Title

AGREEMENT BETWEEN JAPAN AND THE SOCIALIST REPUBLIC OF VIET NAM FOR AN ECONOMIC PARTNERSHIP

Preamble

 Japan and the Socialist Republic of Viet Nam (hereinafter referred to in this Agreement as "Viet Nam"),

Recognizing that a dynamic and rapidly changing global environment brought about by globalization and technological progress presents various economic and strategic challenges and opportunities to the Parties;

Conscious of their longstanding friendship and strong economic and political ties that have developed through many years of fruitful and mutually beneficial cooperation between the Parties;

Believing that such a bilateral relationship will be enhanced by forging a mutually beneficial economic partnership through trade liberalization, trade facilitation, and cooperation; Recognizing the development gap between the Parties;

Reaffirming that the economic partnership will provide a useful framework for enhanced cooperation and serve the common interests of the Parties in various fields as agreed in disagreement and lead to the improvement of economic efficiency and the development of trade, investment, and human resources;

Recognizing that such a partnership will create a larger and new market, and enhance the attractiveness and vibrancy of their markets;

Recalling Article XXIV of the General Agreement on Tariffs and Trade 1994 and Article V of the General Agreement on Trade in Services in Annex 1A and Annex 1B, respectively, to the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh, April 15, 1994;

Convinced that this Agreement would open a new era for the relationship between the Parties; and
Determined to establish a legal framework for an economic partnership between the Parties; HAVE AGREED as follows:

Body

Chapter 1. General Provisions

Article 1. Objectives

The objectives of this Agreement are to:
(a) liberalize and facilitate trade in goods and servicesbetween the Parties;
(b) ensure protection of intellectual property andpromote cooperation in the field thereof;
(c) promote cooperation and coordination for theeffective enforcement of competition laws in eachParty;
(d) facilitate the movement of natural persons between the Parties;
(e) improve business environment in each Party;
(f) establish a framework to enhance closer cooperationin the fields agreed in this Agreement; and (g) create effective procedures for the implementation of this Agreement and for the settlement of disputes.

Article 2. General Definitions

For the purposes of this Agreement, the term:
(a) "Area" means with respect to a Party,
(i) the territory of the Party, including its territorial sea; and
(ii)the exclusive economic zone and the continental shelf with respect to which the Party exercises sovereign rights or jurisdiction in accordance with international law;
Note: Nothing in this subparagraph shall affect the rights and obligations of the Parties under international law, including those under the United Nations Convention on the Law of the Sea.
(b) "customs authority" means the competent authority that is responsible for the administration and enforcement of customs laws and regulations;
(c) "GATS" means the General Agreement on Trade in Services in Annex 1B to the WTO Agreement;
(d) "GATT 1994" means the General Agreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement. For the purposes of this Agreement, references to articles in the GATT 1994 include the interpretative notes;
(e) "Harmonized System" or "HS" means the Harmonized Commodity Description and Coding System set out in the Annex to the International Convention on the Harmonized Commodity Description and Coding System,and adopted and implemented by the Parties in their respective laws;
(f) "Parties" means Japan and Viet Nam, and "Party" means either Japan or Viet Nam; and
(g) "WTO Agreement" means the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh, April 15, 1994.

Article 3. Transparency

1. Each Party shall, in accordance with its laws and regulations, promptly publish, or otherwise make publicly available, its laws, regulations, administrative procedures,and administrative rulings and judicial decisions of general application as well as international agreements to which the Party is a party, with respect to any matter covered by this Agreement.
2. Each Party shall make available to the public the names and addresses of the competent authorities responsible for laws, regulations, administrative procedures, and administrative rulings, referred to in paragraph 1.
3. Each Party shall, upon request by the other Party, within a reasonable period of time, respond to specific questions from, and provide information to, the other Party with respect to matters referred to in paragraph 1.
4. When introducing or changing its laws, regulations, or administrative procedures that significantly affect the implementation and operation of this Agreement, each Party shall, in accordance with its laws and regulations, endeavor to provide, except in emergency situations, a reasonable interval between the time when such laws, regulations, or administrative procedures as introduced or changed are published or made publicly available and the time when they enter into force.

Article 4. Public Comment Procedures

The Government of each Party shall, in accordance with the laws and regulations of the Party, endeavor to adopt or maintain public comment procedures, in order to:
(a) make public in advance regulations of general application that affect any matter covered by this Agreement, when the Government adopts, amends, or repeals them; and
(b) provide a reasonable opportunity for comments by the public and give consideration to those comments before adoption, amendment, or repeal of such regulations.

