2. The Committee shall meet on the request of a Party or the Commission to consider any matter arising under this Chapter, Chapter Four (Rules of Origin and Origin Procedures), or Chapter Five (Customs Administration and Trade Facilitation).
3. The Committee’s functions shall include:
(a) promoting trade in goods between the Parties, including through consultations on accelerating tariff elimination under this Agreement and other issues as appropriate;
(b) addressing barriers to trade in goods between the Parties, especially those related to the application of non-tariff measures, and, if appropriate, referring such matters to the Commission for its consideration; and
(c) providing to the Committee on Trade Capacity Building advice and recommendations on technical assistance needs regarding matters relating to this Chapter, Chapter Four (Rules of Origin and Origin Procedures), or Chapter Five (Customs Administration and Trade Facilitation).
Section I. Definitions
Article 3.32. Definitions
For purposes of this Chapter:
AD Agreement means the WTO Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994;
advertising films and recordings means recorded visual media or audio materials, consisting essentially of images and/or sound, showing the nature or operation of goods or services offered for sale or lease by a person established or resident in the territory of a Party, provided that such materials are of a kind suitable for exhibition to prospective customers but not for broadcast to the general public;
Agreement on Textiles and Clothing means the WTO Agreement on Textiles and Clothing;
agricultural goods means those goods referred to in Article 2 of the WTO Agreement on Agriculture;
commercial samples of negligible value means commercial samples having a value, individually or in the aggregate as shipped, of not more than one U.S. dollar, or the equivalent amount in Panamanian currency, or so marked, torn, perforated, or otherwise treated that they are unsuitable for sale or use except as commercial samples;
consular transactions means requirements that goods of a Party intended for export to the territory of the other Party must first be submitted to the supervision of the consul of the importing Party in the territory of the exporting Party for the purpose of obtaining consular invoices or consular visas for commercial invoices, certificates of origin, manifests, shippers’ export declarations, or any other customs documentation required on or in connection with importation;
consumed means
(a) actually consumed; or
(b) further processed or manufactured so as to result in a substantial change in the value, form, or use of the good or in the production of another good;
duty-free means free of customs duty;
export subsidies shall have the meaning assigned to that term in Article 1(e) of the WTO
Agreement on Agriculture, including any amendment of that article;
goods intended for display or demonstration includes their component parts, ancillary
apparatus, and accessories;
goods temporarily admitted for sports purposes means sports requisites for use in sports contests, demonstrations, or training in the territory of the Party into whose territory such goods are admitted;
import licensing means an administrative procedure requiring the submission of an application or other documentation (other than that generally required for customs clearance purposes) to the relevant administrative body as a prior condition for importation into the territory of the importing Party;
Import Licensing Agreement means the WTO Agreement on Import Licensing Procedures; performance requirement means a requirement that:
(a) a given level or percentage of goods or services be exported;
(b) domestic goods or services of the Party granting a waiver of customs duties or import license be substituted for imported goods;
(c) a person benefiting from a waiver of customs duties or an import license purchase other goods or services in the territory of the Party granting the waiver of customs duties or the import license, or accord a preference to domestically produced goods;
(d) a person benefiting from a waiver of customs duties or an import license produce goods or supply services, in the territory of the Party granting the waiver of customs duties or the import license, with a given level or percentage of domestic content; or
(e) relates in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows, but does not include a requirement that an imported good be:
(f) subsequently exported;
(g) used as a material in the production of another good that is subsequently exported;
(h) substituted by an identical or similar good used as a material in the production of another good that is subsequently exported; or
(i) substituted by an identical or similar good that is subsequently exported;
printed advertising materials means those goods classified in Chapter 49 of the Harmonized System, including brochures, pamphlets, leaflets, trade catalogues, yearbooks published by trade associations, tourist promotional materials, and posters, that are used to promote, publicize, or advertise a good or service, are essentially intended to advertise a good or service, and are supplied free of charge; and
SCM Agreement means the WTO Agreement on Subsidies and Countervailing Measures.
Chapter Four. Rules of Origin and Origin Procedures
Section A. Rules of Origin
Article 4.1. Originating Goods
Except as otherwise provided in this Chapter, each Party shall provide that a good is originating where:
(a) it is a good wholly obtained or produced entirely in the territory of one or both of the Parties;
(b) it is produced entirely in the territory of one or both of the Parties and
(i) each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification specified in Annex 4.1, or
(ii) the good otherwise satisfies any applicable regional value content or other requirements specified in Annex 4.1,
and the good satisfies all other applicable requirements of this Chapter; or
(c) it is produced entirely in the territory of one or both of the Parties exclusively from originating materials.
