indirect material: an asset used in the production, testing or inspection of an asset, but not physically incorporated into the asset; or an asset used in the maintenance of buildings or operation of equipment related to the production of an asset, including:
a) fuel and energy;
b) tools, dies and molds;
c) spare parts and materials used in the maintenance of equipment and buildings;
d) lubricants, greases, composites and other materials used in production or to operate equipment or buildings;
e) gloves, goggles, footwear, clothing, safety equipment and attachments;
f) equipment, apparatus and attachments used for the verification or inspection of goods;
g) catalysts and solvents; or
h) any other property that is not incorporated in the property, but whose use in the production of the property 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 6 -07;
related person: a person who is related to another person, as follows:
a) one of them holds positions of responsibility or management in one of the other's companies;
b) are legally recognized as business associates;
c) are in the relationship of employer and employee;
d) a 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 party;
g) together they directly or indirectly control a third person; or
h) are from the same family and include only children, siblings, parents, grandparents or spouses;
generally accepted accounting principles: those on which there is a recognized consensus or which enjoy substantial and authoritative support 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 and which are applied in the territory of that Party. These standards may be broad guides of general application, as well as detailed practical rules 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;
used: employed or consumed in the production of goods;
transaction value of a good: the price actually paid or payable for a good 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 regard to whether the good is sold for export. For the purposes of this definition, the seller as referred to in the Customs Valuation Code shall be the producer of the good; and
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 regard to whether 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 6-02. Instruments of Application and Interpretation
1. For purposes of this chapter:
(a) the basis for 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.
2. For purposes of this chapter, when 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 may require, as they would apply to international transactions; and b) the provisions of this chapter shall prevail over those of this code in those cases where they are incompatible.
Article 6-03. Originating Goods.
1. A good will be originating when:
a) is wholly obtained or produced entirely in the territory of one or more of the Parties, as defined in Article 6 -01;
b) is produced in the territory of one or more of the Parties exclusively from materials that qualify as originating in one or more of the Parties in accordance with this Chapter;
c) is produced in the territory of one or more of the Parties from non-originating materials that meet a change in tariff classification and other requirements, as specified in Annex 6-03, and the good complies with the other applicable provisions of this Chapter;
d) is produced in the territory of one or more of the Parties from non-originating materials that meet a change in tariff classification and other requirements, and the good meets a regional value content requirement, as specified in Annex 6-03, and the other applicable provisions of this Chapter;
e) is produced in the territory of one or more of the Parties and meets a regional value content requirement, as specified in Annex 6-03, and complies with the other applicable provisions of this Chapter; or
f) except for goods covered by Chapters 61 through 63 of the Harmonized System, the good is produced in the territory of one or more 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 in an unassembled or disassembled state, but has been classified as an assembled good in accordance with General Rule 2(a) of the Harmonized System; or
il) 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 article 6 -04, is not less than 50%, except as otherwise provided in annex 6-03, and the good 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 Annex 6-03, shall be made entirely in the territory of one or more of the Parties, and any regional value content requirement for a good shall be satisfied entirely in the territory of one or more of the Parties.
Article 6. Value of Regional Content.
1. Each Party shall provide that the regional value content of a good shall be calculated, by the exporter or producer of the good, in accordance with the transaction value method set out in paragraph 2.
2. In calculating the regional value content of a good based on the transaction value method, the following formula shall be applied:
RVC = TV - VMN / TV x 100
Where:
RCV: Regional Content Value expressed as a percentage;
TV: Transaction value of a good adjusted on a F.O.B. basis, except as provided In Paragraph 3; and
VMN: Value of non-originating materials used by the producer in the production of the good as determined in accordance with the provisions of Article 6-05.
3. for Purposes of Paragraph 2, when the good is not exported directly by the producer of the good, the transaction value shall be adjusted to the point at which the buyer receives the good within the territory where the producer is located.
4. Each Party shall provide that in the event that there is no transaction value or that the transaction value of the good cannot be determined in accordance with paragraphs 5 and 6, the transaction value may be calculated in accordance with the principles of Articles 2 through 5 of the Customs Valuation Code. If the value cannot be determined in accordance with any of Articles 2 to 5 of the Customs Valuation Code, the producer or exporter may optionally choose to calculate the transaction value in accordance with the principles of Articles 6 or 7 of the Customs Valuation Code.