Article 5. Administrative Procedures

1. Where administrative decisions which pertain to or affect the implementation and operation of this Agreement are taken by the competent authorities of a Party, the competent authorities shall, in accordance with the laws and regulations of the Party:
(a) inform the applicant of the decision within a reasonable period of time after the submission of the application considered complete under the laws and regulations of the Party, taking into account the established standard periods of time referred to in paragraph 3; and
(b) provide, within a reasonable period of time, information concerning the status of the application, at the request of the applicant.
2. The competent authorities of a Party shall, in accordance with the laws and regulations of the Party, endeavor to establish standards for taking administrative decisions in response to submitted applications. The competent authorities shall endeavor to:
(a) make such standards as specific as possible; and
(b) make such standards publicly available except when it would extraordinarily raise administrative difficulties for the Government of the Party.
3. The competent authorities of a Party shall, in accordance with the laws and regulations of the Party, endeavor to:
(a) establish standard periods of time between the receipt of applications by the competent authorities and the administrative decisions taken in response to the submitted applications; and
(b) make publicly available such periods of time, if established.

Article 6. Confidential Information

1. Each Party shall, in accordance with its laws and regulations, maintain the confidentiality of information provided in confidence by the other Party pursuant to this Agreement.
2. Notwithstanding paragraph 1, the information provided pursuant to this Agreement may be transmitted to a third party subject to prior consent of the Party which provided the information.
3. Nothing in this Agreement shall require a Party to provide confidential information, the disclosure of which would impede the enforcement of its laws and regulations, or otherwise be contrary to the public interest, or which would prejudice the legitimate commercial interests of particular enterprises, public or private.

Article 7. Taxation

1. Unless otherwise provided for in this Agreement, the provisions of this Agreement shall not apply to any taxation measures.
2. Nothing in this Agreement shall affect the rights and obligations of either Party under any tax convention. In the event of any inconsistency between this Agreement and any such convention, that convention shall prevail to the extent of the inconsistency.
3. Articles 3 and 6 shall apply to taxation measures, to the extent that the provisions of this Agreement are applicable to such taxation measures.

Article 8. General and Security Exceptions

1. For the purposes of Chapters 2, 3, and 4, Articles XX and XXI of the GATT 1994 are incorporated into and form part of this Agreement, mutatis mutandis.
2. For the purposes of Chapters 7 and 8, Articles XIV and XIV bis of the GATS are incorporated into and form part of this Agreement, mutatis mutandis.

Article 9. Relation to other Agreements

1. The Parties reaffirm their rights and obligations under the WTO Agreement or any other agreements to which both Parties are parties.
2. In the event of any inconsistency between this Agreement and the WTO Agreement, the WTO Agreement shall prevail to the extent of the inconsistency.
3. In the event of any inconsistency between this Agreement and any agreement other than the WTO Agreement to which both Parties are parties, the Parties shall immediately consult with each other with a view to finding a mutually satisfactory solution, taking into consideration general principles of international law.
4. The provisions of the Agreement between Japan and the Socialist Republic of Viet Nam for the Liberalization, Promotion and Protection of Investment, signed at Tokyo on November 14, 2003 (hereinafter referred to in this Article as"BIT"), except its Article 20, as may be amended, are incorporated into and form part of this Agreement, mutatis mutandis.
5. Nothing in this Agreement shall be construed so as to derogate from any of obligations of a Party under the BIT, if such an obligation entitles the other Party to treatment more favorable than that accorded by this Agreement.

Article 10. Implementing Agreement

The Governments of the Parties shall conclude a separate agreement setting forth the details and procedures for the implementation of this Agreement (hereinafter referred to in this Agreement as "the Implementing Agreement").

Article 11. Joint Committee

1. A Joint Committee shall be established under this Agreement.
2. The functions of the Joint Committee shall be:
(a) reviewing and monitoring the implementation and operation of this Agreement;
(b) considering and recommending to the Parties any amendments to this Agreement;
(c) supervising and coordinating the work of all Sub-Committees established under this Agreement;
(d) adopting:
(i) the Implementing Regulations referred to in Part2 of Annex 1 and Rule 11 of Annex 3; and
(ii) any necessary decisions; and
(e) carrying out other functions as the Parties may agree.
3. The Joint Committee:
(a) shall be composed of representatives of the Governments of the Parties; and
(b) may establish, and delegate its responsibilities to, Sub-Committees.
4. The Joint Committee shall establish its rules and procedures.
5. The Joint Committee shall meet at such time and venue as may be agreed by the Parties.

