5. Each Party shall provide that an exporter or producer shall calculate the regional value content of a good solely on the basis of the net cost method set out in paragraph 4 where:
a) there is no transaction value because the property is not the subject of a sale;
b) the sale or price is dependent on some condition or consideration, the value of which cannot be determined in relation to the property;
c) directly or indirectly reverts to the seller any part of the proceeds of resale or of any subsequent transfer or use of the good by the buyer, unless due adjustment can be made in accordance with Article 8 of the Customs Valuation Agreement;
d) the buyer and seller are related persons and the relationship between them influences the price, except as provided in paragraph 2 of Article 1 of the Customs Valuation Agreement;
e) the good is sold by the producer to a related person and the volume of sales, in units of quantity of identical or similar goods, sold to related persons, during a six-month period immediately preceding the month in which the producer sold that good, exceeds 85 percent of the producer's total sales of those goods during that period;
f) the exporter or producer elects to accrue the regional value content of the good « accordance with Article 4-08; or
g) the good is designated as an intermediate material under Article 4-07 and is subject to a regional value content requirement.
6. Each Party shall provide that the regional value content of a good shall be calculated, at the option of the exporter or producer of the good, in accordance with the transaction value method provided in paragraph 2, or with the net cost method provided in paragraph 4, in cases where the transaction value of the good cannot be determined because there are restrictions on the transfer or use of the good by the buyer other than those that:
a) imposed or required by the law or authorities of the Party in which the purchaser of the good is located;
b) limit the geographic territory where the property may be resold; or
c) donot substantially affect the value of the property.
7. Where the exporter or producer of a good calculates its regional value content on the basis of the transaction value method provided for in paragraph 2 and a Party subsequently notifies the exporter or producer, as a result of a verification under Chapter V (Customs Procedures for the Handling of the Origin of Goods), that the transaction value of the good or the value of any material used in the production of the good requires adjustment or is ineligible under paragraph 5, that the transaction value of the good or the value of any material used in the production of the good requires adjustment or is ineligible under paragraph 5, the exporter or producer may then calculate the regional value content of the good on the basis of the net cost method provided in paragraph 4.
8. A producer may average the regional value content of any or all of the goods falling under the same subheading that are produced in the same plant or in different plants within the territory of a Party, either on the basis of all the goods produced by the producer or only those goods that are exported to the other Party:
a) in its fiscal year or period; or
b) in any monthly, bimonthly, quarterly, quarterly, quarterly or semiannual period.
Article 4-05. Value of Materials.
1. The value of a material:
a) is the transaction value of the material; or
b) if there is no transaction value or if the transaction value of the material cannot be determined in accordance with the principles of Article 1 of the Customs Valuation Agreement, it shall be calculated in accordance with the principles of Articles 2 to 7 of that Agreement.
2. When not considered in paragraph 1 a) or b), the value of a material shall include:
a) freight, insurance, packing costs and all other costs incurred in transporting the material to the port of importation in the territory of the Party where the producer of the good is located, except as provided in paragraph 3; and
b) the costs of waste and scrap resulting from the use of the material in the production of the good, less any recovery of these costs, provided that the recovery does not exceed 30 percent of the value of the material, determined in accordance with paragraph 1.
3. When the producer of the good acquires a non-originating material within the territory of the Party where it is located, the value of the non-originating material shall not include: freight, insurance, packing costs and all other costs incurred in transporting the material from the supplier's warehouse to the place where the producer is located.
4. For purposes of calculating the regional value content in accordance with Article 4-04, the value of non- originating materials used by the producer in the production of a good shall not include the value of non- originating materials used by the producer in the production of the good:
a) another producer in the production of an originating material that is acquired and used by the producer of the good in the production of that good; or
b) the producer of the good in the production of a self-produced originating material that is designated by the producer as an intermediate material in accordance with Article 4-07.
Article 4-06. De Minimis.
1. A good shall be considered originating if the value of all non-originating materials used in the production of the good that do not meet the applicable change in tariff classification set out in Annex 4-03 does not exceed 8 percent of the transaction value of the good adjusted on the basis set out in Article 4-04(2) or (3), as the case may be, or in the cases referred to in Article 4-04(5), if the value of all non-originating materials does not exceed 8 percent of the total cost.
