(a) the good is provided for in a tariff provision identified in Annex D-03.1;
(b) the good is for use in a motor vehicle;
(c) each of the non-originating materials used in the production of the good undergoes the change of tariff classification specified in the applicable rule in Annex D-01 for that tariff provision;
(d) the regional value content of that good is not less than 30 per cent under the net cost method; and
(e) the good meets any other applicable requirements set out in this Chapter.
2. For purposes of calculating the regional value content of a motor vehicle, the producer may average its calculation over its fiscal year, using any one of the following categories, on the basis of either all motor vehicles in the category or only those motor vehicles in the category that are exported to the territory of the other Party:
(a) the same model line of motor vehicles in the same class of vehicles produced in the same plant in the territory of a Party;
(b) the same class of motor vehicles produced in the same plant in the territory of a Party;
(c) the same model line of motor vehicles produced in the territory of a Party; or
(d) if applicable, the basis set out in Annex D-03.2.
3. For purposes of calculating the regional value content for any or all goods provided for in a tariff provision listed in Annex D-03.1 produced in the same plant, the producer of the good may:
(a) average its calculation
(i) over the fiscal year of the motor vehicle producer to whom the good is sold,
(ii) over any quarter or month, or
(iii) over its fiscal year, if the good is sold as an aftermarket part;
(b) calculate the average referred to in subparagraph (a) separately for any or all goods sold to one or more motor vehicle producers; or
(c) with respect to any calculation under this paragraph, calculate separately for those goods that are exported to the territory of the other Party
Article D-04. Accumulation
1. For purposes of determining whether a good is an originating good, the production of the good in the territory of one or both of the Parties by one or more producers shall, at the choice of the exporter or producer of the good for which preferential tariff treatment is claimed, be considered to have been performed in the territory of either of the Parties by that exporter or producers, provided that:
(a) all non-originating materials used in the production of the good undergo an applicable tariff classification change set out in Annex D-01, and the good satisfies any applicable regional value-content requirement, entirely in the territory of one or both of the Parties; and
(b) the good satisfies all other applicable requirements of this Chapter.
2. For purposes of Article D-02(10), the production of a producer that chooses to accumulate its production with that of other producers under paragraph 1 shall be considered to be the production of a single producer.
Article D-05. De Minimis
1. Except as provided in paragraphs 3 through 6, a good shall be considered to be an originating good if the value of all non-originating materials used in the production of the good that do not undergo an applicable change in tariff classification set out in Annex D-01 is not more than 9 per cent of the transaction value of the good, adjusted to a F.O.B. basis, or, if the transaction value of the good is unacceptable under Article 1 of the Customs Valuation Code, the value of all such non-originating materials is not more than 9 per cent of the total cost of the good, provided that:
(a) if the good is subject to a regional value-content requirement, the value of such non-originating materials shall be taken into account in calculating the regional value content of the good; and
(b) the good satisfies all other applicable requirements of this Chapter.
2. A good that is otherwise subject to a regional value-content requirement shall not be required to satisfy such requirement if the value of all non-originating materials used in the production of the good is not more than 9 per cent of the transaction value of thegood, adjusted to a F.O.B. basis, or, if the transaction value of the good is unacceptable under Article 1 of the Customs Valuation Code, the value of all non-originating materials is not more than 9 per cent of the total cost of the good, provided that the good satisfies all other applicable requirements of this Chapter.
