9. (a) A Party may publish the name of an enterprise that:
(i) the Party has determined, in accordance with its applicable procedures, to be engaged in intentional circumvention of laws, regulations, and procedures of either Party or international agreements affecting trade in textile or apparel goods; or
(ii) has failed to demonstrate that it produces, or is capable of producing, the textile or apparel goods subject to a verification conducted under paragraph 4(a).
(b) Each Party shall provide that an enterprise whose name has been included in a list that the Party publishes in accordance with subparagraph (a) may request that the Party remove the enterprise from its list. If the importing Party finds that the enterprise has not committed any violations described in subparagraph (a) for a period of not less than three years after the date on which the enterprise’s name was published, the importing Party shall remove the enterprise from its list as of the next publication of the list.
(c) A Party’s decision to publish the name of an enterprise in accordance with subparagraph (a) shall not, in itself, constitute a basis for the Party to deny entry to textile or apparel goods produced or exported by the enterprise.
Article 3.22. Monitoring
1. The eligible Party shall establish and maintain programs to monitor the importation, production, exportation, movement in transit, and processing or manipulation in any free trade zone, foreign trade zone, or export processing zone of textile or apparel goods, as specified in this article. These programs shall provide the information necessary for each Party to ascertain whether a violation of its laws relating to trade in textile or apparel goods or an act of circumvention is occurring or has occurred.
2. The eligible Party shall establish and maintain a program to verify the accuracy of claims of origin relating to textile or apparel goods that are exported to the other Party. This program shall include on-site government inspections of any enterprise of the eligible Party involved in the production of any such good without prior notice to the enterprise to verify that the enterprise complies with laws of the eligible Party relating to trade in textile or apparel goods and that the enterprise’s production of and capability to produce such goods are consistent with claims regarding the origin of such goods.
3. For each shipment of textile or apparel goods that an enterprise in its territory produces for exportation to the other Party or exports to the other Party, the eligible Party shall require the enterprise to maintain in the eligible Party records relating to such production or exportation for a period of five years from the date on which such records are created. The eligible Party also shall require each of its enterprises that produces textile or apparel goods to maintain in the eligible Party records relating to its production capabilities in general, the number of persons it employs, and any other records and information sufficient to allow officials of each Party to verify the enterprise’s production and exportation of textile or apparel goods, including:
(a) records demonstrating that the materials used to produce or assemble textile or apparel goods were obtained or produced by the enterprise and were available for production, such as:
(i) bills of lading from the persons that supplied the materials;
(ii) customs clearance records or equivalent records if the materials were imported into the eligible Party; and
(iii) transaction records, including:
(A) commercial invoices, if the materials were purchased;
(B) records documenting transfers of funds;
(C) mill certificates if the materials were spun, extruded (for yarns) or woven, knitted, or formed by any other fabric forming process (for example, tufting) by an enterprise of the eligible Party;
(D) production records, if the enterprise produced the materials; and
(E) purchase orders, if the materials were imported from a foreign producer, broker, trader, or other intermediary;
(b) with respect to textile or apparel goods that the enterprise has produced with respect to which a claim of origin is made, production records that substantiate the claim or marking, such as:
(i) cutting records for products assembled from cut components;
(ii) assembly or production records that the enterprise creates that document daily production, including workers’ daily production records, wage records, production steps, and sewing tickets; and
(iii) employee time cards, payment records, or other documentation showing which employees were working, how long they worked, and what work they performed during the period the goods were produced; and
(c) with respect to textile or apparel goods that a subcontractor has produced in whole or in part for the enterprise and with respect to which a claim of origin is made, records that substantiate the claim of origin, such as:
(i) cutting records for products assembled from cut components;
(ii) if partially assembled by the subcontractor, production records documenting the partial assembly;
(iii) bills of lading; and
(iv) transfer documents to the shipper or primary contractor and proof of payment by the shipper or primary contractor for the work done.
4. The eligible Party shall establish and maintain a program to ensure that textile or apparel goods that are imported into or exported from the eligible Party or that are processed or manipulated in any free trade zone, foreign trade zone, or export processing zone in the eligible Party en route to the other Party are examined to ascertain prima facie that they are marked with the country of origin in accordance with the documents accompanying the goods and that such documents accurately describe the goods.
(a) This program shall provide for:
(i) immediate referral by the eligible Party’s officials of suspected violations of either Party’s laws relating to circumvention to the appropriate enforcement authorities; and
(ii) issuance by the eligible Party to the other Party of a written report describing each violation relating to circumvention, including a failure to maintain or produce records, any other act of circumvention involving textile or apparel goods destined for the other Party occurring in the territory of the eligible Party, and any enforcement action taken or penalty imposed by the eligible Party.
