Article 2.13. STATE TRADING ENTERPRISES
1. The Parties affirm their existing rights and obligations under Article XVII of GATT 1994, its interpretative notes, and the Understanding on the Interpretation of Article XVII of GATT 1994, contained in Annex 1A to the WTO Agreement, which are incorporated into and made part of this Agreement, mutatis mutandis.
2. Where a Party requests information from the other Party on individual cases of state trading enterprises, the manner of their operation and the effect of their operations on bilateral trade, the requested Party shall have regard to the need to ensure maximum transparency possible without prejudice to Article XVII.4(d) of GATT 1994 on confidential information.
Article 2.14. TRADE RELATED NON-TARIFF MEASURES
1. Further to Chapter 16 (Transparency), the Parties recognize the importance of ensuring the transparency of non-tariff measures affecting trade between the Parties and that any such measures should not create an unnecessary obstacle to trade between the Parties.
2. To this end, the Committee on Trade in Goods established in Article 2.17 shall, when a Party identifies a specific non-tariff measure, review the measure and consider approaches that may better facilitate trade between the Parties and present to the Parties the results of its consideration, including any recommendation, within 12 months. If necessary, the results of the consideration and recommendations of the Committee on Trade in Goods shall be submitted to the next meeting of the Joint Committee for consideration or action.
Article 2.15. TARIFF RATE QUOTA ADMINISTRATION
A Party that has established tariff rate quotas (hereinafter referred to as “TRQs”) as set out in Appendix 2-B-1 shall implement and administer these TRQs in accordance with Article XIII of GATT 1994, including its interpretive notes, and the Import Licensing Agreement.
Section E. Other Measures
Article 2.16. BALANCE OF PAYMENTS
Where a Party is in serious balance of payments and external financial difficulties, or threat thereof, it may, in accordance with GATT 1994, which includes the Understanding on Balance-of-Payments Provisions of GATT 1994, adopt restrictive import measures. In adopting such measures, the Party shall immediately consult with the other Party.
Section F. Institutional Provisions
Article 2.17. COMMITTEE ON TRADE IN GOODS
1. The Parties hereby establish a Committee on Trade in Goods, comprising representatives of each Party.
2. The Committee shall meet on the request of a Party or the Joint Committee to consider any matter arising under this Chapter and Chapter 7 (Trade Remedies).
3. The Committee's functions shall include, inter alia:
(a) monitoring the implementation and administration of this Chapter and Chapter 7 (Trade Remedies);
(b) promoting trade in goods between the Parties, including through consultations on accelerating reduction or elimination of customs duties under this Agreement and other issues as appropriate;
(c) 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 Joint Committee for its consideration; and
(d) providing a forum for discussion or the exchange of information on matters related to subparagraphs (a) through (c), which may directly or indirectly affect trade between the Parties, with a view to eliminating their negative effects on trade and seeking mutually acceptable alternatives.
Section G. Definitions
Article 2.18. DEFINITIONS
For the purposes of this Chapter:
AD Agreement means the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, contained in Annex 1A to the WTO Agreement;
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;
commercial samples of negligible value means commercial samples having a value, individually or in the aggregate as shipped, of not more than the amount specified in a Party's laws, regulations, or procedures governing temporary admission, 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;
duty-free means free of customs duty;
goods intended for display or demonstration includes their component parts, ancillary apparatus, and accessories;
goods 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;
distributor means a person of a Party who is responsible for the commercial distribution, agency, concession, or representation in the territory of that Party of goods of the other Party;
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;
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 an 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 Agreement on Subsidies and Countervailing Measures, contained in Annex 1A to the WTO Agreement.
Chapter 3. RULES OF ORIGIN
Article 3.1. ORIGINATING GOODS
For the purposes of implementing this Agreement, the following goods shall be considered as originating in a Party:
(a) goods wholly obtained or produced in a Party within the meaning of Article 3.3;
(b) goods obtained in a Party incorporating materials which have not been wholly obtained there, provided that such materials have undergone sufficient working or processing in a Party within the meaning of Article 3.4; or
(c) goods obtained in a Party exclusively from materials that qualify as originating pursuant to this Chapter.
Article 3.2. CUMULATION OF ORIGIN
1. Originating goods or materials of a Party, incorporated into a good in the other Party, shall be considered to be originating in the other Party.
2. The Parties may agree to review this Article with a view to providing for other forms of cumulation for the purposes of qualifying goods as originating goods under this Agreement.
Article 3.3. WHOLLY OBTAINED GOODS
1. The following shall be considered as wholly produced or obtained in a Party:
(a) mineral goods and other naturally occurring substances taken or extracted from soil, waters, seabed or subsoil of a Party;
(b) plants and vegetable goods grown, harvested, picked or gathered there;
(c) live animals born and raised there;
(d) goods from live animals as in (c) above;
(e) goods obtained by hunting, trapping, collecting, fishing, aquaculture, and capturing conducted within the land, the internal waters or within the territorial sea of a Party;
(f) used articles collected there fit only for the recovery of raw materials;
(g) waste and scrap resulting from utilization, consumption or manufacturing operations conducted there;
(h) goods of sea fishing and other goods taken from the waters, seabed or subsoil outside the territorial sea of a Party only by their vessels;
(i) goods made aboard their factory ships exclusively from goods referred to in (h);
(j) goods taken or extracted from the waters, seabed, subsoil outside the territorial sea of a Party, provided that the Party has rights to exploit such waters, seabed, or subsoil; and
(k) goods produced in any of the Parties exclusively from the goods specified in subparagraphs (a) to (j) above.
