Article 4-09. Definitions

For the purposes of this section, the following definitions shall mean:

animal: any animal, including fish and wildlife;

commodity: an animal, plant or its products and by-products;

contaminant: any contaminant, including residues of pesticides, fertilizers and chemicals used in agriculture, as well as veterinary drugs and other foreign substances;

risk assessment: evaluation of:

(a) the probability of entry, establishment and spread of a pest or disease and the potential biological, agronomic and economic consequences; or

(b) the probability of adverse effects on human, animal or plant life or health arising from the presence of an additive, contaminant, toxin, or disease-causing organism in a commodity; scientific information: data or information derived from the use of scientific principles or methods; animal or plant health measure: a measure, including an end-product criterion; a process or production method directly related to the product; a test, inspection, certification, or approval procedure; a relevant statistical method; a sampling procedure; a risk assessment method; a packaging and labeling requirement directly related to food safety; and a quarantine regime, such as a relevant requirement associated with the transport of animals or plants, or with material necessary for their survival during transport; that a Party adopts, maintains, or applies in its territory to:

(i) protect animal or plant life or health from risks arising from the introduction, establishment, or spread of a pest or disease;

(ii) protect human, animal, or plant life or health from risks arising from the presence of an additive, contaminant, toxin, or pathogenic organism in a good;

(iii) to protect human life or health from risks arising from a disease-causing organism, or from a pest carried by a good; or

(iv) to prevent or limit other damage from the introduction, establishment, and spread of a pest or disease;

appropriate level of animal or plant health protection: the level of protection to human, animal or plant life or health that a Party considers appropriate;

international standard, guideline or recommendation: any of these established:

(a) in relation to food safety, by the Codex Alimentarius Commission, including that established by the Codex Alimentarius Committee on Fish and Fishery Products, relating to product decomposition, additives, contaminants, hygienic practices, and methods of analysis and sampling;

(b) in relation to animal health and zoonoses, under the auspices of the Office International des Epizooties;

(c) in relation to plant health, under the auspices of the Secretariat of the International Plant Protection Convention; or

(d) by other international organizations to which the Parties are Parties; or

pest: any pest including weeds or any infectious substance that may directly or indirectly injure or cause disease to terminal plants or parts thereof and other processed or manufactured goods;

approval procedure: any registration, notification or other mandatory administrative procedure for:

(a) approving the use of an additive for a defined purpose or under defined conditions; or

(b) establishing a tolerance for a contaminant for a defined purpose or under defined conditions; in a food, beverage or feedstuff, prior to permitting its use or marketing when any of these contain the additive or contaminant;

control or inspection procedure: any procedure used, directly or indirectly, to determine compliance with an animal or plant health measure, including sampling, testing, inspection, verification, monitoring, auditing, conformity assessment, accreditation, registration, certification, or other procedures involving physical examination of a good, the packaging thereof, or equipment or facilities directly related to the production, marketing, or use of a good, but does not mean an approval procedure;

plant: any plant, including wild flora;

area: a country, part of a country, parts of several countries, or all parts of several countries;

area of low pest or disease prevalence: an area in which a specific pest or disease occurs at low levels;

pest- or disease-free area: an area in which a specific pest or disease is not present.

Article 4-10. Scope of Application

In order to establish a framework of rules and disciplines to guide the development, adoption and enforcement of animal and plant health measures, the provisions of this Section apply to any such measures that may directly or indirectly affect trade between the Parties.

Article 4-11. Principal Rights and Obligations

Right to adopt zoosanitary and phytosanitary measures

1. Each Party may, in accordance with this Section, adopt, maintain or apply any animal or plant health or sanitary measure necessary for the protection of human, animal or plant life or health in its territory, even if it is stricter than an international standard, guideline or recommendation.

Right to set the level of protection

2. Notwithstanding any other provision of this Section, each Party may set its appropriate levels of protection, in accordance with Article 4-14, to protect human, animal or plant life or health.

Scientific principles

3. Each Party shall ensure that any animal or plant health measure that it adopts, maintains or applies:

(a) is based on scientific principles, taking into account, where appropriate, relevant factors such as different geographical conditions;

(b) is maintained only when there is a scientific basis for it; and

(c) is based on a risk assessment appropriate to the circumstances.

Non-discriminatory treatment

4. Each Party shall ensure that where identical or similar conditions exist, an animal or plant health measure it adopts, maintains or applies does not arbitrarily or unjustifiably discriminate between its goods and like goods of the other Party, or between goods of the other Party and like goods of any other country.

Unnecessary Obstacles

5. No Party shall adopt, maintain or apply animal health or phytosanitary measures that have the purpose or effect of creating unnecessary obstacles to trade between the Parties. In this regard, animal and phytosanitary measures shall not be more trade-restrictive than necessary to achieve the appropriate level of protection, taking into account technical and economic feasibility.

Covert Restrictions

6. No Party may adopt, maintain or apply any animal health or phytosanitary measure that has the purpose or the effect of creating a disguised restriction on trade between the Parties.

Support in Non-Governmental Bodies

7. Each Party shall ensure that any non-governmental body on which it relies for the application of an animal or plant health measure acts in a manner consistent with this Section.

Article 4-12. International Standards and Standardizing Bodies.

1. Without reducing the appropriate level of animal and plant health protection, each Party shall use, as a basis for its animal or plant health measures, relevant international standards, guidelines or recommendations in order, inter alia, to make its animal or plant health measures equivalent or, where appropriate, identical to those of the other Party.

2. An animal or plant health measure of a Party that conforms to an international standard, guideline or recommendation shall be presumed to be consistent with paragraphs 4 and 5 of Article 4-11. An animal or plant health measure that provides a different level of protection from that which would be achieved by a measure based on an international standard, guideline or recommendation shall not, on that basis alone, be considered inconsistent with the provisions of this Section.

3. Nothing in paragraph 1 shall be construed to prevent a Party from adopting, maintaining or applying, in accordance with the other provisions of this Section, an animal or plant health measure that is more stringent than the relevant international standard, guideline or recommendation.

4. Where a Party has reason to believe that an animal or plant health measure of the other Party adversely affects or may adversely affect its exports and the measure is not based on relevant international standards, guidelines or recommendations, it may request to be informed of the reasons for the measure and the other Party shall do so in writing.

5. Each Party shall participate, to the fullest extent possible, in relevant international standardizing organizations, including the Codex Alimentarius Commission, the Office International des Epizooties and the International Plant Protection Convention, with a view to promoting the development and periodic review of international standards, guidelines and recommendations.

Article 4-13. Equivalence

1.  Without reducing the appropriate level of animal or plant health protection, the Parties shall, to the greatest extent possible and in accordance with this Section, seek equivalence of their respective measures.

