3. Paragraphs 1 and 2 do not apply to a measure set out in Annex 3.3.
Section C. Tariffs
Article 3.4. Tariff Elimination
1. Except as otherwise provided in this Agreement, a Party may not increase any existing customs duty, or adopt any customs duty, on an originating good.
2. Except as otherwise provided in this Agreement, each Party shall progressively eliminate its customs duties on originating goods in accordance with its Schedule to Annex 3.4.1.
3. Each Party shall apply to an originating good the lesser of:
(a) the customs duties rate established in accordance with its Schedule to Annex 3.4.1; or
(b) the existing rate pursuant to Article Il of GATT 1994.
4. For greater certainty, a Party may:
(a) modify a tariff outside this Agreement on a good for which a tariff preference is not claimed under this Agreement;
(b) raise a customs duty to the level applicable under its Schedule to Annex 3.4.1 following a unilateral reduction; or
(c) maintain or increase a customs duty as authorized by a dispute settlement provision of the WTO Agreement.
5. At the request of a Party, the Parties shall discuss accelerating the elimination of customs duties set out in their Schedules or incorporating into a Party's Schedule to Annex 3.4.1 a good that is not subject to tariff elimination. An agreement between the Parties to accelerate the elimination of a customs duty on a good or to include a good in a Schedule to Annex 3.4.1 shall supersede a duty rate or staging category determined pursuant to that Schedule for that good when approved by each Party in accordance with its applicable legal procedures.
6. Except as otherwise provided in this Agreement, a Party shall establish a TRQ set out in Annex 3.4.2. A Party may adopt or maintain import measures to allocate in-quota imports made pursuant to a TRQ set out in Annex 3.4.2, provided that such measures comply with Article 3.16.
Article 3.5. Export Contingent Programs
The Parties agree that in their reciprocal trade they shall maintain their rights and obligations according to the Agreement on Subsidies and Countervailing Measures of the WTO Agreement.
Article 3.6. Temporary Admission of Goods
1. Each Party shall grant duty-free temporary admission for the following goods admitted from the territory of the other Party, regardless of their origin and regardless of whether a like, directly competitive, or substitutable good is available in the territory of the importing Party:
(a) professional equipment necessary for carrying out the business activity, trade or profession of a business person who qualifies for temporary entry pursuant to Chapter Fourteen (Temporary Entry for Business Persons);
(b) equipment for the press, equipment for sound or television broadcasting, and cinematographic equipment;
(c) a good imported for sports purposes and a good intended for display or demonstration; and
(d) a commercial sample and advertising films.
2. Except as otherwise provided in this Agreement, a Party may not impose a condition on the duty-free temporary admission of a good referred to in paragraph 1(a), (b) or (c), other than to require that the good:
(a) be imported by a national or resident of the other Party who seeks temporary entry;
(b) be used only by or under the personal supervision of that person in the exercise of the business activity, sport, trade, or profession of that person;
(c) not be sold or leased while in its territory;
(d) be accompanied by a bond in an amount no greater than 110% of the charges that would otherwise be owed on entry or final importation, or by another form of security, releasable on exportation of the good, except that a bond for customs duties shall not be required for an originating good;
(e) be capable of identification when exported;
(f) be exported on the departure of that person or within another period of time that is reasonably related to the purpose of the temporary importation; and
(g) be imported in a quantity no greater than is reasonable for its intended use.
3. If another form of monetary security is used under sub-paragraph 2(d), it shall not be a more burdensome form of security than a bonding requirement referred to in that sub-paragraph. If a Party requires a non-monetary form of security, it shall not require a more burdensome form of security than existing forms of security used by that Party.
4. Except as otherwise provided in this Agreement, a Party may not impose a condition on the duty-free temporary admission of a good referred to in paragraph 1(d), other than to require that such good:
(a) be imported only for the solicitation of orders for a good or service provided from the territory of the other Party or a non-Party;
(b) not be sold, leased, or used for anything other than exhibition or demonstration while in its territory;
(c) be capable of identification when exported;
(d) be exported within a period that is reasonably related to the purpose of the temporary importation; and
(e) be imported in a quantity no greater than is reasonable for its intended use.