2. The terms "their vessels" and "their factory ships" in paragraphs 1(h) and 1(i) shall apply only to vessels and factory ships which are flagged and registered or recorded in a Party, in conformity with the law of the said Party;
Article 3.4. SUFFICIENTLY WORKED OR PROCESSED GOODS
1. For the purposes of Article 3.1(b), goods which are not wholly obtained are considered to be sufficiently worked or processed when the conditions set out in the list in Annex 3-A are fulfilled. (1)
2. Those conditions indicate, for all goods covered by this Agreement, the working or processing which must be carried out on non-originating materials used in manufacturing and apply only in relation to such materials. Accordingly, it follows that if non-originating materials undergo sufficient working or processing, which results in an originating good, and when that good is used in the subsequent manufacture of another good, no account shall be taken of the non-originating material contained therein.
Article 3.5. DE MINIMIS
1. A good that does not undergo a change in tariff classification pursuant to Article 3.4.1 and Annex 3-A shall be considered as originating if:
(a) the value of all non-originating materials used in its production that do not undergo the required change in tariff classification does not exceed 10 percent of the ex-works price of the good; and
(b) the good meets all other applicable criteria set forth in this Chapter for qualifying as an originating good. Any of the percentages given in Annex 3- A for the maximum value of non-originating materials are not exceeded through the application of this paragraph.
2. Paragraph 1 shall not apply to:
(a) a non-originating material used in the production of a good provided for in Chapters 1 through 14 of the Harmonized System (HS); and
(b) a non-originating material used in the production of a good provided for in Chapters 15 through 24 of the Harmonized System (HS), unless the non- originating material is provided for in a different subheading from that of the good for which the origin is being determined under this Article.
3. A good provided for in Chapters 50 through 63 of the Harmonized System (HS) 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 3-A, shall nonetheless be considered as originating if the total weight of all such fibers or yarns in that component is not more than 10 percent of the total weight of that component.
Article 3.6. INSUFFICIENT WORKING OR PROCESSING
1. The following operations shall be considered as insufficient working or processing to confer the status of originating goods, whether or not the requirements of Article 3.4 are satisfied:
(a) preserving operations to ensure that the goods remain in good condition during transport and storage;
(b) simple (2) changing of packaging or breaking-up and assembly of packages;
(c) washing, cleaning, removal of dust, oxide, oil, paint or other coverings;
(d) simple (2) painting and polishing operations, including applying oil;
(e) husking, partial or total bleaching, polishing, and glazing of cereals and rice;
(f) ironing or pressing of textiles;
(g) operations to colour sugar or form sugar lumps;
(h) peeling, stoning and shelling, of fruits, nuts and vegetables;
(i) sharpening, simple (2) grinding, or simple (2) cutting;
(j) sifting, screening, sorting, classifying, grading or matching (including the making-up of sets of articles);
(k) affixing or printing marks, labels, logos and other like distinguishing signs on goods or their packaging;
(l) a simple (2) dilution in water or other substances, providing that the characteristics of the goods remain unchanged;
(m) simple (2) testing or calibrations;
(n) simple (2) placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards and all other simple (2) packaging operations;
(o) simple (2) assembly of parts of articles to constitute a complete article or disassembly of goods into parts;
(p) simple mixing (3) of goods, whether or not of different kinds;
(q) slaughter of animals; or
(r) a combination of two or more of the above operations.
2. All operations carried out in a Party on a given good shall be considered together when determining whether the working or processing undergone by that good is to be regarded as insufficient within the meaning of paragraph 1.
Article 3.7. UNIT OF QUALIFICATION
1. The unit of qualification for the application of the provisions of this Chapter shall be the particular good which is considered as the basic unit when determining classification using the nomenclature of the Harmonized System (HS). It follows that:
(a) When a good composed of a group or assembly of articles is classified under the terms of the Harmonized System (HS) in a single heading, the whole constitutes the unit of qualification;
(b) When a consignment consists of a number of identical goods classified under the same heading of the Harmonized System (HS), each good must be taken individually when applying the provisions of this Chapter.
2. Where, under General Rule 5 of the Harmonized System (HS), packaging is included with the good for classification purposes, it shall be included for the purposes of determining origin.
Article 3.8. ACCOUNTING SEGREGATION
1. Where identical and interchangeable originating and non-originating materials (4) are used in the manufacture of a good, those materials shall be physically segregated, according to their origin, during storage.
