(a) 40% under the transaction value method or 33.33% under the net cost method, from January 1, 1995 to December 31, 1997; and
(b) 45% under the transaction value method or 37.50% under the net cost method, from January 1, 1998 to December 31, 1998.
2. A good classified under subheading 6404.11 of the Harmonized System subject to the regional content requirement shall comply with a percentage of regional content of not less than 45% under the transaction value method or 37.50% under the net cost method, from January 1, 1995 through December 31, 1998.
3. As of January 1, 1999, the goods referred to in this article shall comply with the regional content percentage established in the annex to article 5-03.
Chapter VI. Customs Procedures
Article 6-01. Definitions.
1. For purposes of this Chapter, the following definitions shall apply:
competent authority: the authority that, according to the legislation of each Party, is responsible for the administration of its customs and tax laws and regulations;
identical goods: goods that are alike in every respect, including their physical characteristics, quality and commercial prestige. Minor differences in appearance do not prevent them from being considered identical;
determination of origin ruling: a ruling issued as a result of a verification that establishes whether a good qualifies as originating;
preferential tariff treatment: the application of the appropriate tariff rate to an originating good under the Tariff Relief Program;
2. Except as defined in this Article, the definitions set forth in Chapter V (Rules of Origin) are incorporated into this Chapter.
Article 6-02. Declaration and Certification of Origin.
1. For purposes of this Chapter, prior to the entry into force of this Agreement, the Parties shall develop a single format for the certificate and declaration of origin.
2. The certificate of origin referred to in paragraph 1 shall serve to certify that a good exported from the territory of one Party to the territory of the other Party qualifies as originating.
3. Each Party shall provide that its exporters shall complete and sign a certificate of origin in respect of the export of a good for which an importer may claim preferential tariff treatment. For a period of 4 years from the entry into force of this Agreement, the certificate of origin shall require validation by the competent authority of the exporting Party.
4. Each Party shall provide that:
(a) where an exporter is not the producer of the good, it completes and signs the certificate of origin on the basis of the declaration of origin referred to in paragraph 1; and
(b) the declaration of origin covering the good being exported is completed and signed by the producer of the good and provided voluntarily to the exporter.
5. Each Party shall provide that the certificate of origin completed and signed by the exporter shall cover:
(a) a single importation of one or more goods; or.
(b) several imports of identical goods to be made within a period of time established by the exporter on the certificate of origin, which shall not exceed the period of time set out in paragraph 6.
6. Each Party shall provide that the certificate of origin shall be accepted by the competent authority of the importing Party for one year from the date of signature.
Article 6-03. Obligations with Respect to Imports.
1. Each Party shall require an importer claiming preferential tariff treatment for a good imported into its territory from the territory of the other Party to:
(a) declares in writing, on the import document provided for in its legislation, on the basis of a valid certificate of origin, that the good qualifies as originating;
(b) has the certificate of origin in its possession at the time of making such declaration;
(c) provides a copy of the certificate of origin when requested by its competent authority; and
(d) submits a corrected declaration and pays the corresponding duties, when he has reason to believe that the certificate of origin on which his import declaration is based contains incorrect information. When the importer submits the aforementioned declaration spontaneously, he shall not be penalized.
2. Each Party shall provide that, where its importer fails to comply with any of the requirements set out in paragraph 1, preferential tariff treatment shall be denied to the good imported from the territory of the other Party for which the preference was claimed.
Article 6-04. Export Obligations.
1. Each Party shall provide that its exporter or producer that has completed and signed a certificate or declaration of origin shall furnish a copy of the certificate or declaration of origin to its competent authority upon request.
2. Each Party shall provide that its exporter or producer who has completed and signed a certificate or declaration of origin and has reason to believe that such certificate or declaration contains incorrect information shall promptly notify in writing any change that may affect the accuracy or validity of the certificate or declaration of origin to all persons to whom he has delivered the certificate or declaration and, in accordance with its legislation, to its competent authority, in which case he shall not be penalized for having submitted an incorrect certification or declaration.
