(b) increase the rate of customs duty on the originating good to a level not to exceed the lesser of:
(i) the most-favored-nation applied rate of customs duty in effect on the date on which the bilateral safeguard measure is applied; and
(ii) the most-favored-nation applied rate of customs duty in effect on the date immediately preceding the date of entry into force of this Agreement.
Article 2.11. Investigation
1. A Party may apply a bilateral safeguard measure only after an investigation has been carried out by the competent authorities of that Party in accordance with the same procedures as those provided for in Article 3 and subparagraph 2(c) of Article 4 of the Agreement on Safeguards.
2. The investigation referred to in paragraph 1 shall, except in special circumstances, be completed within one year, and in no case more than 18 months following its date of initiation.
In the investigation referred to in paragraph 1 to determine whether increased imports of an originating good have caused or are threatening to cause serious injury to a domestic industry under the terms of this Article, the competent authorities 3. of a Party which carry out the investigation shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that domestic industry, in particular, the rate and amount of the increase in imports of the originating good in absolute terms, the share of the domestic market taken by the increased imports of the originating good, and the changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment.
4. The determination that increased imports of an originating good have caused or are threatening to cause serious injury to a domestic industry shall not be made unless the investigation referred to in paragraph 1 demonstrates, on the basis of objective evidence, the existence of the causal link between the increased imports of the originating good and serious injury or threat of serious injury. When factors other than the increased imports of the originating good are causing injury to the domestic industry at the same time, such injury shall not be attributed to the increased imports of the originating good.
Article 2.12. Notification and Consultations
1. A Party shall immediately deliver a written notice to the other Party upon:
(a) initiating an investigation referred to in paragraph 1 of Article 2.11 related to serious injury or threat of serious injury, and the reasons therefor; and
(b) taking a decision to apply or extend a bilateral safeguard measure.
2. The Party making the written notice referred to in paragraph 1 shall provide the other Party with all pertinent information, which shall include:
(a) in the written notice referred to in subparagraph 1(a), the reason for the initiation of the investigation, a precise description of the originating good subject to the investigation and its subheading under the Harmonized System, the period of time subject to the investigation and the date of initiation of the investigation; and
(b) in the written notice referred to in subparagraph 1(b), evidence of serious injury or threat of serious injury caused by the increased imports of the originating good, a precise description of the originating good subject to the proposed bilateral safeguard measure and its subheading under the Harmonized System, a precise description of the proposed bilateral safeguard measure, and the proposed date of the introduction and expected duration of the bilateral safeguard measure.
3. A Party proposing to apply or extend a bilateral safeguard measure shall provide adequate opportunity for prior consultations with the other Party with a view to reviewing the information arising from the investigation referred to in paragraph 1 of Article 2.11, exchanging views on the bilateral safeguard measure and reaching an agreement on compensation set out in Article 2.14.
Article 2.13. Conditions and Limitations
1. No bilateral safeguard measure shall be maintained except to the extent and for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment, provided that such period of time shall not exceed three years. However, in highly exceptional circumstances, a bilateral safeguard measure may be extended, provided that the total duration of the bilateral safeguard measure, including such extensions, shall not exceed six years. In order to facilitate adjustment in a situation where the expected duration of a bilateral safeguard measure is over one year, the Party maintaining the bilateral safeguard measure shall progressively liberalize the bilateral safeguard measure at regular intervals during the period of application.
2. No bilateral safeguard measure shall be applied again to the import of a particular originating good which has been subject to such a bilateral safeguard measure, for a period of time equal to the duration of the previous bilateral safeguard measure or one year, whichever is longer.
3. Upon the termination of a bilateral safeguard measure, the rate of customs duty on an originating good subject to the measure shall be the rate which would have been in effect if the bilateral safeguard measure had never been applied.
4. Each Party shall adopt or maintain equitable, timely, transparent and effective procedures relating to bilateral safeguard measures.
Article 2.14. Compensation
1. A Party proposing to apply or extend a bilateral safeguard measure shall provide to the other Party mutually agreed adequate means of trade compensation in the form of concessions of customs duties which are substantially equivalent to the value of the additional customs duties expected to result from the bilateral safeguard measure.
