(i) waste and scrap derived from:
(i) production carried out there; or
(ii) used goods collected there;
provided that such waste or scrap is fit only for the recovery of raw materials;
and
(j) a good obtained or produced there exclusively from a good referred to in subparagraphs (a) through (i).
Article 4.4. Regional Value Content
1. Each Party shall provide that a regional value content requirement specified in this Chapter, including related Annex 4-A, to determine whether a good is originating is calculated as follows:
(a) Build-down Method: Based on the Value of Non-Originating Materials
RVC = FOB - VNM / FOB x 100
(b) Build-up Method: Based on the Value of Originating Materials
RVC = VOM/FOB x 100
or
(c) Net Cost Method (for Automotive Goods Only)
RVC = NC - VNM / NC x 100
where:
RVC is the regional value content of a good expressed as a percentage; FOB is the free on board value of the good;
VOM is the value of originating materials used in the production of the good in the territory of one or more of the Parties;
NC is the net cost of the good determined in accordance with Article 4.5; and
VNM is the value of non-originating materials, including materials of undetermined origin, used in the production of the good.
2. Each Party shall provide that all values considered for the calculation of regional value content are recorded and maintained in conformity with the Generally Accepted Accounting Principles applicable in the territory of a Party where the good is produced.
Article 4.5. Net Cost
1. Each Party shall provide that for the purpose of the regional value content requirement specified in Article 4.4.1 (c), net cost means total cost minus sales promotion, marketing and after- sales service costs, shipping and packing costs, royalties and non -allowable interest costs that are included in the total cost, and shall be calculated in accordance with the following definitions.
2. Net cost of the good means the net cost that can be reasonably allocated to the good, using one of the following methods:
(a) calculating the total cost incurred with respect to all automotive goods produced by that producer, subtracting any sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the total cost of all those goods, and then reasonably allocating the resulting net cost of those goods to the good;
(b) calculating the total cost incurred with respect to all automotive goods produced by that producer, reasonably allocating the total cost to the good, and then subtracting any sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the portion of the total cost allocated to the good; or
(c) reasonably allocating each cost that forms part of the total cost incurred with respect to the good, so that the aggregate of these costs does not include any sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs, provided that the allocation of all those costs is consistent with the provisions regarding the reasonable allocation of costs set out in Generally Accepted Accounting Principles.
For the purpose of this paragraph, reasonably allocate means to apportion in an appropriate manner under Generally Accepted Accounting Principles.
3. Total cost means all product costs, period costs and other costs fora good incurred in the territory of one or more of the Parties, where:
(a) product costs are costs that are associated with the production of a good and include the value of materials, direct labour costs and direct overheads;
(b) period costs are costs, other than product costs, that are expensed in the period in which they are incurred, such as selling expenses and general and administrative expenses; and
(c) other costs are all costs recorded on the books of the producer that are not product costs or period costs, such as interest.
Total cost does notinclude profits thatare 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.
4. Costs of sales promotion, marketing and after-sales services of goods means the following costs:
(a) sales and marketing promotion; media advertising; advertising and market research; promotional and demonstration materials; displayed goods; sales promotion conferences, trade shows and trade conventions; banners; marketing exhibitions; free samples; sales, marketing and after-sales services literature such as product brochures, catalogs, technical literature, price lists, service manuals and sales aid information; establishment and protection of logos and trademarks; sponsorships; whole sale and retail restocking charges, and entertainment;
(b) sales and marketing incentives; consumer, retailer, or wholesaler rebates; and merchandise incentives;
(c) wages and salaries, sales commissions; bonuses; benefits such as medical, insurance and pension benefits; traveling and living expenses; and membership and professional fees for sales promotion, marketing and after-sales service personnel;
(d) recruiting and training of sales promotion, marketing and after-sale services personnel, and after-sales training of customers' employees if those costs are identified separately for sales promotion, marketing and after-sales services of goods on the financial statements or cost account of the producer;
(e) product liability insurance;
(f) office supplies for sales promotion, marketing and after-sales servicesof goods, if those costs are identified separately for sales promotion, marketing and after-sales services 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 services of goods on the financial statements or cost accounts of the producer;
(h) rents 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 office and distribution centres, if those costs are identified separately for sales promotion, marketing and after-sales services of goods on the financial statements or cost accounts of the producer; and
(j) payments by the producer to other persons for warranty repairs.