5. For the purposes of paragraph 4, there is no transaction value when the property is not the subject of a sale.
6. For purposes of paragraph 4, the transaction value of the property may not be determined when: a) there are any restrictions on the transfer or use of the property by the purchaser except for those that:
i) imposed or required by the law or authorities of the Party in which the purchaser of the good is located;
ii) limit the geographic territory where the property may be resold; or
iii) do not appreciably affect the value of the property;
b) the sale or price is dependent on some condition or consideration, the value of which cannot be determined in relation to the property;
c) directly or indirectly reverts to the seller any part of the proceeds of the resale or of any subsequent transfer or use of the good by the buyer, unless due adjustment can be made in accordance with the provisions of Article 8 of the Customs Valuation Code;
d) the buyer and seller are related persons and the relationship between them influences the price, except as provided in Article 1.2 of the Customs Valuation Code; or
e) 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.
7. Except for goods covered by Article 6-15, a producer may average the regional value content of any or all of the goods falling within the same subheading that are produced in the same plant or in different plants within the territory of a Party, either on the basis of all the goods produced by the producer or only those goods that are exported to the other Party:
a) in its fiscal year or period; or
b) in any monthly, bimonthly, quarterly, quarterly, quarterly or semiannual period.
Article 6-05. Value of Materials
1. The value of a material:
a) is the transaction value of the material; or
b) in the event that there is no transaction value or the transaction value of the material cannot be determined in accordance with paragraphs 5 and 6 of Article 6-04, it shall be calculated in accordance with the principles of Articles 2 through 5 of the Customs Valuation Code. If the value cannot be determined in accordance with any of Articles 2 to 5 of the Customs Valuation Code, the producer or exporter may optionally choose to calculate the transaction value in accordance with the principles of Articles 6 or 7 of the Customs Valuation Code.
2. When not considered in subparagraphs a) or b) of paragraph 1, 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, determined in accordance with paragraph 1.
3. When the producer of the good acquires a non-originating material within the territory of the Party where it is located, the value of the non-originating material shall not include freight, insurance, packing costs and all other costs incurred in transporting the material from the supplier's warehouse to the place where the producer is located.
4. For purposes of calculating the regional value content in accordance with Article 6-04, 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 the producer in the production of the good:
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 a self-produced originating material that is designated by the producer as an intermediate material in accordance with Article 6-07.
Article 6-06. De Minimis.
1. A good shall be considered originating if the value of all non-originating materials used in the production of the good that do not comply with the corresponding change in tariff classification set out in Annex 6-03 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 6 -04.
2. Where the good referred to in paragraph 1 is additionally 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 Annex 6 -03 does not have to 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 6-04.
4. Paragraph 1 does not apply to: a) goods covered by Chapters 50 to 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 pursuant to this Article.
5. A good of 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 for in Annex 6 - 03, shall nevertheless be considered as originating if the total weight of such fibers and yarns of that material does not exceed 7% of the total weight of that material.
Article 6-07. Intermediate Materials.
1. For purposes of calculating the regional value content in accordance with Article 6-04, the producer of a good may designate as intermediate material, any self-produced material used in the production of the good provided that such material complies with the provisions of Article 6 - 03.
2. Where an intermediate material is designated and is subject to a regional value content requirement, for purposes of calculating the regional value content of the intermediate material, the transaction value of the intermediate material referred to in Article 6-04 may be determined in accordance with the principles of Articles 2 through 5 of the Customs Valuation Code. If the value cannot be determined in accordance with any of Articles 2 to 5 of the Customs Valuation Code, the producer or exporter may optionally choose to calculate such value in accordance with the principles of Articles 6 or 7 of the Customs Valuation Code.
3. Notwithstanding paragraph 2, where an intermediate material is designated and Is subject to a regional value content requirement, for purposes of calculating the regional value content of the intermediate material, the transaction value of the intermediate material referred to in Article 6-04 may be:
a) the total cost incurred in respect of all goods produced by the producer of the good, which can be reasonably allocated to that intermediate material in accordance with Annex 6 -01; or
b) the amount of each cost that is part of the total cost incurred in respect of the intermediate material, which can be reasonably allocated to that intermediate material, in accordance with Schedule 6-01.
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.
Article 6-08. 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 more of the Parties, of materials that are incorporated in the good, so that the production of the materials is considered to be carried out by that exporter or producer, provided that the provisions of Article 6-03 are complied with.
Article 6-09. Expendable Property and Materials.