2. If the Parties are unable to agree on the compensation within 30 days after the commencement of the consultations in accordance with paragraph 3 of Article 2.12, the Party to whose originating good the bilateral safeguard measure is applied shall be free to suspend the application of concessions of customs duties under this Agreement, which are substantially equivalent to the bilateral safeguard measure. The Party exercising the right of suspension may suspend the application of concessions of customs duties only for the minimum period of time necessary to achieve the substantially equivalent effects and only during the period of application of the bilateral safeguard measure.
Article 2.15. Provisional Bilateral Safeguard Measures
1. In critical circumstances, where delay would cause damage which it would be difficult to repair, a Party may apply a provisional bilateral safeguard measure, which shall take the form of the measure set out in subparagraph 2(a) or (b) of Article 2.10, pursuant to a preliminary determination that there is clear evidence that increased imports of an originating good of the other Party have caused or are threatening to cause serious injury to a domestic industry of the former Party.
2. A Party shall deliver a written notice to the other Party prior to applying a provisional bilateral safeguard measure. Consultations between the Parties on the application of the provisional bilateral safeguard measure shall be initiated immediately after the provisional bilateral safeguard measure is applied.
3. The duration of a provisional bilateral safeguard measure shall not exceed 200 days. During that period, the pertinent requirements of Article 2.11 shall be met. The duration of the provisional bilateral safeguard measure shall be counted as a part of the period of time referred to in paragraph 1 of Article 2.13.
4. Paragraphs 3 and 4 of Article 2.13 shall apply, mutatis mutandis, to a provisional bilateral safeguard measure. The customs duty imposed as a result of the provisional bilateral safeguard measure shall be refunded if the subsequent investigation referred to in paragraph 1 of Article 2.11 does not determine that increased imports of an originating good of the other Party have caused or threatened to cause serious injury to a domestic industry.
Article 2.16. Relation to Safeguard Measures Under the WTO Agreement
1. Nothing in this Chapter shall prevent a Party from applying a safeguard measure to an originating good of the other Party in accordance with:
(a) Article XIX of the GATT 1994 and the Agreement on Safeguards; or
(b) Article 5 of the Agreement on Agriculture.
2. A Party shall not apply a bilateral safeguard measure or a provisional bilateral safeguard measure under this Chapter on a good that is subject to a measure that the Party has applied pursuant to Article XIX of the GATT 1994 and the Agreement on Safeguards, or Article 5 of the Agreement on Agriculture, nor shall a Party continue to maintain a bilateral safeguard measure or a provisional bilateral safeguard measure on a good that becomes subject to a measure that the Party applies pursuant to Article XIX of the GATT 1994 and the Agreement on Safeguards, or Article 5 of the Agreement on Agriculture.
3. The period of application of a bilateral safeguard measure referred to in this Section shall not be interrupted by a Party’s non-application of the bilateral safeguard measure in accordance with paragraph 2. That Party may resume the application of the bilateral safeguard measure to imports of the originating good upon the termination of the safeguard measures applied in accordance with subparagraph 1(a) or (b), up to the remaining period of time of the bilateral safeguard measure.
Article 2.17. Communications
A written notice referred to in paragraph 1 of Article 2.12 and paragraph 2 of Article 2.15 and any other communication between the Parties in accordance with this Section shall be made in the English language.
Article 2.18. Review
The Parties shall review the provisions of this Section, if necessary, 10 years after the date of entry into force of this Agreement.
Section 3. Other Provisions
Article 2.19. Anti-Dumping and Countervailing Measures
Nothing in this Chapter shall be construed to prevent a Party from taking any measure in accordance with the provisions of Article VI of the GATT 1994, the Agreement on Anti-Dumping and the Agreement on Subsidies and Countervailing Measures.
Article 2.20. Measures to Safeguard the Balance of Payments
1. Nothing in this Chapter shall be construed to prevent a Party from taking any measure for balance-of-payments purposes. A Party taking such measure shall do so in accordance with the conditions established under Article XII and Section B of Article XVIII of the GATT 1994 and the Understanding on the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement.
