(iii) observations made at the enterprise relating to circumvention; and
(iv) an assessment of whether the enterprise's production records and other documents support its claims for preferential tariff treatment for:
(A) a textile or apparel good subject to a verification conducted under paragraph 2(a)(i); or
(B) in the case of a verification conducted under paragraph 2(a)(ii), any textile or apparel good exported or produced by the enterprise.
5. On request of a Party conducting a verification under paragraph 2(a), a Party shall provide, consistent with its laws, regulations, and procedures, production, trade, and transit documents and other information necessary to conduct the verification. Where the providing Party designates the information as confidential, Article 5.6 (Confidentiality) shall apply. Notwithstanding the foregoing, a Party may publish the name of an enterprise that:
(a) the Party has determined to be engaged in intentional circumvention of laws, regulations, and procedures of any Party or international agreements affecting trade in textile or apparel goods; or
(b) has failed to demonstrate that it produces, or is capable of producing, textile or apparel goods.
6. (a) During a verification conducted under paragraph 2(a), if there is insufficient information to support a claim for preferential tariff treatment, the importing Party may take appropriate action, which may include suspending the application of such treatment to:
(A) in the case of a verification conducted under paragraph 2(a)(i), the textile or apparel good for which a claim for preferential tariff treatment has been made; and
(B) in the case of a verification conducted under paragraph 2(a)(ii), any textile or apparel good exported or produced by the enterprise subject to that verification for which a claim for preferential tariff treatment has been made.
(i) On completion of a verification conducted under paragraph 2(a), if there is insufficient information to support a claim for preferential tariff treatment, the importing Party may take appropriate action, which may include denying the application of such treatment to any textile or apparel good described in clauses (i)(A) and (B).
(ii) During or on completion of a verification conducted under paragraph 2(a), if the importing Party discovers that an enterprise has provided incorrect information to support a claim for preferential tariff treatment, the importing Party may take appropriate action, which may include denying the application of such treatment to any textile or apparel good described in clauses (i)(A) and (B).
(b) During a verification conducted under paragraph 2(a), if there is insufficient information to determine the country of origin, the importing Party may take appropriate action, which may include detention of any textile or apparel good exported or produced by the enterprise subject to the verification, but for no longer than the period permitted under its law.
(i) On completion of a verification conducted under paragraph 2(a), if there is insufficient information to determine the country of origin, the importing Party may take appropriate action, which may include denying entry to any textile or apparel good exported or produced by the enterprise subject to the verification.
(ii) During or on completion of a verification conducted under paragraph 2(a), if the importing Party discovers that an enterprise has provided incorrect information as to the country of origin, the importing Party may take appropriate action, which may include denying entry to any textile or apparel good exported or produced by the enterprise subject to the verification.
(c) The importing Party may continue to take appropriate action under any provision of this paragraph only until it receives information sufficient to enable it to make the determination in paragraph 2(a)(i) or (ii), as the case may be, but in any event for no longer than the period permitted under its law.
(d) The importing Party may deny preferential tariff treatment or entry under this paragraph only after providing a written determination to the importer of the reason for the denial.
7. Not later than 45 days after it completes a verification conducted under paragraph 2(a), the exporting Party shall provide the importing Party a written report on the results of the verification. The report shall include all documents and facts supporting any conclusion that the exporting Party reaches. After receiving the report, the importing Party shall notify the exporting Party of any action it will take under paragraph 6(a)(ii) or (iii) or 6(b)(ii) or (iii), based on the information provided in the report.
8. On the written request of a Party, two or more Parties shall enter into consultations to resolve any technical or interpretive difficulties that may arise, or to discuss ways to improve customs cooperation, regarding the application of this Article. Unless the consulting Parties otherwise agree, consultations shall begin within 30 days after delivery of the request, and conclude within 90 days after delivery.
9. A Party may request technical or other assistance from any other Party in implementing this Article. The Party receiving such a request shall make every effort to respond favorably and promptly to it.
Article 3.25. Rules of Origin and Related Matters
Consultations on Rules of Origin
1. On request of a Party, the Parties shall, within 30 days after the request is delivered, consult on whether the rules of origin applicable to a particular textile or apparel good should be modified.
2. In the consultations referred to in paragraph 1, each Party shall consider all data that a Party presents demonstrating substantial production in its territory of the good. The Parties shall consider that there is substantial production if a Party demonstrates that its domestic producers are capable of supplying commercial quantities of the good in a timely manner.