2. The importing Party shall:

(a) shall treat an animal or plant health measure adopted or maintained by the exporting Party as equivalent to one of its own, where the exporting Party, in cooperation with the importing Party, provides it with scientific or other information, in accordance with risk assessment methods agreed by them, to demonstrate objectively, subject to subparagraph (b), that the exporting Party's measure achieves the importing Party's appropriate level of protection;

(b) may, where it has a scientific basis for doing so, make a finding that the exporting Party's measure does not meet the importing Party's appropriate level of protection; and

(c) shall provide in writing to the exporting Party, upon request, its reasons for a finding under subparagraph (b). For the purpose of establishing equivalence between animal health and phytosanitary measures, the exporting Party shall, at the request of the importing Party, adopt such reasonable procedures as may be available to it to facilitate access to its territory for inspection, testing and other relevant resources. In developing an animal or phytosanitary measure, each Party shall consider the relevant existing or proposed animal or phytosanitary measures of the other Party.

Article 4-14. Risk Assessment and Appropriate Level of Animal and Plant Health Protection.

1. In conducting a risk assessment, each Party shall take into account:

(a) relevant risk assessment methods and techniques developed by international standardizing organizations;

(b) available scientific and technical information;

(c) relevant process and production methods;

(d) relevant inspection, sampling and testing methods;

(e) the existence of pests or diseases to be taken into account, including the existence of pest or disease free areas and areas of low pest or disease prevalence;

(f) ecological and other environmental conditions to be considered; or

(g) relevant applicable treatments to the satisfaction of the importing Party, such as quarantines.

2. In addition to paragraph 1, in establishing its appropriate level of animal and plant health protection in relation to the risk associated with the introduction, establishment or spread of a pest or disease, and in assessing the risk, each Party shall also take into account, where relevant, the following economic factors:

(a) the loss of production or sales that could result from the pest or disease;

(b) the costs of controlling or eradicating the pest or disease in its territory; and

(c) the cost-effectiveness of other options for limiting the risks.

3. Each Party, in establishing its appropriate levels of animal and plant health protection, shall:

a) take into account the objective of minimizing negative effects on trade; and

b) avoid making distinctions, under different circumstances, that may result in arbitrary or unjustifiable discrimination against a good of the other Party or constitute a disguised restriction on trade between the Parties, with the objective of achieving consistency in those levels of protection.

4. Notwithstanding paragraphs 1 through 3 and paragraph 3(c) of Article 4-11, where a Party conducts a risk assessment and concludes that the available information, including scientific information, is insufficient to complete the assessment, it may adopt a provisional animal or plant health measure, based on available relevant information, including information from international standardizing organizations and the other Party's animal or plant health measures. Once it has sufficient information to complete the risk assessment, the Party shall, within a reasonable period of time, review and, where appropriate, modify the provisional animal or phytosanitary measure in the light of that assessment.

5. Where a Party is able to achieve its appropriate level of protection through the gradual application of an animal or plant health measure, it may, on request of the other Party and in accordance with this Section, allow such gradual application or grant specific exemptions for the measure for limited periods, taking into account the export interests of the requesting Party.

Article 4-15. Adaptation to Regional Conditions.

1. Each Party shall adapt any of its animal or plant health measures related to the introduction, establishment or spread of a pest or disease to the animal or plant health characteristics of the area where a good subject to that measure is produced and the area in its territory to which the good is destined, taking into account any relevant conditions, including those relating to transport and loading between those areas. In assessing the animal and plant health characteristics of an area, taking into account whether it is a pest-free or disease-free area, or an area of low pest or disease prevalence, and may be retained as such, as the case may be, each Party shall take into account, among other factors:
(a) the prevalence of pests or diseases in that area;
(b) the existence of eradication or control programs in that area; and
(c) any relevant standards, guidelines or recommendations.

2. In addition to the provisions of paragraph 1, each Party, when establishing whether an area is a pest-free or disease-free area, or is an area of low pest or disease prevalence, shall base its judgement on factors such as geographical conditions, ecosystems, epidemiological surveillance and the effectiveness of animal or plant health controls in that area.

3. The importing Party shall recognize that an area in the territory of the exporting Party is a pest-free or disease-free area, or an area of low pest or disease prevalence, and may be retained as such, as the case may be, when the exporting Party provides the importing Party with sufficient scientific or other information to demonstrate this to the satisfaction of the importing Party. For this purpose, the exporting Party shall, upon request, provide the importing Party with reasonable access in its territory for inspection, testing and other relevant procedures.

4. Each Party may, in accordance with this Section:
a) adopt, maintain or apply a different risk assessment procedure for a pest-free or disease-free area than for an area of low pest or disease prevalence; or
b) determine a different final destination for the disposal of a good produced in a pest-free or disease-free area than for a good produced in an area of low pest or disease prevalence; taking into account any relevant conditions, including those related to transport and cargo.

5. In adopting, maintaining or applying an animal or plant health measure in relation to the introduction, establishment or spread of a pest or disease, each Party shall accord to a good produced in a pest-free or disease-free area in the territory of the other Party treatment no less favorable than that accorded to a good produced in a pest-free or disease-free area in another country presenting the same level of risk. The Party shall use equivalent risk assessment techniques to evaluate the relevant conditions and controls in the pest-free or disease-free area and in the area adjacent to that area, and shall take into account any relevant conditions, including those related to transportation and loading.

 6. The importing Party shall seek agreement with the exporting Party, upon request, on specific requirements, compliance with which would allow a good produced in an area of low pest or disease prevalence in the territory of the exporting Party to be imported into the territory of the importing Party if it achieves the level of protection required by the importing Party.

Article 4-16. Control, Inspection and Approval Procedures.

  1. Each Party shall, in connection with any control or inspection procedure it carries out:
a) initiate and conclude the procedure as expeditiously as possible and in a manner no less favorable to a good of the other Party than to a like good of the Party or of any other country;
b) publish the normal duration of the procedure or communicate the expected duration of the procedure to any person requesting it;
c) ensure that the competent body:
 (i) upon receipt of an application, promptly examine the completeness of the documentation and inform the applicant accurately and fully of any deficiencies;
(ii) as soon as possible, transmit to the applicant the results of the procedure accurately and fully, so that any necessary corrective action may be taken;
(iii) where the application is deficient, continue, as far as possible, with the procedure if the applicant so requests;
(iv) report, at the request of the applicant, on the status of the application and the reasons for any delay;
(d) limit the information to be submitted by the applicant to that necessary to carry out the procedure;
(e) accord to confidential or proprietary information arising out of, or submitted in connection with, the conduct of the procedure for an asset of the other Party:
 (i) treatment no less favorable than that accorded for a good of the Party; and
(ii) treatment that protects the legitimate commercial interests of the applicant in accordance with the law of that Party;
(f) limit to what is reasonable or necessary any requirement with respect to individual specimens or samples of a good;
g) shall not charge a higher fee for conducting the procedure on a good of the other Party than on its goods or the goods of another country, taking into account communication, transportation and other related costs;
h) shall use criteria for selecting the location of the facilities where the procedure is conducted so as not to cause unnecessary inconvenience to an applicant or its representative;
 (i) provide a mechanism for reviewing complaints regarding the operation of the procedure and for taking corrective action when a complaint is justified;
(j) use criteria for selecting samples of goods that do not cause unnecessary inconvenience to an applicant or its representative; and
(k) in the case of a good that has been modified subsequent to a determination that it complies with the requirements of the applicable animal or plant health measure, limit the procedure to that necessary to establish that it continues to comply with the requirements of that measure.