5. If a good is temporarily admitted duty-free under paragraph 1 and a condition that a Party imposes under paragraph 2 or 3 has not been fulfilled, that Party may impose:
(a) the customs duty and any other charge that would be owed on entry or final importation of the good; and
(b) any applicable criminal, civil, or administrative penalties that the circumstances may warrant.
6. Except as otherwise provided in this Agreement, a Party may not:
(a) prevent a vehicle or container used in international traffic that enters its territory from the territory of the other Party from exiting its territory on a route that is reasonably related to the economic and prompt departure of that vehicle or container;
(b) require a bond or impose a penalty or charge only because of a difference between the port of entry and the port of departure of a vehicle or container;
(c) condition the release of an obligation, including a bond, based on the entry of a vehicle or container into its territory on exiting through a particular port of departure; and
(d) require that a vehicle or carrier bringing a container from the territory of the other Party into its territory be the same vehicle or carrier that takes that container to the territory of the other Party.
7. For the purposes of paragraph 6, "vehicle" means a truck, a truck tractor, a tractor, a trailer unit, a trailer, a locomotive, a railway car, or other railroad equipment.
Article 3.7. Duty-Free Entry of Certain Commercial Samples of Negligible Value and Printed Advertising Materials
Each Party shall grant duty-free entry to a commercial sample of negligible value and to printed advertising material, imported from the territory of the other Party,
regardless of origin, but may require that:
(a) the commercial sample of negligible value be imported only for the solicitation of an order for a good or service provided from the territory of the other Party or a non-Party; or
(b) the printed advertising materials be imported in packets containing no more than one copy of each such material and that neither such materials nor the packets form part of a larger consignment.
Article 3.8. Goods Re-Entered after Repair or Alteration
1. A Party may not apply a customs duty to a good, regardless of its origin, that re-enters its territory after that good has been exported from its territory to the territory of the other Party for repair or alteration, regardless of whether the repair or alteration could be performed in its territory.
2. A Party may not apply a customs duty to a good, regardless of its origin, imported temporarily from the territory of the other Party for repair or alteration.
3. For the purposes of this Article, repair or alteration does not include an operation or process that:
(a) destroys the essential characteristics of a good or creates a new or commercially different good; or
(b) transforms an unfinished good into a finished good.
4. Paragraph 1 does not apply to a good imported in bond, into foreign trade zones, or in similar status, that is exported for repair and is not re-imported in bond, into foreign trade zones, or in similar status.
Section D. Non-Tariff Measures
Article 3.9. Import and Export Restrictions
1. Except as otherwise provided in this Agreement, a Party may not adopt or maintain a prohibition or restriction on the importation of a good of the other Party or on the exportation or sale for export of a good to the territory of the other Party, except in accordance with Article XI of the GATT 1994, and to this end Article XI of the GATT 1994 is incorporated into and made a part of this Agreement.
2. The Parties understand that the rights and obligations of the GATT 1994 incorporated by paragraph 1 prohibit, in a circumstance in which any other form of restriction is prohibited:
(a) an export price requirement; and
(b) an import price requirement, except as permitted in enforcement of countervailing and anti-dumping orders and undertakings.
3. If a Party adopts or maintains a prohibition or restriction on the importation from or exportation to a non-Party of a good, this Agreement does not prevent that Party from:
(a) prohibiting or restricting the importation from the territory of the other Party of that good of that non-Party; or
(b) requiring as a condition of export of that good of that Party to the territory of the other Party that the good not be re-exported to the non-Party, directly or indirectly, without being consumed in the territory of the other Party.
4. If a Party adopts or maintains a prohibition or restriction on the importation of a good from a non-Party, the Parties, at the request of the other Party, shall discuss how to avoid undue interference with or distortion of pricing, marketing, and distribution arrangements in the other Party.
