3. Paragraphs 1 and 2 shall not apply to the measures set forth in Annex 3-10.
Article 3-09. Elimination of Performance Requirements.
1. Upon entry into force of this Agreement, the Parties may not grant incentives subject to the fulfillment of performance requirements.
2. For these purposes, a performance requirement is understood as any measure that conditions the receipt of any benefit to the export result or to the use of domestic goods to the detriment of imported goods (3).
Article 3-10. Export Taxes.
Except as provided in Annex 3-10, neither Party shall adopt or maintain any tax, levy or charge on the exportation of goods to the territory of the other Party, unless such tax, levy or charge is adopted or maintained on such good, when intended for domestic consumption.
Article 3-11. International Obligations.
A Party, before taking a measure under an intergovemmental agreement on goods under Article XX(h) of the GATT 1994 that may affect trade in commodities between the Parties, shall consult with the other Party to avoid nullifying or impairing a concession granted by that Party under Article 3-03.
Article 3-12. Export Subsidies on Non-agricultural Goods.
Upon entry into force of this Agreement, the Parties shall not apply to the goods of a Party export refunds or export subsidies under the terms of Article 3 of Part Il of the Agreement on Subsidies and Countervailing Measures, which is part of the WTO Agreement.
Article 3-13. Export Subsidies on Agricultural Goods.
1. The Parties share the objective of achieving the multilateral elimination of export subsidies on agricultural goods. In this regard, they will cooperate in the effort to reach an agreement within the framework of the WTO Agreement.
2. No Party may maintain or introduce export subsidies on agricultural goods in its reciprocal trade after the entry into force of this Agreement. Likewise, as of this date, the Parties waive their rights under the GATT 1994 to use export subsidies and any rights with respect to the use of such subsidies that may result from multilateral negotiations on agricultural trade under the WTO Agreement in their reciprocal trade.
3. Where a Party considers that a non-Party is exporting to the territory of the other Party an agricultural good that enjoys export subsidies, the importing Party shall, upon written request of the other Party, consult with the other Party to agree on specific measures that the importing Party may take to counteract the effect of any subsidized imports. From the entry into force of this Agreement, if the importing Party adopts the above measures in accordance with this paragraph, the other Party shall immediately refrain or cease to apply any subsidy to the export of that good to the territory of the importing Party.
Article 3-14. Internal Support.
With respect to domestic support for agricultural goods, the Parties shall abide by the provisions of the Agreement on Agriculture, which is part of the WTO Agreement.
Section E. Consultations
Article 3-15. Committee on Trade In Goods.
1. The Parties establish a Committee on Trade in Goods, which shall be composed of representatives of the Parties.
2. The Committee shall be constituted upon entry into force of the treaty, and shall meet at any time at the request of any of the Parties.
3. The Committee shall monitor and encourage cooperation between the Parties in the implementation and administration of this chapter, and shall serve as a forum for consultation among the Parties on matters related to this chapter.
Article 3-16. Provision of Information and Consultations.
1. Upon request of the other Party, a Party shall provide information and promptly respond to questions regarding any existing or proposed measures that may relate to the application of this Chapter.
2. If, in the course of the implementation of this Agreement, a Party considers that an existing measure of the other Party affects the effective implementation of this Chapter, that Party may bring the matter to the attention of the Committee.
3. Within a period of no more than 30 days from the date of presentation of the request to the Committee, the Committee may decide to request technical reports from the competent authorities and take the necessary actions to help resolve the matter.
4. When the Committee has met as established in Article 3-15 and agreement has not been reached within the time limit specified, or it is considered that a matter is beyond the scope of the Committee's competence, any Party may request in writing that the Commission meet, as provided in Article 17-01 (Administrative Commission).
5. The Parties undertake, within a period not to exceed one year from the entry into force of this Agreement, to identify in terms of the tariff items and the nomenclature that corresponds to them according to their respective tariffs, the measures, restrictions or prohibitions on the import or export of goods for reasons of national security, public health, preservation of flora or fauna, the environment, plant and animal health, standards, labels, international commitments, public order requirements or any other regulation. The Parties shall update such information and communicate it to the Committee, whenever necessary.