2. Where the good referred to in paragraph 1 is, in addition, subject to a regional value content requirement, the value of those non-originating materials shall be taken into account in calculating the regional value content of the good and the good shall satisfy the other applicable requirements of this Chapter.
3. A good that is subject to a regional value content requirement set out in Annex 4-03 need not satisfy it if the value of all non-originating materials does not exceed 8 percent of the transaction value of the good adjusted on the basis indicated in Article 4-04(2) or (3), as the case may be, or in the cases referred to in Article 4-04(5), if the value of all non-originating materials does not exceed 8 percent of the total cost.
4. Paragraph 1 does not apply to:
a) goods included in Chapters 50 to 63 of the Harmonized System; or
b) a non-originating material that is used in the production of goods falling within Chapters 01 through 01 27 of the Harmonized System, unless the non-originating material falls under a subheading other than that of the good for which origin is being determined in accordance with this Article.
Article 4-07. Intermediate Materials.
1. For purposes of calculating the regional value content in accordance with Article 4-04, the producer of a good may designate as an intermediate material any self-produced material used in the production of the good, provided that such material is an originating good within the meaning of Article 4-03.
2. When the intermediate material is subject to a regional value content, this shall be calculated in accordance with Article 4-04(4).
3. For purposes of calculating the regional value content of the good, the value of the intermediate material shall be the total cost that can be reasonably assigned to that intermediate material in accordance with the provisions of the Uniform Regulations of this chapter.
4. If a material designated as an intermediate material is subject to a regional value content, no other self- produced material subject to a regional value content used in the production of that intermediate material may, in turn, be designated by the producer as an intermediate material.
5. Except where two or more producers cumulate their production under Article 4-08, the restriction set forth in paragraph 4 shall not apply to an intermediate material used by another producer in the production of a material that is subsequently acquired and used in the production of a good by the producer referred to in paragraph 4.
Article 4-08. Accumulation.
1. For purposes of establishing whether a good is originating, the producer of a good may cumulate its production with that of one or more producers in the territory of one or both Parties that produce materials that are incorporated in the good, so that the production of such materials is considered to be carried out by that producer, provided that the good complies with the provisions of Article 4-03.
2. In cases where the good on which the accrual is being accrued is subject to a regional value content requirement, the calculation of the regional value content must be made by the net cost method.
Article 4-09. Expendable Property and Materials.
1. For purposes of establishing whether a good is originating, when originating and non-originating fungible materials that are physically mixed or combined in inventory are used in its production, the origin of the materials may be determined by one of the inventory control methods established in the Uniform Regulations.
2. When originating and non-originating fungible goods are physically mixed or combined in inventory, and prior to their exportation they do not undergo any productive process or any other operation in the territory of the Party in which they were physically mixed or combined, other than unloading, reloading or any other movement necessary to maintain the goods in good condition or transport them to the territory of the other Party, the origin of the good may be determined from one of the inventory control methods established in the Uniform Regulations.
3. Once one of the inventory control methods established in the Uniform Regulations has been selected, it should be used throughout the fiscal year or period.
Article 4-10. Sets or Assortments.
1. Sets of goods that are classified according to rule 3 of the General Rules of Interpretation of the Harmonized System, as well as goods whose description according to the nomenclature of the Harmonized System is specifically that of a set, shall qualify as originating, provided that each of the goods contained in the set complies with the rule of origin that has been established for each of the goods in this chapter.
2. Notwithstanding paragraph 1, a set of goods shall be considered as originating if the value of all the non- originating goods used in the formation of the set does not exceed 8 percent of the transaction value of the set adjusted on the basis indicated in paragraph 2 or 3, as the case may be, of Article 4-04, in the cases referred to in Article 4-04(5), if the value of all the non-originating goods referred to above does not exceed 8 percent of the total cost of the set.
3. The provisions of this article shall prevail over the specific rules set forth in Annex 4-03.
Article 4-11. Indirect Materials.
