1. Each Party shall provide that agood is originating if the good is produced in the territory of one or both of the Parties by one or more producers, provided that the good satisfies the requirements of Article 3.2 (Originating Goods).
2. Each Party shall provide that an originating good or material of a Party is considered as originating in the territory of the other Party when it is used as a material in the production of a good in the territory of the other Party.
3. Each Party shall provide that an exporter may take into account production carried out on a non-originating material in the territory of the other Party for the purposes of determining the originating status of a good. This paragraph shall only apply if:
(a) Indonesia enters into a free trade agreement which contains a provision with equivalent effect to paragraph 3, upon entry into force of that free trade agreement and in accordance with and upon completion of each Party’s applicable legal procedures; or
(b) the Parties decide to apply paragraph 3 following the review provided for in Article 26.4 (Final Provisions – Review).
4. Subject to paragraph 5, if, as permitted by the WTO Agreement, each Party has a free trade agreement with the same non-Party, a material from that non-Party may be taken into consideration by the exporter when determining if a good is originating under this Agreement.
5. Each Party shall apply paragraph 4only if equivalent provisions are in force between each Party and the non-Party and upon agreement by the Parties on the applicable conditions.
Article 3.5. Materials Used In Production
Each Party shall provide that if a non-originating material undergoes further production that satisfies the requirements of this Chapter, the material is treated as originating when determining the originating status of the subsequently produced good, regardless of whether that material was produced by the producer of the good.
Article 3.6. Net Cost
1. For the purposes of this Article:
automotive material means a good of heading 87.06, 87.07 or 87.08; motor vehicle means a good of heading 87.03 through 87.05 or 87.09;
net cost means total cost minus sales promotion, marketing and after-sales service costs, royalty, shipping and packing costs, and non-allowable interest cost that are included in the total cost;
non-allowable interest cost means interest costs incurred by a producer that exceed 700 basis points above the applicable national government interest rate identified for comparable maturities;
royalty means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use or right to use any copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, secret formula, or process, excluding those payments under technical assistance or similar agreements that can be related to specific services such as:
(a) personnel training, without regard to where it is performed; and
(b) if performed in the territory of one or both of the Parties, engineering, tooling, die-setting, software design, and similar computer services, or other services;
sales promotion, marketing, and after-sales service costs means the following costs related to sales promotion, marketing, and after-sales service:
(a) sales and marketing promotion; media advertising; advertising and market research; promotional and demonstration materials; exhibits; sales conferences, trade shows and conventions; banners; marketing displays; free samples; sales, marketing and after-sales service literature (brochures for the good, catalogues, technical literature, price lists, service manuals and sales aid information); establishment and protection of logos and trademarks; sponsorships; wholesale and retail restocking charges; or entertainment;
(b) sales and marketing incentives; consumer, retailer or wholesaler rebates; or merchandise incentives;
(c) salaries and wages; sales commissions; bonuses; benefits (for example, medical, insurance, and pension); travelling and living expenses; or membership and professional fees for sales promotion, marketing, and after-sales service personnel;
(d) recruiting and training of sales promotion, marketing, and after-sales service personnel, and after-sales training of customers’ employees, if those costs are identified separately for sales promotion, marketing, and after-sales service of goods on the financial statements or cost accounts of the producer;
(e) goods liability insurance;
(f) office supplies for sales promotion, marketing, and after-sales service of goods, if those costs are identified separately for sales promotion, marketing, and after-sales service of goods on the financial statements or cost accounts of the producer;
(g) telephone, mail, and other communications, if those costs are identified separately for sales promotion, marketing, and after-sales service of goods on the financial statements or cost accounts of the producer;
(h) rent and depreciation of sales promotion, marketing, and after-sales service offices and distribution centres;
(i) property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing, and after-sales service offices and distribution centres, ifsuch costs are identified separately for sales promotion, marketing, and after-sales service of goods on the financial statements or cost accounts of the producer; and
(j) payments by the producer to other persons for warranty repairs; shipping and packing costs means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding costs of preparing and packaging the good for retail sale; and total cost means all product costs, period costs, and other costs incurred in relation to the production of a good in Canada when:
(a) product costs means those costs that are associated with the production of a good and include the value of materials, direct labour costs, and direct overhead;
(b) period costs means those costs other than product costs that are expensed in the period in which they are incurred, including selling expenses and general and administrative expenses; and
(c) other costs means all costs recorded on the books of the producer that are not product costs or period costs. Total cost does not include profits that are earned by the producer, regardless of whether they are retained by the producer or paid out to other persons as dividends, or taxes paid on those profits, including capital gains taxes.
