(b) the same class 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; or
(d) any other category as the Parties may decide.
4. Each Party shall provide that, for the purposes of the Net Cost Method in paragraphs 1 and 2, for automotive materials of subheading 8407.31 through 8407.34, 8408.20, heading 84.09, 87.06, 87.07, or 87.08, 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 another Party.
5. For the purposes of this Article:
(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 8702.10 or 8702.90, and motor vehicles classified under subheading 8704.21 or 8704.31;
(iv) motor vehicles classified under subheadings 8703.21 through 8703.90; or
(v) motor vehicles classified under heading 87.11.
(b) model line of motor vehicles means a group of motor vehicles having the same platform or model name;
(c) non-allowable interest costs means 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;
(d) reasonably allocate means to apportion in a manner appropriate under Generally Accepted Accounting Principles;
(e) 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:
(i) personnel training, without regard to where that training is performed; or
(ii) 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;
(f) sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and after-sales service:
(i) 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 (good brochures, catalogues, technical literature, price lists, service manuals and sales aid information); establishment and protection of logos and trademarks; sponsorships; wholesale and retail restocking charges; and entertainment;
(ii) sales and marketing incentives; consumer, retailer or wholesaler rebates; and merchandise incentives;
(iii) salaries and wages; sales commissions; bonuses; benefits (for example, medical, insurance or pension benefits); travelling and living expenses; and membership and professional fees for sales promotion, marketing and after-sales service personnel;
(iv) 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;
(v) liability insurance for goods;
(vi) 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;
(vii) 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;
(viii) rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centres;
(ix) property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centres, 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; and payments by the producer to other persons for warranty repairs;
(g) shipping and packing costs means the 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; and
(h) total cost means all product costs, period costs and other costs for a good incurred in the territory of one or more of the Parties, where:
(i) 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;
(ii) 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
(iii) 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 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.
Article 3.10. Accumulation
1. Each Party shall provide that a good is originating if the good is produced in the territory of one or more of the Parties by one or more producers, provided that the good satisfies the requirements in Article 3.2 (Originating Goods) and all other applicable requirements in this Chapter.
2. Each Party shall provide that an originating good or material of one or more of the Parties that is used in the production of another good in the territory of another Party is considered as originating in the territory of the other Party.
3. Each Party shall provide that production undertaken on a non-originating material in the territory of one or more of the Parties by one or more producers may contribute toward the originating content of a good for the purpose of determining its origin, regardless of whether that production was sufficient to confer originating status to the material itself.
Article 3.11. De Minimis
1. Except as provided in Annex 3-C (Exceptions to Article 3.11 (De Minimis)), each Party shall provide that a good that contains non-originating materials that do not satisfy the applicable change in tariff classification requirement specified in Annex 3-D (Product-Specific Rules of Origin) for the good is nonetheless an originating good if the value of all those materials does not exceed 10 per cent of the value of the good, as defined under Article 3.1 (Definitions), and the good meets all the other applicable requirements of this Chapter.
2. Paragraph 1 applies only when using a non-originating material in the production of another good.
3. 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.
4. With respect to a textile or apparel good, Article 4.2 (Rules of Origin and Related Matters) applies in place of paragraph 1.
Article 3.12. Fungible Goods or Materials
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 if the fungible good or material is commingled, provided that the inventory management method selected is used throughout the fiscal year of the person that selected the inventory management method.
Article 3.13. Accessories, Spare Parts, Tools and Instructional or other Information Materials
1. Each Party shall provide that:
(a) in determining whether a good is wholly obtained, or satisfies a process or change in tariff classification requirement as set out in Annex 3-D (Product-Specific Rules of Origin), accessories, spare parts, tools or instructional or other information materials, as described in paragraph 3, are to be disregarded; and
(b) in determining whether a good meets a regional value content requirement, the value of the accessories, spare parts, tools or instructional or other information materials, as described in paragraph 3, are to be taken into account as originating or non- originating materials, as the case may be, in calculating the regional value content of the good.