Indirect materials shall be considered as originating without regard to the place of their production and the value of such materials shall be the costs thereof as reported in the accounting records of the producer of the good.
Article 4-12. Accessories, Spare Parts and Tools.
1. Accessories, spare or replacement parts and tools delivered with the good as part of the usual accessories, Spare parts and tools of the good shall be disregarded in determining whether all non-originating materials used in the production of the good comply with the applicable change in tariff classification set out in Annex 4-03, provided that:
a) accessories, spare or replacement parts and tools are not invoiced separately from the good, regardless of whether they are itemized or detailed separately in the invoice itself; and
b) the quantity and value of such accessories, spare or replacement parts and tools are those customary for the property.
2. The provisions of numeral 1 shall be applicable whenever accessories, spare parts and tools are not invoiced separately from the good, regardless of whether they are itemized or detailed separately in the invoice itself.
3. When the good is subject to a regional value content, accessories, spare parts and tools shall be considered as originating or non-originating materials, as the case may be, when calculating the regional value content of the good.
4. For the purposes set forth in paragraph 2, when accessories, spare or replacement parts and tools correspond to self-manufactured materials, the producer may choose to designate such materials as intermediate materials according to article 4-07.
Article 4-13. Retail Containers and Packaging Materials.
1. Where the containers and packing materials in which a good is presented for retail sale are classified in the Harmonized System with the good they contain, in accordance with General Rule 5(b) of the Harmonized System, they shall be disregarded in determining whether all non-originating materials used in the production of the good comply with the corresponding change in tariff classification set out in Annex 4-03.
2. When the good is subject to a regional value content, they shall be considered as originating or non- originating, as the case may be, to calculate the regional value content of the good.
3. For the purposes set forth in paragraph 2, when packaging materials and containers correspond to self-manufactured materials, the producer may designate such materials as intermediate materials according to article 4-07.
Article 4-14. Containers and Packing Materials for Shipment.
Containers and packing materials for shipment in which a good is packed or packaged exclusively for transportation shall not be taken into account for the purpose of establishing whether:
a) the non-originating materials used in the production of the good undergo the corresponding change in tariff classification set out in Annex 4-03; and
b) if the good satisfies a regional content requirement.
Article 4-15. Non-origin Conferring Transactions and Practices.
1. A good shall not be considered as originating solely because:
a) simple filtrations and dilutions in water or other substance that do not materially alter the characteristics of the property;
b) simple operations intended to ensure the preservation of the good during transportation or storage, such as aeration, refrigeration, freezing, removal of damaged parts, drying or addition of substances;
c) dedusting, screening, classifying, sorting, selecting, washing or cutting;
d) packing, repacking, wrapping or repacking or packaging for retail sale;
e) the application of trademarks, labels or similar distinctive signs;
f) cleaning, including removal of rust, grease, paint or other coatings;
g) the simple assembly of parts and components, when presented disassembled or not yet assembled, which are classified as a good in accordance with rule 2(a) of the General Rules of Interpretation of the Harmonized System. The foregoing shall not apply to goods which have already been assembled and subsequently disassembled for convenience of packing, handling or transportation;
h) fractionation into lots or volumes, shelling or shelling; and
i) the accumulation of two or more of the operations indicated in paragraphs a} to h) of this article.
2. Any price-fixing activity or practice, in respect of which it can be demonstrated, on the basis of sufficient evidence, that its purpose is to evade compliance with the provisions of this chapter, does not confer origin to a good.
3. The provisions of this article shall prevail over the specific rules set forth in Annex 4-03.
Article 4-16. Proceedings Conducted Outside the Territories of the Parties.
A good that has been produced in accordance with the requirements of Article 4-03 shall lose its originating status if it undergoes further processing or any other operation outside the territories of the Parties in which production under Article 4-03 was carried out, other than unloading, reloading or any other movement necessary to maintain it in good condition or to transport it to the territory of the other Party.
Article 4-17. Shipment, Transportation and Transit of Goods.