(b) Article 5.6 (Confidentiality) shall apply to any information contained in a report under subparagraph (a)(ii) that the eligible Party designates as confidential.
(c) Notwithstanding subparagraph (b), a Party may publish the name of an enterprise that it has determined is engaged in circumvention.
5. If the eligible Party discovers conduct by an enterprise that it suspects is a violation of either Party’s laws relating to circumvention, and the conduct has not been described in a report under paragraph 4(a)(ii), the eligible Party shall report the conduct to the other Party not later than 14 days after the eligible Party discovers the conduct. The eligible Party shall also immediately initiate a detailed review of all textile or apparel goods that the enterprise has produced for exportation to the other Party or exported to the other Party during the six months preceding the date that the eligible Party discovered the conduct. The eligible Party shall prepare a report describing the results of that review and shall transmit the report to the other Party not later than 60 days after it initiates the review of the enterprise or such later date as the Parties may agree.
6. A report describing the results of a review conducted pursuant to paragraph 5 shall include the following:
(a) the name and address of the enterprise investigated;
(b) the nature of the suspected violation (for example, failure to maintain adequate production records or making false statements relating to country of origin or production);
(c) a brief description of the evidence of a violation and any penalty imposed or other action taken;
(d) the identification numbers of the invoices or certificates, if required, and the date of exportation of the goods subject to the review;
(e) the product category, description, and quantity of the goods included in the shipments to the other Party; and
(f) purchase orders, bills of lading, contracts, payment records, invoices, and other records indicating the origin of the goods included in the shipments to the other Party, and, if known, information identifying the importer of the goods in the other Party.
7. The eligible Party shall obtain and annually update the following information regarding its enterprises:
(a) the name and address of the enterprise and the location of all of its textile or apparel facilities in the eligible Party;
(b) the telephone number, facsimile number, and e-mail address of the enterprise;
(c) the names and nationalities of the owners, if known, or the directors and corporate officers and their positions within the enterprise;
(d) the number of employees of the enterprise and their occupations;
(e) the number and type of machines the enterprise uses to produce textile or apparel goods and the approximate number of hours the machines operate per week;
(f) a general description of the textile or apparel goods the enterprise produces and the enterprise’s production capacity; and
(g) the name of, and contact information for, each of the enterprise’s customers in the other Party.
The eligible Party shall provide this information to the other Party within three months after the date of entry into force of this Agreement and annually thereafter. The other Party shall consider the information that the eligible Party provides under this paragraph to have been designated as confidential information in accordance with Article 5.6 (Confidentiality).
Article 3.23. Consultations on Customs Cooperation and Monitoring
1. On the written request of a Party, the Parties shall enter into consultations to resolve any technical or interpretive difficulties that may arise, or to discuss ways to improve customs cooperation, under Articles 3.21 and 3.22. Unless the Parties otherwise agree, consultations shall begin within 30 days after delivery of the request, and conclude within 90 days after delivery of the request.
2. A Party may request technical or other assistance from the other Party in carrying out Articles 3.21 and 3.22. The Party receiving such a request shall make every effort to respond favorably and promptly to it.
Article 3.24. Textile Safeguard Measures
1. Subject to the following paragraphs, and during the transition period only, if, as a result of the reduction or elimination of a duty provided for in this Agreement, a textile or apparel good of a Party is being imported into the territory of the other Party in such increased quantities, in absolute terms or relative to the domestic market for that good, and under such conditions as to cause serious damage, or actual threat thereof, to a domestic industry producing a like or directly competitive good, the importing Party may, to the extent necessary to prevent or remedy such damage and to facilitate adjustment, apply a textile safeguard measure to that good, consisting of an increase in the rate of duty on the good to a level not to exceed the lesser of:
(a) the most-favored-nation (MFN) applied rate of duty in effect at the time the measure is applied; or
(b) the MFN applied rate of duty in effect on the date of entry into force of this Agreement.
2. In determining serious damage, or actual threat thereof, the importing Party:
(a) shall examine the effect of increased imports of the good of the other Party on the particular industry, as reflected in changes in such relevant economic variables as output, productivity, utilization of capacity, inventories, market share, exports, wages, employment, domestic prices, profits, and investment, none of which, either alone or combined with other factors, shall necessarily be decisive; and
(b) shall not consider changes in technology or consumer preference as factors supporting a determination of serious damage or actual threat thereof.
