agricultural goods means those goods referred to in Article 2 of the Agreement on Agriculture, contained in Annex 1A to the WTO Agreement;
commercial samples of negligible value means commercial samples having a value, individually or in the aggregate as shipped, of not more than one U.S. dollar, or the equivalent amount in Bahrani currency, or so marked, torn, perforated, or otherwise treated that they are unsuitable for sale or use except as commercial samples;
consular transactions means requirements that goods of a Party intended for export to the territory of the other Party must first be submitted to the supervision of the consul of the importing Party in the territory of the exporting Party for the purpose of obtaining consular invoices or consular visas for commercial invoices, certificates of origin, manifests, shippers' export declarations, or any other customs documentation required on, or in connection with, importation;
consumed means
(a) actually consumed; or
(b) further processed or manufactured so as to result in a substantial change in value, form, or use of the good or in the production of another good;
duty-free means free of customs duty;
export subsidies means "export subsidies" as defined in Article 1(e) of the Agreement on Agriculture, contained in Annex 1A to the WTO Agreement, including any amendment of that article;
goods imported for sports purposes means sports requisites for use in sports contests, demonstrations, or training in the territory of the importing Party;
goods intended for display or demonstration includes their component parts, ancillary apparatus, and accessories;
import license means a license issued by a Party pursuant to an administrative procedure requiring the submission of an application or other documentation (other than that generally required for customs clearance purposes) to the relevant administrative body as a prior condition for importation into the territory of the Party;
performance requirement means a requirement that:
(a) a given level or percentage of goods or services be exported;
(b) domestic goods or services of the Party granting a waiver of customs duties or an import license be substituted for imported goods or services;
(c) a person benefiting from a waiver of customs duties or an import license purchase other goods or services in the territory of the Party granting the waiver of customs duties or the import license, or accord a preference to domestically produced goods;
(d) a person benefiting from a waiver of customs duties or an import license produce goods or supply services in the territory of the Party granting the waiver of customs duties or the import license, with a given level or percentage of domestic content; or
(e) relates in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows;
but does not include a requirement that:
(f) an imported good be subsequently exported;
(g) an imported good be used as a material in the production of another good that is subsequently exported;
(h) an imported good be substituted by an identical or similar good used as a material in the production of another good that is subsequently exported; or
(i) an imported good be substituted by an identical or similar good that is subsequently exported; and
printed advertising materials means those goods classified in Chapter 49 of the Harmonized System, including brochures, pamphlets, leaflets, trade catalogues, yearbooks published by trade associations, tourist promotional materials, and posters, that are used to promote, publicize, or advertise a good or service, are essentially intended to advertise a good or service, and are supplied free of charge.
Chapter Three. Textiles and Apparel
Article 3.1. Bilateral Emergency Action
1. If, as a result of the reduction or elimination of a duty under this Agreement, a textile or apparel good benefiting from preferential tariff treatment is being imported into the territory of a Party in such increased quantities, in absolute terms or relative to the domestic market for that good, and under such conditions as to cause serious damage, or actual threat thereof, to a domestic industry producing a like or directly competitive good, the Party may, to the extent and for such time as may be necessary to prevent or remedy such damage and to facilitate adjustment, take emergency action, consisting of an increase in the rate of duty on the good to a level not to exceed the lesser of:
(a) the most-favored-nation ("MFN") applied rate of duty in effect at the time the action is taken; and
(b) the MFN applied rate of duty in effect on the date of entry into force of this Agreement.
2. In determining serious damage, or actual threat thereof, the importing Party:
(a) shall examine the effect of increased imports of the good from the exporting Party on the particular industry, as reflected in changes in such relevant economic variables as output, productivity, utilization of capacity, inventories, market share, exports, wages, employment, domestic prices, profits, and investment, none of which shall necessarily be decisive; and
(b) shall not consider changes in technology or consumer preference as factors supporting a determination of serious damage or actual threat thereof.
3. The importing Party may take an emergency action under this Article only following an investigation by its competent authorities.