For originating goods to benefit from preferential treatment, they must have been shipped directly from the exporting Party to the importing Party. For this purpose, it is considered direct shipment:
a) goods transported without passing through the territory of a country that is not a Party to this Agreement;
b) goods in transit through one or more countries not Party to this Agreement, with or without transshipment or temporary storage, under the supervision of the competent customs authority, provided that:
i) the transit is justified by geographic reasons or considerations related to transportation requirements;
ii) not intended for trade, use or employment in the State of transit; and
iii) do not undergo, during transportation or storage, any operation other than loading, unloading or handling, in order to maintain them in good condition or ensure their preservation.
Article 4-18. Committee on Rules of Origin and Customs Procedures.
1. The Committee on Rules of Origin and Customs Procedures shall have the following functions:
a) cooperate in the application of this Chapter, taking into account the provisions of Chapter V (Customs Procedures for the Handling of Origin of Goods);
b) at the request of either Party, consider proposals for modifications to the specific rules of origin in Annex 4-03, duly substantiated, that are due to changes in production processes or other matters related to the determination of the origin of a good;
c) determine, where appropriate, the incidence of interest costs incurred by a Party's producer in the production of a good, in order to avoid the improper use of such costs in the determination of origin of that good;
d) seek to reach agreements on:
(i) tariff classification and customs valuation matters related to determinations of origin, referred to in Article 5-08 (Procedures to verify origin);
(ii) the common procedures and criteria for the request, approval, modification, revocation and application of advance rulings, referred to in Article 5-10 (Advance Rulings);
(iii) modifications to the certificate or declaration of origin referred to in Article 5-02 (Declaration and certification of origin};
(iv) the uniform interpretation, application and administration of this chapter, Chapter V (Customs Procedures for Handling the Origin of Goods), and the Uniform Regulations; and
(v) any other customs matters arising under this Agreement;
e) propose modifications or additions to this chapter, to chapter V (Customs Procedures for the Handling of Origin of Goods), to the Uniform Regulations, and to the matters within its competence; and
f} examine proposals for administrative or operational changes in customs matters that may affect the flow of trade between the territories of the Parties.
2. Nothing in Chapter V (Customs Procedures for the Handling of Origin of Goods) or the provisions of the preceding paragraph shall be construed to prevent a Party from issuing a determination of origin or an advance ruling or taking any other action as it deems necessary because of the pendency of a decision on the matter before this Committee.
Chapter V. CUSTOMS PROCEDURES FOR THE HANDLING OF THE ORIGIN OF GOODS
Article 5-01. Definitions and Terms.
1. For the Purposes of this Chapter, the following definitions shall apply:
Customs Authority: the "customs Authority" of a Party, as provided In Annex 5-01 (Customs Authority);
competent authority: the authority that, according to the legislation of each Party, is responsible for the validation of certificates of origin, being able to delegate such function to other public agencies or private entities. In the case of Mexico, the Secretariat of Economy, or its successor, and in the case of Uruguay, the General Directorate of Trade, Foreign Trade Area of the Ministry of Economy and Finance, or its successor;
identical goods: "identical goods" as defined in the Customs Valuation Agreement;
valid certificate of origin: the certificate of origin that has been completed, signed and validated in accordance with the provisions of this Agreement and the instructions for completing the certificate of origin agreed to by the Parties;
exporter: an "exporter" located in the territory of a Party from which the good is exported who, under this Chapter, is required to maintain in the territory of that Party the records referred to in Article 5-06(a);
commercial importation: importation of a good into the territory of one of the Parties for the purpose of sale or use for commercial, industrial or similar purposes;
importer: an "importer" located in the territory of a Party into which the good is imported who, under this Chapter, is required to keep in the territory of that Party the records referred to in Article 5-06(b);
producer: a "producer", as defined in Article 4-01 (Definitions and Terms), located in the territory of a Party, who is required to maintain in the territory of that Party the records referred to in Article 5-06(a);
Determination of origin ruling: a ruling issued as a result of a verification of origin that establishes whether a good qualifies as originating, in accordance with Chapter IV (Rules of Origin};
preferential tariff treatment: the application of the corresponding tariff rate to an originating good under the Duty-Free Program; and
value: the value of a good or material for the purpose of calculating customs duties or for the application of Chapter IV (Rules of Origin).