2. Each Party shall apply to its approval procedures the relevant provisions of paragraph 1(a) through (i), with necessary modifications.

 3. When, at the stage of production of a good, the importing Party requires to carry out a control or inspection procedure, the exporting Party shall, at the request of the importing Party, take such reasonable measures as may be available to it to provide the importing Party with access to its territory in order to carry out its control or inspection procedure. The exporting Party shall also provide the importing Party with the assistance necessary for this purpose.

4. A Party maintaining an approval procedure may establish an authorization requirement for the use of an additive, or set a tolerance level for a contaminant in a food, beverage or feedstuff, in accordance with that procedure, prior to granting access to its domestic market for that food, beverage or feedstuff containing that additive or contaminant. Where that Party so requires, it may adopt a relevant international standard, guideline or recommendation as a basis for granting access to such goods, pending completion of the procedure.

Article 4-17. Notification, Publication and Provision of Information

 1. In addition to the provisions of Articles 10-02 (Publication) and 10-03 (Notification and Provision of Information), when proposing the adoption or modification of an animal or plant health measure of general application, each Party shall:
 (a) at least 60 days in advance, publish a notice and notify the other Party in writing of its intention to adopt or modify such measure, other than by law, and publish and provide to the other Party the full text of the proposed measure, in a manner that will enable interested persons to become familiar with the proposal;
(b) identify in the notice and notification the good to which the measure would apply, and include a brief description of the objective and the reasons for the measure;
 (c) provide a copy of the proposed measure to the other Party or interested person that so requests and, where possible, identify any provisions that deviate substantially from relevant international standards, guidelines or recommendations; and
(d) without discrimination, allow the other Party and interested persons to comment in writing and, upon request, discuss them and take into account the results of those discussions.

2. Each Party shall, through appropriate measures, seek to ensure, with respect to an animal or plant health measure that a competent authority other than a central or federal government authority, as the case may be, intends to adopt or modify:
(a) that notice and notification of the type required under paragraph 1(a) and (b) is given at an appropriate initial stage prior to its adoption; and
(b) compliance with paragraph 1(c) and (d).

3. Where a Party considers it necessary to address an urgent problem related to animal or plant health protection, it may omit any of the steps set out in paragraphs 1 or 2 provided that, once an animal or plant health measure has been adopted:
(a) immediately notifies the other Party, in accordance with the requirements set out in paragraph 1(b), including a brief description of the urgent problem;
(b) provides a copy of the measure to the other Party or interested persons who so request; and
(c) without discrimination, allows the other Party and interested persons to make comments in writing and, upon request, discusses them and takes into account the results of those discussions. 

4. Each Party shall, except where necessary to address an urgent problem referred to in paragraph 3, allow a reasonable period to elapse between the publication of an animal or plant health measure of general application and the date of entry into force of the measure, in order to allow time for interested persons to adapt to the measure.

5. Each Party shall designate a government authority to be responsible for the implementation in its territory of the notification provisions of this Article and shall notify the other Party accordingly. Where a Party designates two or more governmental authorities for this purpose, it shall provide the other Party with complete and unambiguous information on the scope of responsibilities of those authorities.

6. Where the importing Party denies entry into its territory of a good of the other Party because it does not comply with an animal health or phytosanitary measure, the importing Party shall, upon request, provide a written explanation to the exporting Party, identifying the relevant measure as well as the reasons why the good does not comply with that measure.

Article 4-18. Information Centers

1. Each Party shall ensure that there is an information center capable of responding to all reasonable inquiries from the other Party and interested persons, as well as providing relevant documentation regarding:
(a) any animal or plant health measures of general application, including control or inspection or approval procedures, proposed, adopted or maintained in its territory by any government, whether central or federal;
(b) the Party's risk assessment processes and the factors it takes into consideration in conducting the assessment and in establishing its appropriate level of protection;
(c) the Party's membership and participation in international and regional animal and plant health and phytosanitary bodies and systems, and bilateral and multilateral agreements within the scope of this Section, as well as in relation to the provisions of those bodies, systems or agreements; and
(d) the location of notices published pursuant to this Section or the place where the information contained therein may be obtained.

2. Each Party shall ensure that, where copies of documents are requested by the other Party or interested persons, in accordance with the provisions of this Section, they shall be provided at the same price as for domestic sale, plus the cost of postage.

Article 4-19. Limitations on the Provision of Information

 Nothing in this Section shall be construed to require a Party to furnish any information the dissemination of which it considers likely to impede the enforcement of its laws, to be contrary to the public interest, or to prejudice the legitimate commercial interests of particular enterprises. 

Article 4-20. Working Group on Animal and Plant Health Measures

1. The Parties establish the Working Group on Animal and Plant Health Measures, composed of representatives of each Party with responsibilities in animal and plant health matters.

 2. The Working Group shall:
a) shall, to the greatest extent possible, seek the assistance of relevant international standard-setting organizations in order to obtain available scientific and technical advice and to minimize duplication of effort in the exercise of its functions;
b) may be assisted by experts and expert organizations as it deems appropriate;
c) shall report annually to the Commission on the implementation of this section;
d) shall meet, at the request of any Party, at least once a year, unless otherwise agreed by the Parties; and
e) may establish working groups as it deems appropriate and determine the scope and terms of reference of such working groups.

3. The Working Group shall facilitate:
a) the improvement of food safety and animal and plant health conditions in the territory of the Parties;
b) the activities of the Parties in accordance with Articles 4-12 and 4-15;
c) technical cooperation between the Parties, including cooperation in the development, application and enforcement of animal or plant health measures; and
d) consultations on specific animal or plant health matters.

Article 4-21. Technical Consultations

1. Each Party may request consultations with the other Party on any problem related to this Section.

2. Each Party may have recourse to relevant international standardizing organizations, including those referred to in paragraph 5 of Article 4-12, for advice and assistance on animal and plant health matters within their respective mandates.

3. Where a Party requests consultations concerning the application of this Section with respect to an animal or plant health measure of the other Party and so notifies the Working Group, the Working Group may facilitate consultations, if it does not consider the matter itself, by referring the matter to an ad hoc working group or other forum for non-binding technical advice or recommendation.

4. The Working Group shall consider any matter referred to it pursuant to paragraph 3 as expeditiously as possible, particularly in relation to perishable goods, and shall forward to the Parties, in turn, any technical advice or recommendations it develops or receives in relation to that matter. The Parties shall provide the Working Group with a written response regarding such technical advice or recommendation within such time as the Working Group may direct.

5. Where, in accordance with paragraph 3, the Parties have had recourse to consultations facilitated by the Working Group, the consultations shall, if the Parties so agree, constitute those provided for in the First Additional Protocol to this Agreement.