Article 12. Communications

Each Party shall designate a contact point to facilitate communications between the Parties on any matter relating to this Agreement.

Chapter 2. Trade In Goods

Article 13. Definitions

For the purposes of this Chapter, the term:
(a) "bilateral safeguard measure" means a bilateral safeguard measure provided for in paragraph 4 of Article 20;
(b) "customs duty" means any customs or import duty and a charge of any kind imposed in connection with the importation of a good, but does not include any:
(i) charge equivalent to an internal tax imposed consistently with the provisions of paragraph2 of Article III of the GATT 1994, in respect of the like goods or, directly competitive or substitutable goods of the Party or in respect of goods from which the imported goods have been manufactured or produced in whole or in part;
(ii) anti-dumping or countervailing duty applied pursuant to a Party's law and applied consistently with the provisions of Article VI of the GATT 1994, the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 in Annex 1Ato the WTO Agreement, and the Agreement on Subsidies and Countervailing Measures in Annex1A to the WTO Agreement; or
(iii) fees or other charges commensurate with the cost of services rendered;
(c) "customs value of goods" means the value of goods for the purposes of levying ad valorem customs duties on imported goods;
(d) "domestic industry" means the producers as a whole of the like or directly competitive goods operating in a Party, or those whose collective output of the like or directly competitive goods constitutes a major proportion of the total domestic production of those goods;
(e) "originating good" means a good that qualifies as originating in accordance with the provisions of Chapter 3;
(f) "provisional bilateral safeguard measure" means a provisional bilateral safeguard measure provided for in subparagraph 11(a) of Article 20;
(g) "serious injury" means a significant overall impairment in the position of a domestic industry; and
(h) "threat of serious injury" means serious injury that, on the basis of facts and not merely on allegation,conjecture, or remote possibility, is clearly imminent.

Article 14. Classification of Goods

The classification of goods in trade between the Parties shall be in conformity with the Harmonized System.

Article 15. National Treatment

Each Party shall accord national treatment to the goods of the other Party in accordance with Article III of the GATT1994.

Article 16. Elimination or Reduction of Customs Duties

1. Except as otherwise provided for in this Agreement, each Party shall, in accordance with its Schedule in Annex 1,eliminate or reduce its customs duties on originating goods of the other Party.
2. The Parties shall negotiate on issues such as improving market access conditions on originating goods designated for negotiation in the Schedules in Annex 1, in accordance with the terms and conditions set out in such Schedules.
3. In cases where its most-favored-nation applied rate of customs duty on a particular good is lower than the rate of customs duty to be applied in accordance with paragraph 1 on the originating good which is classified under the same tariff line as that particular good, each Party shall apply the lower rate with respect to that originating good in accordance with its laws, regulations, and procedures.

Article 17. Customs Valuation

For the purposes of determining the customs value of goods traded between the Parties, provisions of Part I of the Agreement on Implementation of Article VII of the GeneralAgreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement (hereinafter referred to in this Agreement as "the Agreement on Customs Valuation") shall apply mutatis mutandis.

Article 18. Export Subsidies

Neither Party shall, in accordance with its obligations under the WTO Agreement, introduce or maintain any export subsidies.

Article 19. Non-tariff Measures

1. Each Party shall not introduce or maintain any non-tariff measures on the importation of any good of the other Party or on the exportation or sale for export of any good destined for the other Party which are inconsistent with its obligations under the WTO Agreement.
2. Each Party shall ensure transparency of its non-tariff measures permitted under paragraph 1, including quantitative restrictions. Each Party shall ensure full compliance with the obligations under the WTO Agreement with a view to minimizing possible distortions to trade to the maximum extent possible.

Article 20. Bilateral Safeguard Measures

1. Each Party may apply a safeguard measure to an originating good of the other Party in accordance with Article XIX of the GATT 1994 and the Agreement on Safeguards in Annex 1A to the WTO Agreement (hereinafter referred to in this Article as “the Agreement on Safeguards”), or Article 5 of the Agreement on Agriculture in Annex 1A to the WTO Agreement (hereinafter referred to in this Article as“Agreement on Agriculture”). Any action taken pursuant to Article XIX of the GATT 1994 and the Agreement on Safeguards, or Article 5 of the Agreement on Agriculture shall not be subject to Chapter 13 of this Agreement.