3. The Parties shall endeavor to conclude the consultations within 90 days after delivery of the request. If the Parties reach an agreement to modify a rule of origin for a particular good, the agreement shall supersede that rule of origin when approved by the Parties in accordance with Article 19.1.3(b) (The Free Trade Commission).
Fabrics, Yarns, and Fibers Not Available in Commercial Quantities
4. (a) At the request of an interested entity, the United States shall, within 30 business days of receiving the request, add a fabric, fiber, or yarn in an unrestricted or restricted quantity to the list in Annex 3.25, if the United States determines, based on information supplied by interested entities, that the fabric, fiber, or yarn is not available in commercial quantities in a timely manner in the territory of any Party, or if no interested entity objects to the request.
(b) If there is insufficient information to make the determination in subparagraph (a), the United States may extend the period within which it must make that determination by no more than 14 business days, in order to meet with interested entities to substantiate the information.
(c) If the United States does not make the determination in subparagraph (a) within 15 business days of the expiration of the period within which it must make that determination, as specified in subparagraph (a) or (b), the United States shall grant the request.
(d) The United States may, within six months after adding a restricted quantity of a fabric, fiber, or yarn to the list in Annex 3.25 pursuant to subparagraph (a), eliminate the restriction.
(e) If the United States determines before the date of entry into force of this Agreement that any fabrics or yarns not listed in Annex 3.25 are not available in commercial quantities in the United States pursuant to section 112(b)(5)(B) of the African Growth and Opportunity Act (19 U.S.C. § 3721(b)), section 204(b)(3)(B)(ii) of the Andean Trade Preference Act (19 U.S.C. § 3203(b)(3)(B)(ii)), or section 213(b)(2)(A)(v)(ID of the Caribbean Basin Economic Recovery Act (19 U.S.C. 2703(b)(2)(A)(v)(ID), the United States shall add such fabrics or yarns in an unrestricted quantity to the list in Annex 3.25.
5. At the request of an interested entity made no earlier than six months after the United States has added a fabric, yarn, or fiber in an unrestricted quantity to Annex 3.25 pursuant to paragraph 4, the United States may, within 30 business days after it receives the request:
(a) delete the fabric, yarn, or fiber from the list in Annex 3.25; or
(b) introduce a restriction on the quantity of the fabric, yarn, or fiber added to Annex 3.25,
if the United States determines, based on the information supplied by interested entities, that the fabric, yarn, or fiber is available in commercial quantities in a timely manner in the territory of any Party. Such deletion or restriction shall not take effect until six months after the United States publishes its determination.
6. Promptly after the date of entry into force of this Agreement, the United States shall publish the procedures it will follow in considering requests under paragraphs 4 and 5.
De Minimis
7. A textile or apparel good that is not an originating good because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in Annex 4.1 (Specific Rules of Origin), shall nonetheless be considered to be an originating good if the total weight of all such fibers or yarns in that component is not more than ten percent of the total weight of that component. (4)
8. Notwithstanding paragraph 7, a good containing elastomeric yarns (5) in the component of the good that determines the tariff classification of the good shall originate only if such yarns are wholly formed in the territory of a Party. (6)
Treatment of Sets
9. Notwithstanding the specific rules of origin in Annex 4.1 (Specific Rules of Origin), textile or apparel goods classifiable as goods put up in sets for retail sale as provided for in General Rule of Interpretation 3 of the Harmonized System, shall not be regarded as originating goods unless each of the products in the set is an originating good or the total value of the non- originating goods in the set does not exceed ten percent of the adjusted value of the set.
Treatment of Nylon Filament Yarn
10. A textile or apparel good that is not an originating good because certain yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in Annex 4.1 (Specific Rules of Origin), shall nonetheless be considered to be an originating good if the yarns are those described in section 204(b)(3)(B)(vi)(IV) of the Andean Trade Preference Act (19 U.S.C. § 3203(b)(3)(B)(vi)(IV)).
Article 3.26. Most-Favored-Nation Rates of Duty on Certain Goods
For a textile or apparel good provided for in chapters 61 through 63 of the Harmonized System that is not an originating good, the United States shall apply its MFN rate of duty only on the value of the assembled good minus the value of fabrics formed in the United States, components knit-to-shape in the United States, and any other materials of U.S. origin used in the production of such a good, provided that the good is sewn or otherwise assembled in the territory of another Party or Parties with thread wholly formed in the United States, from fabrics wholly formed in the United States and cut in one or more Parties, or from components knit-to-shape in the United States, or both. (7)
Article 3.27. Preferential Tariff Treatment for Wool Apparel Goods Assembled In Costa Rica
Annex 3.27 sets out provisions applicable to certain apparel goods of Costa Rica.