6. A Party asserting that an animal or plant health measure of the other Party is inconsistent with this Section shall have the burden of proving inconsistency.

Article 4-22. Technical Cooperation

Each Party, at the request of the other Party:
a) facilitate the provision of technical advice, information and assistance, on mutually agreed terms and conditions, to strengthen its animal and plant health measures and related activities, including research, process technology, infrastructure and the establishment of domestic regulatory bodies. Such assistance may include credits, grants and funds for the acquisition of technical skills, training and equipment to facilitate adjustment and compliance with an animal or plant health measure of the other Party;
b) provide information on its technical cooperation programs relating to animal or plant health measures in areas of particular interest; and
c) consult with the other Party during the development of any animal or plant health measure, or prior to a change in its application.

Chapter V. Rules of Origin

Article 5-01. Definitions

For the purposes of this Chapter, the following definitions shall apply:
good: any good, product, article or material;
fungible goods: goods that are interchangeable for commercial purposes, whose properties are essentially identical and which it is impractical to differentiate by simple visual examination;
identical or similar goods: "identical goods" and "like goods" respectively, as defined in the Customs Valuation Code; originating good or originating material: a good or material that qualifies as originating in accordance with the provisions of this Chapter;
goods wholly obtained or produced entirely in the territory of one or both of the Parties:
a) minerals extracted in the territory of one or both Parties;
b) vegetables harvested in the territory of one or both Parties;
c) live animals, born and raised in the territory of one or both Parties;
d) goods obtained from hunting or fishing in the territory of one or both Parties;
e) fish, crustaceans and other marine species obtained by vessels registered or registered by a Party and flying the flag of that Party;
f) goods produced on board factory ships from the goods identified in subparagraph e), provided that such factory ships are registered or recorded by a Party and fly the flag of that Party;
g) goods obtained by a Party or a person of a Party from the seabed or subsoil outside the territorial waters, provided that the Party has rights to exploit that seabed or subsoil;
h) waste and scrap derived from:
 (i) production in the territory of one or both Parties;
(ii) goods used or collected in the territory of one or both Parties, provided that such goods serve only for the recovery of raw materials; or
(iii) goods produced in the territory of one or both Parties exclusively from the goods referred to in subparagraphs (a) through (h) or their derivatives, at any stage of production;
containers and packing materials for shipment: goods that are used to protect a good during transportation, other than retail containers and materials;
shipping and repacking costs: the costs incurred in repacking and transporting a good outside the territory where the producer or exporter of the good is located;
cost of sales promotion, marketing and after-sales services: the following costs related to sales promotion, marketing and after-sales services:
 (a) sales promotion and marketing; media advertising; advertising and market research; promotional and demonstration materials; exhibited goods; sales promotion conferences, trade fairs and conventions; banners; marketing exhibitions; free samples; sales, marketing and after-sales service publications such as goods brochures, catalogs, technical publications, price lists, service manuals and sales support information; establishment and protection of logos and trademarks; sponsorships; restocking fees for wholesale and retail sales; entertainment expenses;
b) sales and marketing incentives; wholesale, retail and consumer and goods rebates;
c) for sales promotion, marketing and after-sales service personnel: salaries and wages, sales commissions, bonuses; medical, insurance and pension benefits; travel, lodging and living expenses; and membership and professional fees;
d) recruitment and training of sales promotion, marketing and after-sales service personnel, and training of the client's employees after the sale;
e) property liability insurance;
f) office equipment for sales promotion, marketing and after-sales services;
g) telephone, mail and other means of communication for sales promotion, marketing and after-sales services;
h) rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centers;
i) property insurance premiums, taxes, utility costs, and repair and maintenance costs of offices and distribution centers; and
j) payments by the producer to others for warranty repairs; net cost: total cost less sales promotion, marketing and after-sales service costs, royalties, shipping and repackaging, and ineligible interest costs, as set forth in the Annex to this Article;
ineligible interest costs: interest paid by a producer on its financial obligations that exceeds 10 percentage points above the highest interest rate on debt obligations issued by the central or federal government, as the case may be, the Party in which the producer is located, as set forth in the Annex to this Article;
total cost: the sum of the following elements as set forth in the Annex to this Article:
a) the cost or value of direct manufacturing materials used in the production of the good;
b) the cost of direct labor used in the production of the good; and
c) an amount for direct and indirect costs and expenses of manufacturing the good, reasonably allocated to the good, except for the following items:
i) costs and expenses of a service provided by the producer of a good to another person, when the service is not related to the good;
ii) costs and losses resulting from the sale of a part of the producer's business, which constitutes a discontinued operation;
iii) costs related to the cumulative effect of changes in the application of accounting principles;
iv) costs or losses resulting from the sale of a capital asset of the producer;
v) costs and expenses related to acts of God or force majeure; or
vi) profits earned by the producer of the asset, whether retained by the producer or paid to others as dividends or taxes paid on those profits, including capital gains taxes;
direct manufacturing costs and expenses: those incurred in a period, directly related to the good, other than the cost or value of direct materials and direct labor costs;
indirect manufacturing costs and expenses: those incurred in a period, other than direct manufacturing costs and expenses, direct labor costs and cost or value of direct materials;
F. O.B.: free on board (F.O.B.). );
place where the producer is located: in relation to a good, the production plant of that good;
material: a good used in the production of another good;
self-produced material: a material produced by the producer of a good and used in the production of that good; expendable materials: materials that are interchangeable for commercial purposes and whose properties are essentially identical;
indirect material: a good used in the production, verification or inspection of a good, but not physically incorporated in the good; or a good that is used in the maintenance of buildings or operation of equipment related to the production of a good, including:
a) fuel and power;
b) tools, dies and molds;
c) spare or replacement parts and materials used in the maintenance of equipment and buildings;
d) lubricants, greases, composites and other materials used in the production or to operate equipment or buildings; e) gloves, goggles, footwear, clothing, safety equipment and attachments;
f) equipment, apparatus and attachments used for checking or inspecting the goods;
g) catalysts and solvents; or
h) any other goods which are not incorporated in the goods, but whose use in the production of the goods can be reasonably demonstrated to be part of that production;
intermediate materials: self-manufactured materials used in the production of a good, and designated in accordance with Article 5-07; 
related person: a person who is related to another person, as follows:
a) one of them holds positions of responsibility or management in an enterprise of the other;
b) they are legally recognized as associated in business;
c) they are in the relationship of employer and employee;
d) one person has, directly or indirectly, ownership, control or possession of 25% or more of the outstanding and voting shares or securities of both;
e) one of them directly or indirectly controls the other;
f) both persons are directly or indirectly controlled by a third person;
g) together they directly or indirectly control a third person; or
h) they are of the same family (children, siblings, grandparents or spouses);
generally accepted accounting principles: the consensus recognized to substantial support authorized in the territory of a Party, with respect to the recording of revenues, expenses, costs, assets and liabilities, disclosure of information and preparation of financial statements. These standards may be broad guides of general application, as well as detailed practical standards and procedures;
production: the growing, extracting, harvesting, fishing, hunting, manufacturing, processing or assembling of a good; producer: a person who grows, extracts, harvests, fishes, hunts, manufactures, processes or assembles a good; royalties: payments that relate to intellectual property rights; used: employed or consumed in the production of goods;
transaction value of a good: the price actually paid or payable for a good related to the transaction of the producer of the good in accordance with the principles of Article 1 of the Customs Valuation Code, adjusted in accordance with the principles of Article 8.1, 8.3 and 8.4 thereof, without regard to whether the good is sold for export. For the purposes of this definition, the seller referred to in the Customs Valuation Code shall be the producer of the good; transaction value of a material: the price actually paid or payable for a material in connection with the transaction by the producer of the good in accordance with the principles of article 1 of the Customs Valuation Code, adjusted in accordance with the principles of article 8.1, 8.3 and 8.4 thereof, without considering that the material is sold for export. For the purposes of this definition, the seller referred to in the Customs Valuation Code shall be the supplier of the material, and the buyer referred to in the Customs Valuation Code shall be the producer of the good.

