e) goods such as fish, crustaceans and other marine species obtained from the sea by vessels registered, registered, flagged or reputed as such, by any of the Parties, according to their legislation, through modalities such as affiliation, leasing or chartering;
f) goods produced on board factory ships of any of the Parties, from the goods identified in subparagraph e), provided that such factory ships are registered, registered, flagged or reputed as such, by any of the Parties, according to their legislation, through modalities such as affiliation, leasing or chartering;
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 more Parties; or
(ii) used goods, collected in the territory of one or more Parties, provided that such goods are used only for the recovery of raw materials; and
i) goods produced in the territory of one or more of the Parties exclusively from the goods referred to in subparagraphs a) through h) or their derivatives, at any stage of production.
shipping containers and packing materials: goods that are used to protect a good during transportation, other than retail containers and materials.
total cost: in relation to a good, the sum of the following elements, in accordance with the provisions of the annex to this article:
a) the cost or value of direct manufacturing materials used in the production of the good;
b) the cost of the direct labor used in the production of the good; and
c) a reasonable amount for direct and indirect costs and expenses of manufacturing the good.
F.O.B.: free on board (L.A.B.).
place where the producer is located: in relation to a good, the production plant 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.
fungible materials: materials that are interchangeable for commercial purposes and whose properties are essentially identical.
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 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, composite materials 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 the goods;
g) catalysts and solvents; and
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: self-manufactured materials used in the production of a good, and designated in accordance with article 6-07.
related person: "linkage between persons" as set forth in Article 15.4 of the Customs Valuation Code.
production: the cultivation, extraction, harvesting, fishing, hunting, manufacturing, processing or assembling of a good.
producer: a person who grows, extracts, harvests, fishes, hunts, manufactures, processes or assembles a good. used: employed or consumed in the production of goods.
transaction value of a good: the price paid or payable for a good related to the transaction of the producer of the good in accordance with the principles of Article 1 of the Customs Valuation Code, adjusted in accordance with the principles of Article 8.1, 8.3 and 8.4 thereof, without considering that the good is sold for export.
transaction value of a material: the price paid or payable for a material related to the transaction of the producer of the good in accordance with the principles of Article 1 of the Customs Valuation Code, adjusted in accordance with the principles of Article 8.1, 8.3 and 8.4 thereof, without considering that the material is sold for export.
Article 6-02. Interpretation and Application.
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 Code;
c) when applying the Customs Valuation Code to determine the origin of a good:
i) the principles of the Customs Valuation Code shall be applied to domestic transactions, with such modifications as circumstances require, as they would be applied to international transactions; and
ii) the provisions of this Chapter and Chapter VII shall prevail over the Customs Valuation Code, insofar as they are incompatible;
d) for purposes of the definition of transaction value of a good established in Article 6-01, the seller referred to in the Customs Valuation Code shall be the producer of the good;
e) for purposes of the definition of transaction value of a material established in Article 6-01, the seller referred to in the Customs Valuation Code shall be the supplier of the material, and the buyer referred to in the Customs Valuation Code shall be the producer of the good;
f) 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; and
g) the provisions of Articles 6-10 and 6-11 shall prevail over the specific rules of origin indicated in the Annex to Article 6-03.
Article 6-03. Originating Goods.
1. A good shall originate in the territory of a Party when:
(a) is wholly obtained or produced entirely in the territory of one or more Parties as defined in Article 6-01;
(b) is produced in the territory of one or more Parties exclusively from materials that qualify as originating under this Article;
(c) is produced in the territory of one or more Parties from non-originating materials that meet a change in tariff classification and other requirements as specified in the Annex to this Article and the good complies with the other applicable provisions of this Chapter;
(d) is produced in the territory of one or more Parties from non-originating materials that meet a change in tariff classification and other requirements, and meets a regional value content requirement, as specified in the Annex to this Article, as well as the other applicable provisions of this Chapter;
(e) is produced in the territory of one or more Parties and complies with a regional value content requirement as specified in the Annex to this Article, as well as with the other applicable provisions of this Chapter;
(f) except for goods covered by Chapters 61 through 63 of the Harmonized System, is produced in the territory of one or more 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 General Rule 2(a) of the Harmonized System; or
ii) the heading for the good is the same for both the good and its parts and that heading is not divided into subheadings or the subheading is the same for both the good and its parts;
provided that the regional value content of the good, determined in accordance with Article 6- 04, is not less than the percentage set forth in the Annex to this Article or in Article 6-18, and the good complies with the other applicable provisions of this Chapter.
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 the Annex to this Article, shall be made entirely in the territory of one or more Parties, and any regional content requirement for a good shall be satisfied entirely in the territory of one or more Parties.
Article 6-04. Value of Regional Content.
1. Each Party shall provide that the regional value content of a good shall be calculated by the exporter or producer in accordance with the transaction value method set out in paragraph 2.
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]100 where RCV: regional content expressed as a percentage.
VT: transaction value of an asset adjusted on the basis of F.O.B, except as provided in paragraph 6.
VMN: value of the non-originating materials used by the producer in the production of the good determined in accordance with the provisions of Article 6-05.