2. Nothing in this Chapter shall preclude the use by a Party of exchange controls or exchange restrictions in accordance with the Articles of Agreement of the International Monetary Fund.
Article 2.21. Sub-Committee on Trade In Goods
1. For the purpose of the effective implementation and operation of this Chapter, the Parties hereby establish a Sub-Committee on Trade in Goods (hereinafter referred to in this Article as “the Sub-Committee”).
2. The functions of the Sub-Committee shall be:
(a) reviewing and monitoring the implementation and operation of this Chapter;
(b) considering any other matter related to this Chapter as the Parties may decide;
(c) reviewing and making appropriate recommendations, as necessary, to the Joint Committee on the Operational Procedures for Trade in Goods referred to in Article 2.22;
(d) reporting the findings of the Sub-Committee to the Joint Committee; and
(e) carrying out other functions as may be delegated by the Joint Committee.
3. The Sub-Committee shall be composed of representatives of the Governments of the Parties.
4. The Sub-Committee shall hold meetings at such times and venues or by means, as may be decided by the Parties.
Article 2.22. Operational Procedures for Trade In Goods
On the date of entry into force of this Agreement, the Joint Committee shall adopt the Operational Procedures for Trade in Goods that provide for detailed regulations pursuant to which the relevant authorities of the Parties shall implement their functions under this Chapter.
Chapter 3. Rules of Origin
Article 3.1. Definitions
For the purposes of this Chapter:
(a) the term “aquaculture” means the farming of aquatic organisms, including fish, molluscs, crustaceans, other aquatic invertebrates and aquatic plants from seed stock such as eggs, fry, fingerlings or larvae, by intervention in the rearing or growth processes to enhance production such as regular stocking, feeding or protection from predators;
(b) the term “competent governmental authority” means the authority that, according to the legislation of each Party, is responsible for the issuance of a certificate of origin or for the designation of certification entities or bodies and for granting the status of an approved exporter;
(c) the term “customs authority” means a customs authority as defined in subparagraph (a) of Article 4.1;
(d) the term “exporter” means a person located in the exporting Party who exports a good from the exporting Party;
(e) the term “factory ships of the Party” or “vessels of the Party” respectively means factory ships or vessels:
(i) which are registered in the Party;
(ii) which sail under the flag of the Party;
(iii) which are owned to an extent of at least 50 percent by nationals of the Parties, or by a juridical person with its head office in either Party, of which the representatives, chairman of the board of directors, and the majority of the members of such board are nationals of the Parties, and of which at least 50 percent of the equity interest is owned by nationals or juridical persons of the Parties; and
(iv) of which at least 25 percent of the total of the master, officers and crew are nationals of the Parties;
(f) the term “fungible originating goods of a Party” or “fungible originating materials of a Party” respectively means originating goods or materials of a Party that are interchangeable for commercial purposes, whose properties are essentially identical;
(g) the term “Generally Accepted Accounting Principles” means those principles recognized by consensus or with substantial authoritative support in a Party, with respect to the recording of revenues, expenses, costs, assets and liabilities; the disclosure of information; and the preparation of financial statements. These principles may encompass broad guidelines of general application as well as detailed standards, practices and procedures;
(h) the term “good” means any merchandise, product, article or material;
(i) the term “importer” means a person who imports a good into the importing Party;
(j) the term “indirect materials” means goods used in the production, testing or inspection of another good but not physically incorporated into the good, or goods used in the maintenance of buildings or the operation of equipment associated with the production of another good, including:
(i) fuel and energy;
(ii) tools, dies and molds;
(iii) spare parts and goods used in the maintenance of equipment and buildings;
(iv) lubricants, greases, compounding materials and other goods used in production or used to operate equipment and buildings;
(v) gloves, glasses, footwear, clothing, safety equipment and supplies;
(vi) equipment, devices and supplies used for testing or inspecting the good;
(viii) catalysts and solvents; and
(viii) any other goods that are not incorporated into another good but whose use in the production of the good can reasonably be demonstrated to be a part of that production;
(k) the term “material” means a good that is used in the production of another good;
(l) the term “non-originating material” means a material which does not qualify as originating under this Chapter, including a material whose originating status cannot be determined;
(m) the term “originating material” means a material which qualifies as originating under this Chapter;
(n) the term “packing materials and containers for transportation and shipment” means goods that are used to protect a good during transportation, other than packaging materials and containers for retail sale referred to in Article 3.13;
(o) the term “preferential tariff treatment” means the rate of customs duties applicable to an originating good of the exporting Party in accordance with paragraph 1 of Article 2.4;
(p) the term “producer” means a person who engages in the production of goods or materials; and
(q) the term “production” means a method of obtaining goods including manufacturing, assembling, processing, raising, growing, breeding, mining, extracting, harvesting, fishing, aquaculture, trapping, gathering, collecting, hunting and capturing.
