shall be disregarded in determining whether:
(a) the non-originating materials used in the production of the good undergo an applicable change in tariff classification as set out in Annex 4.03; and
(b) the good satisfies the regional value content requirement.
Article 4.14. Transshipment
The originating goods of the other Party shall not lose such status when they are:
(a) transported directly from the territory of the other Party; or
(b) transported through the territory or territories of one or more non-Parties for the purpose of transit or temporary storing in warehouses in such territory or territories, provided that they do not undergo operations other than unloading, reloading or any other operation to preserve them in good condition.
Chapter 5. CUSTOMS PROCEDURES
Article 5.01. Definitions
1. For purposes of this Chapter, the following terms shall be understood as:
certifying authority: in the case of the Republic of China, the designated authority is the Bureau of Foreign Trade (BOFT), Ministry of Economic Affairs (MOEA), or other agencies as authorized by BOFT; in the case of Panama, the designated authority is the Vice-ministry of Foreign Trade, or its successor;
commercial importation: the importation of a good into the territory of one of the Parties for the purpose of sale, or any commercial, industrial or other like use;
customs authority: the competent authorities responsible under their respective laws for the administration and implementation of customs laws and regulations;
customs value: value of a good used for calculating the customs tariff according to the legislation of each Party;