Article 3.28. Preferential Tariff Treatment for Non-Originating Apparel Goods of Nicaragua
Annex 3.28 sets out provisions applicable to certain apparel goods of Nicaragua.
Article 3.29. Definitions
For purposes of this Section:
claim of origin means a claim that a textile or apparel good is an originating good or a good of a Party;
exporting Party means the Party from whose territory a textile or apparel good is exported; importing Party means the Party into whose territory a textile or apparel good is imported;
interested entity means a Party, a potential or actual purchaser of a textile or apparel good, or a potential or actual supplier of a textile or apparel good;
textile or apparel good means a good listed in the Annex to the Agreement on Textiles and Clothing, except for those goods listed in Annex 3.29;
textile safeguard measure means a measure applied under Article 3.23.1; and
transition period means the five-year period beginning on the date of entry into force of this Agreement.
Section H. Institutional Provisions
Article 3.30. Committee on Trade In Goods
1. The Parties hereby establish a Committee on Trade in Goods, comprising representatives of each Party.
2. The Committee shall meet on the request of a Party or the Commission to consider any matter arising under this Chapter, Chapter Four (Rules of Origin and Origin Procedures), or Chapter Five (Customs Administration and Trade Facilitation).
3. The Committee's functions shall include:
(a) promoting trade in goods between the Parties, including through consultations on accelerating tariff elimination under this Agreement and other issues as appropriate;
(b) addressing barriers to trade in goods between the Parties, especially those related to the application of non-tariff measures, and, if appropriate, referring such matters to the Commission for its consideration; and
(c) providing to the Committee on Trade Capacity Building advice and recommendations on technical assistance needs regarding matters relating to this Chapter, Chapter Four (Rules of Origin and Origin Procedures), or Chapter Five (Customs Administration and Trade Facilitation).
Section I. Definitions
Article 3.31. Definitions
For purposes of this Chapter:
AD Agreement means the WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994;
advertising films and recordings means recorded visual media or audio materials, consisting essentially of images and/or sound, showing the nature or operation of goods or services offered for sale or lease by a person established or resident in the territory of a Party, provided that such materials are of a kind suitable for exhibition to prospective customers, but not for broadcast to the general public;
Agreement on Textiles and Clothing means the WTO Agreement on Textiles and Clothing;
agricultural goods means those goods referred to in Article 2 of the WTO Agreement on Agriculture;
commercial samples of negligible value means commercial samples having a value, individually or in the aggregate as shipped, of not more than one U.S. dollar, or the equivalent amount in the currency of another Party, or so marked, torn, perforated, or otherwise treated that they are unsuitable for sale or for use except as commercial samples;
consular transactions means requirements that goods of a Party intended for export to the territory of another Party must first be submitted to the supervision of the consul of the importing Party in the territory of the exporting Party for the purpose of obtaining consular invoices or consular visas for commercial invoices, certificates of origin, manifests, shippersâ export declarations, or any other customs documentation required on or in connection with importation; consumed means
(a) actually consumed; or
(b) further processed or manufactured so as to result in a substantial change in value, form, or use of the good or in the production of another good;
duty-free means free of customs duty;
export subsidies shall have the meaning assigned to that term in Article 1(e) of the WTO Agreement on Agriculture, including any amendment of that article;
goods intended for display or demonstration includes their component parts, ancillary apparatus, and accessories;
goods temporarily admitted for sports purposes means sports requisites for use in sports contests, demonstrations, or training in the territory of the Party into whose territory such goods are admitted;
import licensing means an administrative procedure requiring the submission of an application or other documentation (other than that generally required for customs clearance purposes) to the relevant administrative body as a prior condition for importation into the territory of the importing Party;
Import Licensing Agreement means the WTO Agreement on Import Licensing Procedures,
performance requirement means a requirement that:
(a) a given level or percentage of goods or services be exported;
(b) domestic goods or services of the Party granting a waiver of customs duties or import license be substituted for imported goods;
(c) a person benefiting from a waiver of customs duties or an import license purchase other goods or services in the territory of the Party granting the waiver of customs duties or the import license, or accord a preference to domestically produced goods;
(d) a person benefiting from a waiver of customs duties or an import license produce goods or supply services, in the territory of the Party granting the waiver of customs duties or the import license, with a given level or percentage of domestic content; or
(e) relates in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows,
but does not include a requirement that:
(f) an imported good be subsequently exported;
(g) an imported good be used as a material in the production of another good that is subsequently exported;
(h) an imported good be substituted by an identical or similar good used as a material in the production of another good that is subsequently exported; or
(i) an imported good be substituted by an identical or similar good that is subsequently exported;
printed advertising materials means those goods classified in Chapter 49 of the Harmonized System, including brochures, pamphlets, leaflets, trade catalogues, yearbooks published by trade associations, tourist promotional materials, and posters, that are used to promote, publicize, or advertise a good or service, are essentially intended to advertise a good or service, and are supplied free of charge; and
SCM Agreement means the WTO Agreement on Subsidies and Countervailing Measures.