2. Each Party shall be free to apply a bilateral safeguard measure, to the minimum extent necessary to prevent or remedy the serious injury to a domestic industry of that Party and to facilitate adjustment, if as an effect of the obligations incurred by that Party under this Agreement, including tariff concessions, or if as a result of unforeseen developments and of the effects of the obligations incurred by that Party under this Agreement, an originating good of the other Party is being imported in such increased quantities, in absolute terms or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry of the former Party that produces like or directly competitive goods in the former Party.

3. A Party shall not apply a bilateral safeguard measure to an originating good imported up to the limit of quota quantities granted under tariff rate quotas applied in accordance with its Schedule in Annex 1.

4. A Party applying a bilateral safeguard measure may:

(a) suspend the further reduction of any customs duty on the originating good of the other Party provided for under this Chapter; or

(b) increase the customs duty on the originating good of the other Party to a level not to exceed the lesser of:

(i) themost-favored-nationappliedrateonthegood in effect on the day when the bilateral safeguard measure is applied; and

(ii) themost-favored-nationappliedrateonthegood in effect on the day immediately preceding the date of entry into force of this Agreement.

5. (a)APartymayapplyabilateralsafeguardmeasureonly after an investigation has been carried out by the competent authorities of that Party in accordance with the same procedures as those provided for in Article 3 and paragraph 2 of Article 4 of the Agreement on Safeguards.

(b) The investigation referred to in subparagraph (a) shall be completed within one year following its date of initiation.

6. The following conditions and limitations shall apply with regard to a bilateral safeguard measure:

(a) A Party shall immediately give a written notice to the other Party upon:

(i) initiating an investigation referred to in subparagraph 5(a) relating to serious injury, or threat of serious injury, and the reasons for it;

(ii) making a finding of serious injury or threat of serious injury caused by increased imports; and

(iii) taking a decision to apply or extend a bilateral safeguard measure.

(b) The Party giving the written notice referred to in subparagraph (a) shall provide the other Party with all pertinent information, which shall include:

(i) in the written notice referred to in subparagraph (a)(i), the reason for the initiation of the investigation, a precise description of an originating good subject to the investigation and its heading or subheading of the Harmonized System, on which the Schedules in Annex 1 are based, the period subject to the investigation, and the date of initiation of the investigation; and

(ii) in the written notice referred to in subparagraphs (a)(ii) and (iii), the evidence of serious injury or threat of serious injury caused by the increased imports of the originating good, a precise description of the originating good subject to the proposed safeguard measure and its heading or subheading of the Harmonized System, on which the Schedules in Annex 1 are based, a precise description of the bilateral safeguard measure, the proposed date of its introduction, and its expected duration.

(c) A Party proposing to apply or extend a bilateral safeguard measure shall provide adequate opportunity for prior consultations with the other Party with a view to reviewing the information arising from the investigation referred to in subparagraph 5(a), exchanging views on the bilateral safeguard measure and reaching an agreement on compensation set out in paragraph 7.

d) No bilateral safeguard measure shall be maintained except to the extent and for such time as may be necessary to prevent or remedy serious injury and to facilitate adjustment, provided that such time shall not exceed a period of three years. A bilateral safeguard measure may be extended, provided that the conditions set out in this Article are met. The total duration of the bilateral safeguard measure, including any extensions thereof, shall not exceed four years. In order to facilitate adjustment in a situation where the expected duration of a bilateral safeguard measure is over one year, the Party maintaining the bilateral safeguard measure shall progressively liberalize the bilateral safeguard measure at regular intervals during the period of application.

(e) No bilateral safeguard measure shall be applied again to the import of a particular originating good which has been subject to such a bilateral safeguard measure, for a period of time equal to the duration of the previous safeguard measure or one year, whichever is longer.

(f) Upon the termination of a bilateral safeguard measure on a good, the rate of the customs duty for that good shall be the rate which, in accordance with the Schedule of the Party applying the bilateral safeguard measure set out in Annex 1, would have been in effect had the bilateral safeguard measure not been applied.

7. (a) A Party proposing to apply or extend a bilateral safeguard measure shall provide to the other Party mutually agreed adequate means of trade compensation in the form of substantially equivalent level of concessions or other obligations to that existing under this Agreement.

(b) In seeking compensation provided for in subparagraph (a), the Parties shall hold consultations in the Joint Committee. Any proceedings arising from such consultations shall be completed within 30 days from the date on which the bilateral safeguard measure was applied. 