2. Each Party shall provide that a good's accessories, spare parts, tools or instructional or other information materials, as described in paragraph 3, have the originating status of the good with which they are delivered.
3. For the purposes 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 but 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 3.14. 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 the good, are disregarded in determining whether all the non-originating materials used in the production of the good have satisfied the applicable process or change in tariff classification requirement set out in Annex 3-D (Product-Specific Rules of Origin) or whether the good is wholly obtained or produced.
2. Each Party shall provide that if a good is subject to a regional value content requirement, the value of the packaging materials and containers in which the good is packaged for retail sale, if classified with the good, are taken into account as originating or non-originating, as the case may be, in calculating the regional value content of the good.
Article 3.15. Packing Materials and Containers for Shipment
Each Party shall provide that packing materials and containers for shipment are disregarded in determining whether a good is originating.
Article 3.16. Indirect Materials
Each Party shall provide that an indirect material is considered to be originating without regard to where it is produced.
Article 3.17. 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 10 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 3.18. Transit and Transhipment
1. Each Party shall provide that an originating good retains its originating status if the good has been transported to the 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) does not undergo any operation outside the territories of the Parties other than: unloading; reloading; separation from a bulk shipment; storing; labelling or marking required by the importing Party; or any other operation necessary to preserve it in good condition or to transport the good to the territory of the importing Party; and
(b) remains under the control of the customs administration in the territory of a non-Party.
Section B. Origin Procedures
Article 3.19. Application of Origin Procedures
Except as otherwise provided in Annex 3-A (Other Arrangements), each Party shall apply the procedures in this Section.
Article 3.20. Claims for Preferential Treatment
1. Except as otherwise provided in Annex 3-A (Other Arrangements), each Party shall provide that an importer may make a claim for preferential tariff treatment, based on a certification of origin completed by the exporter, producer or importer. (2) (3)
2. An importing Party may:
(a) require that an importer who completes a certification of origin provide documents or other information to support the certification;
(b) establish in its law conditions that an importer shall meet to complete a certification of origin;
(c) if an importer fails to meet or no longer meets the conditions established under subparagraph (b), prohibit that importer from providing its own certification as the basis of a claim for preferential tariff treatment; or
(d) if a claim for preferential tariff treatment is based on a certification of origin completed by an importer, prohibit that importer from making a subsequent claim for preferential tariff treatment for the same importation based on a certification of origin completed by the exporter or producer.
3. Each Party shall provide that a certification of origin: (a) need not follow a prescribed format;
(b) be in writing, including electronic format;
(c) specifies that the good is both originating and meets the requirements of this Chapter; and
(d) contains a set of minimum data requirements as set out in Annex 3- B (Minimum Data Requirements).
4. Each Party shall provide that a certification of origin may apply to: (a) a single shipment of a good into the territory of a Party; or
(b) multiple shipments of identical goods within any period specified in the certification of origin, but not exceeding 12 months.
5. Each Party shall provide that a certification of origin is valid for one year after the date that it was issued or for such longer period specified by the laws and regulations of the importing Party.
6. Each Party shall allow an importer to submit a certification of origin in English. If the certification of origin is not in English, the importing Party may require the importer to submit a translation in the language of the importing Party.
Article 3.21. Basis of a Certification of Origin
1. Each Party shall provide that if a producer certifies the origin of a good, the certification 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 certification of origin may be completed by the exporter of the good on the basis of:
(a) the exporter having information that the good is originating; or
(b) reasonable reliance on the producer's information that the good is originating.
3. Each Party shall provide that a certification of origin may be completed by the importer of the good on the basis of:
(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 greater certainty, nothing in paragraph 1 or 2 shall be construed to allow a Party to require an exporter or producer to complete a certification of origin or provide a certification of origin to another person.
Article 3.22. Discrepancies
Each Party shall provide that it shall not reject a certification of origin due to minor errors or discrepancies in the certification of origin.
Article 3.23. Waiver of Certification of Origin
No Party shall require a certification of origin if:
(a) the customs value of the importation does not exceed US $1,000 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 certification 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 governing claims for preferential tariff treatment under this Agreement.
