Article 3.9. Fungible Materials and Goods
1. For the purposes of determining whether a material or good is an originating material or good, any fungible material or good shall be distinguished by:
(a) physically separating each fungible material or good; or
(b) using any inventory management method recognised in the Generally Accepted Accounting Principles of the Party in which the production is performed or otherwise accepted by that Party in which the production is performed.
2. Once a particular inventory management method is selected under paragraph 1, that method shall continue to be used for those fungible materials or goods throughout the fiscal year of the person that selected the inventory management method.
Article 3.10. Sets or Assortments of Goods
Except as provided in Annex 3-A, a set or assortment of goods, as referred to in General Rule 3 of the Harmonized System, is originating, if:
(a) all of the component goods, including packaging materials and containers, are originating; or
(b) when the set or assortment of goods contains non-originating component goods, including packaging materials and containers, the value of the non-originating goods, including any non-originating packaging materials and containers for the set or assortment of goods, does not exceed 15 percent of the transaction value or ex-works price of the set or assortment of goods.
Article 3.11. Accessories, Spare Parts and Tools
Accessories, spare parts, and tools delivered with a good that form part of its standard accessories, spare parts, or tools are considered originating if the good originates and shall be disregarded in determining whether all the non-originating materials undergo the applicable conditions set out in Annex 3-A, provided that:
(a) the accessories, spare parts, or tools are not invoiced separately from the good; and
(b) the quantities and value of the accessories, spare parts, or tools are customary for the good.
Article 3.12. Packaging Materials and Containers for Retail Sale
Except as provided for in Article 3.10 and in Annex 3-A, packaging materials and containers in which a good is packaged for sale shall be disregarded in determining whether all the non-originating materials undergo the applicable conditions as set out in Annex 3-A.
Article 3.13. Packing Materials and Containers for Shipment
Packing materials, containers, pallets, or similar articles, in which a good is packed for shipment is disregarded in determining the origin of that good.
Article 3.14. Indirect Materials
For the purposes of determining whether a good is originating, it is not necessary to determine the origin of indirect materials used in production, testing or inspection of that good, but which have not entered into the final composition of the good, or which have been used in the maintenance of equipment and buildings or the operation of equipment associated with the production of a good including:
(a) energy and fuel;
(b) tools, dies, and moulds;
(c) spare parts and materials used in the maintenance of equipment and buildings;
(d) lubricants, greases, compounding materials, and other materials used in production or used to operate equipment and buildings;
(e) gloves, glasses, footwear, clothing, safety equipment, and safety supplies;
(f) equipment, devices, and supplies used for testing or inspecting goods; and (g) any other goods that are not incorporated into the good but the use of which in the production of the good can reasonably be demonstrated to be part of that production.
Article 3.15. Principle of Territoriality
1. The conditions for acquiring originating status set out in Articles 3.1 through 3.20 must be fulfilled without interruption in the territory of one or both of the Parties.
2. Notwithstanding paragraph 1, an originating good exported from a Party to a non-party shall, when returned, be considered originating if it is demonstrated to the satisfaction of the customs authorities in accordance with the laws and regulations of the importing Party concerned that the returning good:
(a) is the same as that exported; and
(b) has not undergone any operation beyond that necessary to preserve it in good condition while in that non-party or being exported.
Article 3.16. Transit and Transhipment
An originating good that is transported through the territory of a non-party is non-originating unless it can be demonstrated that the good:
(a) undergoes no further production or other operation in the territory of that non-party, other than unloading, splitting up of loads for transport reasons, reloading, or any other operation necessary to preserve it in good condition;
(b) remains under the customs control while outside the territory of one or both of the Parties; and
(c) does not enter into trade or consumption in the territory of that non-party.
Article 3.17. Application and Interpretation
For the purposes of this Chapter:
(a) the basis for tariff classification is the Harmonized System;
(b) if applying Article 3.3.2, the determination of whether a heading or subheading under the Harmonized System provides for both a good and the materials that are used in the production of the good is made on the basis of the nomenclature of the heading or subheading and the relevant Section or Chapter Notes, in accordance with the General Rules for the Interpretation of the Harmonized System;
(c) in applying the Customs Valuation Agreement under this Chapter:
(i) the principles of the Customs Valuation Agreement apply to domestic transactions, with any modifications required by the circumstances, as they would apply to international transactions;
(ii) the provisions of this Chapter take precedence over the Customs Valuation Agreement to the extent of any difference; and
(iii) the definitions in Article 3.20 shall take precedence over the definitions in the Customs Valuation Agreement to the extent of any difference.
Article 3.18. Discussions and Modifications
1. The Parties shall discuss regularly to ensure that this Chapter is administered effectively, uniformly, and consistently with the spirit and objectives of this Agreement, and cooperate in the administration of this Chapter in accordance with Chapter Four (Origin Procedures and Trade Facilitation).
2. A Party that considers that this Chapter requires modification to take into account developments in production processes or other matters may submit a proposed modification along with supporting rationale and any studies to the other Party for consideration and any appropriate action pursuant to Article 4.14 (Rules of Origin and Customs Committee).
Article 3.19. Common Guidelines
The Parties shall discuss whether to develop common guidelines for the interpretation and application of this Chapter by the date of entry into force of this Agreement.
Article 3.20. Definitions
For the purposes of this Chapter:
Chapter, unless otherwise specified, means a chapter of the Harmonized System;
classified means the classification of a good under a particular heading or subheading of the Harmonized System;
customs value means the value as determined in accordance with the Customs Valuation Agreement;
fungible goods or fungible materials means goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical;
Generally Accepted Accounting Principles means accounting principles accepted and commonly used in the territory of a Party with regard to the recording of revenues, expenses, costs, assets, and liabilities, the disclosure of information, and preparation of financial statements. These principles may encompass guidelines for general application, as well as detailed standards, practices, and procedures;
good means merchandise, product, article, or material;
listed with a Party means a foreign registered vessel bare-boat chartered in accordance with the domestic law of a Party and whose registration in the foreign country is suspended for the duration of the charter;
material means an ingredient, component, part, or other good used in the production of another good;
net cost means total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the total cost;
net cost of a good means the net cost that can be reasonably allocated to a good using one of the methods set out in Article 3.4.4;
non-allowable interest costs means interest costs incurred by a producer that exceed 700 basis points above the applicable national government rate identified for comparable maturities;
non-originating good or non-originating material means a good or material, respectively, that does not qualify as originating;
originating good or originating material means a good or material, respectively, that qualifies as originating;
other costs means all costs recorded on the books of the producer that are not product costs or period costs, such as interest;
period costs means those costs, other than product costs, that are expensed in the period in which they are incurred, such as selling expenses and general and administrative expenses;
producer means a person who engages in the production of a good in the territory of a Party;
product costs means those costs associated with the production of a good and includes the value of materials, direct labour costs, and direct overhead;
production means a method of obtaining goods, including growing, mining, harvesting, fishing, raising, trapping, hunting, manufacturing, processing, assembling, or disassembling a good;
reasonably allocate means to apportion in a manner appropriate to the circumstances;
royalties 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, or 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; and
(b) if performed in the territory of one or both of the Parties, engineering, tooling, die-setting, software design and similar computer services, or other services;
sales promotion, marketing, and after-sales service costs means costs related to:
(a) sales or marketing promotion; media advertising; advertising or market research; promotional or demonstration materials; exhibits; sales conferences, trade shows, or conventions; banners; marketing displays; free samples; sales, marketing, or after-sales service literature (product brochures, catalogues, technical literature, price lists, service manuals, or sales aid information); establishment or protection of logos and trademarks; sponsorships; wholesale or retail restocking charges; entertainment;
(b) sales or marketing incentives; consumer, retailer, or wholesaler rebates; merchandise incentives;
(c) salaries or wages; sales commissions; bonuses; benefits (for example, medical, insurance, or pension benefits); travelling or living expenses; membership or professional fees; for sales promotion, marketing or after-sales service personnel;
(d) recruiting or training of sales promotion, marketing or after-sales service personnel, or after-sales training of customers' employees, if those costs are identified separately for sales promotion, marketing, or after-sales service of goods on the financial statements or cost accounts of the producer;
(e) product liability insurance;
(f) office supplies for sales promotion, marketing, or after-sales service of goods, if those costs are identified separately for sales promotion, marketing, or after-sales service of goods on the financial statements or cost accounts of the producer;
(g) telephone, mail, or other communications, if those costs are identified separately for sales promotion, marketing, or after-sales service of goods on the financial statements or cost accounts of the producer;
(h) rent or depreciation of sales promotion, marketing, or after-sales service offices and distribution centres;
(i) property insurance premiums, taxes, utilities, or repair or maintenance of sales promotion, marketing or after-sales service offices or distribution centres, if those costs are identified separately for sales promotion, marketing or 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;
self-produced material means a material produced by a producer of a good and used in the production of that good;
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;
tariff provision means a Chapter, heading, or subheading of the Harmonized System;
territorial sea means an area of the sea extending up to a limit of 12 nautical miles from baselines determined in accordance with Part II of UNCLOS;
total cost means product costs, period costs, and other costs incurred in the territory of one or both of the Parties. Total cost does not include profits earned by the producer, regardless of whether they are retained by the producer, or paid out to other persons as dividends, or taxes paid on those profits, including capital gains taxes;
transaction value means the price actually paid or payable for a good or material with respect to a transaction of the producer of the good, adjusted in accordance with the principles of paragraphs 1, 3 and 4 of Article 8 of the Customs Valuation Agreement to include, inter alia, such costs as commissions, production assists, royalties, or license fees; and
transaction value or ex-works price of the good, including, for the purposes of this definition, sets or assortments of goods of Article 3.10 and of Annex 3-A, means:
(a) the transaction value of a good when sold by the producer at the place of production; or
(b) the customs value of that good adjusted, if necessary, to exclude any costs incurred subsequent to the good leaving the place of production, such as freight and insurance.
Chapter Four. Origin Procedures and Trade Facilitation
Article 4.1. Certificate of Origin
1. The Parties shall establish, by the date of entry into force of this Agreement, a Certificate of Origin to certify that a good exported from the territory of a Party into the territory of the other Party qualifies as an originating good. This Certificate of Origin may be modified as agreed by the Parties.
2. Each Party may require that a Certificate of Origin for a good imported into its territory is completed in, or translated into, a language required under its domestic law. (1)
3. Each Party shall:
(a) require an exporter in its territory to complete and sign a Certificate of Origin for the exportation of a good for which an importer may claim preferential tariff treatment upon importation of the good into the territory of the other Party; and
(b) provide that, when an exporter in its territory is not the producer of the good, the exporter may complete and sign a Certificate of Origin on the basis of:
(i) the exporter's knowledge of whether the good qualifies as an originating good;
(ii) the exporter's reasonable reliance on the producer's written representation that the good qualifies as an originating good; or
(iii) a completed and signed Certificate of Origin for the good voluntarily provided to the exporter by the producer.
4. Paragraph 3 is not to be construed to require a producer to provide a Certificate of Origin to an exporter.
5. Each Party shall provide that a Certificate of Origin duly completed and signed by an exporter or a producer in the territory of the other Party is applicable to:
(a) a single importation of one or more goods into the Party's territory; or
(b) multiple importations of identical goods into the Party's territory that occur within a specified period, not exceeding 12 months, as set out in the Certificate of Origin by the exporter or producer.
6. The Certificate of Origin referred to in paragraph 3 shall be accepted as proof of origin for at least two years, or for a longer period as specified by the importing Party's laws and regulations, after the date on which the Certificate of Origin was signed.
7. Each Party shall accept a Certificate of Origin that has been completed and signed prior to the date of entry into force of this Agreement by the exporter or producer of an originating good imported into the territory of a Party on or after the date of entry into force of this Agreement.
Article 4.2. Obligations Regarding Importations
1. Except as provided in this Chapter, each Party shall require an importer in its territory that claims preferential tariff treatment for a good imported into its territory from the territory of the other Party to:
(a) request preferential tariff treatment at the time of importation of an originating good, if required by the importing Party's customs administration;
(b) make a written declaration, as prescribed by that Party's laws and regulations, that the good qualifies as an originating good;
(c) have the Certificate of Origin in its possession at the time the declaration is made, if required by the importing Party's customs administration;
(d) provide, on the request of that Party's customs administration, a copy of the Certificate of Origin and, if required by that customs administration, any other documentation relating to the importation of the good in accordance with the domestic law of the importing Party; and
(e) promptly make a corrected declaration in a manner required by the customs administration of the importing Party and pay any duties owing where the importer has reason to believe that a Certificate of Origin on which a declaration was based contains information that is not correct.
2. Each Party shall provide that, if an importer in its territory claims preferential tariff treatment for a good imported into its territory from the territory of the other Party:
(a) the Party may deny preferential tariff treatment to the good if the importer fails to comply with any requirement under this Chapter; and
(b) the importer shall not be subject to penalties for the making of an incorrect declaration if it voluntarily makes a corrected declaration pursuant to paragraph 1(e), provided that the customs administration of the importing Party has not initiated a verification of origin pursuant to Article 4.6.
3. Each Party shall, in accordance with its domestic law, provide that where a good would have qualified as an originating good when it was imported into the territory of that Party, the importer of the good may, within a period of at least one year or for a longer period specified by the importing Party's domestic law after the date on which the good was imported, apply for a refund of any excess duties paid as the result of the good not having been accorded preferential tariff treatment.
Article 4.3. Waiver of Certificate of Origin
Each Party shall provide that a Certificate of Origin is not required for:
(a) an importation of a good whose value does not exceed US$1,000 or its equivalent amount in the Party's currency, or such higher amount as it may establish; or
(b) an importation of a good for which the Party into whose territory the good is imported has waived the requirement for a Certificate of Origin, provided that the importation is not part of a series of importations that may reasonably be considered to have been undertaken or arranged for the purpose of avoiding the certification requirements of Articles 4.1 and 4.2.
Article 4.4. Obligations Regarding Exportations
1. Each Party shall provide that:
(a) an exporter in its territory, or a producer in its territory that has provided a copy of a Certificate of Origin to that exporter pursuant to Article 4.1.3(b)(iii), shall provide a copy of the Certificate of Origin and, if required, other documentation in accordance with the Party's domestic law, to its customs administration on request; and
(b) an exporter or a producer in its territory that has completed and signed a Certificate of Origin, and that has reason to believe that the Certificate of Origin contains information that is not correct, shall promptly notify, in writing, every person to whom the Certificate of Origin was given by the exporter or producer, of a change that could affect the accuracy or validity of the Certificate of Origin.
2. Each Party:
(a) shall provide that a false certification by an exporter or a producer in its territory that a good to be exported to the territory of the other Party qualifies as an originating good shall have the same legal consequences, with appropriate modifications, that would apply to an importer in its territory for a contravention of its customs laws and regulations regarding the making of a false statement or representation; and
(b) may apply such measures as the circumstances warrant where an exporter or a producer in its territory fails to comply with a requirement of this Chapter.
3. A Party shall not impose penalties on an exporter or a producer in its territory that voluntarily provides written notification pursuant to paragraph 1(b) with respect to the making of an incorrect certification.
Article 4.5. Record Keeping Requirements
Each Party shall provide that:
(a) an exporter or a producer in its territory that completes and signs a Certificate of Origin must maintain, in its territory, for five years after the date on which the Certificate of Origin was signed or for a longer period as specified by the Party, records relating to the origin of a good for which preferential tariff treatment was claimed in the territory of the other Party, including records associated with:
(i) the purchase of, cost of, value of, and payment for, the good that is exported from that Party's territory;
(ii) the purchase of, cost of, value of, and payment for, all materials, including indirect materials, used in the production of the good that is exported from that Party's territory;
(iii) the production of the good in the form in which the good is exported from that Party's territory; and
(iv) other documentation as mutually agreed by both parties; and
(b) an importer claiming preferential tariff treatment for a good imported into the Party's territory must maintain, in that Party's territory, for five years after the date of importation of the good or for a longer period as specified by that Party, records relating to the importation of the good required by that Party, including a copy of the Certificate of Origin.
Article 4.6. Origin Verifications
1. For the purposes of determining whether a good imported into its territory from the territory of the other Party qualifies as an originating good, a Party may, through its customs administration, conduct a verification by means of:
(a) written questionnaires to an exporter or a producer in the territory of the other Party;
(b) verification visits to the premises of an exporter or a producer in the territory of the other Party to review the records referred to in Article 4.5(a) and observe the facilities used in the production of the good; or
(c) other procedures as agreed by the Parties.
2. Before conducting a verification visit pursuant to paragraph 1 (b), the Party shall, through its customs administration:
(a) deliver a written notification of its intention to conduct the visit:
(i) to the exporter or producer whose premises are to be visited;
(ii) to the customs administration of the other Party; and
(iii) if requested by the other Party, to the embassy of the other Party in the territory of the Party proposing to conduct the visit; and