(c) If no agreement on the compensation is reached within the time frame specified in subparagraph (b), the Party against whose originating good the bilateral safeguard measure is taken shall be free to suspend concessions of customs duties under this Agreement, which is substantially equivalent to the bilateral safeguard measure. That Party may suspend the concessions only for the minimum period necessary to achieve the substantially equivalent effects and only while the bilateral safeguard measure is maintained. The right of suspension provided for in this subparagraph shall not be exercised for the first two years that a bilateral safeguard measure is in effect, provided that the bilateral safeguard measure has been applied as a result of an absolute increase in imports and that such a bilateral safeguard measure conforms to the provisions of this Article.

8. (a) A Party applying a safeguard measure in connection with an importation of an originating good of the other Party in accordance with Article XIX of the GATT 1994 and the Agreement on Safeguards, or Article 5 of the Agreement on Agriculture, shall not apply the bilateral safeguard measure to that importation.

(b) The period of application of the bilateral safeguard measure referred to in subparagraph 6(d) shall not be interrupted by the Party’s non-application of the bilateral safeguard measure in accordance with subparagraph (a).

9. EachPartyshallensuretheconsistent,impartial,and reasonable administration of its laws and regulations relating to bilateral safeguard measures.

10. Each Party shall adopt or maintain equitable, timely, transparent, and effective procedures relating to bilateral safeguard measures.

11. (a) In critical circumstances, where delay would cause damage which it would be difficult to repair, a Party may apply a provisional bilateral safeguard measure, which shall take the form of the measure set out in subparagraph 4(a) or 4(b), pursuant to a preliminary determination that there is clear evidence that increased imports of an originating good have caused or are threatening to cause serious injury to a domestic industry.

(b) A Party shall give a written notice to the other Party prior to applying a provisional bilateral safeguard measure. Consultations by the Parties in the Joint Committee on the application of the provisional bilateral safeguard measure shall be initiated immediately after the provisional bilateral safeguard measure is applied.

(c) The duration of a provisional bilateral safeguard measure shall not exceed 200 days. During that period, the pertinent requirements of paragraph 5 shall be met. The duration of the provisional bilateral safeguard measure shall be counted as a part of the period referred to in subparagraph 6(d).

(d) Subparagraph 6(f) shall apply, mutatis mutandis, to the provisional bilateral safeguard measure.

(e) Thecustomsdutyimposedasaresultoftheprovisional bilateral safeguard measure shall be refunded if the subsequent investigation referred to in subparagraph 5(a) does not determine that increased imports of the originating good have caused or threatened to cause serious injury to a domestic industry.

12. All official communications and documentations exchanged between the Parties relating to a bilateral safeguard measure shall be in writing and shall be in the English language.

13. (a) Within 10 years after the entry into force of this Agreement, the Parties shall review this Article with a view to determining whether there is a need to maintain the bilateral safeguard mechanism.

(b) If the Parties do not agree to remove the bilateral safeguard mechanism during the review pursuant to subparagraph (a), the Parties shall thereafter conduct reviews to determine the necessity of the bilateral safeguard mechanism in the Joint Committee.

Article 21. Measures to Safeguard the Balance of Payments

Where a Party is in serious balance of payments and external financial difficulties or threat thereof, the Party may, in accordance with the GATT 1994 and the Understanding on the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement, adopt restrictive import measures.

Article 22. Relation to the Agreement on Comprehensive Economic Partnership Among Japan and Member States of the Association of Southeast Asian Nations

The Parties reaffirm that, as is provided for in Article9 of this Agreement, any commitments of the Parties under this Chapter shall not affect the commitments of the Parties under the Agreement on Comprehensive Economic Partnership among Japan and Member States of the Association of Southeast Asian Nations.