2. Each Party shall provide that, for the purpose of calculating the net cost of a good as set out in Annex 3-B (Product-Specific Rules of Origin), the producer of the good may: (a) calculate the total cost incurred with respect to all goods produced by that producer, subtract any sales promotion, marketing and after-sales service costs, royalty, shipping and packing costs, and non-allowable interest cost that is included in the total cost of all those goods, and then reasonably allocate the resulting net cost of those goods to the good; (b) calculate the total cost incurred with respect to all goods produced by that producer, reasonably allocate the total cost to the good, and then subtract any sales promotion, marketing and after-sales service costs, royalty, shipping and packing costs and non-allowable interest cost that is included in the portion of the total cost allocated to the good; or (c) reasonably allocate each cost that forms part of the total cost incurred by that producer with respect to the good so that the aggregate of these costs does not include any sales promotion, marketing and after-sales service costs, royalty, shipping and packing costs, or non-allowable interest cost.
3. Each Party shall provide that, for the purpose of calculating the net cost of a good as set out in Annex 3-B (Product-Specific Rules of Origin), the producer may average its calculation over its fiscal year using any one of the following categories, on the basis of either all motor vehicles produced by that producer in the category or only those motor vehicles in the category that are produced by that producer and exported to the territory of the other Party:
(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 model line of motor vehicles produced in the same plant in the territory of a Party;
(c) the same model line of motor vehicles produced in the territory of a Party;
(d) the same class of motor vehicles produced in the same plant in the territory of a Party; or
(e) any other category as the Parties may decide.
4. Each Party shall provide that, for the purpose of calculating the net cost of a good as set out in Annex 3-B (Product-Specific Rules of Origin), the calculation for automotive materials produced in the same plant may be averaged:
(a) over the fiscal year of the motor vehicle producer to whom the good is sold;
(b) over any quarter or month; or
(c) over the fiscal year of the producer of the automotive material, provided that the good was produced during the fiscal year, quarter or month forming the basis for the calculation, in which:
(i) the average in subparagraph (a) is calculated separately for those goods sold to one or more motor vehicle producers; or
(ii) the average in subparagraph (a) or (b) is calculated separately for those goods that are exported to the territory of another Party.
Article 3.7. De Minimis
1. Each Party shall provide that agood that does not satisfy the applicable change in tariff classification requirement in accordance with Annex 3-B (Product-Specific Rules of Origin) will nonetheless be considered an originating good if:
(a) for a good, other than that provided for in Chapters 50 through 63 of the Harmonized System (HS), the value of all non-originating materials used in the production of the good that did not undergo the required change in tariff classification does not exceed 10 per cent of the value of the good; or
(b) for a good provided for in Chapters 50 through 63of the Harmonized System (HS), the total weight of all non-originating materials used in the production of the good that did not undergo the required change in tariff classification does not exceed 10 per cent of the total weight of that good; and the good satisfies all other applicable requirements of this Chapter.
2. The value of non-originating materials referred to in paragraph 1 shall be included in the value of non-originating materials for any applicable product-specific rule of origin based on a value requirement as set out in Annex 3-B (Product-Specific Rules of Origin).
Article 3.8. Fungible Goods and Materials
1. Each Party shall provide that a fungible good or material is treated as originating based on the: (a) physical segregation of each fungible good or material; or (b) use of any inventory management method recognized in the generally accepted accounting principles of the Party in which production is performed if the fungible good or material is commingled.
2. Once an inventory management method is selected under paragraph 1, that method must be used for those fungible goods or materials throughout the fiscal year of the person that made the selection.
Article 3.9. Indirect Materials
Each Party shall provide that an indirect material is an originating material without regard to where it is produced and its value shall be the cost registered in accordance with the generally accepted accounting principles in the records of the producer of the good.
Article 3.10. Accessories, Spare Parts, Tools, and Instructional or other Information Materials
Each Party shall provide that accessories, spare parts, tools, or instructional or other information materials delivered with a good that form part of its standard accessories, spare parts, or tools are to be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable requirements set out in Annex 3-B (Product-Specific Rules of Origin) provided that:
(a) the accessories, spare parts, tools,and instructional or other information materials are classified with, delivered with, and 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 that good.