Article 5-02. Instruments of Application

a) the basis of tariff classification is the Harmonized System;
b) the determination of the transaction value of a good or material shall be made in accordance with the principles of the Customs Valuation Code; and
c) all costs referred to in this Chapter shall be recorded and maintained in accordance with generally accepted accounting principles applicable in the territory of the Party where the good is produced.

Article 5-03. Originating Goods

 1. A good shall be originating in the territory of a Party when:
 a) it is wholly obtained or produced entirely in the territory of one or both Parties, as defined in Article 5-01;
b) it is produced in the territory of one or both Parties exclusively from materials that qualify as originating under this Chapter;
c) it is produced in the territory of one or both Parties from non-originating materials that meet a change in tariff classification and other requirements as specified in the Annex to this Article and the good complies with the other applicable provisions of this Chapter;
d) is produced in the territory of one or both of the Parties from non-originating materials that comply with a change in tariff classification and other requirements, and the good complies with a regional value content requirement, as specified in the Annex to this Article, and with the other applicable provisions of this Chapter;
e) is produced in the territory of one or both of the Parties and complies with a regional value content requirement, as specified in the Annex to this Article, and complies with the other applicable provisions of this Chapter; or
f) except for goods falling within Chapters 61 through 63 of the Harmonized System, the good is produced in the territory of one or both of the Parties, but one or more of the non-originating materials used in the production of the good does not comply with a change in tariff classification because:

(i) the good has been imported into the territory of a Party unassembled or disassembled, but has been classified as an assembled good in accordance with General Rule 2(a) of the Harmonized System; or
(ii) the heading for the good is the same for both the good and its parts and that heading is not divided into subheadings or the subheading is the same for both the good and its parts; provided that the regional value content of the good, determined in accordance with item 5-04, is not less than 50%, except as otherwise provided in item 5-15, when the transaction value method is used or 41. 66% when the net cost method is used, and the property complies with the other applicable provisions of this chapter.

2. For purposes of this Chapter, the production of a good from non-originating materials that meet a change in tariff classification and other requirements, as specified in the Annex to this Article, shall be made entirely in the territory of one or both Parties, and any regional value content requirement of a good shall be satisfied entirely in the territory of one or both Parties.

Article 5-04. Regional Value Content

1. Except as provided in paragraph 5, each Party shall provide that the regional value content of a good shall be calculated, at the option of the exporter or producer of the good, in accordance with the transaction value method provided in paragraph 2, or the net cost method provided in paragraph 4.

2. The following formula shall be used to calculate the regional value content of a good based on the transaction value method: VT - VMN VCR= ------------- x 100 VT where VCR: regional content value expressed as a percentage. VT: transaction value of a good adjusted on an F.O.B. basis, except as provided for in paragraph 3.

3. For purposes of paragraph 2, where the good is not exported directly by the producer of the good, the transaction value shall be adjusted to the point at which the good is received by the purchaser within the territory where the producer is located.

4. To calculate the regional value content of a good based on the net cost method, the following formula shall be applied:
 CN - VMN

VCR= --------------- x 100
CN  where

VCR: regional content value expressed as a percentage.
NC: net cost of the good.
NVNV: value of the non-originating materials used by the producer in the production of the good determined in accordance with the provisions of Article 5-05.
5. Each Party shall provide that an exporter or producer shall calculate the regional value content of a good solely on the basis of the net cost method set out in paragraph 4 where:
a) there is no transaction value because the good is not the subject of a sale;
b) the transaction value of the good cannot be determined because there are restrictions on the transfer or use of the good by the buyer other than those that:
(i) imposed or required by the law or authorities of the Party in which the purchaser of the property is located;
(ii) limit the geographic territory in which the property may be resold; or
(iii) do not appreciably affect the value of the property;
c) the sale or price is dependent on any condition or consideration the value of which cannot be determined in relation to the property;
d) directly or indirectly reverts to the seller any part of the proceeds of resale or of any subsequent transfer or use of the property by the buyer, unless due adjustment can be made in accordance with the provisions of Article 8 of the Customs Valuation Code;
e) the buyer and seller are related persons and the relationship between them affects the price, except as provided in Article 1. 2 of the Customs Valuation Code;
f) the good is sold by the producer to a related person and the volume of sales, in units of quantity of identical or similar goods, sold to related persons, during a six-month period immediately preceding the month in which the producer sold that good, exceeds 85% of the producer's total sales of those goods during that period;
g) the exporter or producer elects to accrue the regional value content of the good in accordance with article 5-08;
h) the good:
 (i) is a motor vehicle falling within heading 8701 or 8702, subheading 8703. 21 to 8703.90, or heading 8704, 8705 or 8706; or
(ii) is identified in Annex 1 to Article 5-15 or Annex 2 to Article 5-15 and is for use in a motor vehicle of heading 8701 or 8702, subheading 8703.21 to 8703.90, or heading 8704, 8705 or 8706;
i) the good is designated as an intermediate material under Article 5-07 and is subject to a regional value content requirement.

Article 5-05. Value of Materials

1. The value of a material:
a) shall be the transaction value of the material; or
b) where there is no transaction value or where the transaction value of the material cannot be determined in accordance with the principles of Article 1 of the Customs Valuation Code, shall be calculated in accordance with the principles of Articles 2 through 7 of that Code. 
2. Where not covered by paragraph 1(a) or (b), the value of a material shall include:
a) freight, insurance, packing costs and all other costs incurred in transporting the material to the port of importation in the Party where the producer of the good is located, except as provided in paragraph 3; and
b) the cost of waste and scrap resulting from the use of the material in the production of the good, less any recovery of these costs, provided that the recovery does not exceed 30% of the value of the material, as determined in accordance with paragraph 1. Where the producer of the good acquires the non-originating material within the territory of the Party where it is located, the value of the material shall not include freight, insurance, packing costs and all other costs incurred in transporting the material from the supplier's warehouse to the producer's location.
4. For purposes of calculating regional value content pursuant to Article 5-04, except as provided in paragraph 2 of Article 5-15, for a motor vehicle identified in paragraph 3 of Article 5-15, or a component identified in Annex 2 to Article 5-15, the value of non-originating materials used by the producer in the production of a good shall not include the value of non-originating materials used by:
a) another producer in the production of an originating material that is acquired and used by the producer of the good in the production of that good; or
b) the producer of the good in the production of an originating material that is self-manufactured and that is designated by the producer as an intermediate material in accordance with Article 5-07.