Chapter IV. REGIME OF ORIGIN
Article 4-01. Definitions and Terms
For the purposes of this chapter, the following definitions shall apply:
Customs Valuation Agreement: the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994, including its interpretative notes, which forms part of the WTO Agreement;
good: any merchandise, product, article or matter;
fungible goods: goods that are interchangeable for commercial purposes, whose properties are essentially identical and which cannot be differentiated by simple visual examination;
identical or similar goods: "identical goods" and "similar goods" respectively, as defined in the Customs Valuation Agreement;
goods wholly obtained or produced entirely in the territory of one or both Parties:
a) minerals extracted in the territory of one or both Parties;
b) harvested in the territory of one or both Parties;
c) live animals, born and raised in the territory of one or both Parties;
d) goods obtained from hunting or fishing in the territory of one or both Parties;
e) fish, crustaceans and other marine species obtained from the sea by vessels registered or recorded by a Party and flying the flag of that Party;
f) goods produced on board factory ships from the goods identified in subparagraph 6), provided that such factory ships are registered or registered by a Party and fly the flag of that Party;
g) property obtained by a Party or a person of a Party from the seabed or subsoil outside the territorial waters, provided that the Party has rights to exploit that seabed or subsoil;
h) wastes and residues derived from:
(i) production in the territory of one or both Parties, or
(ii) used goods collected in the territory of one or both Parties, provided that such goods are used only for the recovery of raw materials; or
i) goods produced in the territory of one or both Parties exclusively from the goods referred to in subparagraphs a) through h) or their derivatives, at any stage of production;
shipping containers and packaging materials: goods that are used to protect a good during transportation, other than retail containers and materials;
net cost: total cost less costs of sales promotion, marketing and after-sales services, shipping and repackaging, and royalties;
total cost: the sum of the following elements:
a) the costs or value of direct manufacturing materials used in the production of the good; direct labor costs used in the production of the good; and
b) an amount for direct and indirect costs and expenses of manufacturing the good, reasonably allocated to the good, except for the following items:
(i) the costs and expenses of a service provided by the producer of a good to another person, when the service is not related to the good,
(ii) costs and losses resulting from the sale of a portion of the producer's business, which constitutes a discontinued operation,
(iii) costs related to the cumulative effect of changes in the application of accounting principles,
(iv) costs or losses resulting from the sale of a producer's capital asset,
(v) costs and expenses related to acts of God or force majeure,
(vi) profits earned by the producer of the good, regardless of whether they were retained by the producer or paid to other persons as dividends and taxes paid on those profits, including capital gains taxes, and
(vii) interest costs that have been agreed between related parties and that exceed interest paid at market interest rates;
shipping and repacking costs: costs incurred in repacking and transporting a good outside the territory where the producer or exporter of the good is located;
sales promotion, marketing and after-sales service costs: the following costs related to sales promotion, marketing and after-sales services:
a) sales and marketing promotion, media advertising; advertising and market research; promotional and demonstration materials; exhibits; sales promotion conferences, trade shows and conventions; banners; marketing exhibitions; free samples; sales, marketing and after-sales service publications such as product brochures, catalogs, technical publications, price lists, service manuals and sales support information; establishment and protection of logos and trademarks; sponsorships; restocking fees for wholesale and retail sales; and entertainment expenses;
b) sales and marketing incentives; rebates to wholesalers, retailers and consumers;
c) for sales promotion, marketing and after-sales service personnel: salaries and wages; sales commissions; bonuses; medical, insurance and pension benefits; travel, lodging and living expenses; and membership and professional fees;
d) hiring and training of sales promotion, marketing and after-sales service personnel, and training of the customer's employees after the sale, when in the producer's financial statements and cost accounts such costs are separately identified for sales promotion, marketing and after-sales service of goods;
e) insurance premiums for civil liability derived from the property;
f) office supplies for sales promotion, marketing and after-sales service, when in the producer's financial statements and cost accounts such costs are separately identified for sales promotion, marketing and after-sales service of goods;
g) telephone, mail and other means of communication, when in the producer's financial statements and cost accounts such costs are separately identified for sales promotion, marketing and after-sales service of goods;
h) rent and depreciation of sales promotion, marketing and after-sales service offices, as well as distribution centers;
i) property insurance premiums, taxes, utility costs, and office and distribution center repair and maintenance costs, when such costs are separately identified in the producer's financial statements and cost accounts for sales promotion, marketing and after-sales service; and
j) payments by the producer to others for repairs covered by a warranty;
direct manufacturing costs and expenses: costs and expenses incurred in a period, directly related to the good, other than the costs or value of direct materials and direct labor costs,
indirect manufacturing costs and expenses: costs and expenses incurred in a period, other than direct manufacturing costs and expenses, direct labor costs and direct material costs or value;
retail containers and packaging materials: containers and materials in which merchandise is packaged for retail sale;
F.O.B.: free on board, irrespective of the means of transport, at the port or place of shipment abroad;
place where the producer is located: in relation to a good, the plant for the production of that good;
material: a good used in the production of another good;
self-produced material: a material produced by the producer of a good and used in the production of that good;
indirect material: an asset used in the production, testing or inspection of an asset, but not physically incorporated into the asset; or an asset used in the maintenance of buildings or the operation of equipment related to the production of an asset, including:
a) fuel and energy;
b) tools, dies and molds;
c) spare parts and materials used in the maintenance of equipment and buildings;
d) lubricants, greases, composites and other materials used in production or to operate equipment or buildings;
e) gloves, goggles, footwear, clothing, safety equipment and attachments;
f) equipment, apparatus and attachments used for the verification or inspection of goods;
g) catalysts and solvents; or
h) any other property that is not incorporated in the property, but whose use in the production of the property can be reasonably demonstrated to be part of that production;
intermediate material: a self-manufactured material used in the production of a good, provided that it qualifies as originating in accordance with the provisions of this Chapter, and designated as such in accordance with Article 4-07;
originating material: a material that qualifies as originating material in accordance with the provisions of this chapter,
fungible materials: materials that are interchangeable for commercial purposes and whose properties are essentially identical and cannot be differentiated by simple visual examination;
related person: a person who is related to another person, as follows: a) one of them holds positions of responsibility or management in one of the other's companies; b) are legally recognized as business associates; ¢) are in the relationship of employer and employee;
d) one of them having, directly or indirectly, ownership, control or possession of 25 percent or more of the outstanding and voting shares or securities of both;
e) one of them directly or indirectly controls the other;
f) both persons are directly or indirectly controlled by a third party;
g) together they directly or indirectly control a third person; or
h) are from the same family (children, siblings, grandparents or spouses)
generally accepted accounting principles: the consensus recognized to the substantial support authorized in the territory of a Party, with respect to the recording of revenues, expenses, costs, assets and liabilities, disclosure of information and preparation of financial statements. These standards may be broad guidelines of general application, as well as detailed practical rules and procedures;
production: the growing, raising, extracting, harvesting, fishing, hunting, manufacturing, processing or assembling of a good;
producer: a person who grows, raises, extracts, harvests, fishes, hunts, manufactures, processes or assembles agood;
royalties: payments of any kind, including payments for technical assistance or similar arrangements, made for the use or right to use any copyrights, artistic, literary or scientific works, patents, trademarks, designs, models, plans, formulas or secret processes, except payments for technical assistance or similar arrangements that may relate to specific services such as:
a) personnel training, regardless of the place where it is carried out; and
b) plant engineering, plant assembly, mold making, software design and similar computer or other services, provided that they are performed in the territory of one or both Parties;
General Rule 2(a) of the Harmonized System: rule 2(a) of the General Rules of Interpretation of the Harmonized System, or any rule replacing it At the time of the signing of this Treaty, the text of the rule is as follows:
"Any reference to an article in a given heading covers the article even if incomplete or unfinished, provided that it has the essential characteristics of the complete or finished article. It also reaches the complete or finished article, or considered as such under the preceding provisions, when it is presented disassembled or not yet assembled. ââ
General Rule 3 of the Harmonized System: Rule 3 of the General Rules of Interpretation of the Harmonized System, or any rule replacing it. At the time of the signing of this Treaty, the text of the rule is as follows:
"Where a good could, in principle, be classified under two or more headings by application of Rule 2(b) or in any other case, classification shall be made as follows:
a) the heading with the more specific description shall take precedence over headings of a more generic scope. However, where two or more headings each refer to only part of the materials constituting a mixed product or composite article or only part of the articles, in the case of goods put up in sets put up in sets for retail sale, such headings are to be considered equally specific for that product or article, even if one of them describes it more precisely or completely;
b) mixed products, articles composed of different materials or made up of different articles and goods put up in sets or assortments
packaged for retail sale, the classification of which cannot be made by applying Rule 3(a), shall be classified according to the material or article which gives them their essential character, if it is possible to determine this;
c) where Rules 3(a) and 3(b) do not permit classification, the good shall be classified under the last heading in order of numbering among those which can reasonably be taken into account."
General Rule 5(b) of the Harmonized System: rule 5(b) of the General Rules of Interpretation of the Harmonized System, or any rule replacing it. At the time of the signing of this Treaty, the text of the rule is as follows:
"Except as provided in Rule 5(a) above, packages containing goods shall be classified with them when they are of the types normally used for that class of goods. However, this provision is not mandatory when the packages are reasonably likely to be used repeatedly.";
used: employed or consumed in the production of goods;
transaction value of a good: for the purposes of determining origin, the price actually paid or payable for a good in connection with the transaction by the producer of the good in accordance with the principles of Article 1 of the Customs Valuation Agreement, adjusted in accordance with the principles of paragraphs 1, 3 and 4 of Article 8 thereof, without regard to whether the good is sold for export. For the purposes of this definition, the seller referred to in the Customs Valuation Agreement shall be the producer of the good; and
transaction value of a material: for the purpose of determining origin, the price actually paid or payable for a material in connection with the transaction by the producer of the good in accordance with the principles of Article 1 of the Customs Valuation Agreement, adjusted in accordance with the principles of paragraphs 1, 3 and 4 of Article 8 thereof, without regard to whether the material is sold for export. For the purposes of this definition, the seller referred to in the Customs Valuation Agreement shall be the supplier of the material and the buyer referred to in the Customs Valuation Agreement shall be the producer of the good.