Article 3.11. Packaging Materials and Containers for Retail Sale
Each Party shall provide that packaging materials and containers in which a good is packaged for retail sale, which are classified with the good, are disregarded in determining the originating status of the good.
Article 3.12. Packing Materials and Containers for Transportation and Shipment
Each Party shall provide that packing materials and containers for the transportation and shipment of a good are not taken into account in determining the originating status of agood.
Article 3.13. Sets of Goods
Except as provided in Annex 3-B (Product-Specific Rules of Origin), each Party shall provide that a set of goods, as referred to in General Rule 3 of the Harmonized System (HS), are considered originating provided that:
(a) all of the component goods are originating; or
(b) if the set contains non-originating component goods, the value of the non.originating goods does not exceed 25 per cent of the value of the set of goods.
Article 3.14. Transit and Transhipment
1. Each Party shall provide that an originating good retains its originating status if the good has been transported from the territory of the exporting Party to the territory of importing Party without passing through the territory of a non-Party.
2. Each Party shall provide that if an originating good is transported through the territory of one or more non-Parties, the good retains its originating status provided that the good:
(a) has not undergone any further operation in the territory of a non-Party, except for logistics activities including unloading, reloading, storing, or any other operation necessary to preserve it in good condition or to transport it to the importing Party; and
(b) remains under thecontrol of the customs authority in the territory of a non-Party.
Section C. Origin Procedures Article
Article 3.15. Claims for Preferential Tariff Treatment
1. Each Party shall provide that an importer may, upon importation of a good, make a claim for preferential tariff treatment, based on a declaration of origin completed by the exporter or producer, for the purpose of certifying that a good being exported from the territory of a Party into the territory of the other Party qualifies as an originating good.
2. A Party may allow, in accordance with its laws and regulations, a claim for preferential tariff treatment to be based on a declaration of origin completed by the importer that the good qualifies as an originating good. If on the date of entry into force of this Agreement a Party does not allow a claim for preferential treatment to be based on a declaration of origin completed by the importer, that Party shall within 5 years complete a review of the procedures necessary to consider such a claim.
3. For the purposes of paragraph 2, an importing Party may: (1)
(a) require that an importer who completes a declaration of origin provide documents or other information to support the declaration;
(b) establish in its law conditions that an importer shall meet to complete a declaration of origin.
4. Each Party shall provide that a declaration of origin:
(a) need not follow a prescribed format;
(b) contains a set of minimum data requirements as set out in Annex 3-A (Minimum Data Elements of the Declaration of Origin); and
(c) may be provided on an invoice or any other document, including a company letterhead.
5. Each Party shall provide that a declaration of origin may apply to a single shipment of one or more goods into the territory of a Party provided that the declaration certifies that each good qualifies as originating.
6. A Party shall not reject a claim for preferential tariff treatment for the sole reason that the invoice was issued in a non-Party. However, a declaration of origin shall not be provided on an invoice or any other document issued in a non-Party.
7. Each Party shall provide that a declaration of origin is valid for one year after the date that it was issued or for alonger period specified by the laws and regulations of the importing Party.
8. Each Party shall allow a declaration of origin to be completed and submitted electronically and shall accept the declaration of origin with an electronic or digital signature.
9. Each Party shall allow an importer to submit a declaration of origin in English. If the declaration of origin is not in English, the importing Party may require the importer to submit a translation:
(a) for Canada, in English or French; or
(b) for Indonesia, in English, and the importing Party may require the submission of the non-translated declaration of origin.
10. For the purposes of paragraph 8, oncea Party receives a declaration of origin electronically, it shall not require a paper document of the same declaration prior to the release of the goods in the Party’s territory except in limited circumstances set out in its laws, regulations, or procedures.
Article 3.16. Basis of a Declaration of Origin
1. Each Party shall provide that if a producer declares the origin of a good, the declaration of origin is completed on the basis of the producer having information that the good is originating.
2. Each Party shall provide that if the exporter is not the producer of the good, a declaration of origin may be completed by the exporter of the good on the basis of:
(a) the exporter having information, including documentation, that demonstrates that the good is originating; or
(b) reasonable reliance on the producer’s written representation, such as information contained in a declaration of origin, that the good is originating.