5. Shipping and packing costs means costs incurred to pack a good for shipment and to ship the good from the point of direct shipment to the buyer, excluding costs to prepare and package the good for retail sale.
6. Royalties mean 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 that training is performed; or
(b) engineering, tooling, die-setting, software design and similar computer services, or other services,
if performed in the territory of one or more of the Parties.
7. Non-allowable interest costs mean interest costs incurred by a producer that exceed 700 basis points above the yield on debt obligations of comparable maturities issued by the central level of government of the Party in which the producer is located.
8. Each Party shall provide that, for the purposes of the Net Cost Method for motor vehicles of heading 87.01 through 87.06, the calculation may be 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 the other Party:
(a) the same model of line of motor vehicles in the same class of motor vehicles produced in the same plant in the territory of a Party;
(b) the same class of motor vehicles produced in the same plantin the territory of a Party;
(c) the same model line of motor vehicles produced in the territory of a Party; or
(d) any other category as the Parties may decide.
9. For the purposes of paragraph 8:
(a) class of motor vehicles means any one of the following categories of motor vehicles:
(i) motor vehicles classified under subheading 8701.20, motor vehicles for the transport of 16 or more persons classified under subheading 8702.10 or 8702.90, and motor vehicles classified under subheading 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or heading 87.05 or 87.06;
(ii) motor vehicles classified under subheading 8701.10 or subheadings 8701.30 through 8701.90;
(iii) motor vehicles for the transport of 15 or fewer persons classified under subheading 8702.100r8702.90,and motor vehicles classified under subheadings 8704.21 or 8704.31; or
(iv) motor vehicles classified under subheadings 8703.21 through 8703.90.
(b) model line of motor vehicles means a group of motor vehicles having the same platform or model name.
10. Each Party shall provide that, for the purposes of Net Cost Method, for automotive materials of heading 87.06 produced in the same plant, a calculation 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 the other Party.
Article 4.6. Materials Used In Production
1. Each Party shall provide that if a non-originating material undergoes further production such that it 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.
2. Each Party shall provide that if a non-originating material is used in the production of a good, the following may be counted as originating content for the purpose of determining whether the good meets a regional value content requirement:
(a) the value of processing of the non-originating materials undertaken in the territory of one or more of the Parties; and
(b) the value of any originating material used in the production of the non -originating material undertaken in the territory of one or more of the Parties.
Article 4.7. Value of Materials Used In Production
Each Party shall provide that for the purposes of this Chapter, the value of a material is:
(a) fora material imported by the producer of the good, the value of the material at the time of importation, including the costs incurred in the international shipment of the material;
(b) fora material acquired in the territory where the good is produced:
(i) the price paid or payable by the producer in the Party where the producer is located;
(ii) the value as determined for an imported material in subparagraph (a); or
(iii) the earliest ascertainable price paid or payable in the territory of the Party; or
(c) for a material that is self-produced:
(i) all the costs incurred in the production of the material, which includes general expenses; and
(ii) an amount equivalent to the profit added in the normal course of trade, or equal to the profit that is usually reflected in the sale of goods of the same class or kind as the self-produced material that is being valued.
(d) the values referred to in subparagraph (a) and (b) shall be determined in accordance with the Customs Valuation Agreement.
Article 4.8. Indirect Materials
An indirect material shall be considered as originating without regard to where it is produced.
Article 4.9. Minimal Operations or Processes That Do Not Confer Origin
Notwithstanding any provision in this Chapter, a good shall not be considered to have satisfied the requirements for an originating good under merely by reason of going through any of the following operations:
(a) operations to ensure preservation of the goods in good condition during transport and storage, such as drying, freezing, ventilation, chilling;
(b) sifting, classifying, washing, slitting, bending, coiling, uncoiling;
(c) cleaning, including the removal of dust, oxide, oil, paint or other coverings;
(d) painting and polishing operations;
(e) placing in bottles, cans, flasks, bags, cases, boxes, fixing on cards or boards and all other packaging operations;
(f) packaging, changes of packaging and unpacking operations and the breaking up and grouping of consignments;
(g) mere dilution with water or other substances that do not materially alter the characteristics of the goods; and
(h) the combination of two or more operations referred to in subparagraphs (a) through (g).