Article 3.2. Originating Goods
Unless otherwise provided for in this Chapter, a good shall qualify as an originating good of a Party where the good:
(a) is wholly obtained or produced entirely in the Party, as defined in Article 3.3;
(b) is produced entirely in the Party exclusively from originating materials of the Party; or
(c) satisfies the product specific rules (change in tariff classification, qualifying value content or specific manufacturing or processing operation) set out in Annex 2, when the good is produced entirely in the Party using non-originating materials, and the last process of production of such good, other than the operations provided for in Article 3.7, was performed in the exporting Party,
and meets all other applicable requirements of this Chapter.
Article 3.3. Wholly Obtained Goods
For the purposes of subparagraph (a) of Article 3.2, the following goods shall be considered as being wholly obtained or produced entirely in a Party:
(a) live animals born and raised in the Party;
(b) animals obtained by hunting, trapping, fishing, aquaculture, gathering or capturing in the Party;
(c) goods obtained from live animals in the Party;
Note: For the purposes of subparagraphs (a) through (c), the term “animals” covers all animal life, including mammals, birds, fish, crustaceans, molluscs, reptiles, bacteria and viruses.
(d) plant and plant products grown and harvested, picked or gathered in the Party;
Note: For the purposes of this subparagraph, the term “plant” refers to all plant life, including fruit, flowers, vegetables, trees, seaweed, fungi and live plants.
(e) minerals and other naturally occurring substances, not included in subparagraphs (a) through (d), extracted or taken in the Party;
(f) goods of sea-fishing and other marine life taken by vessels of the Party, and other goods taken by that Party or a person of that Party, from the waters, seabed or subsoil beneath the seabed outside the territorial sea of the Parties and non-Parties, in accordance with international law, provided that, in case of goods of sea-fishing and other marine life taken from the exclusive economic zone of any Party or non-Party, that Party or the person of that Party has the rights to exploit such exclusive economic zone, and in case of other goods, that Party or the person of that Party has the rights to exploit such seabed and subsoil beneath the seabed, in accordance with international law;
Note: For the purpose of determining the origin of goods of sea-fishing and other marine life, the term “rights to exploit” referred to in this subparagraph includes those rights of access to the fisheries resources of a coastal State, as accruing from any agreements or arrangements between a Party and the coastal State.
(g) goods processed or made on board any factory ships of the Party, exclusively from the goods referred to in subparagraph (f);
(h) articles collected in the Party which can no longer perform their original purpose in the Party nor are capable of being restored or repaired and which are fit only for disposal or for the recovery of parts or raw materials;
(i) scrap and waste derived from manufacturing or processing operations or from consumption in the Party and which are fit only for disposal or for the recovery of raw materials;
(j) parts or raw materials recovered in the Party from articles which can no longer perform their original purpose in the Party nor are capable of being restored or repaired and which are fit only for the recovery of raw materials; and
(k) goods obtained or produced in the Party exclusively from the goods referred to in subparagraphs (a) through (j).