2. For the purposes of establishing if a good is originating, when in its manufacture are utilized originating and non-originating identical and interchangeable materials, mixed or physically combined, the origin of such materials can be determined by any of the inventory management methods applicable in the Party.
3. Where considerable cost or material difficulties arise in keeping separate stocks of originating and non-originating materials which are identical and interchangeable, the customs authorities may authorize the so-called "accounting segregation"method to be used for managing such stocks.
4. This method must be able to ensure that, for a specific reference-period, the number of goods obtained which could be considered as "originating" is the same as that which would have been obtained if there had been physical segregation of the stocks.
5. The customs authorities may grant such authorisations, subject to any conditions deemed appropriate.
6. This method is recorded and applied on the basis of the general accounting principles applicable in the Party where the good was manufactured.
7. The beneficiary of this facilitation may issue or apply for Proofs of Origin, as the case may be, for the quantity of goods which may be considered as originating. At the request of the customs authorities, the beneficiary shall provide a statement of how the quantities have been managed.
8. The customs authorities shall monitor the use made of the authorisation and may withdraw it at any time whenever the beneficiary makes improper use of the authorisation in any manner whatsoever or fails to fulfil any of the other conditions laid down in this Chapter.
Article 3.9. ACCESSORIES, SPARE PARTS AND TOOLS
Accessories, spare parts and tools dispatched with a piece of equipment, machine, apparatus or vehicle, which are part of the normal equipment and included in the price thereof or which are not separately invoiced, shall be regarded as one with the piece of equipment, machine, apparatus or vehicle in question.
Article 3.10. SETS
Sets, as defined in General Rule 3 of the Harmonized System (HS), shall be regarded as originating when all component goods are originating. Nevertheless, when a set is composed of originating and non-originating goods, the set as a whole shall be regarded as originating, provided that the value of the non-originating goods does not exceed 15 percent of the ex- works price of the set.
Article 3.11. NEUTRAL ELEMENTS
In order to determine whether a good originates, it shall not be necessary to determine the origin of the goods which might be used in its manufacture but which do not enter and which are not intended to enter into the final composition of the good. Neutral elements, for example, will include:
(a) energy and fuel;
(b) plant and equipment;
(c) machines and tools; and
(d) goods which do not enter into and which are not intended to enter into the final composition of the good.
Article 3.12. PRINCIPLE OF TERRITORIALITY
1. Except as provided for in Article 3.2 and paragraph 3, the conditions for acquiring originating status set out in Article 3.4 must be fulfilled without interruption in Israel or in Korea.
2. Where originating goods exported from Israel or from Korea to a non-Party, return to the exporting Party, they must be considered as non-originating, unless it can be demonstrated to the satisfaction of the customs authorities that:
(a) the returning goods are the same as those exported; and
(b) they have not undergone any operation beyond that necessary to preserve them in good condition while in that non-Party or while being exported.
3. Notwithstanding paragraphs 1 and 2, the acquisition of originating status in accordance with the conditions set out in this Chapter shall not be affected by working or processing done outside Israel or Korea on materials exported from Israel or from Korea and subsequently re-imported there, provided that:
(a) the said materials shall be wholly obtained in Israel or in Korea or have undergone working or processing beyond the operations referred to in Article 3.6 prior to being exported;
(b) it shall be demonstrated to the satisfaction of the customs authorities that:
(i) the re-imported goods have been obtained by working or processing the exported materials;
(ii) such working or processing have not resulted in a change of the classification at a six digit level of the Harmonized System (HS) of the said re-imported goods; and
(iii) the total added value (5) acquired outside Israel or Korea by applying the provisions of this Article does not exceed 10 percent of the ex- works price of the end good for which originating status is claimed.
(c) The provisions of paragraph 3 shall not apply to goods which do not fulfil the conditions set out in Article 3.4; and
(d) factual information relevant to subparagraphs (a) through (c) will be indicated in the Certificate of Origin, in accordance with Annex 3-C.
4. Notwithstanding Article 3.1, certain goods shall be considered to be originating even if they have undergone working or processing outside Korea, on materials exported from Korea and subsequently re-imported there, provided that the working or processing is done in the areas designated by the Parties pursuant to Annex 3-B.
(b) The total added value as detailed in footnote 5(a) shall be considered as non-originating materials for the purposes of Article 3.4.1.
Article 3.13. DIRECT TRANSPORT
1. The preferential treatment provided under this Agreement shall apply only to goods, satisfying the requirements of this Chapter, which are transported directly between Israel and Korea. However, goods constituting one single consignment may be transported through other territories with, should the occasion arise, trans-shipment or temporary warehousing in such territories, under the surveillance of the customs authorities therein, provided that:
(a) they are not intended for trade, consumption or use in the non-Party where the goods were in transit; and
(b) they do not undergo operations other than unloading, reloading or any operation designed to preserve them in good condition.
2. Evidence that the conditions set out in paragraph 1 have been fulfilled shall be supplied to the customs authorities of the importing Party by the production of:
(a) the transportation documents, such as the airway bill, the bill of lading or the multimodal or combined transportation document, that certify the transport from the country of origin to the importing country;