Article 3.24. Obligations Relating to Importation
1. Except as otherwise provided for in this Chapter, each Party shall provide that, for the purpose of claiming preferential tariff treatment, the importer shall:
(a) make a declaration (4) that the good qualifies as an originating good;
(b) shave a valid certification of origin in its possession at the time the declaration referred to in subparagraph (a) is made;
(c) provide a copy of the certification of origin to the importing Party if required by the Party; and
(d) if required by a Party to demonstrate that the requirements in Article 3.18 (Transit and Transhipment) have been satisfied, provide relevant documents, such as transport documents, and in the case of storage, storage or customs documents.
2. Each Party shall provide that, if the importer has reason to believe that the certification of origin is based on incorrect information that could affect the accuracy or validity of the certification of origin, the importer shall correct the importation document and pay any customs duty and, if applicable, penalties owed.
3. No importing Party shall subject an importer to a penalty for making an invalid claim for preferential tariff treatment if the importer, on becoming aware that such a claim is not valid and prior to discovery of the error by that Party, voluntarily corrects the claim and pays any applicable customs duty under the circumstances provided for in the Party's law.
Article 3.25. Obligations Relating to Exportation
1. Each Party shall provide that an exporter or producer in its territory that completes a certification of origin shall submit a copy of that certification of origin to the exporting Party, on its request.
2. Each Party may provide that a false certification 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 another 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 if an exporter or a producer in its territory has provided a certification of origin and has reason to believe that it contains or is based on incorrect information, the exporter or producer shall promptly notify, in writing, every person and every Party to whom the exporter or producer provided the certification of origin of any change that could affect the accuracy or validity of the certification of origin.
Article 3.26. 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 a period of no less than five years from the date of importation of the good:
(a) the documentation related to the importation, including the certification 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 certification of origin completed by the importer.
2. Each Party shall provide that a producer or exporter in its territory that provides a certification of origin shall maintain, for a period of no less than five years from the date the certification of origin was issued, all records necessary to demonstrate that a good for which the exporter or producer provided a certification of origin is originating. Each Party shall endeavour to make available information on types of records that may be used to demonstrate that a good is originating.
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, including electronic, optical, magnetic or written form in accordance with that Party's law.
Article 3.27. Verification of Origin
1. For the purpose of determining whether a good imported into its territory is originating, the importing Party may conduct a verification of any claim for preferential tariff treatment by one or more of the following: (5)
(a) a written request for information from the importer of the good;
(b) a written request for information from the exporter or producer of the good;
(c) a verification visit to the premises of the exporter or producer of the good;
(d) for a textile or apparel good, the procedures set out in Article 4.6 (Verification); or
(e) other procedures as may be decided by the importing Party and the Party where an exporter or producer of the good is located.
2. If an importing Party conducts a verification, it shall accept information directly from the importer, exporter or producer.
3. If a claim for preferential tariff treatment is based on a certification of origin completed by the exporter or producer and, in response to a request for information by an importing Party under paragraph 1(a), 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 under paragraph 1(b) or 1(c) before it may deny the claim for preferential tariff treatment. The importing Party shall complete the verification, including any additional request to the exporter or producer under paragraph 1(b) or 1(c), within the time provided in paragraph 6(c). (6)
4. A written request for information or for a verification visit under paragraphs 1(a) through 1(c) shall:
(a) be in English or in an official language of the Party of the person to whom the request is made;
(b) include the identity of the government authority issuing the request;
(c) state the reason for the request, including the specific issue the requesting Party seeks to resolve with the verification;
(d) include sufficient information to identify the good that is being verified;
(e) include a copy of relevant information submitted with the good, including the certification of origin; and
(f) in the case of a verification visit, request the written consent of the exporter or producer whose premises are going to be visited, and state the proposed date and location for the visit and its specific purpose.
5. If an importing Party has initiated a verification in accordance with paragraph 1(b) or 1(c), it shall inform the importer of the initiation of the verification.