3. Each Party shall provide that a false certification or declaration of origin made by its exporter or producer to the effect that a good to be exported to the territory of the other Party qualifies as originating shall have the same legal consequences, with such modifications as the circumstances may require, as those that would apply to its importer making false declarations or statements in contravention of its customs laws and regulations.
4. The competent authority of the exporting Party shall bring to the attention of the competent authority of the importing Party the notification of the exporter or producer referred to in paragraph 2.
Article 6-05. Exceptions.
Provided that it is not part of two or more imports that are made or planned for the purpose of evading compliance with the certification requirements of Articles 6-02 and 6-03, the certificate of origin shall not be required for the importation of goods in the following cases:
(a) the importation for commercial purposes of goods whose customs value does not exceed one thousand United States dollars or its equivalent in national currency, but the invoice may be required to contain a declaration by the importer or exporter that the good qualifies as originating;
(b) the importation for non-commercial purposes of goods the customs value of which does not exceed one thousand United States dollars or its equivalent in local currency; and
c) the importation of a good for which the importing Party has waived the requirement of presentation of the certificate of origin.
Article 6-06. Accounting Records.
Each Party shall provide that:
(a) its exporter or producer that completes and signs a certificate or declaration of origin retains for at least five years after the date of signature of that certificate or declaration, all records and documents relating to the origin of the good, including those relating to:
(i) the acquisition, costs, value and payment for the good that is exported from its territory;
(ii) the acquisition, costs, value and payment for all materials, used in the production of the good being exported from its territory; and
(iii) the production of the good in the form in which it is exported from its territory;
(b) for the purposes of the verification procedure established in Article 6-07, the exporter or producer provides to the competent authority of the importing Party the records and documents referred to in subparagraph (a). When the records and documents are not in the possession of the exporter or producer, the exporter or producer may request the records and documents from the producer or supplier of the materials to be provided through him to the competent authority conducting the verification;
c) an importer claiming preferential tariff treatment for a good being imported into its territory from the territory of the other Party shall retain for at least five years from the date of importation, the certificate of origin and all other documentation relating to the importation required by the importing Party.
Article 6-07. Procedures to Verify Origin.
1. The importing Party may request from the exporting Party information regarding the origin of a good through its competent authority.
2. To determine whether a good imported into its territory from the territory of the other Party qualifies as originating, each Party may, through its competent authority, verify the origin of the good by means of:
(a) written questionnaires addressed to exporters or producers in the territory of the other Party; or
(b) verification visits to an exporter or producer in the territory of the other Party, for the purpose of examining the records and documents evidencing compliance with the rules of origin in accordance with Article 6-06, and inspecting the facilities used in the production of the good and, where appropriate, those used in the production of the materials.
3. The provisions of paragraph 2 shall be without prejudice to the powers of review of the importing Party over its own importers, exporters or producers.
4. An exporter or producer receiving a questionnaire pursuant to paragraph 2(a) shall respond and return the questionnaire no later than 30 days from the date of its receipt. During this period the exporter or producer may request in writing to the importing Party an extension, which in its case shall not exceed 30 days. This request shall not result in the denial of preferential tariff treatment.
5. In the event that the exporter or producer fails to respond or return the questionnaire within the relevant time period, the importing Party may deny preferential tariff treatment upon resolution under the terms of paragraph 11.
6. Before carrying out a verification visit pursuant to paragraph 2(b), the importing Party shall be required, through its competent authority, to notify in writing its intention to carry out the visit. The notification shall be sent to the exporter or producer to be visited, to the competent authority of the Party in whose territory the visit is to take place and, if so requested by the latter, to the embassy of that Party in the territory of the importing Party. The competent authority of the importing Party shall request the written consent of the exporter or producer to be visited.
7. The notification referred to in paragraph 6 shall contain:
(a) the identification of the competent authority making the notification;
(b) the name of the exporter or producer to be visited;
(c) the date and place of the proposed verification visit;
(d) the purpose and scope of the proposed verification visit, making specific mention of the good or goods subject to verification to which the certificate or certificates of origin refer;
(e) the names, personal data and positions of the officials who will carry out the verification visit; and f) the legal basis for the verification visit.