3. Each Party shall provide that a declaration of origin may be completed by the importer of the good on the basis of: (2)
(a) the importer having documentation that the good is originating; or
(b) reasonable reliance on supporting documentation provided by the exporter or producer that the good is originating.
4. For greatercertainty, nothing in paragraph 1 or 2 shall be construed to allow a Party to require an exporter or producer to complete a declaration of origin or provide a declaration of origin to another person.
5. The information, including documents and written representations, referred to in paragraphs 1 to 3 are subject to the requirements of Article 3.21 (Record Keeping Requirements). 2 Paragraph 3 applies to aParty from the date ofimplementationof thedeclaration of origin by theimporter under Article 3.15.2 (Claims for Preferential Tariff Treatment).
Article 3.17. Minor Discrepancies and Errors
Each Party shall provide that its customs administration shall not reject a declaration of origin due to minor discrepancies or errors in it, such as slight discrepancies between the statements made in the declaration of origin and those made in the import documentation submitted to the customs administration, or typing or formatting errors, provided that these do not create doubt as to the validity of the declaration of origin or the correctness of the import documentation.
Article 3.18. Waiver of Declaration of Origin
1. A Party shall notrequirea declaration of origin if:
(a) the customs value of the importation does not exceed US $200 or the equivalent amount in the importing Party’s currency or any higher amount as the importing Party may establish; or
(b) it is a good for which the importing Party has waived the requirement or does not require the importer to present a declaration of origin, provided that the importation does not form part of a series of importations carried out or planned for the purpose of evading compliance with the importing Party’s laws, regulations, or procedures governing claims for preferential tariff treatment under this Agreement.
2. The Parties shall enter into discussionsto review this Article within fiveyears after the date of entry into force of this Agreement.
Article 3.19. Obligations Relating to Importation
1. Except as otherwise provided in this Chapter, each Party shall provide that, for the purpose of claiming preferential tariff treatment in accordance with its laws and regulations, the importer shall:
(a) make a statement forming part of the import document that the good qualifies as an originating good;
(b) have a valid declaration of origin in its possession at the time the statement referred to in subparagraph (a) is made; and
(c) provide a copy of the declaration of origin to the importing Party if required by that Party.
2. Each Party shall provide that, if the importer has reason to believe that the declaration of origin is based on incorrect information that could affect the accuracy or validity of the declaration of origin, the importer shall in accordance with that Party’s laws and regulations correct the importation document and pay any customs duty and, if applicable, penalties owed.
3. An importing Party shall not subject an importer to a penalty for making an invalid claim for preferential tariff treatment if the importer, on becoming aware that their claim is not valid and prior to discovery of the error by that Party, voluntarily corrects the claim in accordance with that Party’s laws and regulations, and pays any applicable customs duty under the circumstances provided for in the Party’s law.
4. A Party may require an importer to demonstrate that a good for which the importer claims preferential tariff treatment was shipped in accordance with Article 3.14 (Transit and Transhipment) by providing:
(a) transportation documents, including the multimodal or combined transportation documents, such as bills of lading or waybills, indicating the shipping route and all points of shipment and transhipment prior to the importation of the good; and
(b) if the good is shipped through or transhipped outside the territories of the Parties, relevant documents, such as in the case of storage, storage documents or a copy of the customs control documents, demonstrating that the good remained under customs control while outside the territories of the Parties.
Article 3.20. Obligations Relating to Exportation
1. Each Party shall provide that an exporter or producer in its territory that completes a declaration of origin shall submit a copy of that declaration of origin to its competent authority on its request.
2. Each Party may provide that a false declaration of origin or other false information provided by an exporter or a producer in its territory to support a claim that a good exported to the territory of the other Party is originating has the same legal consequences, with appropriate modifications, as those that would apply to an importer in its territory that makes a false statement or representation in connection with an importation.
3. Each Party shall provide that an exporter or producer who has completed a declaration of origin must immediately notify, in writing, every person and the competent authority of the exporting Party to whom the exporter or producer provided the declaration of origin if the exporter or producer becomes aware, or has reason to believe, that the declaration of origin contains or is based on incorrect information affecting the originating status of a good covered by the declaration of origin.
4. A Party shall not impose penalties on an exporter or producer in its territory that voluntarily provides written notification pursuant to paragraph 3 with respect to a declaration of origin.
5. Each Party shall allow adeclaration of origin to be maintained in any medium and to be submitted electronically from the exporter or producer in the territory of a Party to an importer in the territory of a Party.
