(a) if the rule of origin of Annex 301 applicable to the good contains a percentage for the maximum value of non-originating materials, the value of such non-originating materials shall be included in calculating the value of non-originating materials; and
(b) the good satisfies all other applicable requirements of this Chapter.
2. Paragraph 1 does not apply to a non-originating material used in the production of a good of Chapters 01 through 21 of the Harmonized System unless the non-originating material is provided for in a different subheading from the good for which origin is being determined under this Article. Nevertheless, paragraph 1 does apply when the good and the non-originating material are classified in the same subheading, provided that the material is different from the good.
3. A good of Chapters 50 through 60 of the Harmonized System that does not originate because certain non-originating fibres or yarns used in the production of the good do not fulfil the requirements set out in Annex 301, shall nonetheless be considered an originating good if the total weight of all such fibres or yarns does not exceed 15 per cent of the total weight of that good.
4. A good of Chapters 61 through 63 of the Harmonized System that does not originate because certain non-originating fibres or yarns used in the production of the component of the good that determines the tariff classification of that good do not fulfil the requirements set out for that good in Annex 301, shall nonetheless be considered an originating good if the total weight of all such fibres or yarns in that component does not exceed 15 per cent of the total weight of that component.
Article 308. Fungible Goods and Materials
1. For purposes of determining whether a good is an originating good:
(a) where originating and non-originating fungible materials are used in the production of a good, the determination of whether the materials are originating materials may be made in accordance with any of the inventory management methods recognized in, or otherwise accepted by, the Generally Accepted Accounting Principles of the Party in which the production is performed; and
(b) where originating and non-originating fungible goods are physically combined or mixed in inventory in a Party and exported in the same form to another Party, the determination of whether the good is an originating good may be made in accordance with any of the inventory management methods recognized in, or otherwise accepted by, the Generally Accepted Accounting Principles of the Party from which the good is exported.
2. A Party shall ensure that the person that selected an inventory management method pursuant to paragraph 1 for a particular fungible good or material continues to use such inventory management method for that fungible good or material throughout the fiscal year of that person.
Article 309. Indirect Materials
An indirect material shall be considered to be an originating material without regard to where it is produced.
Article 310. Sets or Assortments of Goods
Except as provided in Annex 301, a set or assortment of goods, as referred to in General Rule 3 of the Harmonized System, shall be considered as originating, provided that:
(a) all the component goods, including packaging materials and containers, are originating; or
(b) where the set or assortment 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 of the set or assortment of goods.
Article 311. Accessories, Spare Parts and Tools
Accessories, spare parts and tools delivered with a good that form part of the good's standard accessories, spare parts or tools, shall be considered as originating if the good is an originating good, and shall be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable requirements set out in Annex 301 provided that:
(a) the accessories, spare parts and tools are not invoiced separately from the good, whether or not each is listed or detailed on the invoice; and
(b) the quantities and value of such accessories, spare parts, or tools are customary for the good.
Article 312. Packaging Materials and Containers for Retail Sale
Except as provided for in Article 310, packaging materials and containers in which a good is packaged for retail sale shall be disregarded in determining:
(a) whether all the non-originating materials undergo the applicable requirements set out in Annex 301; or
(b) whether the good meets the requirements set out in subparagraphs (a) and (c) of Article 301.
Article 313. Packing Materials and Containers for Shipment
Packing materials, containers, pallets or similar articles, in which a good is packed for shipment shall be disregarded in determining whether that good is originating.
Article 314. Transit and Transshipment
An originating good that is exported from a Party shall maintain its originating status only if the good:
(a) does not undergo further production or any other operation outside the territories of the Parties, other than unloading, reloading or any other operation necessary to preserve it in good condition or to transport the good to the territory of a Party; and
(b) remains under customs control while outside the territories of the Parties.