8. Any modification to the information referred to in paragraph 7(e) shall be notified in writing to the exporter or producer and to the competent authority of the exporting Party prior to the verification visit. Any modification to the information referred to in paragraph 7 (a), (b), (c), (d) and (f) shall be notified under the terms of paragraph 6.
9. If within 30 days of receipt of the notification of the proposed verification visit under paragraph 6, the exporter or producer does not consent in writing to the verification visit, the importing Party may deny preferential tariff treatment to the good or goods that would have been the subject of the verification visit.
10. Each Party shall allow the exporter or the producer whose good or goods are the subject of a verification visit to designate two witnesses who are present during the visit, provided that the witnesses shall speak only in that capacity. Failure by the exporter or producer to designate witnesses shall not result in postponement of the visit.
11. Within 120 days following the conclusion of the verification, the competent authority shall provide a written resolution to the exporter or producer whose good or goods have been the subject of the verification, determining whether or not the good qualifies as originating, which shall include the findings of fact and the legal basis for the determination.
12. When the verification carried out by a Party establishes that the exporter or producer has certified or declared more than once, in a false or unfounded manner, that a good qualifies as originating, the importing Party may suspend the preferential tariff treatment to the identical goods exported or produced by that person, until that person proves that it complies with the provisions of Chapter V (Rules of Origin).
13. Each Party shall provide that, where its competent authority determines that a good imported into its territory does not qualify as originating according to the tariff classification or value applied by that Party to one or more materials used in the production of the good, and this differs from the tariff classification or value applied to the materials by the Party from whose territory the good has been exported, the determination of that Party shall not take effect until it notifies in writing both the importer of the good and the person who has completed and signed the certificate of origin covering the good.
14. The importing Party shall not apply a ruling under paragraph 13 to an importation made before the date on which the ruling becomes effective, provided that the competent authority of the exporting Party has issued an advance ruling under Article 5-02 (Implementing Instruments) on the tariff classification or value of materials on which a person may rely under its laws and regulations.
15. Where a Party denies preferential tariff treatment to a good pursuant to a ruling under paragraph 13, that Party shall postpone the effective date of the denial for a period not to exceed 90 days, provided that the importer of the good or the exporter or producer who has completed and signed the certificate or declaration of origin covering the good establishes that it has relied in good faith, to its detriment, on the tariff classification or value applied to the materials by the competent authority of the exporting Party.
16. Each Party shall maintain the confidentiality of the information gathered in the process of verification of origin in accordance with the provisions of its legislation.
Article 6-08. Review and Challenge.
1. Each Party shall grant the same rights of review and challenge of determinations of origin and advance rulings provided to its importers to exporters or producers of the other Party that:
(a) complete and sign a certificate or declaration of origin covering a good that has been the subject of a determination of origin ruling in accordance with paragraph 11 of Article 6-07; or
(b) have received an advance ruling in accordance with Article 6-10.
2. The rights referred to in paragraph 1 include access to at least one instance of administrative review, independent of the official or agency responsible for the determination or ruling subject to review, and access to one instance of judicial or quasi-judicial review of the determination or decision made in the final instance of administrative review, in accordance with the laws of each Party.
Article 6-09. Sanctions.
Each Party shall establish or maintain criminal, civil, or administrative penalties for violations of its laws and regulations relating to the provisions of this Chapter.
Article 6-10. Advance Rulings.
1. Each Party shall provide, through its competent authority, for the expeditious issuance of written advance rulings prior to the importation of a good into its territory. Advance rulings shall be issued to the importer or to the exporter or producer in the territory of the other Party, based on the facts and circumstances stated by them, as to whether or not the goods qualify as originating.
2. Advance rulings shall address:
(a) whether the non-originating materials used in the production of a good comply with the corresponding change in tariff classification set out in the Annex to Article 5-03 (Specific Rules of Origin);
(b) whether the good complies with the regional value content requirement set out in Chapter V (Rules of Origin);
(c) whether the method applied by the exporter or producer in the territory of the other Party, in accordance with the principles of the Customs Valuation Code, for the calculation of the transaction value of the good or materials used in the production of a good for which an advance ruling is requested is adequate to determine whether the good meets the regional value content requirement under Chapter V (Rules of Origin);
(d) whether the method applied by the exporter or producer in the territory of the other Party for the reasonable allocation of costs in accordance with the Annex to Article 5-01 (Net Cost) is adequate to determine whether the good meets the regional value content requirement under Chapter V (Rules of Origin);
(e) whether the country of origin marking made or proposed for a good satisfies the requirements of Article 3-11 (Country of Origin Marking); and
(f) such other matters as the Parties may agree.