Article 5-06. De Minimis

1. A good shall be considered originating if the value of all the non-originating materials used in the production of the good that do not comply with the corresponding change in tariff classification established in the Annex to Article 5-03 does not exceed 7% of the transaction value of the good adjusted on the basis indicated in paragraph 2 or 3, as the case may be, of Article 5-04 or, in the cases referred to in subparagraphs a) to e) of paragraph 5 of Article 5-04 if the value of all the non-originating materials referred to above does not exceed 7% of the total cost of the good.
2.  Where the same good is subject to a regional value content requirement, the value of those non-originating materials shall be taken into account in the calculation of the regional value content of the good and the good shall satisfy the other applicable requirements of this Chapter.
3. A good that is subject to a regional value content requirement set out in the Annex to Article 5-03 need not satisfy it if the value of all non-originating materials does not exceed 7% of the transaction value of the good adjusted on the basis indicated in paragraph 2 or 3, as the case may be, of Article 5-04 or in the cases referred to in subparagraphs a) to e) of paragraph 5 of Article 5-04, if the value of all the non-originating materials referred to above does not exceed 7% of the total cost of the good. 
4. Paragraph 1 does not apply to
a) goods falling within Chapters 50 through 63 of the Harmonized System; or
b) a non-originating material that is used in the production of goods falling within Chapters 01 through 27 of the Harmonized System, unless the non-originating material falls within a subheading other than that of the good for which origin is being determined in accordance with this Article.
5. A good covered by Chapters 50 through 63 of the Harmonized System that is non-originating because the fibers and yarns used in the production of the material that determines the tariff classification of that good do not comply with the change in tariff classification provided in the Annex to Article 5-03, shall nevertheless be considered as originating if the total weight of those fibers and yarns of that material does not exceed 7 percent of the total weight of that material.

Article 5-07. Intermediate Materials

1. For purposes of calculating the regional value content in accordance with Article 5-04, the producer of a good may designate as intermediate material, except for the components listed in Annex 2 to Article 5-15 and goods of heading 87.06 for use in motor vehicles covered in paragraph 3 of Article 5-15, any self-produced material used in the production of the good provided that such material complies with the provisions of Article 5-03.

2. Where the intermediate material is subject to a regional value content requirement in accordance with the Annex to Article 5-03, the regional value content shall be calculated on the basis of the net cost method set out in Article 5-04.
3.  For purposes of calculating the regional value content of the good, the value of the intermediate material shall be the total cost that can reasonably be assigned to that intermediate material in accordance with the Annex to Article 5-01.
4. If a material designated as an intermediate material is subject to a regional value content requirement, no other self-produced material subject to a regional value content requirement used in the production of that intermediate material may, in turn, be designated by the producer as an intermediate material.
5. Where a good referred to in paragraph 2 of Article 5-15 is designated as an intermediate material, that designation shall apply only to the calculation of the net cost of that good, and the value of non-originating materials shall be determined in accordance with the provisions of paragraph 2 of Article 5-15.

Article 5-08. Accumulation

For purposes of establishing whether a good is originating, an exporter or producer may cumulate its production with that of one or more producers in the territory of one or both Parties of materials that are incorporated in the good, so that the production of the materials shall be considered as having been carried out by that exporter or producer, provided that the provisions of Article 5-03 are complied with.

Article 5-09. Expendable Goods and Materials

1. For the purpose of establishing whether a good is originating, when originating and non-originating fungible materials that are physically mixed or combined in inventory are used in its production, the origin of the materials may be determined by one of the inventory management methods established in paragraph 3.
2. When originating and non-originating fungible goods are physically mixed or combined in inventory, and prior to their exportation they do not undergo any production process or any other operation in the territory of the Party in which they were physically mixed or combined, other than unloading, reloading or any other movement necessary to maintain the goods in good condition or to transport them to the territory of the other Party, the origin of the good may be determined from one of the inventory management methods set out in paragraph 3.
3. The applicable inventory management methods for expendable materials or goods shall be as follows:
a) "PEPS" (first-in-first-out) is the inventory management method whereby the origin of the number of units of the materials or consumables first received into inventory is considered to be the origin in equal number of units of the materials or consumables first removed from inventory;
b) "UEPS" (last-in-first-out) is the inventory management method whereby the origin of the number of units of the materials or consumables last received into inventory is considered as the origin in equal number of units of the materials or consumables first removed from inventory; or
c) "averaging" is the inventory management method whereby, except as provided in paragraph 4, the determination of whether materials or consumables are originating shall be made through the application of the following formula:
 TMO PMO = ------------- x 100
                      TMOYN
where PMO: average of originating materials or consumables.
 TMO: total units of originating materials or consumables that are part of the inventory prior to departure.
 TMOYN: total sum of units of originating and non-originating materials or consumables forming part of the pre-departure inventory.
4. If the good is subject to a regional value content requirement, the determination of the non-originating fungible materials shall be made through the application of the following formula:
TMN PMN =------------ x 100
                     TMOYN
where PMN: average of non-originating materials.
TMN: total value of non-originating fungible materials that are part of the inventory prior to departure.
 TMOYN: total value of originating and non-originating consumables in the pre-departure inventory.
 5. Once one of the inventory management methods set forth in paragraph 3 has been selected, it shall be used throughout the fiscal year or period.

Article 5-10. Sets

1. Sets of goods that are classified according to the provisions of General Rule 3 of the Harmonized System, as well as goods whose description according to the nomenclature of the Harmonized System is specifically that of a set, shall qualify as originating, provided that each of the goods contained in the set complies with the rule of origin that has been established for each of the goods in this chapter.

2. Notwithstanding the provisions of paragraph 1, a set of goods shall be considered as originating if the value of all the non-originating goods used in the formation of the set does not exceed 7% of the transaction value of the set adjusted on the basis indicated in paragraph 2 or 3, as the case may be, of article 5-04 or, in the cases referred to in subparagraphs a) to e) of paragraph 5 of article 5-04, if the value of all the non-originating goods referred to above does not exceed 7% of the total cost of the set.
3. The provisions of this article shall prevail over the specific rules set forth in the Annex to article 5-03.

Article 5-11. Indirect Materials

Indirect materials shall be considered as originating without regard to the place of their production, and the value of such materials shall be the cost thereof as reported in the accounting records of the producer of the good.