3. The importing Party may apply a textile safeguard measure only following an investigation by its competent authority.
4. If, on the basis of the results of the investigation under paragraph 3, the importing Party intends to apply a textile safeguard measure, the importing Party shall promptly provide written notice to the exporting Party of its intent to apply a textile safeguard measure, and on request shall enter into consultations with that Party. The Parties shall begin the consultations without delay and shall complete them within 60 days of the date of receipt of the request. The importing Party shall make a decision on whether to apply a safeguard measure within 30 days of completion of the consultations.
5. The following conditions and limitations apply to any textile safeguard measure:
(a) neither Party may maintain a textile safeguard measure for a period exceeding three years;
(b) neither Party may apply a textile safeguard measure to the same good of the other Party more than once;
(c) on termination of the textile safeguard measure, the Party applying the measure shall apply the rate of duty set out in its Schedule to Annex 3.3 (Tariff Elimination), as if the measure had never been applied; and
(d) neither Party may maintain a textile safeguard measure beyond the transition period.
6. The Party applying a textile safeguard measure shall provide to the Party against whose
good the measure is taken mutually agreed trade liberalizing compensation in the form of concessions having substantially equivalent trade effects or equivalent to the value of the additional duties expected to result from the textile safeguard measure. Such concessions shall be limited to textile or apparel goods, unless the Parties otherwise agree. If the Parties are unable to agree on compensation within 30 days of application of a textile safeguard measure, the Party against whose good the measure is taken may take tariff action having trade effects substantially equivalent to the trade effects of the textile safeguard measure. Such tariff action may be taken against any goods of the Party applying the measure. The Party taking the tariff action shall apply such action only for the minimum period necessary to achieve the substantially equivalent trade effects. The importing Party’s obligation to provide trade compensation and the exporting Party’s right to take tariff action shall terminate when the textile safeguard measure terminates.
7. (a) Each Party retains its rights and obligations under Article XIX of the GATT 1994 and the Safeguards Agreement.
(b) Neither Party may apply, with respect to the same good at the same time, a textile safeguard measure and:
(i) a safeguard measure under Chapter Eight (Trade Remedies); or
ii) a measure under Article XIX of the GATT 1994 and the Safeguards Agreement.
Article 3.25. Rules of Origin and Related Matters
Consultations on Rules of Origin
1. On request of a Party, the Parties shall, within 30 days after the request is delivered, consult on whether the rules of origin applicable to a particular textile or apparel good should be modified.
2. In the consultations referred to in paragraph 1, each Party shall consider all data that a Party presents demonstrating substantial production in its territory of the good. The Parties shall consider that there is substantial production if a Party demonstrates that its domestic producers are capable of supplying commercial quantities of the good in a timely manner.
3. The Parties shall endeavor to conclude the consultations within 90 days after delivery of the request. If the Parties reach an agreement to modify a rule of origin for a particular good, the agreement shall supersede that rule of origin when approved by the Parties in accordance with Article 19.1.3(b) (The Free Trade Commission).
Fabrics, Yarns, and Fibers Not Available in Commercial Quantities
4. (a) At the request of an interested entity, the United States shall, within 30 business days of receiving the request, add a fabric, yarn, or fiber in an unrestricted or restricted quantity to the list in Annex 3.25, if the United States determines, based on information supplied by interested entities, that the fabric, yarn, or fiber is not available in commercial quantities in a timely manner in the territories of the Parties, or if no interested entity objects to the request.
(b) If there is insufficient information to make the determination in subparagraph (a), the United States may extend the period within which it must make that determination by no more than 14 business days, in order to meet with interested entities to substantiate the information.
(c) If the United States does not make the determination in subparagraph (a) within 15 business days of the expiration of the period within which it must make that determination, as specified in subparagraph (a) or (b), the United States shall grant the request.
(d) The United States may, within six months after adding a restricted quantity of a fabric, yarn, or fiber to the list in Annex 3.25 pursuant to subparagraph (a), eliminate the restriction.