Article 3.4. Qualifying Value Content
1. For the purposes of subparagraph (c) of Article 3.2, the qualifying value content of a good shall be calculated by using either of the following methods:
(a) Method based on value of non-originating materials (“Build-down method”)
Q.V.C. = F.O.B. – V.N.M. / F.O.B. x 100
(b) Method based on value of originating materials (“Build-up method”)
Q.V.C. = V.O.M. + Direct Labor Cost + Direct Overhead Cost + Profit + Other Cost / F.O.B. x 100
Where:
Q.V.C. is the qualifying value content of a good, expressed as a percentage;
F.O.B. is, except as provided for in paragraph 2, the free-on-board value of the good payable by the buyer of the good to the seller of the good, regardless of the mode of shipment, not including any internal taxes reduced, exempted or repaid when the good is exported;
V.N.M. is the value of non-originating materials used in the production of the good;
Note: V.N.M. of a good shall not include the value of non-originating materials used in the production of originating materials of the Party which are used in the production of the good.
V.O.M. is the value of originating materials used in the production of the good;
Note: For greater certainty, V.O.M. also includes the value added to the production of non-originating materials produced in the Party.
Direct Labor Cost includes wages, remuneration and other employee benefits; and Direct Overhead Cost is the total overhead expense.
Note: For the purpose of calculating the qualifying value content of a good, the Generally Accepted Accounting Principles in the exporting Party shall apply.
2. F.O.B. referred to in paragraph 1 shall be the value:
(a) adjusted to the first ascertainable price paid for a good from the buyer to the producer of the good, if there is free-on-board value of the good, but it is unknown or cannot be ascertained; or
(b) determined in accordance with Articles 1 through 8 of the Agreement on Customs Valuation, if there is no free-on-board value of the good.
3. For the purpose of calculating the qualifying value content of a good in accordance with paragraph 1, the value of a material used in the production of the good in a Party:
(a) shall be determined in accordance with the Agreement on Customs Valuation, and shall include freight, insurance where appropriate, packing and all the other costs incurred in transporting the material to the importation port in the Party where the producer of the good is located; or
(b) if such value is unknown or cannot be ascertained, shall be the first ascertainable price paid for the material in the Party, but may exclude all the costs incurred in the Party in transporting the material from the warehouse of the supplier of the material to the place where the producer is located, such as freight, insurance and packing as well as any other known and ascertainable cost incurred in the Party.
4. If a good has acquired originating status, the non-originating materials used in the production of the good shall not be considered non-originating when the good is incorporated as a material into another good.
5. For the purposes of subparagraph 2(b) or 3(a), in applying the Agreement on Customs Valuation to determine the value of a good or a material, the Agreement on Customs Valuation shall apply mutatis mutandis to domestic transactions or to the cases where there is no transaction of the good or the material.
Article 3.5. Accumulation
For the purpose of determining whether a good qualifies as an originating good of a Party:
(a) an originating good of the other Party which is used as a material in the production of the good in the former Party may be considered as an originating material of the former Party;
(b) the process of or the value added through the production of non-originating materials in the other Party may be considered as that in the former Party; and
(c) the process of or the value added through the production carried out at different stages by one or more producers within the Party or in the other Party may be taken into account, when the good is produced using non-originating materials,
provided that such good has undergone its last production process in the former Party and such production process goes beyond the operations provided for in Article 3.7.
Article 3.6. De Minimis
For the application of the product specific rules set out in Annex 2, non-originating materials used in the production of a good that do not undergo an applicable change in tariff classification shall be disregarded in determining whether the good qualifies as an originating good of a Party, provided that the totality of such materials does not exceed specific percentage in value, weight or volume of the good as set out in that Annex.
Article 3.7. Non-Qualifying Operations
Notwithstanding subparagraph (c) of Article 3.2, a good shall not be considered as an originating good of a Party if solely one or more of the following operations are conducted on non-originating materials in the production of the good in that Party:
(a) operations to ensure the preservation of products in good condition during transport and storage (such as drying, freezing, keeping in brine) and other similar operations;
(b) changes of packaging and breaking-up and assembly of packages;
(c) simple mixing of goods, whether or not of different kinds;
(d) affixing or printing of marks, labels, logos, or other like distinguishing signs on goods or their packaging;
(e) disassembly of products into parts;
(f) placing in bottles, cases or boxes, and other simple packaging operations;