Article 5-12. Accessories, Spare Parts and Tools

1. Accessories, spare or replacement parts and tools delivered with the good as part of the usual accessories, spare or replacement parts and tools of the good shall be disregarded in determining whether all non-originating materials used in the production of the good comply with the applicable change in tariff classification set out in the Annex to Article 5-03, provided that: 
a) the accessories, spare or replacement parts and tools are not invoiced separately from the good, regardless of whether they are separately itemized or detailed on the invoice itself; and
b) the quantity and value of such accessories, spare or replacement parts and tools are those customary for the good.
2. Where the good is subject to a regional value content requirement, the value of the accessories, spare or replacement parts and tools shall be taken into account as originating or non-originating materials, as the case may be, in calculating the regional value content of the good.

Article 5-13. Containers and Packaging Materials for Retail Sale

1. Containers and packaging materials in which a good is presented for retail sale, when classified with the good they contain, shall not be taken into account in deciding whether all non-originating materials used in the production of the good comply with the corresponding change in tariff classification set out in the Annex to Article 5-03.
2. Where the good is subject to the regional value content requirement, the value of retail containers and packaging materials shall be considered as originating or non-originating, as the case may be, in calculating the regional value content of the good.

Article 5-14. Containers and Packing Materials for Shipment

1.Containers and packing materials for transporting the good shall be disregarded for purposes of determining whether all non-originating materials used in the production of the good comply with the applicable change in tariff classification set out in the Annex to Article 5-03.
2. Where the good is subject to the regional value content requirement, the value of the packaging materials for transporting the good shall be considered as originating or non-originating, as the case may be, in calculating the regional value content of the good, and the value of such material shall be the cost thereof as reported in the accounting records of the producer of the good.

Article 5-15. Automotive Goods

1. For the purposes of this article, the following definitions shall apply:
chassis: the bottom plate of a motor vehicle;
class of motor vehicles: any of the following categories of motor vehicles:
a) motor vehicles covered by subheading 8701.20, Mexican tariff item 8702.10.03 or 8702.90.04 or Bolivian subheading 8702. 10 or 8702.90 when they are motor vehicles designed for the transport of 16 persons or more, subheading 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or in heading 87.05 or 87.06;
b) motor vehicles of subheading 8701.10 or 8701.30 to 8701.90; 78
c) motor vehicles of Mexican tariff item 8702. 10.01, 8702.10.02, 8702.90.01, 8702.90.02 or 8702.90.03, or Bolivian subheading 8702.10 or 8702.90 when they are motor vehicles designed for the transport of fifteen persons or less, or Bolivian subheading 8704.21 or 8704.31; or
d) motor vehicles falling within subheading 8703.21 to 8703.90;
assembler of motor vehicles falling within subheading 8703.21 to 8703.90. 90;
motor vehicle assembler: a producer of motor vehicles and any related persons or joint ventures in which the producer participates;
original equipment: material that is incorporated into a motor vehicle before the first transfer of title or consignment of the motor vehicle to a person who is not an assembler of the motor vehicle.
That material is:
a) a good covered by Annex 1 to this article; or
b) an assembly of automotive components, an automotive component, or a material listed in Annex 2 to this article;
model line: a group of motor vehicles having the same platform or model name;
model name: the word or group of words, letter or letters, number or numbers, or similar designation assigned to a motor vehicle by a marketing division of a motor vehicle assembler to:
a) differentiate the motor vehicle from other motor vehicles using the same platform design; b) associate the motor vehicle with other motor vehicles using a different platform design; or
c) indicate a platform design;
platform: the primary assembly of a load-carrying structural assembly of a motor vehicle that determines the basic size of that vehicle and forms the structural base that supports the powertrain, and serves as the attachment of the motor vehicle to various types of frames, such as body mount, dimensional frame, and unit body;
motor vehicle: a motor vehicle that falls within heading 87. 01, 87.02, 87.03, 87.04, 87.05 or 87.06.

2. For purposes of calculating the regional value content in accordance with the net cost method set out in paragraph 4 of Article 5-04 for:

a) goods that are motor vehicles included in Mexican tariff item 8702.10.01, 8702.10.02, 8702.90.01, 8702.90.02 or 8702.90.03, or in Bolivian subheading 8702.10 or 8702.90 when they are motor vehicles designed for the transportation of fifteen persons or less, or in subheading 8703.21 through 8703.90, 8704. 21 or 8704.31; or 79
b) goods covered by Annex 1 to this article when they are subject to a regional value content requirement and are intended for use as original equipment in the production of goods that are motor vehicles covered by Mexican tariff item 8702.10.01, 8702.10.02, 8702. 90.01, 8702.90.02 or 8702.90.03, or in the Bolivian subheading 8702.10 or 8702.90 when they are motor vehicles designed for the transportation of fifteen persons or less, or in subheading 8703.21 to 8703.90, 8704.21 or 8704. 31;
the value of the non-originating materials used by the producer in the production of the good shall be the sum of the values of the non-originating materials, determined in accordance with paragraphs 1 and 2 of Article 5- 05, imported from countries that are not Parties, included in Annex 1 to this Article and which are used in the production of the good or in the production of any material used in the production of the good.

3.For purposes of calculating the regional value content in accordance with the net cost method set out in paragraph 4 of Article 5-04 for goods that are motor vehicles under heading 87.01, in Mexican tariff item 8702. 10.03 or 8702.90.04, or in Bolivian subheading 8702.10 or 8702.90 when they are motor vehicles designed for the transport of 16 or more persons, in subheading 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or heading 87.05 or 87. 06, or for a component identified in Annex 2 to this article for use as original equipment in the production of the motor vehicles described in this paragraph, the value of the non-originating materials used by the producer in the production of the good shall be the sum of:
a) for each material used by the producer and listed in Annex 2 to this article, whether or not produced by the producer, at the producer's option, and determined in accordance with Article 5-05 or paragraph 3 of Article 5-07, either of the following two values:

i) the value of the non-originating material; or
ii) the value of the non-originating materials used in the production of that material; and
b) the value of any other non-originating material used by the producer, which is not included in Annex 2 to this Article, determined in accordance with Article 5-05 or paragraph 3 of Article 5-07.

4. For purposes of calculating the regional value content of a motor vehicle identified in paragraph 2 or 3, the producer may average the calculation over its fiscal year or period using any of the following categories, either by taking as a basis all motor vehicles in that category, or only motor vehicles in that category that are exported to the territory of the other Party:
a) the same model line in motor vehicles of 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 in motor vehicles produced in the territory of a Party. 

5.For purposes of calculating the regional value content of one or all of the goods covered by a tariff classification listed in Annex 1 to this Article, or of a component or material listed in Annex 2 to this Article, that are produced in the same plant, the producer of the good may:
a) average its calculation:
i) in the fiscal year or period of the producer of the motor vehicle to whom the good is sold; ii) in any quarterly or monthly period; or
iii) in its own fiscal year or period, if the good is sold as a spare or replacement part;
b) calculate the average referred to in subparagraph (a) separately for any or all goods sold to one or more producers of motor vehicles; or
c) in respect of any calculation made under this paragraph, calculate separately the regional value content of the goods that are exported to the territory of the other Party.