3. Each Party shall adopt or maintain procedures for the issuance of advance rulings upon publication of advance rulings that include:
(a) the information reasonably required to process the request;
(b) the authority of its competent authority to request additional information from the person requesting the advance ruling at any time during the process of evaluating the request;
(c) a time limit of 120 days for the competent authority to issue the advance ruling, once it has obtained all the necessary information from the person requesting the advance ruling; and
(d) the obligation to explain in a complete, substantiated and reasoned manner to the applicant, the reasons for the advance ruling when it is unfavorable to the applicant.
4. Each Party shall apply advance rulings to imports into its territory as of the date of issuance of the ruling, or such later date as may be specified therein, unless the advance ruling is modified or revoked in accordance with paragraph 6.
5. Each Party shall accord to any person requesting an advance ruling the same treatment, interpretation and application of the provisions of Chapter V (Rules of Origin) relating to the determination of origin as it has accorded to any other person to whom it has issued an advance ruling, where the facts and circumstances are identical in all material respects.
6. The advance ruling may be modified or revoked by the competent authority in the following cases: (a) when it has been founded on any error:
(i) of fact;
(ii) in the tariff classification of the good or materials;
(iii) relating to the compliance of the good with the regional value content requirement;
(b) where it is inconsistent with an interpretation agreed between the Parties or a modification with respect to Article 3-11 (Country of Origin Marking) or Chapter V (Rules of Origin);
(c) when the circumstances or facts on which it is based change; or d) in order to comply with an administrative or judicial decision.
7. Each Party shall provide that any modification or revocation of an advance ruling shall take effect on the date on which it is issued or on a later date specified therein, and may not be applied to imports of a good made before those dates, unless the person to whom it was issued has not acted in accordance with its terms and conditions.
8. Notwithstanding paragraph 7, the Party issuing the advance ruling shall postpone the effective date of the modification or revocation for a period not exceeding 90 days, where the person to whom the advance ruling was issued has relied on that ruling in good faith and to its detriment.
9. Each Party shall provide that, when examining the regional value content of a good for which an advance ruling has been issued, its competent authority shall assess whether:
(a) the exporter or producer complies with the terms and conditions of the advance ruling;
(b) the exporter's or producer's operations are consistent with the circumstances and substantial facts underlying the advance ruling; and
(c) the data and supporting calculations used in the application of the method for calculating value or allocating cost are correct in all material respects.
10. Each Party shall provide that, where its competent authority determines that any of the requirements set out in paragraph 9 have not been met, the competent authority may modify or revoke the advance ruling as the circumstances warrant.
11. Each Party shall provide that, where its competent authority decides that the advance ruling was based on incorrect information, the person to whom the advance ruling was issued shall not be penalized if that person demonstrates that it acted with reasonable care and in good faith in stating the facts and circumstances on which the advance ruling was based.
12. Each Party shall provide that, where an advance ruling is issued to a person who has misrepresented or omitted material facts or circumstances on which the advance ruling is based, or has not acted in accordance with the terms and conditions of the advance ruling, the competent authority issuing the advance ruling may apply such measures as the circumstances warrant.
13. The validity of an advance ruling shall be subject to the continuing obligation of the advance ruling holder to inform the competent authority of any substantial change in the facts or circumstances on which the competent authority relied in making the advance ruling.
Article 6-11. Customs Procedures Working Group.
1. The Parties establish the Customs Procedures Working Group composed of representatives of each Party, which shall meet at least twice a year, as well as at the request of either Party.