3. Each Party shall provide that the transaction value of a good shall be calculated:
(a) in accordance with the principles of Articles 1 and 8 of the Customs Valuation Code; or
(b) where there is no transaction value or where the transaction value of the good cannot be determined in accordance with paragraphs 4 and 5, in accordance with the principles of Article 6.1 of the Customs Valuation Code, except paragraph 1 of the interpretative note to that Article.
4. For purposes of paragraph 3, there is no transaction value when the property is not the subject of a sale. 5. For purposes of Paragraph 3, the transaction value of the property may not be determined when:
(a) there are restrictions on the transfer or use of the property by the purchaser except for those that:
(i) imposed or required by the law or authorities of the Party in which the purchaser of the good is located;
(ii) limit the geographic territory where the property may be resold; or (iii) do not appreciably affect the value of the property;
(b) the sale or price is dependent on a 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 the resale or of any subsequent transfer or use of the property by the buyer, unless due adjustment can be made in accordance with the provisions of Article 8 of the Customs Valuation Code; or
(d) the buyer and seller are related persons and the relationship between them influences the price, except as provided in Article 1.2 of the Customs Valuation Code.
6. For purposes of determining the transaction value of a good, when the producer of the good does not export it directly, the transaction value will be adjusted to the point within the producer's territory where the buyer receives the good.
Article 6-05. Value of Non-originating Materials.
1. The value of a non-originating material used in the production of a good:
(a) the transaction value of the material, calculated in accordance with the principles of Articles 1 and 8 of the Customs Valuation Code; 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 Code, it shall be calculated in accordance with the principles of Articles 2 to 7 of the Customs Valuation Code; and
(c) shall include, when they are not considered in subparagraphs a) or b):
(i) freight, insurance, packing costs and all other costs incurred in the transportation of the material to the port of importation in the Party where the producer of the good is located, except as provided in paragraph 2; and
(ii) the cost 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% of the value of the material determined in accordance with subparagraphs a) and b).
2. When the producer of the good acquires the non-originating material within its territory, the value of the 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.
3. For purposes of calculating the regional value content in accordance with Article 6-04, the value of non- originating materials used by the producer in the production of a good shall not include:
(a) the value of non-originating materials used by 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 value of non-originating materials used by the producer of the good in the production of an originating material of his own manufacture and which is designated by the producer as an intermediate material in accordance with Article 6-07.
Article 6-06. 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 comply with the applicable change in tariff classification set out in the Annex to Article 6-03 does not exceed 7% of the transaction value of the good determined in accordance with Article 6-04. Where the same good is also subject to the regional value content requirement, the value of those non-originating materials shall be taken into account in the calculation of the regional value content of the good.
2. Paragraph 1 does not apply to:
a) goods covered by Chapters 50 to 63 of the Harmonized System, except as provided in paragraph 3.
b) a non-originating material that is used in the production of goods falling within Chapters 1 through 27 of the Harmonized System, unless the non-originating material falls within a subheading other than that of the good for which origin is being determined in accordance with this Article.
3. A good classified in Chapters 50 through 63 of the Harmonized System that is non-originating because the fibers, yarns or threads used in the production of that good do not comply with the change in tariff classification provided for in the Annex to Article 6-03, shall be considered as originating provided that, in the case of:
a) yarn or thread, the fiber that does not comply with the change of tariff classification established in article 6-03, used in the production of yarn or thread does not exceed 7% of the total weight of the yarn;
b) fabric, the fiber, yarn or thread that does not comply with the change in tariff classification set forth in Article 6-03, used in the production of fabric does not exceed 7% of the total weight of the fabric; and
c) garments, the fiber, yarn or thread that does not comply with the change in tariff classification set out in Article 6-03, used in the production of the fabric containing the material that determines the tariff classification of the good does not exceed 7% of the total weight of that fabric.
Article 6-07. Intermediate Materials.
1. For purposes of calculating regional value content under Article 6-04, the producer of a good may designate as an intermediate material any self-produced material used in the production of the good provided that, if that intermediate material is subject to a regional value content requirement, no other self-produced material subject to the regional value content requirement used in the production of that intermediate material may itself be designated by the producer as an intermediate material.
2. The value of an intermediate material will be:
a) the total cost incurred in respect of all goods produced by the producer of the good, which can be reasonably allocated to that intermediate material in accordance with the provisions of the annex to article 6-01; or
(b) the amount of each cost that is part of the total cost incurred in respect of the intermediate material, which can be reasonably allocated to that intermediate material in accordance with the Annex to Article 6-01.
3. When an intermediate material is designated and is subject to a regional value content requirement, for purposes of calculating the regional value content of the intermediate material, the transaction value referred to in Article 6-04 shall be the value referred to in paragraph 2.
Article 6-08. Accumulation.
1. For purposes of establishing whether a good is originating, an exporter or producer may cumulate the production, with one or more producers in the territory of one or more Parties, of materials that are incorporated in the good so that the production of the materials is considered as having been carried out by that exporter or producer, provided that the provisions of Article 6-03 are complied with.