(e) The United States shall add a fabric, yarn, or fiber in an unrestricted quantity to the list in Annex 3.25 if, before the date of entry into force of this Agreement, the United States has determined that the fabric, yarn, or fiber is not available in commercial quantities in the United States pursuant to:
(i) section 112(b)(5)(B) of the African Growth and Opportunity Act (19 U.S.C. § 3721(b)), section 204(b)(3)(B)(ii) of the Andean Trade Preference Act (19 U.S.C. § 3203(b)(3)(B)(ii)), or section 213(b)(2)(A)(v)(II) of the Caribbean Basin Economic Recovery Act (19 U.S.C. § 2703(b)(2)(A)(v)(II)); or
(ii) procedures under another free trade agreement to which the United States is a party that permit the United States to determine that a fabric, yarn, or fiber is not available in commercial quantities in a timely manner, and the United States has added the fabric, yarn, or fiber in an unrestricted quantity to a list of fabrics, yarns, and fibers that are not available in commercial quantities in a timely manner established under that free trade agreement.
5. At the request of an interested entity made no earlier than six months after the United States has added a fabric, yarn, or fiber in an unrestricted quantity to Annex 3.25 pursuant to paragraph 4, the United States may, within 30 business days after it receives the request:
(a) delete the fabric, yarn, or fiber from the list in Annex 3.25; or
(b) introduce a restriction on the quantity of the fabric, yarn, or fiber added to Annex 3.25,
if the United States determines, based on the information supplied by interested entities, that the fabric, yarn, or fiber is available in commercial quantities in a timely manner in the territory of either Party. Such deletion or restriction shall not take effect until six months after the United States publishes its determination.
6. Promptly after the date of entry into force of this Agreement, the United States shall publish the procedures it will follow in considering requests under paragraphs 4 and 5.
De Minimis
7. A textile or apparel good that is not an originating good because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in Annex 4.1 (Specific Rules of Origin), shall nonetheless be considered to be an originating good if the total weight of all such fibers or yarns in that component is not more than ten percent of the total weight of that component. (4)
8. Notwithstanding paragraph 7, a good containing elastomeric yarns (5) in the component of the good that determines the tariff classification of the good shall originate only if such yarns are wholly formed and finished in the territory of one or both of the Parties.
Treatment of Sets
9. Notwithstanding the specific rules of origin in Annex 4.1 (Specific Rules of Origin), textile or apparel goods classifiable as goods put up in sets for retail sale as provided for in General Rule of Interpretation 3 of the Harmonized System, shall not be regarded as originating goods unless each of the products in the set is an originating good or the total value of the non- originating goods in the set does not exceed ten percent of the adjusted value of the set. (6)
Treatment of Nylon Filament Yarn
10. A textile or apparel good that is not an originating good because certain yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in Annex 4.1 (Specific Rules of Origin), shall nonetheless be considered to be an originating good if the yarns are those described in section 204(b)(3)(B)(vi)(IV) of the Andean Trade Preference Act (19 U.S.C. § 3203(b)(3)(B)(vi)(IV)).
Consultations on Cumulation
11. If Panama enters into a free trade agreement covering trade in textile or apparel goods with a country with which the United States has entered into a free trade agreement, the Parties shall enter into consultations in accordance with paragraphs 1 and 3, with a view to deciding whether any material that is a good of that country that is incorporated into a good of a Party classified under chapter 61 or 62 of the Harmonized System may be counted for purposes of determining whether the good classified under chapter 61 or 62 is an originating good under this Agreement.
Article 3.26. Most-Favored-Nation Rates of Duty on Certain Goods
For a textile or apparel good provided for in chapters 61 through 63 of the Harmonized System that is not an originating good, the United States shall apply its MFN rate of duty only on the value of the assembled good minus the value of fabrics wholly formed and finished in the United States, components knit-to-shape in the United States, and any other materials of U.S. origin used in the production of such a good, provided that the good is sewn or otherwise assembled in the territory of Panama with thread wholly formed and finished in the United States, from fabrics wholly formed and finished in the United States and cut in one or both of the Parties, or from components knit-to-shape in the United States, or both.
Article 3.27. Duty-Free Treatment for Certain Goods
1. The Parties may identify at any time particular textile or apparel goods of the exporting Party that they mutually agree fall within:
(a) hand-loomed fabrics of a cottage industry;
(b) hand-made cottage industry goods made of such hand-loomed fabrics;
(c) traditional folklore handicraft goods; or
(d) textile or apparel goods that substantially incorporate one or more molas.
2. The importing Party shall grant duty-free treatment to goods so identified, if certified by the competent authority of the exporting Party.