Article 315. Interpretation and Application
For purposes of this Chapter:
(a) the basis for tariff classification in this Chapter is the Harmonized System;
(b) where applying subparagraph (d) of Article 301, 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 shall be 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; and
(c) all costs referred to in this Chapter shall be recorded and maintained in accordance with the Generally Accepted Accounting Principles applicable in the territory of the Party in which the good is produced.
Article 316. Consultation and Modifications
1. The Parties shall consult regularly to ensure that this Chapter is administered effectively, uniformly, and consistently with the spirit and objectives of this Agreement, and shall 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, lack of supply of originating materials or other matters may submit a proposed modification along with supporting rationale and any studies to the other Party for consideration and appropriate action under Chapter Two (National Treatment and Market Access for Goods).
Article 317. Short Supply
1. For purposes of determining the origin of a good of Chapters 50 through 63 of the Harmonized System, at the request of an interested entity of a Party, a Party shall, to the extent possible within 45 days of receiving the request, temporarily allow fibre, yarn or fabric from a non-Party to be considered originating, if the Party determines, based on information it considers necessary that the fibre, yarn, or fabric is not available in commercial quantities in a timely manner in the territory of any Party. Each Party shall implement such short-supply allowances in accordance with its applicable legal procedures.
2. The Party receiving a request for a short supply allowance pursuant to paragraph 1 shall notify the other Party of the request to the extent possible within 10 days of receiving the request. A Party may decline to grant a short-supply allowance if the other Party does not also grant such an allowance.
3. The Committee on Trade in Goods shall establish procedures to guide the administration of the short-supply allowances referred to in paragraphs 1 and 2.
Article 318. Definitions
For 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;
customs value means the value 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 the principles used in the territory of each Party, which provide substantial authorized support to the recording of income, costs, expenses, assets and liabilities involved in the disclosure of information and preparation of financial statements. These principles may be broad guidelines of general application, as well as those standards, practices and procedures normally employed in accounting;
good means any merchandise, product, article or material;
goods wholly obtained or produced entirely in the territory of one or both of the Parties means:
(a) minerals and other non-living natural resources extracted in or taken from the territory of one or both of the Parties;
(b) plants and plant products harvested or gathered in the territory of one or both of the Parties;
(c) live animals born and raised in the territory of one or both of the Parties;
(d) goods obtained from live animals in the territory of one or both of the Parties;
(e) goods obtained from hunting, trapping, fishing or aquaculture in the territory of one or both of the Parties;
(f) goods (fish, shellfish and other marine life) taken from the sea, seabed or subsoil outside the territory of one or both of the Parties, by a vessel registered or recorded with a Party, or leased or chartered by an enterprise established in the territory of a Party, and entitled to fly its flag, or listed with a Party;
(g) goods produced on board a factory ship from the goods referred to in subparagraph (f), provided such factory ship is registered or recorded with a Party, or leased or chartered by an enterprise established in the territory of a Party, and entitled to fly its flag, or listed with a Party;
(h) goods, other than fish, shellfish and other marine life, taken or extracted from the seabed, ocean floor or subsoil, outside the territories of the Parties by a Party or a person of a Party, provided that such Party or person of such Party has rights to exploit such seabed, ocean floor or subsoil;
(i) goods taken from outer space, provided they are obtained by a Party or a person of a Party and not processed in a non-Party;
(j) waste and scrap derived from production in the territory of one or both of the Parties; and
(k) goods produced in the territory of one or both of the Parties exclusively from goods referred to in subparagraphs (a) through (j), or from their derivatives, at any stage of production;
indirect material means a good used in the production, testing or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including:
(a) fuel and energy;
(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 the production or the operation of equipment and buildings; (e) gloves, glasses, footwear, clothing, safety equipment and safety supplies;
(f) equipment, devices, and supplies used for testing or inspecting the good;
(g) catalysts and solvents; and (h) any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production;
intermediate material means a material that is produced by a producer of a good and used in the production of that good;
listed with a Party means a foreign registered ship bare-boat chartered to a citizen of a Party or a permanent resident or a corporation of a Party, which is listed in the Register of Ships of the Party for the duration of the charter and whose registration in the foreign country is suspended for the duration of the charter;