3. Paragraph 1 does not apply to:
(a) a non-originating material provided for in Chapter 4 of the Harmonized System or tariff item 1901.90.aa (dairy preparations containing over 10 per cent by weight of milk solids) that is used in the production of a good provided for in Chapter 4 of the Harmonized System;
(b) a non-originating material provided for in Chapter 4 of the Harmonized System or tariff item 1901.90.aa (dairy preparations containing over 10 per cent by weight of milk solids) that is used in the production of a good provided for in tariff item 1901.10.aa (infant preparations containing over 10 per cent by weight of milk solids), 1901.20.aa (mixes and doughs, containing over 25 per cent by weight of butterfat, not put up for retail sale), 1901.90.aa (dairy preparations containing over 10 per cent by weight of milk solids), heading 21.05 or tariff item 2106.90.dd (preparations containing over 10 per cent by weight of milk solids), 2202.90.cc (beverages containing milk) or 2309.90.aa (animal feeds containing over 10 per cent by weight of milk solids);
(c) a non-originating material provided for in Chapter 15 of the Harmonized System that is used in the production of a good provided for in heading 15.01 through 15.08, 15.12, 15.14 or 15.15;
(d) a non-originating material provided for in heading 17.01 that is used in the production of a good provided for in heading 17.01 through 17.03;
(e) a non-originating material provided for in Chapter 17 of the Harmonized System or heading 18.05 that is used in the production of a good provided for in subheading 1806.10;
(f) a non-originating material provided for in heading 22.03 through 22.07 that is used in the production of a good provided for in heading 22.03 through 22.07 or subheading 2208.20;
(g) a non-originating material used in the production of a good provided for in tariff item 7321.11.aa (gas stove or range), subheading 8415.10, 8415.20 through 8415.83, 8418.10 through 8418.21, 8418.29 through 8418.40, 8421.12, 8422.11, 8450.11 through 8450.20 or 8451.21 through 8451.29, heading 84.56 through 84.63 or 84.77, tariff item 8516.60.aa (electric stove or range) or subheading 8526.10;
(h) a non-originating material provided for in tariff item 8548.10.aa (spent primary cells, spent primary batteries and spent electric accumulators) that is used in the production of a good provided for in heading 85.06 or 85.07; or
(i) a printed circuit assembly, including a part that incorporates a printed circuit assembly, that is a non-originating material used in the production of a good where the applicable change in tariff classification for the good, as set
out in Annex D-01, places restrictions on the use of such non-originating material.
4. Paragraph 1 does not apply to a non-originating single juice ingredient provided for in heading 20.09 that is used in the production of a good provided for in tariff item2106.90.cc (concentrated mixtures of fruit or vegetable juice, fortified with minerals or vitamins) or 2202.90.bb (mixtures of fruit or vegetable juices, fortified with minerals or vitamins).
5. Paragraph 1 does not apply to a non-originating material used in the production of a good provided for in Chapter 1 through 21 of the Harmonized System unless the non-originating material is provided for in a different subheading than the good for which origin is being determined under this Article.
6. A good provided for in Chapter 50 through 63 of the Harmonized System that does not originate because certain fibres or yarns used in the production of the component of the good that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in Annex D-01, shall nonetheless be considered to originate if the total weight of all such fibres or yarns in that component is not more than 9 per cent of the total weight of that component (5).
Article D-06. Fungible Goods and Materials
For purposes of determining whether a good is an originating good:
(a) where originating and non-originating fungible materials are used in the production of a good, the determination of whether the materials are originating need not be made through the identification of any specific fungible material, but may be determined in accordance with any of the inventory management methods recognized in, or otherwise accepted by, the Generally Accepted Accounting Principles of the Party in which the production is performed; and
(b) where originating and non-originating fungible goods are commingled and exported in the same form, the determination may be made in accordance with any of the inventory management methods recognized in, or otherwise accepted by, the Generally Accepted Accounting Principles of the Party from which the good is exported.
Article D-07. Accessories, Spare Parts and Tools
Accessories, spare parts or tools delivered with the good that form part of the good's standard accessories, spare parts, or tools, shall be considered as originating if the good originates and shall be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex D- 01, provided that:
(a) the accessories, spare parts or tools are not invoiced separately from the good;
(b) the quantities and value of the accessories, spare parts or tools are customary for the good; and
(c) if the good is subject to a regional value-content requirement, the value of the accessories, spare parts or tools shall be taken into account as originating or non-originating materials, as the case may be, in calculating the regional value content of the good.
Article D-08. Indirect Materials
An indirect material shall be considered to be an originating material without regard to where it is produced.
Article D-09. Packaging Materials and Containers for Retail Sale
Packaging materials and containers in which a good is packaged for retail sale shall, if classified with the good, be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex D-01, and, if the good is subject to a regional value-content requirement, the value of such packaging materials and containers shall be taken into account as originating or nonoriginating materials, as the case may be, in calculating the regional value content of the good.
Article D-10. Packing Materials and Containers for Shipment
Packing materials and containers in which a good is packed for shipment shall be disregarded in determining whether:
(a) the non-originating materials used in the production of the good undergo an applicable change in tariff classification set out in Annex D-01; and
(b) the good satisfies a regional value-content requirement.