Article 3.28. Duty-Free Treatment for Certain Guayabera-Style Dresses and Shirts
An importing Party shall grant duty-free treatment to dresses of heading 62.04 and shirts and blouses of heading 62.05 or 62.06 containing:
(a) short or long sleeves;
a center front placket with button closure that runs the full length of the good; a collar and yoke;
either pleats or embroidery that run the full length of the good on both sides of the center front placket from the yoke to the hem with a decorative button where the pleats or embroidery meet the yoke;
corresponding pleats or embroidery that run the full length of the good on both sides of the back from the yoke to the hem with a decorative button where the pleats or embroidery meet the yoke;
four pockets with buttons on the front of the good; a straight hem; and
side vents or slits with a button closure,
provided that the good is both cut and sewn or otherwise assembled in the territory of one or both of the Parties.
Article 3.29. Duty-Free Treatment for Certain Socks
The United States shall grant duty-free treatment to:
(a) babies’ socks and booties classified under tariff item 6111.20.6050, 6111.30.5050, or 6111.90.5050 of the Harmonized Tariff Schedule of the United States; and
(b) socks classified under subheading 6115.91 through 6115.99,
provided that the good is sewn or otherwise assembled in Panama with thread wholly formed and finished in the United States from components knit-to-shape in the United States from yarns wholly formed and finished in the United States.
Article 3.30. Definitions
For purposes of this Section:
circumvention means providing a false declaration or false information for the purpose of, or with the effect of, violating or evading existing customs, country of origin labeling, or trade laws of a Party relating to imports of textile and apparel goods, if such action results in the avoidance of tariffs, quotas, embargoes, prohibitions, restrictions, trade remedies, including antidumping or countervailing duties, or safeguard measures, or in obtaining preferential tariff treatment. Examples of circumvention include illegal transshipment; rerouting; fraud; false declarations concerning country of origin, fiber content, quantities, description, or classification; falsification of documents; and smuggling;
claim of origin means a claim that a textile or apparel good is an originating good or a good of a Party;
eligible Party means the Party whose calendar year exports by value of goods classified under Harmonized System chapter 61 or 62 (excluding subheadings 6117.90 and 6217.90) as a percentage of its calendar year total exports by value of goods classified under Harmonized System chapters 50 through 63 exceed said percentage of the other Party’s exports by value of goods classified under Harmonized System chapters 50 through 63. For purposes of this definition, the first calendar year shall be the most recent calendar year for which a full 12 months of data are available as of the date of entry into force of this Agreement. If either Party’s calendar year exports by value of goods classified under Harmonized System chapters 50 through 63 fall below US$2 million, then the export data from the most recent prior calendar year in which both Parties’ exports of such goods exceeded US$2 million shall be used for purposes of this definition;
enterprise, in the case of Panama, means an enterprise as defined in Article 2.1 (Definitions of General Application), and includes an enterprise involved in:
(a) production, processing, or manipulation of textile or apparel goods in the territory of Panama, including in any free trade zone, foreign trade zone, or export processing zone;
(b) importation of textile or apparel goods into the territory of Panama, including into any free trade zone, foreign trade zone, or export processing zone; or
(c) exportation of textile or apparel goods from the territory of Panama, including from any free trade zone, foreign trade zone, or export processing zone;
exporting Party means the Party from whose territory a textile or apparel good is exported; importing Party means the Party into whose territory a textile or apparel good is imported;
interested entity means a Party, a potential or actual purchaser of a textile or apparel good, or a potential or actual supplier of a textile or apparel good;
mola (or morra in the native Kuna language) means a good produced through reverse appliqué, traditional and historic in nature, made within Panama, of small decorative pieces of cloth onto a larger piece, elaborated back to front with a combination of fabrics of different bright colors. A mola is made up by hand in two or more layers of cut fabrics, handsewn one over the other, and is usually inspired in nature, cosmic view, or geometrical designs;
textile or apparel good means a good listed in the Annex to the Agreement on Textiles and Clothing, except for those goods listed in Annex 3.30;
textile safeguard measure means a measure applied under Article 3.24.1;
transition period means the five-year period beginning on the date of entry into force of this
Agreement; and
wholly formed and finished means:
(a) when used in reference to fabrics, all production processes and finishing operations necessary to produce a finished fabric ready for use without further processing. These processes and operations include formation processes, such as weaving, knitting, needling, tufting, felting, entangling, or other such processes, and finishing operations, including bleaching, dyeing, and printing; and
(b) when used in reference to yarns, all production processes and finishing operations, beginning with the extrusion of filaments, strips, film, or sheet, and including drawing to fully orient a filament or slitting a film or sheet into strip, or the spinning of all fibers into yarn, or both, and ending with a finished yarn or plied yarn.
Section H. Institutional Provisions
Article 3.31. Committee on Trade In Goods
1. The Parties hereby establish a Committee on Trade in Goods, comprising representatives of each Party.