5. Paragraphs 1 through 4 do not apply to a measure set out in Annex 3.3.
Article 3.10. Distilled Spirits
A Party may not adopt or maintain a measure requiring that distilled spirits imported from the territory of the other Party for bottling be blended with distilled spirits of the Party.
Article 3.11. Export Taxes
A Party may not adopt or maintain a duty, tax, or other charge on the export of a good to the territory of the other Party unless the duty, tax, or charge is adopted or maintained on the good if it is destined for domestic consumption.
Article 3.12. Customs Fees and Similar Charges
1. A Party may not adopt or maintain any customs fee or other similar charge in connection with the importation of a good of the other Party that is not commensurate with the cost of services rendered.
2. Nothing in this Article modifies Article VIII of GATT 1994 as it applies to the Parties.
Article 3.13. Export Subsidies for Agricultural Goods
1. The Parties share the objective of the multilateral elimination of agricultural export subsidies and shall work towards an agreement in the WTO to eliminate those subsidies and avoid their reintroduction in any form.
2. Notwithstanding any other provisions of this Agreement, each Party shall eliminate, as of the date of entry into force of this Agreement, any form of export subsidies for agricultural goods exported to the other Party, and shall not reintroduce such subsidies in any form.
Article 3.14. Domestic Support for Agricultural Goods
1. The Parties recognize that domestic support measures can be of crucial importance to their agricultural sectors, but may also have distorting effects on the production or trade of agricultural goods.
2. The Parties shall cooperate in the WTO agricultural negotiations in order to achieve a substantial reduction of production and trade-distorting domestic support measures,
3. Pending the elimination of trade-distorting domestic support measures, if a Party maintains, introduces or re-introduces such a measure that the other Party considers to be distortive of bilateral trade covered under this Agreement or its internal market, the Party applying the measure shall, at the request of the other Party, consult with a view to making a best efforts endeavour to eliminate such distortion or avoid nullification or impairment of concessions granted under this Agreement. Such consultations shall be deemed to satisfy the requirements of Article 21.8 (Institutional Arrangements and Dispute Settlement Procedures - Consultations).
Article 3.15. Agricultural Safeguard Measures
1. Notwithstanding Article 3.4, Honduras may apply an additional customs duty on an originating agricultural good listed in Annex 3.15, if the volume of imports into Honduras of the originating agricultural good during a calendar year exceeds the quantity of the good, set out in Annex 3.15, for that year.
2. Honduras shall not apply a customs duty on a good, including the additional customs duty referred to in paragraph 1, which exceeds the lesser of the applied most favoured nation duty rate for that good:
(a) at the time the measure is adopted; or
(b) applied on the day immediately preceding the entry into force of this Agreement.
3. Honduras may maintain an agricultural safeguard measure until the end of the calendar year in which it was imposed.
4. Honduras may not impose an agricultural safeguard measure on an originating agricultural good in connection with the same good:
(a) if the good is subject to a TRQ and the agricultural safeguard measure increases an in-quota duty;
(b) after the expiration of the tariff elimination period for that good set out in Honduras' schedule to Annex 3.4.1; or
(c) at the same time as Honduras applies to that good:
(i) an emergency action, under Chapter Nine (Emergency Action), or
(ii) a safeguard under Article XIX of GATT 1994 and the Agreement on Safeguards.
5. For greater certainty: (a) sub-paragraph 4(a) does not limit Honduras from applying an agricultural safeguard measure on imports above the volumes specified in the Annex 3.4.2 for that good; and (b) an agricultural safeguard measure is not subject to compensation. 6. Honduras shall apply an agricultural safeguard measure in a transparent manner. Honduras shall inform Canada in writing within 30 days of the application of that measure, and shall provide all relevant data. At the request of Canada, Honduras shall facilitate discussions with Canada on the conditions for the application of that agricultural safeguard measure.
Article 3.16. Administration and Implementation of Tariff Rate Quotas
1. Each Party shall implement and administer its TRQs in accordance with Article XII of the GATT 1994, and the Agreement on Import Licensing Procedures.
2. Each Party shall ensure that:
(a) its procedures for administering its TRQs are transparent, made available to the public, timely, non-discriminatory, responsive to market conditions, and are designed to minimize any burden on trade;
(b) subject to subparagraph (c), a person of a Party that fulfills that Party's legal and administrative requirements for TRQs shall be eligible to apply, and to be considered, for an import license or an in-quota quantity allocation under the Party's TRQs;
(c) it does not, under its TRQs:
(i) allocate a portion of an in-quota quantity to a producer or a producer's group,
(ii) make access to an in-quota quantity conditional on purchase of domestic production, or
(iii) limit access to an in-quota quantity only to processors or to distributors;
(d) its national government, sub-national governments, or state enterprises administer its TRQs and that the administration is not delegated to another person; and
(e) it allocates in-quota quantities under its TRQs in commercially viable shipping quantities and, to the extent possible, in the amounts that importers request.
3. Each Party shall make every effort to administer its TRQs in a manner that allows importers to fully utilize them.
4. A Party may not impose a condition on the application for or use of an in-quota quantity allocation under a TRQ on the re-export of an agricultural good.
5. A Party may not count food aid or other non-commercial shipments in determining whether an in-quota quantity under a TRQ has been filled.
6. At the request of the exporting Party, the importing Party shall consult with the exporting Party regarding the administration of the importing Party's TRQs and licenses. Those consultations shall be deemed to satisfy the requirements of Article 21.8 (Institutional Arrangements and Dispute Settlement Procedures - Consultations).
7. The in-quota quantities set out in Annex 3.4.2 correspond to calendar years, except as otherwise indicated. If this Agreement enters into force after January 31 of year 1, a Party shall pro-rate the in-quota quantity of that year for the remainder of the calendar year.
Article 3.17. Country of Origin Marking
1. Each Party shall apply, when applicable, its country of origin marking rules to a good of the other Party in accordance with Article IX of the GATT 1994. To this end, Article IX of the GATT 1994 is incorporated into and made part of this Agreement.
2. Each Party shall accord to the goods of the other Party, treatment no less favourable than that which it accords to the goods of a non-Party country with respect to the application of its country of origin marking rules in accordance with Article IX of the GATT 1994.
3. Each Party shall, in adopting, maintaining and applying a measure relating to country of origin marking, minimize the difficulties, costs and inconveniences that the measure may cause to the commerce and industry of the other Party. A Party shall permit the country of origin marking of a good of the other Party to be indicated in English, French, or Spanish. A Party may, however, as part of its general consumer information measures, require that an imported good be marked with its country of origin in the same manner as a good of that Party.
Article 3.18. Customs Valuation
The Customs Valuation Agreement governs the customs valuation rules applied by the Parties to their reciprocal trade. A Party may not make use, in that reciprocal trade, of the options and reservations permitted under Article 20 and paragraphs 2, 3, and 4 of Annex III of the Customs Valuation Agreement.
Section E. Institutional Provisions
Article 3.19. Committee on Trade In Goods and Rules of Origin
1. The Parties hereby establish a Committee on Trade in Goods and Rules of Origin, composed of representatives of each Party.
2. The Committee shall meet periodically, and at any other time at the request of either Party, or the Commission, to ensure the effective implementation and administration of this Chapter, Chapter Four (Rules of Origin), Chapter Five (Customs Procedures), Chapter Six (Trade Facilitation), Chapter Nine (Emergency Action), and the Uniform Regulations. In this regard, the Committee shall:
(a) monitor the implementation and administration by the Parties of this Chapter, Chapter Four (Rules of Origin), Chapter Five (Customs Procedures), Chapter Six (Trade Facilitation), Chapter Nine (Emergency Action), and the Uniform Regulations, to ensure their uniform interpretation;
(b) at the request of either Party, review a proposed modification of or addition to this Chapter, Chapter Four (Rules of Origin), Chapter Five (Customs Procedures), Chapter Six (Trade Facilitation), Chapter Nine (Emergency Action), or the Uniform Regulations;
(c) recommend to the Commission any modification of or addition to this Chapter, Chapter Four (Rules of Origin), Chapter Five (Customs Procedures), Chapter Six (Trade Facilitation), Chapter Nine (Emergency Action), the Uniform Regulations, or any other provision of this Agreement, which may be required to conform with a change to the Harmonized System; and
(d) consider any other matter relating to the Parties' implementation and administration of this Chapter, Chapter Four (Rules of Origin), Chapter Five (Customs Procedures), Chapter Six (Trade Facilitation), Chapter Nine (Emergency Action), and the Uniform Regulations Referred to it by:
(i) a Party,
(ii) the Customs Procedures Sub-Committee established under Article 5.14 (Customs Procedures The Customs Procedures Sub Committee), or
(iii) the Sub-Committee on Agriculture established under paragraph 4.
3. If the Committee fails to resolve a matter referred to it pursuant to sub-paragraph 2 (b) or (d) within 30 days of that referral, either Party may request a meeting of the Commission under Article 21.1 (institutional Arrangements and Dispute Settlement Procedures - Free Trade Commission).
4. The Parties hereby establish a Sub-Committee on Agriculture, composed of representatives of each Party, that:
(a) shall provide a forum for the Parties to discuss issues relating to market access for agricultural goods;
(b) shall monitor the implementation and administration of this Chapter, Chapter Four (Rules of Origin), Chapter Six (Trade Facilitation), Chapter Nine (Emergency Action), and the Uniform Regulations as they affect agricultural goods;
(c) shall meet periodically, or whenever so requested by either Party;
(d) shall refer to the Committee on Trade in Goods and Rules of Origin any matter under sub-paragraph (b) on which it has been unable to reach a decision;
(e) shall submit to the Committee on Trade in Goods and Rules of Origin for its consideration any decision reached under this paragraph;
(f) shall report to the Committee on Trade in Goods and Rules of Origin;
(g) shall follow-up and promote cooperation in matters relating to agricultural goods; and
(h) may review the overall operation of the agricultural special safeguard mechanism in Article 3.15.
5. Each Party, to the extent possible, shall take the measures necessary to implement any modification of or addition to this Chapter, Chapter Four (Rules of Origin), Chapter Five (Customs Procedures), Chapter Six (Trade Facilitation), Chapter Nine (Emergency Action), and the Uniform Regulations within 180 days of the date on which the Commission approves the modification or addition.
6. The Parties shall convene at the request of either Party a meeting of their officials responsible for customs, immigration, inspection of food and agricultural products, border inspection facilities, or regulation of transportation, to address issues related to movement of goods through a Party's port of entry.
7. This Chapter does not preclude a Party from issuing a determination of origin or an advance ruling relating to a matter under consideration by the Committee on Trade in Goods and Rules of Origin, or from taking other action it considers necessary, pending a resolution of the matter under this Agreement.
Chapter Four. RULES OF ORIGIN
Article 4.1. Definitions
For the purposes of this Chapter:
aquaculture means the farming of aquatic organisms, including fish, molluscs, crustaceans, other aquatic invertebrates, and aquatic plants, from seedstock such as eggs, fry, fingerlings, and larvae, by intervention in the rearing or growth processes to enhance
production, such as regular stocking, feeding, or protection from predators;
ex-factory price means the total value of materials, parts, factory overhead, labour, any other reasonable costs incurred during the normal manufacturing process, and a reasonable profit. Any costs incurred subsequent to the goods leaving the factory, such as freight, loading, and temporary storage, are not included in the ex-factory price calculation;
fungible goods means goods that are interchangeable for commercial purposes and whose properties are essentially identical;
fungible materials means materials that are interchangeable for commercial purposes and whose properties are essentially identical;