Article 4.2: Regional Value Content
1. Where Annex 4.1 specifies a regional value content test to determine whether a good is originating, each Party shall provide that the importer, exporter, or producer may use a calculation of regional value content based on one or the other of the following methods:
(a) Method Based on Value of Non-Originating Materials (“Build-down Method”)
RVC = AV - VNM x 100 AV
(b) Method Based on Value of Originating Materials (“Build-up Method”)
RVC = VOM x 100 AV
where,
RVC is the regional value content, expressed as a percentage;
AV is the adjusted value;
VNM is the value of non-originating materials that are acquired and used by the producer in the production of the good; VNM does not include the value of a material that is self-produced; and
VOM is the value of originating materials acquired or self-produced, and used by the producer in the production of the good.
2. Each Party shall provide that all costs considered for the calculation of regional value content shall be recorded and maintained in conformity with the Generally Accepted Accounting Principles applicable in the territory of the Party where the good is produced.
3. Where Annex 4.1 specifies a regional value content test to determine if an automotive good (1) is originating, each Party shall provide that the importer, exporter, or producer may use a calculation of the regional value content of that good as provided in paragraph 1 or based on the following method:
Method for Automotive Products (“Net Cost Method”)
RVC = NC - VNM x 100 NC
where,
RVC is the regional value content, expressed as a percentage; NC is the net cost of the good; and
VNM is the value of non-originating materials acquired and used by the producer in the production of the good; VNM does not include the value of a material that is self- produced.
4. Each Party shall provide that, for purposes of the regional value content method in paragraph 3, the importer, exporter, or producer may use a calculation averaged over the producer’s fiscal year, using any one of the following categories, on the basis of all motor vehicles in the category or only those motor vehicles in the category that are exported to the territory of one or both of the Parties:
(a) the same model line of motor vehicles in 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 of motor vehicles produced in the territory of a Party.
5. Each Party shall provide that, for purposes of calculating regional value content under paragraph 3 for automotive materials (2) produced in the same plant, an importer, exporter, or producer may use a calculation:
(a) averaged:
(i) over the fiscal year of the motor vehicle producer to whom the good is sold;
(ii) over any quarter or month; or
(iii) over the automotive producer’s fiscal year,
provided that the good was produced during the fiscal year, quarter, or month forming the basis for the calculation;
(b) in which the average in subparagraph (a) is calculated separately for such goods sold to one or more motor vehicle producers; or
(c) in which the average in subparagraph (a) or (b) is calculated separately for those goods that are exported to the territory of one or both of the Parties.
Article 4.3. Value of Materials
Each Party shall provide that, for purposes of Articles 4.2 and 4.6, the value of a material shall be:
(a) for a material imported by the producer of the good, the adjusted value of the material;
(b) for a material acquired in the territory where the good is produced, the value, determined in accordance with Articles 1 through 8, Article 15, and the corresponding interpretative notes of the Customs Valuation Agreement, i.e., in the same manner as for imported goods, with such reasonable modifications as may be required due to the absence of an importation by the producer; or
(c) for a material that is self-produced,
(i) all the expenses incurred in the production of the material, including general expenses, and
(ii) an amount for profit equivalent to the profit added in the normal course of trade.
Article 4.4. Further Adjustments to the Value of Materials
1. Each Party shall provide that, for originating materials, the following expenses, where not included under Article 4.3, may be added to the value of the material:
(a) the costs of freight, insurance, packing, and all other costs incurred in transporting the material within a Party’s territory or between the territories of the Parties to the location of the producer;
(b) duties, taxes, and customs brokerage fees on the material paid in the territory of one or both of the Parties, other than duties and taxes that are waived, refunded, refundable, or otherwise recoverable, including credit against duty or tax paid or payable; and
(c) the cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of renewable scrap or by-product.
2. Each Party shall provide that, for non-originating materials, the following expenses, where included under Article 4.3, may be deducted from the value of the material:
(a) the costs of freight, insurance, packing, and all other costs incurred in transporting the material within a Party’s territory or between the territories of the Parties to the location of the producer;
(b) duties, taxes and customs brokerage fees on the material paid in the territory of one or both of the Parties, other than duties and taxes that are waived, refunded, refundable, or otherwise recoverable, including credit against duty or tax paid or payable;
(c) the cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of renewable scrap or by-product; and
(d) the cost of originating materials used in the production of the non-originating material in the territory of a Party.
Article 4.5. Accumulation
1. Each Party shall provide that originating goods or materials of a Party, incorporated into a good in the territory of the other Party, shall be considered to originate in the territory of the other Party.
2. Each Party shall provide that a good is originating where the good is produced in the territory of one or both of the Parties by one or more producers, provided that the good satisfies the requirements in Article 4.1 and all other applicable requirements in this Chapter.
Article 4.6. De Minimis Rule
1. Except as provided in Annex 4.6, each Party shall provide that a good that does not undergo a change in tariff classification pursuant to Annex 4.1 is nonetheless originating if the value of all non-originating materials used in the production of the good and that do not undergo the applicable change in tariff classification does not exceed 10 percent of the adjusted value of the good, provided that the value of such non-originating materials shall be included in the value of non-originating materials for any applicable regional value content requirement and that the good meets all other applicable requirements in this Chapter.
2. With respect to a textile or apparel good, Article 3.25.7 (Rules of Origin and Related Matters) applies in place of paragraph 1.