4. The importing Party shall deliver to the exporting Party, without delay, written notice of its intent to take emergency action and, on the request of the exporting Party, shall enter into consultations with that Party regarding the matter.
5. An importing Party:
(a) shall not maintain an emergency action for a period exceeding three years;
(b) shall not take or maintain an emergency action against a good beyond ten years after the Party must eliminate customs duties on that good pursuant to this Agreement;
(c) shall not take an emergency action more than once against the same good of the other Party; and
(d) shall, on termination of the emergency action, apply to the good that was subject to the emergency action the rate of duty that would have been in effect but for the action.
6. The importing Party shall provide to the exporting Party mutually agreed trade liberalizing compensation in the form of concessions having substantially equivalent trade effects or equivalent to the value of the additional duties expected to result from the emergency action. Such concessions shall be limited to textile and apparel goods, unless the Parties agree otherwise. If the Parties are unable to agree on compensation, the exporting Party may suspend tariff concessions under this Agreement having trade effects substantially equivalent to the trade effects of the emergency action. Such tariff action may be taken against any goods of the importing Party. The exporting Party shall apply the tariff action only for the minimum period necessary to achieve the substantially equivalent trade effects. The importing Party's obligation to provide trade compensation and the exporting Party's right to take tariff action shall terminate when the emergency action terminates.
7. Nothing in this Agreement shall be construed to limit a Party's right to restrain imports of textile and apparel goods in a manner consistent with the Agreement on Textiles and Clothing or the Safeguards Agreement. However, a Party may not take or maintain an emergency action under this Article against a textile or apparel good that is subject, or becomes subject, to a safeguard measure that a Party takes pursuant to either such agreement.
Article 3.2. Rules of Origin and Related Matters
Application of Chapter Four
1. Except as provided in this Chapter, including its Annexes, Chapter Four (Rules of Origin) applies to textile and apparel goods.
2. For greater certainty, the rules of origin set forth in this Agreement shall not apply in determining the country of origin of a textile or apparel good for non-preferential purposes.
Consultations
3. On the request of either Party, the Parties shall consult to consider whether the rules of origin applicable to a particular textile or apparel good should be revised to address issues of availability of supply of fibers, yarns, or fabrics in the territories of the Parties.
4. In the consultations referred to in paragraph 3, each Party shall consider all data presented by the other Party that demonstrate substantial production in its territory of a particular fiber, yarn, or fabric. The Parties shall consider that there is substantial production if a Party demonstrates that its domestic producers are capable of supplying commercial quantities of the fiber, yarn, or fabric in a timely manner.
5. The Parties shall endeavor to conclude consultations within 60 days after delivery of a request. If the Parties agree in the consultations to revise a rule of origin, the agreement shall supersede that rule of origin when approved by the Parties in accordance with Article 21.2 (Amendments).
De Minimis
6. A textile or apparel good that is not an originating good because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in Annex 3-A, shall nonetheless be considered to be an originating good if the total weight of all such fibers or yarns in that component is not more than seven percent of the total weight of that component. Notwithstanding the preceding sentence, a good containing elastomeric yarns in the component of the good that determines the tariff classification of the good shall be considered to be an originating good only if such yarns are wholly formed in the territory of a Party.