2. Except as defined in this article, the definitions set forth in Chapter IV (Origin Regime) are incorporated into this chapter.
Article 5-02. Declaration and Certification of Origin.
1. For the purposes of this Chapter, on the date of entry into force of this Agreement, the Parties shall establish a single format for the certificate of origin, which may be modified by agreement between them. Likewise, they shall establish the minimum set of data to be contained in the declaration of origin, which may be modified by agreement between the Parties.
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. The certificate shall be valid for up to two (2) years from the date of its validation by the competent authority.
3. Each Party shall provide that its exporters shall complete and sign the certificate of origin in respect of the export of a good for which an importer may claim preferential tariff treatment. The certificate of origin shall require validation by the competent authority of the exporting Party.
4. Each Party shall provide that for the issuance of a certificate of origin, a declaration of origin must be submitted with the necessary documentary evidence that the good complies with the provisions of Chapter IV (Rules of Origin).
5. The competent authority of the exporting Party:
a) determine the administrative mechanisms for the validation of the certificate of origin completed and signed by the exporter;
b) provide, at the request of the importing Party, information concerning the origin of the goods imported under preferential tariff treatment; and
c) shall communicate to the other Party the list of the persons authorized to validate the certificates of origin with their corresponding stamps, signatures and facsimile. Modifications to such list shall be communicated in the same terms.
6. The competent authority of the exporting Party shall be responsible for the filing of the copies of the certificates of origin that are validated, keeping the files for a minimum period of 5 (five) years from the date of issue. Such file shall also include all the background information that served as the basis for the validation of the certificate of origin. The competent authority of the exporting Party shall keep a permanent record of the validated certificates of origin, which shall contain, at least, the certificate number, the certificate applicant and the date of issuance.
7. Each Party shall provide that the certificate of origin completed and signed by the exporter in the territory of the other Party and validated by the competent authority of the exporting Party shall cover:
a) the export of one or more goods; or
b) several imports of identical goods to be made within a specific period of time established by the exporter in the certificate, which shall not exceed 12 months.
Article 5-03. 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) declare in writing, in the import document provided for in its legislation, based on 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 the declaration;
c) provide a copy of the certificate of origin when requested by your customs authority; and
d) submit, until the customs authority initiates an investigation process, a corrected declaration and pay the corresponding customs 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 complies with the above obligations, he shall not be penalized.
2. Each Party shall provide that, where an importer in its territory fails to comply with any of the requirements set out in this Chapter, the preferential tariff treatment claimed for the good imported from the territory of the other Party shall be denied.
3. Each Party shall provide that, when preferential tariff treatment has not been requested for a good imported into its territory that has qualified as originating, the importer of the good, within 180 days from the date of importation, may request a refund of the customs duties paid in excess because preferential tariff treatment has not been granted to the good, provided that the request is accompanied by:
a) a written declaration stating that the good qualified as originating at the time of importation;
b) acopy of the certificate of origin; and
c) any other documentation related to the importation of the good, as required by that Party.
Article 5-04. Obligations with Respect to Exports.
1. Each Party shall provide that its exporter or producer, who has completed and signed a certificate of origin, shall deliver a copy of such certificate to its customs 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, all persons to whom he has given the certificate or declaration of origin, as the case may be, and its competent authority, of any change that may affect the accuracy or validity of the certificate or declaration of origin. In such cases the exporter or producer shall not be penalized for having submitted an incorrect certificate or declaration, respectively.
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 representations in contravention of its customs laws and regulations. In addition, it may apply such measures, as the circumstances warrant, when the exporter or producer fails to comply with any of the requirements of this chapter.
4. The competent authority of the exporting Party shall inform the customs authority of the importing Party in writing of the notification referred to in paragraph 2.
Article 5-05. Exceptions.
Provided that it is not part of two or more imports made or intended to be made for the purpose of evading compliance with the certification requirements of Articles 5-02 and 5-03, the Parties shall not require a certificate of origin in the following cases: