3. Paragraphs 1 and 2 do not apply to the measures set out in Annex 2-A.
Article 2.4. Classification of Goods
The classification of goods in trade between the Parties shall be that set out in each Party’s respective tariff nomenclature in conformity with the Harmonized System.
Article 2.5. Reduction or Elimination of Customs Duties on Imports
1. Except as otherwise provided in this Agreement, a Party shall not increase any existing customs duty, or adopt any new customs duty, on an originating good.
2. Except as otherwise provided in this Agreement, each Party shall eliminate its customs duties on originating goods in accordance with its Schedule to Annex 2-B.
3. Each Party shall apply to an originating good the lesser of the customs duty resulting from:
(a) the rate of customs duty calculated in accordance with its Schedule to Annex 2-B; or
(b) the most-favoured-nation (“MFN”) applied rate of customs duty.
4. On the request of a Party, the Parties shall consult through the Committee on Trade in Goods to consider accelerating the elimination of customs duties or improving tariff commitments set out in their Schedules to Annex 2-B. A decision of the Joint Committee to accelerate the elimination of a customs duty or improve tariff commitments on an originating good shall supersede any rate of customs duty or staging category determined pursuant to the Parties’ Schedules in Annex 2-B for that good when approved by each Party in accordance with its applicable legal procedures.
5. A Party may at any time unilaterally accelerate the elimination of customs duties set out in its Schedule to Annex 2-B on originating goods of the other Party. A Party shall inform the other Party as early as practicable before the new rate of customs duty takes effect.
6. For greater certainty, a Party may:
(a) increase a customs duty to the level established in its Schedule to Annex 2-B following a unilateral reduction; or
(b) maintain or increase a customs duty as authorized by this Agreement, the Dispute Settlement Body of the WTO, or an agreement under the WTO Agreement.
Article 2.6. Waiver of Customs Duties
A Party shall not adopt or maintain any waiver of a customs duty if the waiver is conditioned, explicitly or implicitly, on the fulfillment of a performance requirement.
Article 2.7. Import and Export Restrictions
1. Except as otherwise provided in this Agreement, a Party shall not adopt or maintain any prohibition or restriction on the importation of any good of the other Party or on the exportation or sale for export of any good destined for the territory of the other Party except in accordance with Article XI of the GATT 1994. To this end, Article XI of the GATT 1994 are incorporated into and made a part of this Agreement.
2. A Party shall not adopt or maintain any measure prohibited by Article 4.2 of the Agreement on Agriculture with respect to goods of the other Party. To this end, Article
4.2 of the Agreement on Agriculture is incorporated into and made part of this Agreement. This Article does not apply to measures taken pursuant to the Andean Price Band System with respect to the goods listed in Annex 2-C, in accordance with Article 2.18.
3. The Parties understand that GATT 1994 rights and obligations incorporated by paragraph 1 prohibit, in any circumstances in which any other form of restriction is prohibited, a Party from adopting or maintaining:
(a) export or import price requirements, except as permitted in enforcement of countervailing and antidumping duty orders or undertakings;
(b) import licensing conditioned on the fulfilment of a performance requirement; or
(c) voluntary export restraints, except for those applied consistently with Article VI of the GATT 1994, as implemented under Article 18 of the SCM Agreement or Article 8 of the AD Agreement.
4. 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) limiting or prohibiting the importation of the good of that non-party from the territory of the other Party; or
(b) requiring, as a condition for exporting the 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.
5. If a Party adopts or maintains a prohibition or restriction on the importation of a good from a non-party, the Parties shall, on the request of a Party, consult with a view to avoiding undue interference with or distortion of pricing, marketing or distribution arrangements in the other Party.
6. This Article does not apply to the measures set out in Annex 2-A.
Article 2.18. Import Licensing
1. Each Party shall ensure that all its import licensing procedures are implemented in a transparent and predictable manner. A Party shall not adopt or maintain an import licensing measure that is inconsistent with the Import Licensing Agreement.
2. Promptly after this Agreement enters into force, each Party shall notify the other Party of its existing import licensing procedures, if any. The notification shall include the information specified in Article 5.2 of the Import Licensing Agreement.
3. A Party shall be deemed to be in compliance with the obligations in paragraph 2 with respect to an existing import licensing procedure if:
(a) it has notified that procedure to the WTO Committee on Import Licensing established under Article 4 of the Import Licensing Agreement together with the information specified in Article 5.2 of that agreement; and
(b) in the most recent annual submission due before the date of entry into force of this Agreement for that Party to the WTO Committee on Import Licensing in response to the annual questionnaire on import licensing procedures described in Article 7.3 of the Import Licensing Agreement, it has provided, with respect to that procedure, the information requested in that questionnaire.
4. A Party shall publish on an official government website any new or modified import licensing procedure, including any information that is required to be published under Article 1.4(a) of the Import Licensing Agreement. To the extent possible, the Party shall do so at least 20 days before the new procedure or modification takes effect.
5. Each Party shall notify the other Party of any new import licensing procedures it adopts and any modifications it makes to its existing import licensing procedures, if possible, no later than 60 days before the new procedure or modification takes effect. A Party shall not provide the notification later than 60 days after the date of publication of the new procedure or modification. A Party shall be deemed to be in compliance with this obligation if it notifies a new import licensing procedure or a modification to an existing import licensing procedure to the WTO Committee on Import Licensing in accordance with Article 5.1, 5.2 or 5.3 of the Import Licensing Agreement.
6. Each Party shall respond within 60 days to a reasonable enquiry from the other Party concerning its licensing rules and its procedures for the submission of an application for an import licence, including the eligibility of persons, firms and institutions to make an application, the administrative body or bodies to be approached and the list of products subject to the licensing requirement.
7. If a Party denies an import licence application with respect to a good of the other Party, it shall, on request of the applicant and within a reasonable period after receiving the request, provide the applicant with a written explanation of the reason for the denial.
8. A Party shall not apply an import licensing procedure to a good of the other Party unless the Party has complied with the requirements of paragraphs 2 and 4 with respect to that procedure.
Article 2.9. Export Licensing
1. Within 30 days after the date of entry into force of this Agreement, each Party shall notify the other Party in writing of the publications in which its export licensing procedures, if any, are set out, including addresses of relevant government websites on which the procedures are published. Thereafter, each Party shall publish any new export licensing procedure or any modification of an export licensing procedure it adopts as soon as practicable but no later than 30 days after the date the new procedure or modification takes effect.
2. Each Party shall notify the other Party of any new export licensing procedures it adopts and any modifications it makes to its existing export licensing procedures as soon as practicable but no later than 60 days after the date the new procedure or modification takes effect. The notification requirements in Article 5 of the Import Licensing Agreement shall be carried out between the Parties with regard to any new or modified export licensing procedures.
3. A Party shall be deemed to be in compliance with paragraphs 1 and 2 if it has notified the export licensing procedure to the WTO Committee on Market Access in accordance with the Decision on Notification Procedures for Quantitative Restrictions (G/L/59/Rev.1), adopted by the WTO Council on Trade in Goods on 22 June 2012.
4. A Party shall provide the other Party, on request of a Party and to the extent practicable, the following information regarding a particular export licensing procedure that it adopts or maintains, except where doing so would reveal business proprietary or other confidential information of a particular person:
(a) the aggregate number of licences the Party has granted over a recent period specified in the other Party’s request; and
(b) measures, if any, that the Party has taken in conjunction with the licensing procedure to restrict domestic production or consumption or to stabilize production, supply, or prices for the relevant good.
5. For greater certainty, this Article does not:
(a) require a Party to grant an export licence;
(b) prevent a Party from implementing its obligations or commitments under United Nations Security Council Resolutions, multilateral non-proliferation regimes or export control arrangements; or
(c) prevent a Party from adopting, maintaining or implementing an export control regime or an independent sanctions regime.