Treatment of Sets
7. Notwithstanding the specific rules of origin set out in Annex 3-A, textile or apparel goods classified under General Rule of Interpretation 3 of the Harmonized System as goods put up in sets for retail sale shall not be regarded as originating goods unless each of the goods in the set is an originating good or the total value of the non-originating goods in the set does not exceed 10 percent of the value of the set determined for purposes of assessing customs duties. Preferential Tariff Treatment for Certain Non-Originating Textile and Apparel Goods
8. Subject to paragraph 9, each Party shall accord preferential tariff treatment to the following goods, if they meet the applicable conditions for preferential tariff treatment under this Agreement other than the condition that they be originating goods:
(a) cotton or man-made fiber fabric goods provided for in Chapters 52, 54, 55, 58, and 60 of the Harmonized System that are wholly formed in the territory of a Party from yarn produced or obtained outside the territory of a Party;
(b) cotton or man-made fiber fabric goods provided for in Annex 3-B that are wholly formed in the territory of a Party from yarn spun in the territory of a Party from fiber produced or obtained outside the territory of a Party;
(c) cotton or man-made fiber apparel goods provided for in Chapters 61 or 62 of the Harmonized System that are cut or knit to shape, or both, and sewn or otherwise assembled in the territory of a Party from fabric or yarn produced or obtained outside the territory of a Party; and
(d) cotton or man-made fiber made-up goods provided for in Chapter 63 that are cut or knit to shape, or both, and sewn or otherwise assembled in the territory of a Party from fabric wholly formed in a Party from yarn produced or obtained outside the territory of a Party.
9. The treatment described in paragraph 8 shall be limited to goods imported into the territory of a Party up to an annual total quantity of 65 million square meters equivalent in each of the first ten years after entry into force of this Agreement. Upon the request of an exporting Party, the importing Party shall allocate such quantity among the four categories of goods described in paragraph 8, in accordance with such request. To determine the quantity in square meters equivalent that is charged against the annual quantity, the importing Party shall apply the conversion factors listed in the Correlation: U.S. Textile and Apparel Category System with the Harmonized Tariff Schedule of the United States of America ("The Textile Correlation"), 2003, U.S. Department of Commerce, Office of Textiles and Apparel, or successor publication.
10. At the written request of an exporting Party, an importing Party shall require an importer claiming preferential tariff treatment under paragraph 8 to submit to the importing Party a certificate of eligibility. An importing Party shall not accept such a claim unless the certificate of eligibility is properly completed and signed by an authorized official of the exporting Party and is presented at the time the preferential tariff treatment is claimed.
11. Where an importing Party has reason to question the accuracy of a claim under paragraph 8, or where an importing Party seeks such information in the course of a verification under Article 3.3, it may require an importer claiming preferential tariff treatment for a textile or apparel good under paragraph 8 to prepare, sign, and submit to its competent authority a declaration supporting such a claim for preferential tariff treatment and to provide all pertinent information concerning the production of the good, including:
(a) a description of the good, quantity, invoice numbers, and bills of lading;
(b) a description of the operations performed in the production of the good in the territory of one or both of the Parties;
(c) a reference to the specific provision of paragraph 8 that forms the basis for the claim for preferential tariff treatment; and
(d) a statement as to any fiber, yarn, or fabric of a non-Party and the origin of such materials used in the production of the good. The importing Party may require the importer to retain all documents relied upon to prepare the declaration for a period of five years.
Article 3.3. Customs Cooperation
1. The Parties shall cooperate for purposes of:
(a) enforcing or assisting in the enforcement of their measures affecting trade in textile or apparel goods;
(b) verifying the accuracy of claims of origin;
(c) enforcing or assisting in the enforcement of measures implementing international agreements affecting trade in textile or apparel goods; and
(d) preventing circumvention of international agreements affecting trade in textile or apparel goods.
2. On the request of the importing Party, the exporting Party shall conduct a verification for purposes of enabling the importing Party to determine that a claim of origin for a textile or apparel good is accurate. The exporting Party shall conduct such a verification, regardless of whether an importer claims preferential tariff treatment for the good. The exporting Party also may conduct such a verification on its own initiative.
3. Where the importing Party has a reasonable suspicion that an exporter or producer of the exporting Party is engaging in unlawful activity relating to trade in textile or apparel goods, the exporting Party shall conduct, on the request of the importing Party, a verification for purposes of enabling the importing Party to determine that the exporter or producer is complying with applicable customs measures regarding trade in textile or apparel goods, including measures that the exporting Party adopts and maintains pursuant to this Agreement and measures of either Party implementing other international agreements affecting trade in textile or apparel goods, or to determine that a claim of origin regarding textile or apparel goods exported or produced by that enterprise is accurate. For purposes of this paragraph, a reasonable suspicion of unlawful activity means a suspicion based on relevant factual information of the type set forth in Article 5.5 (Cooperation) or information that indicates:
(a) circumvention by the exporter or producer of applicable customs measures regarding trade in textile or apparel goods, including measures adopted to implement this Agreement; or
(b) conduct that facilitates the violation of measures relating to any other international agreement regarding trade in textile or apparel goods.