Article 4.10. Accumulation
1. Materials originating in Singapore shall be considered as materials originating in a Party to the Pacific Alliance when incorporated into a good produced there and exported to Singapore, provided that those materials satisfy all applicable requirements of this Chapter.
2. Materials originating in a Party to the Pacific Alliance shall be considered as materials originating in Singapore when incorporated into a good produced there and exported to the same Party to the Pacific Alliance, provided that those materials satisfy all applicable requirements of this Chapter.
3. Materials originating in a Party to the Pacific Alliance shall be considered as materials originating in Singapore when further processed or incorporated into a good produced there and exported to another Party to the Pacific Alliance, provided that those materials satisfy all applicable requirements of this Chapter.
4. For paragraph 3, at the time of accumulation, those materials and the good shall be subject to a tariff rate of 0% according to the application of the respective tariff schedules under this Agreement.
5. Materials originating in a Party to the Pacific Alliance shall be considered as materials originating in another Party to the Pacific Alliance in accordance with all applicable provisions of the Additional Protocol to the Pacific Alliance Framework Agreement and its Annex 4.2 Product Specific Rules of Origin ("PA's PSR") when further processed or incorporated into a good produced there and exported to Singapore.
6. Notwithstanding paragraph 5, the good exported to Singapore shall meet the provisions set outon Annex 4-A and other applicable provisions of this Chapter when claiming for preferential treatment in Singapore.
7. For paragraphs 5 and 6, at the time of accumulation, those materials and the good shall be subject to a tariff rate of 0% according to the application of the respective tariff schedules in the Additional Protocol to the Pacific Alliance Framework Agreement and in this Agreement.
8. If any other Party to the Pacific Alliance participates in the accumulation referred to in paragraph 5, its materials shall be subject to a tariff rate of 0% according to the application of the related tariff schedules in the Additional Protocol to the Pacific Alliance Framework Agreement.
9. Materials originating in Singapore shall be considered as materials originating in a Party to the Pacific Alliance when further processed or incorporated into a good produced there and exported to another Party to the Pacific Alliance.
10. Those materials referred to in paragraph 9 shall be considered originating if they meet the product specific rules of origin set out in Annex 4-A and all applicable provisions of this Agreement.
11. Notwithstanding paragraph 10, the good exported to a Party to the Pacific Alliance shall meet all applicable provisions of PA's PSRs when claiming for preferential treatment in the importing Party,
12. For paragraphs 9, 10 and 11, at the time of accumulation, those materials and the good shall be subject to a tariff rate of 0% according to the application of the respective tariff schedule in this Agreement and the Additional Protocol to the Pacific Alliance Framework Agreement.
13. If any other Party to the Pacific Alliance participates in the accumulation referred to in paragraph 9, its material shall be subject to a tariff rate of 0% according to the application of the related tariff schedules in the Additional Protocol to the Pacific Alliance Framework Agreement.
Article 4.11. De Minimis
1. A good that does not satisfy the applicable change in tariff classification requirement pursuant to Annex 4-A shall, nonetheless, be an originating good if:
(a) for a good, other than that provided for in Chapters 50 through 63 of the Harmonized System, 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 FOB value of the good; or
(b) for a good provided for in Chapters 50 through 63 of the Harmonized System, the total weight of all non-originating fibres and yarns of the component that determines the tariff classification of the good 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 the good, and the good satisfies all other applicable requirements of this Chapter.
2. If a good described in paragraph 1 is also subject to a regional value content requirement, the value of those non-originating materials shall be included in the value of non-originating materials for the applicable regional value content requirement.
Article 4.12. 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 recognised in the Generally Accepted Accounting Principles of the Party in which production is performedif the fungible good or material is commingled.
2. Once a particular inventory management method is selected under paragraph 1 (b), that method shall continue to be used for those fungible materials or goods throughout the fiscal year of the person that selected the inventory management method.