Article 2.10. Administrative Fees and Formalities
1. Each Party shall ensure in accordance with Article VIII:1 of the GATT 1994 and Article 6.2 of the Trade Facilitation Agreement, that all fees and charges of whatever character (other than customs duties, charges equivalent to an internal tax or other internal charges applied consistently with Article III:2 of the GATT 1994, and anti-dumping and countervailing duties) imposed on or in connection with importation or exportation, are limited in amount to the approximate cost of services rendered and do not represent a direct or indirect protection for domestic goods or a taxation of imports for fiscal purposes., that all fees and charges of whatever character (other than customs duties, charges equivalent to an internal tax or other internal charges applied consistently with Article III:2 of the GATT 1994, and anti-dumping and countervailing duties) imposed on or in connection with importation or exportation, are limited in amount to the approximate cost of services rendered and do not represent a direct or indirect protection for domestic goods or a taxation of imports for fiscal purposes.
2. A Party shall not require consular transactions, including related fees and charges, in connection with the importation of a good of the other Party.
3. Each Party shall make publicly available online a current list of the fees and charges it imposes in connection with importation or exportation.
Article 2.11. Exchange of Data for Preference Utilization
1. For the purpose of monitoring the functioning of this Agreement and calculating preference utilization rates, the Parties shall annually exchange updated import statistics for a period starting one year after the date of entry into force of this Agreement and expiring five years after the tariff elimination is completed. The Committee on Trade in Goods may decide to extend this period.
2. The import statistics referred to in paragraph 1 shall include data pertaining to the most recent calendar year available, at the tariff line level for Chapters 1 through 97 of the Harmonized System, on imports of goods from the other Party that are subject to MFN-applied tariffs and tariff preferences under this Agreement, including information on value and, where applicable, volume and tariff rate quota fill rate.
Article 2.12. State Trading Enterprises
1. The Parties affirm their rights and obligations with respect to state trading enterprises under Article XVII of the GATT 1994 and the Understanding on the Interpretation of Article XVII of the GATT 1994.
2. The Parties intend to cooperate at the WTO to ensure transparency regarding the operation and maintenance of state trading enterprises.
Section C. Institutional Provisions
Article 2.13. Committee on Trade In Goods
1. The Parties hereby establish a Committee on Trade in Goods (“Committee”), composed of government representatives of each Party.
2. The Committee shall meet within 60 days of a request of a Party or of the Joint Committee to consider any matter arising under this Chapter.
3. The Committee shall meet at a venue and time as the Parties decide. The Committee may meet in person or by electronic means. Unless the Parties decide otherwise, in-person meetings shall be held alternately in the territory of each Party. The Party hosting an in-person meeting of the Committee shall provide administrative support for that meeting.
4. The Committee’s functions shall include:
(a) monitoring the implementation and administration of this Chapter;
(b) promoting trade in goods between the Parties, including through consultations on accelerating or improvement of tariff commitments under this Agreement and other issues as appropriate;
(c) consulting on and endeavoring to resolve any issues relating to this Chapter, including, as appropriate, in coordination or jointly with other committees, subcommittees, working groups, or other bodies established under this Agreement;
(d) promptly seeking to address barriers to trade in goods between the Parties, including those related to the application of non-tariff measures, other than those within the competence of other committees, subcommittees, working groups or any other bodies established under this Agreement and, if appropriate, referring those matters to the Joint Committee for its consideration;
(e) coordinating the exchange of information on trade in goods between the Parties;
(f) discussing and endeavoring to resolve any difference that may arise between the Parties on matters related to the Harmonized System, including ensuring that each Party’s obligations under this Agreement are not altered by its implementation of future amendments to the Harmonized System into its national nomenclature;
(g) referring any relevant issues to other committees, subcommittees, working groups or any other bodies established under this Agreement and notifying the Joint Committee, as appropriate;
(h) providing advice and recommendations to the Joint Committee with regards to matters within the Committee’s competence; and
(i) carrying out any other work related to this Chapter that the Joint Committee may assign or another committee may refer to the Committee.