material means a good that is used in the production of another good, and includes a part or an ingredient;
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;
non-allowable interest costs means interest costs incurred by a producer that exceed 1000 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;
other costs means all costs recorded on the books of the producer that are not product costs or period costs;
period costs means those costs other than product costs that are expensed in the period in which they are incurred, including selling expenses and general and administrative expenses;
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;
producer means a person who grows, mines, raises, harvests, fishes, traps, hunts, manufactures, processes or assembles a good;
production means growing, mining, harvesting, raising, fishing, hunting, trapping, manufacturing, processing or assembling 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, 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 performed; and
(b) if performed in the territory of one or both Parties, engineering, tooling, die-setting, software design and similar computer services, or other services; 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 (product brochures, catalogues, technical literature, price lists, service manuals, sales aid information); establishment and protection of logos and trademarks; sponsorships; wholesale and retail restocking charges; entertainment;
(b) sales and marketing incentives; consumer, retailer or wholesaler rebates; merchandise incentives;
(c) salaries and wages, sales commissions, bonuses, benefits (for example, medical, insurance, 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, where such 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) product liability insurance;
(f) office supplies for sales promotion, marketing and after-sales service of goods, where such 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, where such 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 such 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;
tariff provision means a chapter, heading or subheading of the Harmonized System;
total cost means all product costs, period costs and other costs for a good incurred in the territory of one or both of the Parties. Total cost does not include profits that are 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;
transaction value of the good, including for purposes of Article 310 and Annex 301 the transaction value of sets or assortments of goods, 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, and 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
Section A. Origin Procedures
Article 401. Certificate of Origin
1. The Parties shall establish, no later than the date of entry into force of this Agreement, a Certificate of Origin for the purpose of certifying that a good being exported from the territory of a Party into the territory of the other Party qualifies as an originating good. The Certificate of Origin may thereafter be modified as the Parties may decide.
2. Each Party shall permit the Certificate of Origin to be provided to its respective competent authority in English, French or Spanish. Each Party may nonetheless require the importer to submit a translation of the Certificate of Origin into a language required by its domestic law.
3. Each Party shall:
(a) require an exporter in its territory to complete and sign a Certificate of Origin for any 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 where 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) its knowledge of whether the good qualifies as an originating good, based on information in the exporter's possession,
(ii) its 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. Each Party shall permit a Certificate of Origin to apply 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.
5. Each Party shall ensure that the Certificate of Origin is accepted by its competent authority for four years after the date on which the Certificate of Origin was signed.
Article 402. Obligations Regarding Importations
1. Except as otherwise 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) make a written declaration, based on a valid Certificate of Origin, that the good qualifies as an originating good;
(b) have the Certificate of Origin in its possession at the time the declaration is made;
(c) provide, on the request of that Party's competent authority, the Certificate of Origin and, if required by that competent authority, such other documentation relating to the importation of the good in accordance with the domestic law of the importing Party; and
(d) promptly make a corrected declaration and pay any duties owing where the importer has reason to believe that the Certificate of Origin on which a declaration was based contains information that is not correct.
2. For the purpose of subparagraph 1(c), where the competent authority of the importing Party determines that the Certificate of Origin has not been completed in accordance with Article 401, the importing Party shall ensure that the importer is granted a period of not less than five working days to provide the competent authority with a corrected Certificate of Origin.
3. Where an importer claims preferential tariff treatment for a good imported from the territory of the other Party:
(a) the importing Party may deny preferential tariff treatment to the good if the importer fails to comply with any requirement under this Chapter; and
(b) the importing Party shall not subject the importer to penalties for making an incorrect declaration, if the importer voluntarily makes a correction of the declaration pursuant to subparagraph 1(d).