Article 4.13. Accessories, Spare Parts, Tools, and Instructional or other Information Materials
1. If a good is wholly obtained or produced in accordance with Article 4.2(a) or Article 4.2(b), or satisfies a process or change in tariff classification requirement set out in Annex 4-A, accessories, spare parts, tools, and instructional or other information materials are to be disregarded for qualification and to determine the origin.
2. If a good is subject to the regional value content requirement, the value of the accessories, spare parts, tools, and instructional or other information materials 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.
3. Each Party shall provide that a good's accessories, spare parts, tools, and instructional or other information materials, as described in paragraph 4, have the originating status of the good with which they are delivered.
4. For the purpose of this Article, accessories, spare parts, tools, and instructional or other information materials are covered when:
(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 types, quantities and value of the accessories, spare parts, tools, and instructional or other information materials are customary for that good.
Article 4.14. 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, if classified with a good, are disregarded when determining whether the good meets the specified change in tariff classification requirement set out in Annex 4-A.
2. Each Party shall provide that packaging materials and containers in which a good is packaged for retail sale, if classified with a good, are taken into account as originating or non -originating, as the case may be, when determining whether the good meets the regional value content requirement set out in Annex 4-A.
3. Each Party shall provide that packaging materials and containers in which a good is packaged for retail sale, if classified with the good, are disregarded if the good is wholly obtained or produced in the territory of one or more Parties, in accordance with Article 4.2(a) or is exclusively produced from originating materials in accordance with Article 4.2(b).
Article 4.15. Packing Materials and Containers for Shipment
Packing materials and containers for shipment shall be disregarded in determining whether a good is originating. Article 4.16: Sets of Goods 1. Each Party shall provide that for a set classified as a result of the application of rule 3(a) or (b) of the General Rules for the Interpretation of the Harmonized System, the originating status of the set shall be determined in accordance with the product specific rule of origin that applies to the set.
2. Each Party shall provide that for a set classified as a result of the application of rule 3(c) of the General Rules for the 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 the other applicable requirements of this Chapter.
3. Notwithstanding paragraph 2, for a set classified as a result of the application of rule 3(c) of the General Rules for the Interpretation of the Harmonized System, the set is originating if the value of all the non-originating goods in the set does not exceed 12 per cent of the value of the set.
4. For the purposes of paragraph 3, the value of the non-originating goods in the set and the value of the set shall be calculated in the same manner as the value of non-originating materials and the value of the good.
Article 4.17. Transit and Transhipment
1. Each Party shall provide that an originating good retains its originating status if the good has been transported from the exporting Party to the importing Party without passing through the territory of one or more States that are not the exporting Party or the importing Party.
2. Each Party shall provide that if an originating good is transported through the territory of one or more States that are not the exporting Party or the importing Party, the good retains its originating status provided that the good:
(a) does not undergo any operation outside the territories of the exporting Party or the importing Party other than: unloading; reloading; splitting up; storing; labelling or marking required by the importing Party; or any other operation necessary to preserve it in good condition; and
(b) remains under customs control in the territory of one or more States that are not the exporting Party or the importing Party. Article 4.18: Consultations and Modifications All Parties to the Pacific Alliance shall notify Singapore on an annual basis of any changes to PA's PSRs. If PA's PSRs are modified, all Parties to the Pacific Alliance and Singapore shall hold consultations regarding the review of Annex 4-A one year after the entry into force of the aforementioned modification.
Section B. Origin Procedures
Article 4.19. Certification of Origin
1. Each Party shall provide that an importer may make a claim for preferential tariff treatment based on acertification of origin completed by an exporter or a producer, in accordance with Annex 4-B, for the purpose of certifying that a good being exported from the territory of a Party into the territory of the importing Party qualifies as an originating good.
2. Each Party shall provide thatif a producer certifies the origin of a good, the certification of origin is completed on the basis of the producer having supporting documents that demonstrate that the good is originating.
3. Accertification of origin completed by an exporter who is not the producer of the good shall be based on:
(a) supporting documents in its possession that demonstrate that the good qualifies as an originating good;
(b) its reasonable reliance on the producer's written representation, based on information in the producer's possession that the good qualifies as an originating good; or
(c) a completed certification of origin for the good, voluntarily provided to the exporter by the producer.
4. Nothing in paragraph 3 shall be construed to require a producer to provide a certification of origin to an exporter.