Section D. Agriculture
Article 2.14. Definitions
For the purposes of this Section:
agricultural good means a product listed in Annex 1 of the Agreement on Agriculture;
export subsidy means an export subsidy as defined in Article 1(e) of the Agreement on Agriculture;
Nairobi Decision means the WTO Ministerial Decision on Export Competition, adopted in Nairobi, 19 December 2015, (WT/L/980).
Article 2.15. Scope
This Section applies to any measure adopted or maintained by a Party relating to trade in agricultural goods, except as otherwise provided in Article 2.16.
Article 2.16. Export Restrictions – Food Security
1. For the purposes of this Article, “foodstuff” includes fish and fish products intended for human consumption.
2. The Parties recognize that under Article XI:2(a) of the GATT 1994, a Party may temporarily apply an export prohibition or restriction that is otherwise prohibited under Article XI:1 of the GATT 1994 on a foodstuff to prevent or relieve a critical shortage, subject to meeting the conditions set out in Article 12.1 of the Agreement on Agriculture.
3. A Party that maintains a prohibition or restriction on the exportation or sale for export of a foodstuff as of the date of entry into force of this Agreement shall notify the measure to the other Party within 30 days of the date of entry into force of this Agreement. A Party shall be deemed to be in compliance with this obligation if it has previously notified the measure to the WTO Committee on Agriculture.
4. A Party that adopts a new prohibition or restriction on the exportation or sale for export of a foodstuff to the other Party shall, in addition to meeting the conditions set out in Article 12.1 of the Agreement on Agriculture, notify the measure to the other Party at least 15 days prior to the date the measure takes effect, except when the critical shortage is caused by an event constituting force majeure, in which case the Party adopting the export prohibition or restriction shall notify the other Party prior to the date the measure takes effect. A Party shall be deemed to be in compliance with this obligation if it has notified the measure to the WTO Committee on Agriculture within the timeframe required by the present paragraph.
5. For the purposes of this Article, “force majeure” means the occurrence of an irresistible force or of an unforeseen event, beyond the control of the Party, that makes it materially impossible for the Party to perform its obligations under this Article.
6. A Party shall not apply a measure that is subject to notification under paragraph 3 or 4 to a foodstuff purchased for a non-commercial, humanitarian purpose.
Article 2.17. Export Competition
1. The Parties affirm their rights and obligations under the Nairobi Decision.
2. The Parties share the objective of the multilateral elimination of export subsidies for agricultural goods and shall work together to prevent their reintroduction in any form.
3. A Party shall not provide an export subsidy on any agricultural good destined for the territory of the other Party.
4. Within 30 days of a written request of a Party, the Parties shall enter into consultations regarding any measure the requesting Party considers to be an export subsidy.
Article 2.18. The Andean Price Band System
Ecuador may maintain the Andean Price Band System for agricultural goods subject to the APBS only for goods listed in Annex 2-C, subject to the conditions and modalities of Annex 2-B.
Article 2.19. Sub-Committee on Agriculture
1. The Parties hereby establish a Sub-Committee on Agriculture, composed of relevant government representatives of each Party.
2. The Sub-Committee shall meet within 60 days of a request by a Party or by the Committee on Trade in Goods.
3. The Sub-Committee shall meet at a venue and time as the Parties decide. The Sub-Committee may meet in person or by electronic means. Unless the Parties decide otherwise, in-person meetings shall be held alternately in the territory of each Party. The Party hosting an in-person meeting of the Sub-Committee shall provide administrative support for that meeting.
4. The Sub-Committee’s functions shall include:
(a) facilitating communications between the Parties on any matter covered by this Section;
(b) promoting trade in agricultural goods between the Parties under this Agreement;
(c) monitoring and promoting cooperation on the implementation and administration of this Section;
(d) endeavouring to share information, at an appropriately early stage,
of regulatory or policy changes under consideration by a Party that would affect trade in an agricultural good between the Parties;
(e) consulting and endeavouring to address issues or trade barriers and to improve access to their respective markets for agricultural goods, in coordination or jointly with other committees, working groups or any other subsidiary bodies established under this Agreement;
(f) fostering cooperation between the Parties in areas of mutual interest, such as rural development, technology, research and development, capacity building and inclusive approaches to trade; and
(g) undertaking any additional work, including any work that the Committee on Trade in Goods may assign or another committee may assign or refer to it.