6.Notwithstanding the Annex to Article 5-03, the regional value content shall be:
a) for goods that are motor vehicles under heading 87.01, under Mexican tariff item 8702.10. 03 or 8702.90.04, or in the Bolivian subheading 8702.10 or 8702.90 when they are motor vehicles designed for the transportation of 16 persons or more, in subheading 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or heading 87.05 or 87. 06, 35% under the net cost method for a producer's fiscal year or period beginning on the earlier of January 1, 1995 through the fiscal year or period ending on the earlier of January 1, 1997; and

b) for the goods set out in Annex 1 to this article, subject to the regional value content requirement and intended for use in the motor vehicles covered by paragraphs 2 and 3, except for goods of heading 84. 07, 84.08 or subheading 8708.40, when they are intended for use in the motor vehicles covered by paragraphs 2 and 3, in which case the regional content as defined in footnotes 4 and 32 of Section B of the Annex to Article 5-03 shall apply, and except for heading 87. 06, in which case the provisions of subparagraph a) shall apply:
i) 40% under the net cost method, for the fiscal year or period of a producer beginning on the earliest date on January 1, 1995 through the fiscal year or period ending on the earliest date on January 1, 2000; and
ii) 50% under the net cost method, for the fiscal year or period of a producer beginning on the earliest date on January 1, 2000 through the fiscal year or period of a producer ending on the earliest date on January 1, 2005. 81

Article 5-16. Non-origin Conferring Transactions and Practices

1. A good shall not be considered as originating solely because of:
a) dilution in water or other substance that does not materially alter the characteristics of the good;
b) simple operations intended to ensure the preservation of the goods during transportation or storage, such as aeration, refrigeration, removal of damaged parts, drying or addition of substances;
c) dusting, sifting, sorting, grading, selecting, washing, cutting;
 d) packing, repacking or packaging for retail sale;
e) assembling of goods to form sets or assortments;
f) application of marks, labels or similar distinctive signs;
g) cleaning, including removal of rust, grease, paint or other coatings; and
h) simple assembly of parts and components that are classified as one good under general rule 2 (a) of the Harmonized System. The foregoing shall not apply to goods that had already been assembled, and subsequently disassembled for convenience of packaging, handling or transportation.
 2. The origin of a good shall not be conferred by any pricing activity or practice, in respect of which it can be demonstrated, on the basis of sufficient evidence, that its purpose is to evade compliance with the provisions of this Chapter.
3. The provisions of this article shall prevail over the specific rules set forth in the Annex to article 5-03.

Article 5-17. Transshipment and Direct Shipment

1. A good shall not be considered as originating even if it has been produced in accordance with the requirements of Article 5-03, if after such production, the good undergoes further processing or any other operation outside the territories of the Parties, except unloading, reloading or any other movement necessary to maintain it in good condition or to transport it to the territory of the other Party.
2. A good shall not lose its originating status when, while in transit through the territory of one or more non-Party countries, with or without transshipment or temporary storage, under the supervision of the competent customs authority in those countries:
a) the transit is justified by geographical reasons or by considerations relating to transportation requirements;
b) it is not intended for trade, use or employment in the country or countries of transit; and c) during its transportation and storage it is not subjected to operations other than packing, packaging, loading, unloading, unloading or handling to ensure its preservation.

Article 5-18. Consultations and Modifications

1.The Parties establish the Working Group on Rules of Origin, composed of representatives of each Party, which shall meet at least twice a year and at the request of any Party.
2. The Working Group shall:
a) ensure the effective implementation and administration of this Chapter;
b) reach agreement on the interpretation, application and administration of this Chapter;
c) review annually, with respect to ineligible interest costs, the percentage points above the highest rate of interest on debt obligations issued by the federal or central government, as the case may be; and
d) address any other matter agreed by the Parties. The Parties shall consult regularly and cooperate to ensure that this Chapter is implemented effectively, uniformly and in accordance with the spirit and objectives of this Agreement.
 4. Any Party that considers that this chapter requires modification due to changes in the development of production processes or other matters, may submit to the Working Group a proposal for modification for its consideration and the reasons and studies that support it. The Working Group shall submit a report to the Commission to make the pertinent recommendations to the Parties.

Article 5-19. Interpretation

For purposes of this Chapter, in applying the Customs Valuation Code to determine the origin of a good:
a) the principles of that Code shall apply to domestic transactions, with such modifications as circumstances require, as they would apply to international transactions; and
b) the provisions of this Chapter shall prevail over those of that Code insofar as they are inconsistent.

Chapter VI. Customs Procedures

Article 6-01. Definitions

1. For the purposes of this Chapter, the following definitions shall apply:
competent authority: the authority which, under the legislation of each Party, is responsible for the administration of its customs and tax laws and regulations;
identical goods: goods that are alike in all respects, including their physical characteristics, quality and commercial prestige. Minor differences in appearance do not prevent them from being considered identical;
determination of origin ruling: a ruling issued as a result of a verification that establishes whether a good qualifies as originating;
preferential tariff treatment: the application of the tariff rate corresponding to an originating good under the Tariff Relief Program; 

2. Except as defined in this Article, the definitions set out in Chapter V (Rules of Origin) are incorporated into this Chapter.

Article 6-02. Declaration and Certification of Origin

1.For the purposes of this Chapter, prior to the entry into force of this Agreement, the Parties shall develop a single format for the certificate and declaration of origin.
2.The certificate of origin referred to in paragraph 1 shall serve to certify that a good exported from the territory of one Party to the territory of the other Party qualifies as originating.
3. Each Party shall provide that its exporters shall complete and sign a certificate of origin in respect of the export of a good for which an importer may claim preferential tariff treatment.
4. Each Party shall provide that:
a) where an exporter is not the producer of the good, it shall complete and sign the certificate of origin on the basis of the declaration of origin referred to in paragraph 1; and b) the declaration of origin covering the good being exported shall be completed and signed by the producer of the good and provided voluntarily to the exporter.
5. Each Party shall provide that the certificate of origin completed and signed by the exporter shall cover:
a) a single importation of one or more goods; or
b) several importations of identical goods to be made within a period established by the exporter in the certificate of origin, which shall not exceed the period established in paragraph
6. Each Party shall provide that the certificate of origin shall be accepted by the competent authority of the importing Party for one year from the date of its signature.

Article 6-03. Obligations with Respect to Imports

1. Each Party shall require an importer claiming preferential tariff treatment for a good imported into its territory from the territory of the other Party to:
a) declare in writing, on the import document provided for in its legislation, on the basis of a valid certificate of origin, that the good qualifies as originating;
b) have the certificate of origin in its possession at the time of making that declaration;
c) provide a copy of the certificate of origin when requested by its competent authority; and
d) submit a corrected declaration and pay the corresponding duties, when it has reason to believe that the certificate of origin on which its import declaration is based, contains incorrect information.
Where the importer submits the aforementioned declaration spontaneously, he shall not be penalized.