Chapter 3. Rules of Origin

Article 23. Definitions

For the purposes of this Chapter, the term:
(a) "exporter" means a natural or juridical person located in an exporting Party who exports a good from the exporting Party;
(b) "factory ships of the Party" or "vessels of the Party" respectively means factory ships or vessels:
(i) which are registered in the Party;
(ii) which sail under the flag of the Party;
(iii) which are owned to an extent of at least 50 percent by nationals of the Parties, or by a juridical person with its head office in either Party, of which the representatives, chairman of the board of directors, and the majority of the members of such board are nationals of the Parties, and of which at least 50 percent of the equity interest is owned by nationals or juridical persons of the Parties; and
(iv) of which at least 75 percent of the total of the master, officers, and crew are nationals of the Parties or non-Parties which are Member States of the Association of Southeast Asian Nations (hereinafter referred to in this Agreement as"ASEAN");
(c) "generally accepted accounting principles" means the recognized consensus or substantial authoritative support in a Party, with respect to the recording of revenues, expenses, costs, assets, and liabilities; the disclosure of information; and the preparation of financial statements. These standards may encompass broad guidelines of general application as well as detailed standards, practices, and procedures;
(d) "good" means any merchandise, product, article, or material;
(e) "identical and interchangeable materials" means materials being of the same kind and commercialquality, possessing the same technical and physicalcharacteristics, and which once they areincorporated into the good cannot be distinguishedfrom one another for origin purposes by virtue of anymarkings;
(f) "importer" means a natural or juridical person whoimports a good into the importing Party;
(g) "materials" means any matter or substance used orconsumed in the production of a good, physicallyincorporated into a good, or used in the productionof another good;
(h) "originating good" or "originating material" meansa good or material that qualifies as originating inaccordance with the provisions of this Chapter;
(i) "packing materials and containers fortransportation and shipment" means the goods used to protect a good during its transportation and shipment, different from those containers or materials used for its retail sale;
(j) "preferential tariff treatment" means the rate ofcustoms duties applicable to an originating good ofthe exporting Party in accordance with paragraph 1 of Article 16; and
(k) "production" means methods of obtaining a goodincluding growing, mining, harvesting, raising,breeding, extracting, gathering, collecting,capturing, fishing, trapping, hunting,manufacturing, processing, or assembling.

Article 24. Originating Goods

For the purposes of this Agreement, a good shall qualifyas an originating good of a Party if it:
(a) is wholly obtained or produced entirely in the Partyas provided for in Article 25;
(b) satisfies the requirements of Article 26 when usingnon-originating materials; or
(c) is produced entirely in the Party exclusively fromoriginating materials of the Party, and meets all other applicable requirements of this Chapter.

Article 25. Goods Wholly Obtained or Produced

For the purposes of paragraph (a) of Article 24, the following shall be considered as wholly obtained or produced entirely in a Party:
(a) plant and plant products grown and harvested, picked, or gathered in the Party; Note: For the purposes of this paragraph, the term "plant" refers to all plant life, includingfruit, flowers, vegetables, trees, seaweed,fungi, and live plants.
(b) live animals born and raised in the Party; Note: For the purposes of paragraphs (b) and (c), the term "animals" covers all animal life,including mammals, birds, fish, crustaceans,molluscs, reptiles, bacteria, and viruses.
(c) goods obtained from live animals in the Party;
(d) goods obtained from hunting, trapping, fishing,gathering, or capturing conducted in the Party;
(e) minerals and other naturally occurring substances,not included in paragraphs (a) through (d), extracted or taken from soil, waters, seabed or beneath theseabed of the Party;
(f) goods taken from the waters, seabed or beneath theseabed outside the territorial waters of the Party,provided that the Party has the rights to exploit such waters, seabed and beneath the seabed in accordancewith its laws and regulations and international law; Note: Nothing in this Agreement shall affect the rights and obligations of the Parties underinternational law, including those under theUnited Nations Convention on the Law of the Sea.
(g) goods of sea-fishing and other marine products taken by vessels of the Party from outside the territorialseas of the Parties;
(h) goods processed and/or made on board factory shipsof the Party exclusively from products referred toin paragraph (g);
(i) articles collected in the Party which can no longerperform their original purpose or be restored orrepaired, and are fit only for disposal, for therecovery of parts or raw materials, or for recyclingpurposes;
(j) parts or raw materials recovered in the Party fromarticles which can no longer perform their originalpurpose nor are capable of being restored orrepaired;
(k) scrap and waste derived from manufacturing orprocessing operations, including mining,agriculture, construction, refining, incinerationand sewage treatment operations, or from consumption, in the Party, and fit only for disposal or for therecovery of raw materials; and
(l) goods obtained or produced in the Party exclusivelyfrom goods referred to in paragraphs (a) through (k).

Article 26. Goods Not Wholly Obtained or Produced

1. For the purposes of paragraph (b) of Article 24, a good shall qualify as an originating good of a Party if:

(a) the good has a local value content (hereinafter referred to in this Agreement as “LVC”), calculated using the formula set out in Article 27, of not less than 40 percent, and the final process of production has been performed in the Party; or

(b) all non-originating materials used in the production of the good have undergone in the Party a change in tariff classification (hereinafter referred to in this Agreement as “CTC”) at the 4-digit level (i.e. a change in tariff heading) of Harmonized System.

Note: For the purposes of this paragraph, “Harmonized System” is that on which the product specific rules set out in Annex 2 are based.