Article D-11. Transshipment
A good shall not be considered to be an originating good by reason of having undergone production that satisfies the requirements of Article D-01 if, subsequent to that production, the good undergoes further production or any other operation outside the territories of the Parties, other than unloading, reloading or any other operation necessary to preserve it in good condition or to transport the good to the territory of a Party.
Article D-12. Non-qualifying Operations
A good shall not be considered to be an originating good merely by reason of:
(a) mere dilution with water or another substance that does not materially alter the characteristics of the good; or
(b) any production or pricing practice in respect of which it may be demonstrated, on the basis of a preponderance of evidence, that the object was to circumvent this Chapter
Article D-13. Interpretation and Application
For purposes of this Chapter:
(a) the basis for tariff classification in this Chapter is the Harmonized System;
(b) where a good referred to by a tariff item number is described in parentheses following the tariff item number, the description is provided for purposes of reference only;
(c) where applying Article D-01(d), the determination of whether a heading or subheading under the Harmonized System provides for and specifically describes both a good and its parts shall be made on the basis of the nomenclature of the heading or subheading and the relevant Section or Chapter Notes, in accordance with the General Rules for the Interpretation of the Harmonized System;
(d) in applying the Customs Valuation Agreement under this Chapter
1. the principles of the Customs Valuation Agreement shall apply to domestic transactions, with such modifications as may be required by the circumstances, as would apply to international transactions,
2. the provisions of this Chapter shall take precedence over the Customs Valuation Agreement to the extent of any difference, and
3. the definitions in Article D-17 shall take precedence over the definitions in the Customs Valuation Agreement to the extent of any difference; and
(e) all costs referred to in this Chapter shall be recorded and maintained in accordance with the Generally Accepted Accounting Principles applicable in the territory of the Party in which the good is produced.
Article D-14. Consultation and Modifications
1. The Parties shall consult regularly to ensure that this Chapter is administered effectively, uniformly and consistently with the spirit and objectives of this Agreement, and shall cooperate in the administration of this Chapter in accordance with Chapter E.
2. A Party that considers that this Chapter requires modification to take into account developments in production processes or other matters may submit a proposed modification along with supporting rationale and any studies to the other Party for consideration and any appropriate action under Chapter E.
Article D-15. NAFTA Accession
Upon the accession o f Chile to the NAFTA, the rules of origin in this Chapter shall be replaced by the rules of origin to be negotiated as part of the terms of the accession of Chile to the NAFTA.
Article D-16. Definitions
For purposes of this Chapter:
aquaculture means the farming of aquatic organisms, including fish, molluscs, crustaceans, other aquatic invertebrates and aquatic plants, from seedstock such as eggs, fry, fingerlings and larvae, by intervention in the rearing or growth processes to enhance production, such as regular stocking, feeding, protection from predators, etc.
class of motor vehicles means any one of the following categories of motor vehicles:
(a) motor vehicles provided for in subheading 8701.20, tariff item 8702.10.aa or 8702.90.aa (vehicles for the transport of 16 or more persons), subheading 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90 or heading 87.05;
(b) motor vehicles provided for in subheading 8701.10 or 8701.30 through 8701.90;
(c) motor vehicles provided for in tariff item 8702.10.bb or 8702.90.bb (vehicles for the transport of 15 or fewer persons) or subheading 8704.21 or 8704.31; or
(d) motor vehicles provided for in subheading 8703.21 through 8703.90;
F.O.B. means free on board, regardless of the mode of transportation, at the point of direct shipment by the seller to the buyer;
fungible goods or fungible materials means goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical;
goods wholly obtained or produced entirely in the territory of one or both of the Parties means:
(a) mineral goods extracted in the territory of one or both of the Parties;
(b) vegetable goods, as such goods are defined in the Harmonized System, harvested in the territory of one or both of the Parties;
(c) live animals born and raised in the territory of one or both of the Parties;
(d) goods obtained from hunting, trapping, fishing or aquaculture in the territory of one or both of the Parties;
(e) goods (fish, shellfish and other marine life) taken from the sea by vessels registered or recorded with a Party and flying its flag;
(f) goods produced on board factory ships from the goods referred to in subparagraph (e) provided such factory ships are registered or recorded with that Party and fly its flag;
(g) goods taken by a Party or a person of a Party from the seabed or beneath the seabed outside territorial waters, provided that a Party has rights to exploit such seabed;
(h) goods taken from outer space, provided they are obtained by a Party or a person of a Party and not processed in a non-Party;
(i) waste and scrap derived from
(i) production in the territory of one or both of the Parties, or
(ii) used goods collected in the territory of one or both of the Parties, provided such goods are fit only for the recovery of raw materials;
(j) components that have been extracted from used goods collected in the territory of one or both of the Parties, and have undergone any process necessary to ensure their working condition; and