4. The exporting Party, through its competent authorities, shall permit the importing Party, through its competent authorities, to assist in a verification conducted pursuant to paragraph 2 or 3, including by conducting, along with the competent authorities of the exporting Party, visits in the territory of the exporting Party to the premises of an exporter, producer, or any other enterprise involved in the movement of a textile or apparel good from the territory of the exporting Party to the territory of the importing Party. If an exporter, producer, or other enterprise refuses to consent to a visit by the competent authorities of the importing Party, the importing Party may consider that the verification cannot be completed and the determination described in paragraph 2 or 3 cannot be made and may take appropriate action as described in paragraph 8.
5. Each Party shall provide to the other Party, consistent with the Party's law, production, trade, and transit documents and other information necessary for the exporting Party to conduct a verification under paragraph 2 or 3. Each Party shall treat any documents or information exchanged in the course of such a verification in accordance with Article 5.6 (Confidentiality).
6. While a verification is being conducted, the importing Party may, consistent with its law, take appropriate action, which may include suspending the application of preferential tariff treatment to:
(a) the textile or apparel good for which a claim of origin has been made, in the case of a verification under paragraph 2; or
(b) any textile or apparel good exported or produced by the person subject to a verification under paragraph 3, where the reasonable suspicion of unlawful activity relates to that good.
7. The Party conducting a verification under paragraph 2 or 3 shall provide the other Party with a written report on the results of the verification, which shall include all documents and facts supporting any conclusion that the Party reaches.
8. (a) If the importing Party is unable to make the determination described in paragraph 2 within 12 months after its request for a verification, or makes a negative determination, it may, consistent with its law, take appropriate action, including denying preferential tariff treatment to the textile or apparel good subject to the verification, and to similar goods exported or produced by the person that exported or produced the good.
(b) If the importing Party is unable to make a determination described in paragraph 3 within 12 months after its request for a verification, or makes a negative determination, it may, consistent with its law, take appropriate action, including denying preferential tariff treatment to any textile or apparel good exported or produced by the person subject to the verification.
9. (a) The importing Party may deny preferential tariff treatment or entry under paragraph 8 only after notifying the other Party of its intention to do so. (b) If the importing Party takes action under paragraph 8 because it is unable to make a determination described in paragraph 2 or 3, it may continue to take appropriate action under paragraph 8 until it receives information sufficient to enable it to make the determination.
10. On the request of either Party, the Parties shall consult to resolve any technical or interpretive difficulties that may arise under this Article or to discuss ways to improve the effectiveness of their cooperative efforts. In addition, either Party may request technical or other assistance from the other Party in implementing this Article. The Party receiving such a request shall make every effort to respond favorably and promptly.
Article 3.4. Definitions
For purposes of this Chapter:
claim of origin means a claim that a textile or apparel good is an originating good;
exporting Party means the Party from whose territory a textile or apparel good is exported;
importing Party means the Party into whose territory a textile or apparel good is imported; and
textile or apparel good means a good listed in the Annex to the Agreement on Textiles and Clothing.
Chapter Four. Rules of Origin
Article 4.1. Originating Goods
Except as otherwise provided in this Chapter or Chapter Three (Textiles and Apparel), each Party shall provide that a good is an originating good where it is imported directly from the territory of one Party into the territory of other Party, and,
(a) it is a good wholly the growth, product, or manufacture of one or both of the Parties; or
(b) for goods other than those covered by the rules in Annex 3-A or Annex 4-A, the good is a new or different article of commerce that has been grown, produced, or manufactured in the territory of one or both of the Parties; and the sum of (i) the value of materials produced in the territory of one or both of the Parties, plus (ii) the direct costs of processing operations performed in the territory of one or both of the Parties is not less than 35 percent of the appraised value of the good at the time it is imported into the territory of a Party; or
(c) for goods covered by the rules in Annex 3-A or Annex 4-A, the good has satisfied the requirements specified in that Annex.