Each Party shall permit the exporter of the good to decide whether to use subparagraph (a) or (b) when determining whether the good qualifies as an originating good of the Party.

2. Notwithstanding paragraph 1, a good subject to product specific rules shall qualify as an originating good if it satisfies the applicable product specific rules set out in Annex 2. Where a product specific rule provides a choice of rules from an LVC-based rule of origin, a CTC-based rule of origin, a specific manufacturing or processing operation, or a combination of any of these, each Party shall permit the exporter of the good to decide which rule to use in determining whether the good qualifies as an originating good of the Party.

3. For the purposes of subparagraph 1(a) and the relevant product specific rules set out in Annex 2 which specify a certain LVC, it is required that the LVC of a good, calculated using the formula set out in Article 27, is not less than the percentage specified by the rule for the good.

4. For the purposes of subparagraph 1(b) and the relevant product specific rules set out in Annex 2, the rules requiring that the materials used have undergone CTC, or a specific manufacturing or processing operation, shall apply only to non-originating materials.

Article 27. Calculation of Local Value Content

1. For the purposes of calculating the LVC of a good, the following formula shall be used:

LVC = FOB - VNM x 100 % FOB

2. For the purposes of this Article:

(a) “FOB”is, except as provided for in paragraph3, the free-on-board value of a good, inclusive of the cost of transport from the producer to the port or site of final shipment abroad;

(b) “LVC”istheLVCofagood,expressedasapercentage; and

(c) “VNM”isthevalueofnon-originatingmaterialsused in the production of a good.

3. FOB referred to in subparagraph 2(a) shall be the value:

(a) adjusted to the first ascertainable price paid for a good from the buyer to the producer of the good, if there is free-on-board value of the good, but it is unknown and cannot be ascertained; or

(b) determined in accordance with Articles 1 through 8 of the Agreement on Customs Valuation, if there is no free-on-board value of a good.

4. For the purposes of paragraph 1, the value of non-originating materials used in the production of a good in a Party:

(a) shall be determined in accordance with the Agreement on Customs Valuation and shall include freight, insurance, and where appropriate, packing and all other costs incurred in transporting the materials to the importation port in the Party where the producer of the good is located; or

(b) if such value is unknown and cannot be ascertained, shall be the first ascertainable price paid for the materials in the Party, but may exclude all the costs incurred in the Party in transporting the materials from the warehouse of the supplier of the materials to the place where the producer is located such as freight, insurance and packing as well as any other known and ascertainable costs incurred in the Party.

5. For the purposes of paragraph 1, the VNM of a good shall not include the value of non-originating materials used in the production of originating materials of the Party which are used in the production of the good.

6. For the purposes of subparagraph 3(b) or 4(a), in applying the Agreement on Customs Valuation to determine the value of a good or non-originating materials, the Agreement on Customs Valuation shall apply, mutatis mutandis, to domestic transactions or to the cases where there is no domestic transaction of the good or non-originating material.

Article 28. De Minimis

1. A good that does not satisfy the requirements of subparagraph 1(b) of Article 26 or an applicable CTC-based rule of origin set out in Annex 2 shall be considered as an originating good of a Party if:

(a) in the case of a good classified under Chapters16, 19, 20, 22, 23, 28 through 49, and 64 through 97 of the Harmonized System, the total value of non-originating materials used in the production of the good that have not undergone the required CTC does not exceed 10 percent of the FOB;

(b) in the case of a particular good classified under Chapters 9, 18, and 21 of the Harmonized System, the total value of non-originating materials used in the production of the good that have not undergone the required CTC does not exceed 10 percent or seven percent of the FOB, as specified in Annex 2; or

(c) in the case of a good classified under Chapters 50 through 63 of the Harmonized System, the weight of all non-originating materials used in the production of the good that have not undergone the required CTC does not exceed 10 percent of the total weight of the good, provided that it meets all other applicable criteria set out in this Chapter for qualifying as an originating good.

Note: For the purposes of this paragraph, subparagraph 2(a) of Article 27 shall apply.

2. The value of non-originating materials referred to in paragraph 1 shall, however, be included in the value of non-originating materials for any applicable LVC-based rule of origin for the good.

Article 29. Accumulation

Originating materials of a Party used in the production of a good in the other Party shall be considered as originating materials of that other Party.