(k) goods produced in the territory of one or both of the Parties exclusively from goods referred to in subparagraphs (a) through (j), or from their derivatives, at any stage of production;
identical or similar goods means "identical goods" and "similar goods", respectively, as defined in the Customs Valuation Agreement;
indirect material means a good used in the production, testing or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including:
(a) fuel and energy;
(b) tools, dies and moulds;
(c) spare parts and materials used in the maintenance of equipment and buildings;
(d) lubricants, greases, compounding materials and other materials used in production or used to operate equipment and buildings;
(e) gloves, glasses, footwear, clothing, safety equipment and supplies;
(f) equipment, devices, and supplies used for testing or inspecting the goods;
(g) catalysts and solvents; and
(h) any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production;
intermediate material means a material that is self-produced and used in the production of a good, and designated pursuant to Article D-02(10);
material means a good that is used in the production of another good, and includes a part or an ingredient;
model line means a group of motor vehicles having the same platform or model name;
motor vehicle means a motor vehicle provided for in heading 87.01 or 87.02, subheading 8703.21 through 8703.90 or heading 87.04 and 87.05;
net cost means total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the total cost;
net cost of a good means the net cost that can be reasonably allocated to a good using one of the methods set out in Article D-02(8);
non-allowable interest costs means interest costs incurred by a producer that exceed 700 basis points above the applicable national government interest rate identified in the Uniform Regulations for comparable maturities;
non-originating good or non-originating material means a good or material that does not qualify as originating under this Chapter;
producer means a person who grows, mines, harvests, fishes, traps, hunts, manufactures, processes, assembles or disassembles a good;
production means growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing, assembling or disassembling a good;
reasonably allocate means to apportion in a manner appropriate to the circumstances; related person means a person related to another person on the basis that:
(a) they are officers or directors of one another's businesses;
(b) they are legally recognized partners in business;
(c) they are employer and employee;
(d) any person directly or indirectly owns, controls or holds 25 per cent or more of the outstanding voting stock or shares of each of them;
(e) one of them directly or indirectly controls the other;
(f) both of them are directly or indirectly controlled by a third person; or
(g) they are members of the same family (members of the same family are natural or adoptive children, brothers, sisters, parents, grandparents, or spouses);
royalties means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use or right to use any copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, secret formula or process, excluding those payments under technical assistance or similar agreements that can be related to specific services such as:
(a) personnel training, without regard to where performed; and
(b) if performed in the territory of one or both of the Parties, engineering, tooling, die-setting, software design and similar computer services, or other services;
sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and after-sales service:
(a) sales and marketing promotion; media advertising; advertising and market research; promotional and demonstration materials; exhibits; sales conferences, trade shows and conventions; banners; marketing displays; free samples; sales, marketing and after-sales service literature (product brochures, catalogues, technical literature, price lists, service manuals, sales aid information); establishment and protection of logos and trademarks; sponsorships; wholesale and retail restocking charges; entertainment;
(b) sales and marketing incentives; consumer, retailer or wholesaler rebates; merchandise incentives;
(c) salaries and wages, sales commissions, bonuses, benefits (for example, medical, insurance, pension), travelling and living expenses, membership and professional fees, for sales promotion, marketing and after-sales service personnel;
(d) recruiting and training of sales promotion, marketing and after-sales service personnel, and after-sales training of customers' employees, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
(e) product liability insurance;
(f) office supplies for sales promotion, marketing and after-sales service of goods, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
(g) telephone, mail and other communications, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;
(h) rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centres;
(i) property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centres, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer; and
(j) payments by the producer to other persons for warranty repairs; self-produced material means a material that is produced by the producer of a good and used in the production of that good;
shipping and packing costs means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding costs of preparing and packaging the good for retail sale;
total cost means all product costs, period costs and other costs incurred in the territory of one or both of the Parties;
transaction value means the price actually paid or payable for a good or material with respect to a transaction of the producer of the good, adjusted in accordance with the principles of paragraphs 1, 3 and 4 of Article 8 of the Customs Valuation Agreement, regardless of whether the good or material is sold for export; and
used means used or consumed in the production of goods.