Article 4.2. New or Different Article of Commerce
For purposes of this Chapter, new or different article of commerce means a good that has been substantially transformed from a good or material that is not wholly the growth, product, or manufacture of one of both of the Parties and that has a new name, character, or use distinct from the good or material from which it was transformed.
Article 4.3. Non-qualifying Operations
Each Party shall provide that, for purposes of Article 4.1, no good shall be considered a new or different article of commerce by virtue of having merely undergone (a) simple combining or packaging operations or (b) mere dilution with water or with another substance that does not materially alter the characteristics of the good.
Article 4.4. Cumulation
1. Each Party shall provide that direct costs of processing operations performed in the territory of one or both of the Parties as well as the value of materials produced in the territory of one or both of the Parties may be counted without limitation toward satisfying the 35 percent value-content requirement specified in Article 4.1(b).
2. Each Party shall provide that an originating good or a material produced in the territory of one or both of the Parties, incorporated into a good in the territory of the other Party, shall be considered to originate in the territory of the other Party.
3. Each Party shall provide that a good shall originate where the good is grown, produced, or manufactured in the territory of one or both of the Parties by one or more producers, provided that the good satisfies the requirements of Article 4.1 and all other applicable requirements in this Chapter or Chapter Three (Textiles and Apparel).
Article 4.5. Value of Materials
1. For purposes of this Chapter, each Party shall provide that the value of a material produced in the territory of one or both of the Parties includes:
(a) the price actually paid or payable by the producer of the good for the material;
(b) when not included in the price actually paid or payable by the producer of the good for the material, the freight, insurance, packing, and all other costs incurred in transporting the material to the producer's plant;
(c) the cost of waste or spoilage, less the value of recoverable scrap; and
(d) taxes or customs duties imposed on the material by one or both of the Parties, provided the taxes or customs duties are not remitted upon exportation.
2. Each Party shall provide that where the relationship between the producer of the good and the seller of the material influenced the price actually paid or payable for the material, or where paragraph 1 is otherwise not applicable, the value of the material produced in the territory of one or both of the Parties includes:
(a) all expenses incurred in the growth, production, or manufacture of the material, including general expenses;
(b) a reasonable amount for profit; and
(c) freight, insurance, packing, and all other costs incurred in transporting the material to the producer's plant.
Article 4.6. Direct Costs of Processing Operations
1. For purposes of this Chapter, direct costs of processing operations means those costs either directly incurred in, or that can be reasonably allocated to, the growth, production, or manufacture of the good. Such costs include the following, to the extent that they are includable in the appraised value of goods imported into the territory of a Party:
(a) all actual labor costs involved in the growth, production, or manufacture of the specific good, including fringe benefits, on-the-job training, and the cost of engineering, supervisory, quality control, and similar personnel;
(b) tools, dies, molds, and other indirect materials, and depreciation on machinery and equipment that are allocable to the specific good;
(c) research, development, design, engineering, and blueprint costs to the extent that they are allocable to the specific good;
(d) costs of inspecting and testing the specific good; and
(e) costs of packaging the specific good for export to the territory of the other Party.
2. For greater certainty, those items that are not included as direct costs of processing operations are those that are not directly attributable to the good or are not costs of growth, production, or manufacture of the good. These include:
(a) profit; and
(b) general expenses of doing business that are either not allocable to the specific good or are not related to the growth, production, or manufacture of the good, such as administrative salaries, casualty and liability insurance, advertising, and salesmen's salaries, commissions, or expenses.
Article 4.7. Packaging and Packing Materials and Containers for Retail Sale and for Shipment
Each Party shall provide that packaging and packing materials and containers in which a good is packaged for retail sale and for shipment, if classified with the good, shall be disregarded in determining whether the good qualifies as an originating good, except that the value of originating packaging and packing materials and containers may be counted toward satisfying, where applicable, the 35 percent value-content requirement specified in Article 4.1(b).