2. When an exporter or producer decides to cumulate the production of materials in accordance with paragraph 1 and the good is subject to a regional value content requirement, for purposes of calculating the regional value content of the good, the value of the non-originating materials used by the producer of the good shall be the sum of the value of those materials determined in accordance with Article 6-05, less any of the total cost elements of the producer of the material except the value of the non-originating materials used by the producer of the material.
Article 6-09. Expendable Property and Materials.
1. For the purposes of establishing whether a good is originating:
(a) where originating and non-originating fungible materials are used in the production of a good that are physically mixed or combined in inventory, the origin of the materials need not be established by identification of a specific fungible material, but may be defined by one of the inventory management methods set out in paragraph 2; and
(b) where originating and non-originating fungible goods are physically mixed or combined in inventory, and prior to exportation do not undergo any production 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 to transport them to the territory of another Party, the origin of the good may be established from one of the inventory management methods set out in paragraph 2.
2. The applicable inventory management methods for materials or consumables shall be as follows:
a) "FIFO" (first-in-first-out) is the inventory management method whereby the origin of the number of units of materials or consumables first received into inventory is considered to be the origin of the same number of units of materials or consumables first removed from inventory;
b) "LIFE" (last-in-first-out) is the method of inventory management whereby the origin of the number of units of materials or consumables received last in inventory is considered as the origin of the same number of units of materials or consumables first out of inventory; or
c) "averaging" is the method of inventory management whereby:
i) the determination as to whether the materials or consumables are originating shall be made, except as provided in item ii), through the application of the following formula:
PMO = (TMO/TMOYN) 100 where
PMO: average of materials or consumables originating.
TMO: total number of units of materials or goods original expendable items that are part of the inventory prior to departure.
TMOYN: total sum of units of materials or originating and non-originating fungible goods that make
up part of the pre-departure inventory.
ii) in the case where the good is subject to a regional value content requirement, the determination of the value of the non-originating materials shall be made through the application of the following formula:
PMN= (TMN/TMOYN) 100 where PMN: average of non-originating materials.
TMN: total value of non-expendable consumables that are part of the inventory prior to the output.
TMOYN: total value of consumables
originating and non-originating companies that form part of the
pre-departure inventory.
Once one of the inventory management methods set forth in paragraph 2 has been selected, it should be used throughout the fiscal year.
Article 6-10. Sets or Assortments.
Goods that are classified as sets according to the provisions of General Rule 3 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 good in this chapter. Notwithstanding the provisions of 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 7% of the transaction value of the set, determined in accordance with Article 6-04.
Article 6-11. Non-origin Conferring Transactions and Practices.
A good shall not be considered as originating when it is only subject to the following operations or practices:
a) dilution in water or in another substance that does not materially alter the characteristics of the good;
b) simple operations intended to ensure the preservation of goods during transportation or storage, such as aeration, refrigeration, removal of damaged parts, drying or addition of substances;
c) dedusting, screening, sorting, classifying, selecting, washing, cutting;
d) packing, repacking or packaging for retail sale;
e) gathering of goods to form sets or assortments;
f) application of trademarks, labels or similar distinctive signs;
g) cleaning, including the removal of rust, grease, paint or other coatings; and
h) 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.
Article 6-12. Transshipment and Direct Shipment.
1. A good shall not be considered as originating even if it has been produced in accordance with the requirements of Article 6-03, if subsequent to such production, the good undergoes further processing or is subject to any other operation outside the territories of the Parties, except unloading, reloading or any other movement necessary to maintain it in good condition or to transport it to the territory of a Party.
2. Notwithstanding the provisions of paragraph 1, a good shall not lose its originating status when, while in transit through the territory of one or more non-Party countries, with or without transshipment or temporary storage, under the supervision of the competent customs authority in those countries:
a) the transit is justified by geographical reasons or by considerations relating to transportation requirements;
(b) is not intended for trade, use or use in the country or countries of transit; and
c) during transportation and storage, it is not subjected to operations other than packaging, packing, loading, unloading or handling to ensure its preservation.
Article 6-13. 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 cost of such materials as reported in the accounting records of the producer of the good.
Article 6-14. Accessories, Spare Parts and Tools.
1. Accessories, spare parts and tools delivered with the good as part of the usual accessories, spare parts and tools of the good shall be considered to be originating if the good is originating and 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 the Annex to Article 6-03, 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 on the invoice itself; and
b) the quantities and value of such accessories, spare or replacement parts and tools are those customary for the property.
2. When the good is subject to a regional value content requirement, the value of accessories, spare parts and tools shall be taken into account as originating or non-originating materials, as the case may be, when calculating the regional value content of the good.
Article 6-15. Containers and Packaging Materials for Retail Sale.
Containers and packaging materials in which a good is presented for retail sale, when classified with the good they contain, shall be disregarded in deciding whether all non-originating materials used in the production of the good comply with the corresponding change in tariff classification set out in the Annex to Article 6-03. When the good is subject to the regional value content requirement, the value of the retail containers and packaging materials shall be considered as originating or non-originating, as the case may be, in calculating the regional value content of the good.