Article 4-02. Instruments of Application and Interpretation.
1. For the purposes of this Chapter:
a) the basis for tariff classification Is the Harmonized System;
b) the determination of the transaction value of a good or material shall be made in accordance with the principles of the Customs Valuation Agreement; and
c) all costs referred to in this chapter shall be recorded and maintained in accordance with generally accepted accounting principles applicable in the territory of the Party where the good is produced.
2. For the purposes of this chapter, when applying the Customs Valuation Agreement to determine the origin of a good:
a) the principles of the Customs Valuation Agreement shall apply to domestic transactions, with such modifications as circumstances may require, as they would apply to international transactions; and
b) the provisions of this Chapter shall prevail over those of the Customs Valuation Agreement insofar as they are incompatible.
Article 4-03. Originating Goods.
1. Except as otherwise provided In this Chapter, a good shall be originating In the territory of one or both Parties when:
a) is wholly obtained or produced entirely in the territory of one or both Parties, as defined in Article 4-01;
b) is produced in the territory of one or both Parties exclusively from materials that qualify as originating under this Chapter;
c) is produced in the territory of one or both Parties from non-originating materials that meet a change in tariff classification and other requirements, as specified in Annex 4-03, and the good complies with the other applicable provisions of this Chapter;
d) is produced in the territory of one or both Parties from non-originating materials that meet a change in tariff classification and other requirements, and the good meets a regional value content as specified in Annex 4-03, and the other applicable provisions of this Chapter,
e) is produced in the territory of one or both Parties and meets a regional value content, as specified in Annex 4-03, calculated in accordance with Article 4-04 and complies with the other applicable provisions of this Chapter; or
f) except for goods of heading 4201 through 4203 or Chapters 61 through 63 of the Harmonized System, the good is produced in the territory of one or both of the Parties, but one or more of the non-originating materials used in the production of the good does not comply with a change in tariff classification because:
(i) the good has been imported into the territory of a Party in an unassembled or disassembled state, but has been classified as an assembled good in accordance with rule 2(a) of the General Rules of Interpretation of the Harmonized System, or
(ii) the heading for the good is the same for both the good and its parts and specifically describes them and that heading is not divided into subheadings or the subheading is the same for both the good and its parts and specifically describes them;
provided that the regional value content of the good, determined in accordance with Article 4-04, is not less than 50 percent when using the transaction value method or 40 percent when using the net cost method, and the good complies with the other applicable provisions of this chapter unless the applicable rule of Annex 4-03 under which the good is classified specifies a different regional value content requirement, in which case that requirement shall apply.
2. For purposes of this Chapter, the production of a good from non-originating materials that meet a change in tariff classification and other requirements, as specified in Annex 4-03, shall be made entirely in the territory of one or both of the Parties, and any regional value content of a good shall be satisfied entirely in the territory of one or both of the Parties.
Article 4-04. Value of Regional Content.
1. Except as provided in paragraphs 5 and 6, each Party shall provide that the regional value content of a good shall be calculated in accordance with the transaction value method provided in paragraph 2, or in the case of the provisions of paragraph 5, the net cost method provided in paragraph 4.
2. To calculate the regional content value of a good based on the transaction value method, the following formula shall be applied:
VCR = VT- VMN / VT x 100
where:
VCR: regional content value expressed as a percentage;
VT: transaction value of an asset adjusted on a F.O.B. basis, except as provided in paragraph 3; and
VMM: value of non-originating materials used by the producer in the production of the good as determined in accordance with Article 4-05.
3. For purposes of paragraph 2, where the producer of the good does not export it directly, the transaction value shall be adjusted to the point at which the buyer receives the good within the territory where the producer is located.
4. To calculate the regional value of a good based on the net cost method, the following formula shall be applied:
VCR = NC-VMN / NC x 100
where:
VCR: regional content value expressed as a percentage;
NC: net cost of the asset; and
VNM: value of non-originating materials used by the producer in the production of the good as determined in accordance with Article 4-05.