Article 30. Non-qualifying Operations

A good shall not be considered to satisfy the requirements of CTC or specific manufacturing or processing operation merely by reason of:

(a) operationstoensurethepreservationofproductsin good condition during transport and storage (such as drying, freezing, keeping in brine) and other similar operations;

(b) changes of packaging and breaking up and assembly of packages;

(c) disassembly;

(d) placinginbottles,cases,andboxesandothersimple packaging operations;

(e) collection of parts and components classified as a good pursuant to Rule 2(a) of the General Rules for the Interpretation of the Harmonized System;

(f) mere making-up of sets of articles; or

(g) any combination of operations referred to in  subparagraphs (a) through (f). 

Article 31. Direct Consignment

1. Preferential tariff treatment shall be accorded to an originating good satisfying the requirements of this Chapter and which is consigned directly from the exporting Party to the importing Party.
2. The following shall be considered as consigned directly from the exporting Party to the importing Party:
(a) a good transported directly from the exporting Party to the importing Party; or
(b) a good transported through one or more non-Parties, provided that the good does not undergo operations other than transit or temporary storage in warehouses, unloading, reloading, and any other operation to preserve it in good condition.

Article 32. Packing Materials and Containers

1. Packing materials and containers for transportation and shipment of a good shall not be taken into account in determining the origin of any good.
2. Packing materials and containers in which a good is packaged for retail sale, when classified together with the good, shall not be taken into account in determining whether all of the non-originating materials used in the production of the good have met the applicable CTC-based rule of origin for the good.
3. If a good is subject to an LVC-based rule of origin, the value of the packing materials and containers in which the good is packaged for retail sale shall be taken into account as originating or non-originating materials, as the case may be, in calculating the LVC of the good.

Article 33. Accessories, Spare Parts, Tools, and Instructional or other Information Materials

1. If a good is subject to the requirements of CTC or specific manufacturing or processing operation, the accessories, spare parts, tools, and instructional or other information materials presented with the good shall not be taken into account in determining whether the good qualifies as an originating good, provided that:
(a) the accessories, spare parts, tools, and instructional or other information materials are not invoiced separately from the good; and
(b) the quantities and value of the accessories, spare parts, tools, and instructional or other information materials are customary for the good.
2. If a good is subject to an LVC-based rule of origin, the value of the accessories, spare parts, tools, and instructional or other information materials shall be taken into account as the value of the originating or non-originating materials, as the case may be, in calculating the LVC of the good.

Article 34. Indirect Materials

1. Indirect materials shall be treated as originating materials regardless of where they are produced.
2. For the purposes of this Article, the term "indirect materials" means goods used in the production, testing, or inspection of a good but not physically incorporated into the good, or goods used in the maintenance of buildings or the operation of equipment associated with the production of a good, including:
(a) fuel and energy;
(b) tools, dies, and moulds;
(c) spare parts and materials used in the maintenance of equipment and buildings;
(d) lubricants, greases, compounding materials, and other materials used in production or used to operate equipment and buildings; (e) gloves, glasses, footwear, clothing, safety equipment, and supplies;
(f) equipment, devices, and supplies used for testing or inspecting the good;
(g) catalysts and solvents; and 
(h) any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production.

Article 35. Identical and Interchangeable Materials

The determination of whether identical and interchangeable materials are originating materials shall be made by the use of generally accepted accounting principles of stock control applicable, or those of inventory management practiced, in the exporting Party.

Article 36. Operational Certification Procedures

The operational certification procedures, as set out in Annex 3, shall apply with respect to procedures regarding certificate of origin and related matters.

Article 37. Sub-committee on Rules of Origin

1. For the purposes of the effective implementation and operation of this Chapter, a Sub-Committee on Rules of Origin(hereinafter referred to in this Article as "the Sub-Committee") shall be established pursuant to Article 11.
2. The functions of the Sub-Committee shall be:
(a) reviewing and making appropriate recommendations, as needed, to the Joint Committee on:
(i) the implementation and operation of this Chapter;
(ii) any amendments to Annex 2 and Attachment to Annex 3, proposed by either Party; and
(iii) the Implementing Regulations referred to in Rule 11 of Annex 3;
(b) considering any other matter related to this Chapter, as the Parties may agree;
(c) reporting the findings of the Sub-Committee to the Joint Committee; and
(d) carrying out other functions as may be delegated by the Joint Committee pursuant to Article 11.
3. The Sub-committee shall be composed of representatives of the Governments of the Parties, and may invite representatives of relevant entities other than the Governments of the Parties with necessary expertise relevant to the issues to be discussed, upon agreement of the Parties.
4. The Sub-Committee shall meet at such time and venue as maybe agreed by the Parties.