Chapter Four. Rules of Origin and Origin Procedures
Section A. Rules of Origin
Article 4.1. Originating Goods
Except as otherwise provided in this Chapter, each Party shall provide that a good is originating where:
(a) it is a good wholly obtained or produced entirely in the territory of one or more of the Parties;
(b) it is produced entirely in the territory of one or more of the Parties and
(i) each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification specified in Annex 4.1, or
(ii) the good otherwise satisfies any applicable regional value content or other requirements specified in Annex 4.1,
and the good satisfies all other applicable requirements of this Chapter; or
(c) it is produced entirely in the territory of one or more of the Parties exclusively from originating materials.
Article 4.2. Regional Value Content
1. Where Annex 4.1 specifies a regional value content test to determine whether a good is originating, each Party shall provide that the importer, exporter, or producer may use a calculation of regional value content based on one or the other of the following methods:
(a) Method Based on Value of Non-Originating Materials ("Build-down Method")
RVC = AV - VNM / AV x 100
(b) Method Based on Value of Originating Materials ("Build-up Method")
RVC = VOM / AV x 100 where,
RVC is the regional value content, expressed as a percentage;
AV is the adjusted value;
VNM is the value of non-originating materials that are acquired and used by the producer in the production of the good; VNM does not include the value of a material that is self-produced; and
VOM is the value of originating materials acquired or self-produced, and used by the producer in the production of the good.
2. Each Party shall provide that all costs considered for the calculation of regional value content shall be recorded and maintained in conformity with the Generally Accepted Accounting Principles applicable in the territory of the Party where the good is produced.
3. Where Annex 4.1 specifies a regional value content test to determine if an automotive good (1) is originating, each Party shall provide that the importer, exporter, or producer may use a calculation of the regional value content of that good as provided in paragraph 1 or based on the following method:
Method for Automotive Products ("Net Cost Method")
RVC = NC - VNM/NC x 100
where, RVC is the regional value content, expressed as a percentage;
NC is the net cost of the good; and
VNM is the value of non-originating materials acquired and used by the producer in the production of the good; VNM does not include the value of a material that is self- produced.
4. Each Party shall provide that, for purposes of the regional value content method in paragraph 3, the importer, exporter, or producer may use a calculation averaged over the producer's fiscal year, using any one of the following categories, on the basis of all motor vehicles in the category or only those motor vehicles in the category that are exported to the territory of one or more of the other Parties:
(a) the same model line of motor vehicles in 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 of motor vehicles produced in the territory of a Party.
5. Each Party shall provide that, for purposes of calculating regional value content under paragraph 3 for automotive materials (2) produced in the same plant, an importer, exporter, or producer may use a calculation:
(a) averaged:
(i) over the fiscal year of the motor vehicle producer to whom the good is sold;
(ii) over any quarter or month; or
(iii) over its fiscal year,
provided that the good was produced during the fiscal year, quarter, or month forming the basis for the calculation;
(b) in which the average in subparagraph (a) is calculated separately for such goods sold to one or more motor vehicle producers; or
(c) in which the average in subparagraph (a) or (b) is calculated separately for those goods that are exported to the territory of one or more of the Parties.
Article 4.3. Value of Materials
Each Party shall provide that, for purposes of Articles 4.2 and 4.6, the value of a material shall be:
(a) for a material imported by the producer of the good, the adjusted value of the material;
(b) for a material acquired in the territory where the good is produced, the value, determined in accordance with Articles 1 through 8, Article 15, and the corresponding interpretative notes of the Customs Valuation Agreement in the same manner as for imported goods, with such reasonable modifications as may be required due to the absence of an importation; or
(c) for a material that is self-produced,
(i) all the expenses incurred in the production of the material, including general expenses, and
(ii) an amount for profit equivalent to the profit added in the normal course of trade.
Article 4.4. Further Adjustments to the Value of Materials
1. Each Party shall provide that, for originating materials, the following expenses, where not included under Article 4.3, may be added to the value of the material:
(a) the costs of freight, insurance, packing, and all other costs incurred in transporting the material within a Party's territory or between the territories of two or more Parties to the location of the producer;