4. Each Party, through its competent authority, may require an importer to demonstrate that a good for which the importer claims preferential tariff treatment was shipped in accordance with Article 314 (Rules of Origin - Transit and Transshipment) by providing:
(a) bills of lading or waybills indicating the shipping route and all points of shipment and transhipment prior to the importation of the good; and
(b) where the good is shipped through or transhipped outside the territories of the Parties, a copy of the customs control documents indicating to that competent authority that the good remained under customs control while outside the territories of the Parties.
5. Where a good would have qualified as an originating good when it was imported into the territory of a Party, but no claim for preferential tariff treatment was made at the time of importation, the importing Party shall permit the importer, within a period of at least one year or for such longer period specified by the importing Party's law after the date of importation, to make a claim for preferential tariff treatment and apply for a refund of any excess duties paid as a result of the good not having been accorded preferential tariff treatment, on presentation to the importing Party of:
(a) a written declaration stating that the good was originating at the time of importation; (b) the Certificate of Origin; and
(c) such other documentation relating to the importation of the good as the importing Party may require.
Article 403. Exceptions
A Party shall not require a Certificate of Origin for:
(a) an importation of a good whose customs value does not exceed US$1,000 or its equivalent amount in the Party's currency, or such higher amount as it may establish, except that it may require that the invoice accompanying the importation include a statement from the exporter certifying that the good qualifies as an originating good; or
(b) an importation of a good for which the importing Party has waived the requirement for a Certificate of Origin; provided that the importation does not form 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 401 and 402.
Article 404. Obligations Regarding Exportations
1. Each Party shall provide that:
(a) on request of its competent authority, an exporter in its territory, or a producer in its territory that has provided a Certificate of Origin to that exporter in accordance with subparagraph 3(b)(iii) of Article 401, shall provide a copy of the Certificate of Origin to that competent authority;
(b) where an exporter or a producer in its territory has provided a Certificate of Origin and has reason to believe that the Certificate of Origin contains or is based on incorrect information, the exporter or producer shall promptly notify in writing any change that could affect the accuracy or validity of the Certificate of Origin to every person to whom the exporter or producer has provided the Certificate of Origin; and
(c) 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 is originating, shall be subject to penalties equivalent to those that would apply to an importer in the territory of the exporting Party that makes a false statement or representation in connection with an importation, with appropriate modifications.
2. Each Party may apply such measures as the circumstances may warrant where an exporter or a producer in its territory fails to comply with any requirement of this Chapter.
3. Neither Party may impose penalties on an exporter or a producer in its territory that voluntarily provides written notification pursuant to subparagraph 1(b) with respect to the making of an incorrect certification.
Article 405. Records
1. Each Party shall provide that an exporter or a producer in its territory that provides a Certificate of Origin in accordance with Article 401 shall maintain, for a minimum of five years after the date the certification was issued or for such longer period as specified in the Party's laws and regulations, all records necessary to demonstrate that the good for which the producer or exporter provided the Certificate of Origin was an originating good, including records concerning:
(a) the purchase of, cost of, value of, shipping of and payment for, the exported good;
(b) the purchase of, cost of, value of, and payment for all materials, including indirect materials, used in the production of the exported good; and (c) the production of the good in the form in which it was exported.
2. Each Party shall require an importer claiming preferential tariff treatment for a good imported into its territory to maintain documentation relating to the importation of the good, including a copy of the Certificate of Origin, for five years after the date of importation of the good or for such longer period as specified in the Party's laws and regulations.
3. Where a Party requires importers, exporters and producers in its territory to maintain documentation or records in relation to the origin of a good, in accordance with that Party's laws and regulations, it shall permit them to do so in any medium, provided that the documentation or records can be retrieved and printed.
4. A Party may deny preferential tariff treatment to a good that is the subject of an origin verification where the exporter, producer or importer of the good that is required to maintain records or documentation under this Article:
(a) fails to maintain records or documentation relevant to determining the origin of the good in accordance with the requirements of the Chapter; or
(b) denies access to such records or documentation.