(b) The competent authority of the exporting Party shall respond within ten days of receipt of the request, and shall indicate the date on which authorized personnel of the importing Party may perform the visit. The exporting party shall seek, in accordance with its laws, regulations, and procedures, permission from the enterprise to conduct the visit. If consent is not provided, the importing Party may deny preferential tariff treatment to the type of goods of the enterprise that would have been the subject of the verification, except that the importing Party may not deny preferential tariff treatment to such goods based solely on a postponement of the visit, if there is adequate reason for such postponement.
(c) Authorized personnel of the importing and exporting Parties shall conduct the visit in accordance with the laws, regulations, and procedures of the exporting Party.
(d) On completion of the visit, the importing Party shall provide the exporting Party with an oral summary of the results of the visit and provide it with a written report of the results of the visit within approximately 45 days of the visit. The written report shall include:
(i) the name of the enterprise visited;
(ii) particulars of the shipments that were checked;
(iii) observations made at the enterprise relating to circumvention, if any; and
(iv) an assessment of whether the enterprise's production records and other documents support its claims of origin, for:
(A) a textile or apparel good subject to a verification conducted under subparagraph 3(a)(i); or
(B) in the case of a verification conducted under subparagraph 3(a)(ii), any textile or apparel good exported or produced by the enterprise.
6. In accordance with its laws, each Party shall provide to the other Party production, trade, and transit documents and other information necessary to conduct verifications under paragraph 3(a). Each Party shall treat any documents or information exchanged in the course of such verification in accordance with Article 5.6 (Confidentiality). Nothwithstanding the foregoing, a Party may publish the name (2) of an enterprise if the Party has determined, consistent with its laws, that such enterprise:
(a) has engaged in circumvention of the laws, regulations, or procedures of that Party or of international agreements affecting trade in textile or apparel goods; or
(b) has failed to demonstrate that it produces, or is capable of producing, textile or apparel goods.
7. (a) (i) If, during a verification conducted under subparagraph 3(a), the information to support a claim for preferential tariff treatment is insufficient, the importing Party may take the actions it considers appropriate, which may include suspending the application of such treatment to:
(A) in the case of a verification conducted under subparagraph 3(a)(i), the textile or apparel good for which a claim for preferential tariff treatment has been made; and
(B) in the case of a verification conducted under subparagraph 3(a)(ii), any textile or apparel good exported or produced by the enterprise subject to that verification for which a claim of preferential tariff treatment has been made.
(ii) If, on completion of a verification conducted under subparagraph 3(a), the information to support a claim for preferential tariff treatment is insufficient, the importing Party may take the actions it considers appropriate, which may include denying the application of such treatment to any textile or apparel good described in clauses (i)(A) and (B).
(iii) If, during or on completion of a verification conducted under subparagraph 3(a), the importing Party discovers that an enterprise has provided incorrect information to support a claim for preferential tariff treatment, the importing Party may take the actions it considers appropriate, which may include denying the application of such treatment to any textile or apparel good described in clauses (i)(A) and (B).
(b) (i) If, during a verification conducted under subparagraph 3(a), the information to determine the country of origin is insufficient, the importing Party may take the actions it considers appropriate, which may include detention of any textile or apparel good exported or produced by the enterprise subject to the verification.
(ii) If, on completion of a verification conducted under subparagraph 3(a), the information to determine the country of origin is insufficient, the importing Party may take the actions it considers appropriate, which may include denying entry to any textile or apparel good exported or produced by the enterprise subject to the verification.
(iii) If, during or on completion of a verification conducted under subparagraph 3(a), the importing Party discovers that an enterprise has provided incorrect information as to the country of origin, the importing Party may take appropriate action, which may include denying entry to any textile or apparel good exported or produced by the enterprise subject to the verification.
(c) The importing Party may continue to take the actions it considers appropriate under this paragraph only until it receives information sufficient to enable it to make the determination in subparagraphs 3(a)(i) or (ii), as the case may be.
8. No later than 45 days after it completes a verification conducted under subparagraph 3(a), the exporting Party shall provide the importing Party a written report on the results of the verification. The report shall include all documents and facts supporting any conclusion that the exporting Party reaches. After receiving the report, the importing Party shall notify the exporting Party of any action it will take under subparagraph 7(a)(ii) or (iii) or 7(b)(ii) or (iii), based on the information provided in the report.
9. On the written request of a Party, two or more Parties shall enter into consultations to resolve any technical or interpretive difficulties that may arise or to discuss ways to improve customs cooperation regarding the application of this Article. Unless the consulting Parties otherwise agree, consultations shall begin within 30 days after delivery of the request and conclude within 90 days after delivery.
10. A Party may request technical or other assistance from any other Party in implementing this Article. The Party receiving such a request shall make every effort to respond promptly and favorably to it.
Article 3.3. Rules of Origin, Origin Procedures, and Related Matters
1. Except as provided in this Article and the Annexes to this Chapter, Chapter Four (Rules of Origin and Origin Procedures) applies with respect to textile and apparel goods.
Consultations on Rules of Origin
2. 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 revised.
3. Where the consultations referred to in paragraph 2 concern an input not available in commercial quantities, each Party shall consider all data that a Party presents demonstrating that there is substantial production in its territory of such input. 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 input to the Parties in a timely manner.
4. The Parties shall endeavor to conclude the consultations within 90 days after delivery of the request. If the Parties reach an agreement to revise a rule of origin for a particular good, the agreement shall supersede that rule of origin when modified by the Commission in accordance with Article 20.1.3(b).