Article 4.7. Fungible Goods and Materials
1. Each Party shall provide that an importer may claim that a fungible good or material is an originating good where the importer, exporter, or producer has:
(a) physically segregated each fungible good or material; or
(b) used any inventory management method, such as averaging, last-in-first-out (LIFO) or first-in-first-out (FIFO), recognized in the Generally Accepted Accounting Principles of the Party in which the production is performed or otherwise accepted by the Party in which the production is performed.
2. Each Party shall provide that the inventory management method selected under paragraph 1 for a particular fungible good or material shall continue to be used for that good or material throughout the fiscal year of the person that selected the inventory management method.
Article 4.8. Accessories, Spare Parts, and Tools
1. Each Party shall provide that a good’s standard accessories, spare parts, or tools delivered with the good shall be treated as originating goods if the good is an originating good and shall be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification, provided that:
(a) the accessories, spare parts, or tools are classified with and not invoiced separately from the good, regardless of whether they appear specified or separately identified in the invoice itself; and
(b) the quantities and value of the accessories, spare parts, or tools are customary for the good.
2. If a good is subject to a regional value content requirement, the value of accessories, spare parts, or 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 4.9. Packaging Materials and Containers for Retail Sale
Each Party shall provide that packaging materials and containers in which a good is packaged for retail sale shall, if classified with the good, be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex 4.1 and, if the good is subject to a regional value content requirement, the value of such packaging materials and containers 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 4.10. Packing Materials and Containers for Shipment
Each Party shall provide that packing materials and containers for shipment shall be disregarded in determining whether a good is originating.
Article 4.11. Indirect Materials Used In Production
Each Party shall provide that an indirect material shall be considered to be an originating material without regard to where it is produced.
Article 4.12. Transit and Transshipment
Each Party shall provide that a good shall not be considered to be an originating good if the good:
(a) undergoes subsequent production or any other operation outside the territories of the Parties other than unloading, reloading, or any other operation necessary to preserve the good in good condition or to transport the good to the territory of a Party; or
(b) does not remain under the control of customs authorities in the territory of a non- Party.
Article 4.13. Sets of Goods
1. Each Party shall provide that if goods are classified as a set as a result of the application of rule 3 of the General Rules of Interpretation of the Harmonized System, the set is originating only if each good in the set is originating and both the set and the goods meet all other applicable requirements in this Chapter.
2. Notwithstanding paragraph 1, a set of goods is originating if the value of all the non- originating goods in the set does not exceed 15 percent of the adjusted value of the set.
3. With respect to a textile or apparel good, Article 3.25.9 (Rules of Origin and Related Matters) applies in place of paragraphs 1 and 2.
Article 4.14. Consultation and Modifications
1. The Parties shall consult regularly to ensure that this Chapter is administered effectively, uniformly, and consistently with the spirit and objectives of this Agreement, and shall cooperate in the administration of this Chapter.
2. A Party that considers that a specific rule of origin set out in Annex 4.1 requires modification to take into account developments in production processes, lack of supply of originating materials, or other relevant factors may submit a proposed modification along with supporting rationale and any studies to the Commission for consideration.
3. On submission by a Party of a proposed modification under paragraph 2, the Commission may refer the matter to an ad hoc working group within 60 days or on such other date as the Commission may decide. The working group shall meet to consider the proposed modification within 60 days of the date of referral or on such other date as the Commission may decide.
4. Within such period as the Commission may direct, the working group shall provide a report to the Commission, setting out its conclusions and recommendations, if any.
5. On receipt of the report, the Commission may take appropriate action under Article 19.1.3(b) (The Free Trade Commission).
6. With respect to a textile or apparel good, paragraphs 1 through 3 of Article 3.25 (Rules of Origin and Related Matters) apply in place of paragraphs 2 through 5.
Section B. Origin Procedures
Article 4.15. Claims of Origin
1. Each Party shall provide that an importer may make a claim for preferential tariff treatment based on either:
(a) a written or electronic certification by the importer, exporter, or producer; or
(b) the importer’s knowledge that the good is an originating good, including reasonable reliance on information in the importer’s possession that the good is an originating good.
2. Each Party shall provide that a certification need not be made in a prescribed format, provided that the certification is in written or electronic form, including but not limited to the following elements:
(a) the name of the certifying person, including as necessary contact or other identifying information;
(b) tariff classification under the Harmonized System and a description of the good;
(c) information demonstrating that the good is originating;
(d) date of the certification; and
(e) in the case of a blanket certification issued as set out in paragraph 4(b), the period that the certification covers.
3. Each Party shall provide that a certification by the producer or exporter of the good may be completed on the basis of:
(a) the producer’s or exporter’s knowledge that the good is originating; or
(b) in the case of an exporter, reasonable reliance on the producer’s written or electronic certification that the good is originating.
Neither Party may require an exporter or producer to provide a written or electronic certification to another person.
4. Each Party shall provide that a certification may apply to:
(a) a single shipment of a good into the territory of a Party; or