Article 4.8. Indirect Materials
Each Party shall provide that indirect materials shall be disregarded in determining whether the good qualifies as an originating good, except that the cost of such indirect materials may be counted toward satisfying the 35 percent value-content requirement where applicable.
Article 4.9. Transit and Transshipment
For purposes of this Chapter, a good shall not be considered to be imported directly from the territory of the other Party if the good undergoes subsequent production, manufacturing, or any other operation outside the territories of the Parties, other than unloading, reloading, or any other operation necessary to preserve it in good condition or to transport the good to the territory of the other Party.
Article 4.10. Importer Requirements
Each Party shall provide that whenever an importer makes a claim for preferential tariff treatment, the importer:
(a) shall be deemed to have certified that such good qualifies for preferential tariff treatment; and
(b) shall submit to the customs authorities of the importing Party, upon request, a declaration setting forth all pertinent information concerning the growth, production, or manufacture of the good. Each Party may require that the information on the declaration should contain at least the following pertinent details:
(i) a description of the good, quantity, invoice numbers, and bills of lading;
(ii) a description of the operations performed in the growth, production, or manufacture of the good in the territory of one or both of the Parties and, where applicable, identification of the direct costs of processing operations;
(iii) a description of any materials used in the growth, production, or manufacture of the good that are wholly the growth, product, or manufacture of one or both of the Parties, and a statement as to the value of such materials;
(iv) a description of the operations performed on, and a statement as to the origin and value of, any foreign materials used in the good that are claimed to have been sufficiently processed in the territory of one or both of the Parties so as to be materials produced in the territory of one or both of the Parties, or are claimed to have undergone an applicable change in tariff classification specified in Annex 3-A or Annex 4-A; and
(v) a description of the origin and value of any foreign materials used in the good that are not claimed to have been substantially transformed in the territory of one or both of the Parties, or are not claimed to have undergone an applicable change in tariff classification specified in Annex 3-A or Annex 4-A.
The importing Party should request a declaration only when that Party has reason to question the accuracy of a deemed certification referred to in subparagraph (a), when that Party's risk assessment procedures indicate that verification of a claim is appropriate, or when the Party conducts a random verification. The importer shall retain the information necessary for the preparation of the declaration for five years from the date of importation of the good.
Article 4.11. Obligations Relating to Importation
1. Each Party shall grant any claim for preferential tariff treatment made in accordance with this Chapter, unless the Party possesses information indicating that the importer's claim fails to comply with any requirement under this Chapter or Chapter Three (Textiles and Apparel).
2. To determine whether a good imported into its territory qualifies for preferential tariff treatment, the importing Party may, through its customs authority, verify the origin.
3. Where a Party denies a claim for preferential tariff treatment, it shall issue a written determination containing findings of fact and the legal basis for its determination. The Party shall issue the determination within a period established under its law.
4. Nothing in this Article shall prevent a Party from taking action under Article 3.3 (Customs Cooperation).
Article 4.12. Consultations and Modifications
1. The Parties shall consult and cooperate to ensure that this Chapter is applied in an effective and uniform manner, in accordance with the objectives of this Agreement.
2. The Parties may establish ad hoc working groups, or a subcommittee of the Joint Committee established pursuant to Article 18.2 (Joint Committee), to consider any matter related to this Chapter (including Annex 4-A). On request of a Party, the Parties may direct a working group or subcommittee to review operation of this Chapter (including Annex 4-A) and develop recommendations for amendments in the light of any pertinent developments, including changes in technology and production processes, and other relevant factors.
Article 4.13. Regional Cumulation
At a time to be determined by the Parties, and in the light of their desire to promote regional integration, the Parties shall enter into discussions with a view to deciding the extent to which materials that are products of countries in the region may be counted for purposes of satisfying the origin requirement under this Agreement as a step toward achieving regional integration.