Fabrics, Yarns, and Fibers Not Available in Commercial Quantities
5. (a) At the request of an interested entity, the United States shall, within 30 business days of receiving the request, add a fabric, fiber, or yarn in an unrestricted or restricted quantity to the list in Annex 3-B, if the United States determines, based on information supplied by interested entities, that the fabric, fiber, or yarn is not available in commercial quantities in a timely manner in the territory of any Party, 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, fiber, or yarn to the list in Annex 3-B pursuant to subparagraph (a), modify or eliminate the restriction.
(e) If the United States determines before the date of entry into force of this Agreement that any fabrics or yarns not listed in Annex 3-B are not available in commercial quantities in the United States pursuant to 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)), the United States may, after consultation with the Parties, add such fabrics or yarns in an unrestricted quantity to the list in Annex 3-B.
6. 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-B pursuant to paragraph 5, 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-B; or
(b) introduce a restriction on the quantity of the fabric, yarn, or fiber added to Annex 3B; 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 any Party. Such deletion or restriction shall not take effect until six months after the United States publishes its determination.
7. 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 5 and 6. After publication of such procedures, a Party or Parties may request consultations with respect to those procedures.
De Minimis
8. 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 the applicable change in tariff classification set out in Annex 3-A, 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. (3)
9. Notwithstanding paragraph 8, a good containing elastomeric yarns (4) in the component of the good that determines the tariff classification of the good shall be originating only if such yarns are wholly formed in the territory of a Party. (5)
Treatment of Sets
10. Notwithstanding the specific rules of origin in Annex 3-A 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 goods 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.
Treatment of Nylon Filament Yarn
11. 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 3-A 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)).
Duty-free Treatment for Certain Goods
12. An importing and an exporting Party may identify at any time particular textile or apparel goods of the exporting Party that they mutually agree are:
(a) hand-loomed fabrics;
(b) hand-made goods made of such hand-loomed fabrics;
(c) traditional folklore handicraft goods; or
(d) handmade goods that substantially incorporate a historical or traditional regional design or motif. A historical or traditional regional design or motif includes, but is not limited to, depictions of traditional geometric patterns or native objects, landscapes, animals, or people.
13. The importing Party shall grant duty-free treatment to goods identified pursuant to paragraph 12, if the competent authority of the exporting Party certifies such identification.
Regional Cumulation
14. In the light of their desire to promote regional integration, the Parties shall enter into discussions, within six months of the date of entry into force of this Agreement, or at a time to be determined by the Parties, with a view to deciding, subject to their applicable domestic legal requirements (such as a requirement to consult with the legislature and domestic industry), whether materials that are goods of countries in the region may be counted for purposes of satisfying the origin requirement under this Chapter as a step toward achieving regional integration.
Article 3.4. Committee on Textile and Apparel Trade Matters
The Parties hereby establish a Committee on Textile and Apparel Trade Matters. The Committee on Textile and Apparel Trade Matters shall meet upon the request of any Party or the Free Trade Commission to consider any matter arising under this Chapter.
Article 3.5. Definitions
For purposes of this Chapter:
claim of origin means a claim that a textile or apparel good is an originating good or satisfies the non-preferential rules of origin of a Party;
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;
input means a fiber, yarn, or fabric used in the production of a textile or apparel good;
interested entity means a Party, an actual or potential purchaser of a textile or apparel good, or an actual or potential supplier of a textile or apparel good;
textile or apparel good means a good listed in the Annex to the WTO Agreement on Textiles and Clothing, except for those goods listed in Annex 3-C;
textile safeguard measure means a measure applied under Article 3.1; and
transition period means the five-year period beginning on the date of entry into force of this Agreement.
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 more of the Parties;
(b) it is produced entirely in the territory of one or more 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 Annex 3-A (Textile and Apparel Specific Rules of Origin), or
(ii) the good otherwise satisfies any applicable regional value content or other requirements specified in Annex 4.1 or Annex 3-A (Textile and Apparel Specific Rules of Origin), and the good satisfies all other applicable requirements of this Chapter; or
(c) it is produced entirely in the territory of one or more 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, for purposes of making a claim for preferential tariff treatment in accordance with Article 4.15, calculate 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 / AV x 100
(b) Method Based on Value of Originating Materials ("Build-up Method")
RVC = VOM/AV x 100 where,
RVC is the regional value content, expressed as a percentage;
AV is the adjusted value of the good;
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 shall, for purposes of making a claim for preferential tariff treatment in accordance with Article 4.15, calculate the regional value content of that good based solely on the following method:
Method for Automotive Products ("Net Cost Method")
RVC = NC - VNM / NC x 100 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 more 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 materials 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 more 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 by the producer 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 two or more 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 more 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 two or more of the Parties to the location of the producer;
(b) duties, taxes, and customs brokerage fees on the material paid in the territory of two or more 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 one or more of the Parties, incorporated into a good in the territory of another 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 more 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
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 ten 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.
Article 4.7. Fungible Goods and Materials
1. Each Party shall provide that an importer may claim that a fungible good or material is originating 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 the accessories, spare parts, or tools described in paragraph 1 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. 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.
Article 4.10. Packaging Materials and Containers for Retail Sale
1. 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 or Annex 3-A (Textile and Apparel Specific Rules of Origin).
2. If a good is subject to a regional value content requirement, the value of packaging materials and containers described in paragraph 1 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 4.11. 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.