5. The Sub-Committee shall inform the Committee on Trade in Goods of the results of its meetings.
Chapter 3. RULES OF ORIGIN
Article 3.1. 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 seed stock such as eggs, fingerlings, fry, larvae, post-larvae or seedlings, by the intervention in the rearing or growth processes to enhance production, such as regular stocking, feeding or protection from predators;
fungible goods or materials means goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical;
generally accepted accounting principles means the principles recognized by consensus or with substantial authoritative support in the territory of a Party, with respect to the recording of revenues, expenses, costs, assets and liabilities; the disclosure of information; and the preparation of financial statements. These principles may encompass broad guidelines for general application as well as detailed standards, practices and procedures;
listed means a foreign registered vessel bare-boat chartered in accordance with the law of a Party and whose registration in the foreign country is suspended for the duration of the charter;
material means a good used in the production of another good, and includes a part or ingredient;
motor vehicle means a good of heading 87.03 through 87.04;
net cost means total cost minus sales promotion, marketing and after-sales service costs, royalty, shipping and packing costs, and non-allowable interest cost that are included in the total cost;
non-allowable interest cost means interest costs incurred by a producer that exceed 700 basis points above the applicable national government interest rate identified for comparable maturities;
non-originating good or non-originating material means a good or material that does not qualify as originating under this Chapter;
originating good or originating material means a good or material that qualifies as originating under this Chapter;
production means methods for obtaining goods, including growing, raising, harvesting, cultivating, picking, gathering, fishing, hunting, trapping, capturing, aquaculture, extracting, manufacturing, processing or assembling a good;
reasonably allocate means to apportion in a manner appropriate under generally accepted accounting principles;
recovered material means a material in the form of one or more individual parts that results from:
(a) the disassembly of a used good into individual parts; and
(b) the cleaning, inspecting, testing or other processing of those parts as necessary for improvement to sound working condition;
remanufactured good means a good that is entirely or partially composed of recovered materials and:
(a) has a similar life expectancy and performs the same as or similar to that good when new; and
(b) has a factory warranty similar to that applicable to that good when new;
royalty means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use or right to use any copyright, literary, artistic or scientific work, patent, trademark, design, model, plan, secret formula or process, excluding those payments under technical assistance or similar agreements that can be related to specific services such as:
(a) personnel training, without regard to where it is performed; or
(b) engineering, tooling, die-setting, software design and similar computer services, or other services, if performed in the territory of one or both of the Parties;
sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and after-sales service:
(a) sales and marketing promotion, media advertising, advertising and market research, promotional and demonstration materials, exhibits, sales conferences, trade shows and conventions, banners, marketing displays, free samples, sales, marketing and after-sales service literature, such as brochures for the good, catalogues, technical literature, price lists, service manuals and sales aid information, establishment and protection of logos or trademarks, sponsorships, wholesale and retail restocking charges, and entertainment;
(b) sales and marketing incentives; consumer, retailer or wholesaler rebates; and merchandise incentives;
(c) salaries and wages, sales commissions, bonuses, benefits, such as medical, insurance and pension, travelling and living expenses, membership and professional fees for sales promotion, marketing and after-sales service personnel;
(d) recruiting and training of sales promotion, marketing and after-sales service personnel and after-sales training of customers’ employees, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
(e) goods liability insurance;
(f) office supplies for sales promotion, marketing and after-sales service of goods, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
(g) telephone, mail and other communications, if those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
(h) rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centres;
(i) property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centres, where those costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer; and
(j) payments by the producer to other persons for warranty repairs;
shipping and packing costs means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding costs of preparing and packaging the good for retail sale;
total cost means all product costs, period costs and other costs incurred in relation to the production of a good in the territory of one or both of the Parties where:
(a) product costs means those costs that are associated with the production of a good and include the value of materials, direct labour costs and direct overhead;