Article 3.21. Record Keeping Requirements
1. Each Party shall provide that an importer claiming preferential tariff treatment for a good imported into the territory of that Party shall maintain, for four years from the date of importation of the good, or a longer period as specified in that Party’s laws and regulations: (a) the documentation related to the importation, including the declaration of origin that served as the basis for the claim; and (b) all records necessary to demonstrate that the good is originating and qualified for preferential tariff treatment, if the claim was based on a declaration of origin completed by the importer. (3)
2. Each Party shall provide that a producer or exporter in its territory that provides a declaration of origin shall maintain, for four years from the date the declaration of origin was issued or a longer period as specified in that Party’s laws and regulations, all records necessary to demonstrate that a good for which the exporter or producer provided a declaration of origin is originating, including records associated with: (a) the purchase of, cost of, value of, shipping of, and payment for, the good or material; (b) the purchase of, cost of, value of, shipping of, and payment for all materials, including indirect materials, used in the production of the good or material; and (c) the production of the good in the form in which the good is exported or the production of the material in the form in which the material was sold.
3. Each Party shall provide that an importer, exporter, or producer in its territory may choose to maintain the records specified in paragraphs 1 and 2 in any medium that allows for prompt retrieval and printing, including electronic, optical, magnetic, or written form in accordance with that Party’s law.
Article 3.22. Verification of Origin
For the purpose of determining whether a good imported into its territory is originating, the customs administration of the importing Party may conduct a verification of a claim for preferential tariff treatment by one or more of the following:
(a) a written request for information to the importer, in accordance with Article 3.23 (Request for Verification of Origin) and Article 3.25 (Supplementary Provisions for Verifications of Origin);
(b) a written request for information to the exporter or producer, in accordance with Article 3.23 (Request for Verification of Origin) and Article 3.25 (Supplementary Provisions for Verifications of Origin);
(c) a verification visit to the premises of the exporter or producer in the territory of the other Party, in accordance with Article 3.24 (Verification Visit) and Article 3.25 (Supplementary Provisions for Verifications of Origin); or
(d) any other procedure to which the Parties may decide.
Article 3.23. Request for Verification of Origin
1. For the purpose of determining whether a good imported into its territory is originating, the customs administration of the importing Party may, pursuant to subparagraphs (a) and (b) of Article 3.22 (Verification of Origin), conduct a verification of a claim for preferential tariff treatment by sending a written request for information to the importer, exporter, or producer.
2. A written request for information under paragraph 1 shall:
(a) include the identity of the customs administration issuing the request;
(b) state the reason for the request, including the specific issue the requesting Party seeks to resolve with the verification; and
(c) include sufficient information to identify the good that is being verified, which may include the declaration of origin.
3. For greater certainty, if the claim for preferential tariff treatment is based on the importer’s declaration of origin, the importing Party is not required to request information from the exporter or producer to support a claim for preferential tariff treatment.
4. If the claim for preferential tariff treatment is based on a declaration of origin completed by the exporter or producer:
(a) the importing Party may send a request for information to the importer under paragraph 1. If in response to such request, the importer does not provide information to the importing Party or the information provided is not sufficient to support a claim for preferential tariff treatment, the importing Party shall request information from the exporter or producer pursuant to subparagraphs (b) or(c) of Article 3.22 (Verification of Origin) before it may deny the claim for preferential tariff treatment; or
(b) the importing Party may send a request for information directly to the exporter or producer under paragraph 1.
5. The customs administration of the importing Party shall provide the importer with at least 30 days or a shorter period in accordance with its laws and regulations, and the exporter or producer at least 45 days, from the date of receipt of the written request for information sent under Paragraph 1 to respond to the request.
6. If the customs administration of the importing Party initiates a verification to the exporter or producer in accordance with paragraph 1, it shall promptly inform the importer and competent authority of the exporting Party, only for the purpose of their awareness, of the initiation of such verification.
7. If the importing Party conducts a verification, it shall accept information directly from the importer, exporter, or producer.
8. During verification, the importing Party shall allow the release of the good, subject to payment of duties or provision of security as provided for in its laws and regulations. If as a result of the verification the importing Party determines that the good is an originating good, it shall grant preferential tariff treatment to the good and refund any excess duties paid or release any security provided unless the security also covers other obligations, subject to its laws and regulations.