1. For purposes 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 set out 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 transport them to the territory of another 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 materials or consumables shall be as follows:
a) "PEPS'" (first-in-first-out) is the method of inventory management whereby the origin of the number of units of materials or consumables first received into inventory is considered to be the origin in equal number of units of materials or consumables first out of inventory;
b) "UEPS" (last-in-first-out) is the method of inventory management whereby the origin of the number of units of the materials or consumables that were received last in inventory is considered to be the origin in equal number of units of the materials or consumables that first leave inventory; or
c) "averaging" is the method of inventory management whereby, except as provided in paragraph 4, the determination as to whether materials or consumables are originating shall be made through the application of the following formula:
PMO = TMO / TMOYN x 100
where: PMO: average of original materials or consumables;
TMO: total units of the originating materials or consumables in the pre-departure inventory; and
TMOYN: total sum of units of originating and non-originating materials or consumables that are part of the pre-departure inventory.
4. In the case where 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:
PMN = TMN / TMOYN x 100
where:
PMN: average of non-originating materials;
TMN: total value of non-originating consumable materials that are part of the inventory prior to departure; and
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 should be used throughout the fiscal year or period.
Article 6-10. Sets or Assortment
1. Sets or assortments 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 or assortment, shall qualify as originating, provided that each of the goods contained in the set or assortment 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 6 -04.
3. The provisions of this article shall prevail over the specific rules set forth in annex 6-03.
Article 6-11. 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 of such materials as reported in the accounting records of the producer of the good.
Article 6-12. Accessories, Spare or Replacement 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 Annex 6-03, provided that:
a) accessories, spare or replacement parts and tools are not invoiced separately from the good, regardless of whether they are itemized or detailed separately in the invoice itself; and
b) the quantity and value of such accessories, spare or replacement parts and tools are those customary for the property.
2. When the good Is subject to a regional value content requirement, the value of accessories, spare or replacement parts and tools shall be taken into account as originating or non-originating materials, as the case may be, when calculating the regional value content of the good.
Article 6-13. Packaging and Packaging Materials for Retail Sale.
1. Where the good is subject to a change in tariff classification, containers and packaging materials in which a good is presented for retail sale, when classified with the good they contain, shall be disregarded 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 Annex 6 -03.
2. When 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 6-14. Containers and Packing Materials for Shipment.
1. Containers and packing materials for transporting the good shall be disregarded for purposes of establishing whether all non-originating materials used in the production of the good comply with the corresponding change in tariff classification set out in Annex 6 -03.
2. When the good is subject to the regional value content requirement, the value of the packaging materials for transportation of the good shall be considered as originating or non-originating, as the case may be, for calculating the regional value content of the good and the value of such material shall be the cost thereof reported in the accounting records of the producer of the good.
Article 6-15. Automotive Industry 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 of subheading 8702.10 or 8702.90, when they are motor vehicles designed for the transport of 16 persons or more, or of subheading 8701.20, 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or of subheading 8701.20, 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or of subheading 8701.20, 8704.32 or 8704.90, or of subheading 8701.20. heading 87.05 or 87.06;
b) motor vehicles falling under subheading 8701.10 or 8701.30 to 8701.90;
c) motor vehicles of subheading 8702.10 or 8702.90, when they are motor vehicles designed for the transport of 15 persons or less, or of subheading 8704.21 or 8704.31; or
d) motor vehicles falling under subheading 8703.21 to 8703.90;
model line: a group of motor vehicles having the same platform or the same 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) associating the motor vehicle with other motor vehicles using a different platform design; or
c) indicate a platform design;
plant: a building or nearby but not necessarily contiguous buildings, machinery, apparatus and appurtenances that are under the control of a producer and are used for the production of motor vehicles; platform: the primary assembly of a load-bearing 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 to join the motor vehicle in various types of frames, such as body mount, dimensional frame and unit body; and
motor vehicle: goods of heading 87.01, 87.02, 87.03, 87.04, 87.05 or 87.06.
2. To calculate the regional value content of a motor vehicle, the producer may average the calculation over its fiscal year or period, using any of the following categories, either taking as a basis all motor vehicles of that category, or only motor vehicles of that category that are exported to the territory of the other Party:
a) the same model line of the same class of motor 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;
c) the same model line of motor vehicles produced in the territory of a Party; or
d) the same class of motor vehicles produced in the territory of a Party.
Article 6-16. Non-origin Conferring Transactions and Practices.
1. A good shall not be considered as originating solely because:
a) dilution in water;
b) simple operations intended to ensure the preservation of goods during transportation or storage, such as aeration, refrigeration, freezing, freezing, damaged parts, drying or addition of substances;
c) dusting, sieving, screening, shelling, shelling, splitting, painting, grading, sorting, washing, cutting;