2. It shall be the duty of the Working Group
(a) to seek to reach agreement on:
(i) the interpretation, application and administration of this Chapter;
(ii) tariff classification and valuation matters relating to rulings on determinations of origin;
(iii) procedures for the application, approval, issuance, modification, revocation and application of advance rulings;
(iv) modifications to the certificate or declaration of origin referred to in article 6-02; and
(v) any other matter referred by a Party; and
(b) to examine proposals for administrative or operational modifications in customs matters that may affect the flow of trade between the Parties.
Chapter VII. Safeguard Measures
Article 7-01. Definitions.
For the purposes of this Chapter, the following definitions shall apply:
threat of serious injury: the provisions of Article Il, paragraph 6(b) of the Agreement on Safeguards of the GATT 1994;
competent authority: those indicated for each Party in the Annex to this Article; identical good: that which coincides in all its characteristics with the good being compared;
similar good: a good which, although it does not coincide in all its characteristics with the good being compared, has some identical characteristics, especially in its nature, use, function and quality;
serious injury: a general and significant impairment of a domestic industry;
transition period: the period of relief applicable to each good, according to the provisions of the Tariff Relief Program;
domestic industry: the producer or producers of identical, similar or directly competitive goods operating within the territory of a Party and constituting a major proportion of the total domestic production of such goods. Such major proportion may not be less than 40%.
Article 7-02. General Provisions.
The Parties may apply to imports of goods made under the Tariff Relief Program a safeguard regime, the application of which shall be based on clear, strict and time-bound criteria. The Parties may adopt bilateral or global safeguard measures.
Article 7-03. Bilateral Measures.
1. The Parties may adopt and apply bilateral measures if the volume of imports of one or more goods benefiting from the Tariff Discharge Program increases at such a rate and under such conditions as to cause serious injury or threat of serious injury to the domestic production of identical, like or directly competitive goods, subject to the following rules:
(a) the measures shall be effective only during the transition period;
(b) they may only be adopted when strictly necessary to counteract serious injury or threat of serious injury caused by imports from another Party;
(c) the measures shall be of a tariff nature. The tariff to be determined shall in no case exceed the lesser of the tariff in force against third countries for that good at the time the safeguard measure is taken and the tariff for that good on the day before the entry into force of this Agreement;
(d) the measures may be applied for a maximum period of one year and may be extended for a single consecutive equal period of time; and
(e) upon termination of the application of the bilateral measure, the rate of duty for the good in question shall be the rate of duty applicable to that good as of that date under the Tariff Discharge Schedule.
2. The Party that decides to initiate a procedure that could result in the adoption of a bilateral safeguard measure shall notify the other Party in writing and shall, at the same time, request consultations in accordance with the provisions of Article 7-05.
3. The Party intending to apply a bilateral safeguard measure shall grant to the Party affected by such measure, a mutually agreed compensation, which shall consist of additional tariff concessions, the effects of which on the trade of the exporting Party are equivalent to the impact of the safeguard measure.
4. The compensation referred to in paragraph 3 shall be determined at the stage of prior consultations referred to in paragraph 2.
5. If the Parties are unable to agree on compensation, the Party proposing to take the measure shall have the authority to do so and the Party affected by the measure may impose tariff measures that have trade effects equivalent to those of the measure taken.
Article 7-04. Global Measures.
1. The Parties retain their rights and obligations to apply safeguard measures under Article XIX of the GATT.
2. When a Party decides to adopt a safeguard measure under Article XIX of the GATT, it may apply it to the other Party only when it determines that imports of goods originating in that Party, taken individually, account for a substantial part of total imports and contribute importantly to the serious injury or threat of serious injury to the importing Party.
3. Such determination shall take into account, inter alia, the following criteria:
(a) imports of goods originating in the other Party shall be considered to be substantial if they are included within the imports of the principal countries supplying the good subject to the proceeding, whose exports account for 80 per cent of the total imports of that good into the importing Party;
(b) imports of goods originating in a Party shall not normally be considered to contribute substantially to serious injury or threat of serious injury if their rate of growth during the period in which the injurious increase in imports is substantially less than the rate of growth of total imports from all sources during the same period;
(c) changes in the Party's share of total imports and the volume of imports shall also be taken into account in the determination of material participation in serious injury or threat of serious injury.