[Once one of the inventory management methods [established in paragraph 3] has been selected, it shall be used for the entire period or fiscal year.] 

[4.3) Sets [ and assortments.]]

[4.3.1][[Sets and assortments of goods classified pursuant to] [Except as provided in Annex 1.3, a set, as referred to in] rule 3 of the General Rules of Interpretation of the Harmonized System, [as well as goods whose description conforms to the Harmonized System Nomenclature, whether specifically that of a set or assortment,] shall qualify as originating, [provided that [each of the goods contained in the set or assortment complies with the [corresponding specific] rules of origin.]] [established for each of the goods in this chapter.] :

[(a) all the component goods, including packaging materials and containers, are originating; or

(b) where a set contains non-originating component goods, including packaging materials and containers,

(i) at least one of the component goods, or all the packaging materials and containers for the set, is originating, and

(ii) the value of the non-originating component goods, including any non-originating packaging materials and containers for the set, does not exceed __ per cent of the transaction value {of the goods}{of the set}.]

[4.3.2] [Notwithstanding the provisions of paragraph {[4.3.1]}, a set or assortment of goods shall be considered originating if the value of {all} non-originating goods used in the formation of the set or assortment [, adjusted on a CIF basis,] does not exceed ____ percent [of the value of the set or assortment].[set forth under 4.1 de minimis] [, adjusted on a FOB basis,]] [of the transaction value of same, adjusted on the base indicated in paragraph 1.4.2 or 1.4.3, as appropriate, or in the cases referred to in subparagraphs a) through f) of paragraph 1.4.5 if the value of all the aforementioned non-originating goods does not exceed (___%) of the total cost of the set or assortment.]

[Sets and assortments of goods shall be considered originating if each of the goods making them up complies with the provisions of this [Chapter].]

[Sets as defined in General Rule 3 of the Harmonised System shall be regarded as originating goods where all the goods making up the sets are originating goods. However, where the set is comprised of originating and non-originating goods, the set as a whole shall be regarded as originating where the value of the non-originating goods does not exceed .... per cent of the value of the final product.]

[4.3.3 The provisions of this article shall prevail over the specific rules established in the annex to article 1.3.]

[The provisions of this section shall prevail over the specific rules set forth in the annex of specific rules.]

4.4) Accessories, spare parts and tools.

[4.4.1][For purposes of determining whether all of the non-originating materials used in the production of a good comply with the applicable change in tariff classification described in Annex yy,] accessories, [spare parts {or}] {and} tools delivered with [the] [a] good that form [part [of the good’s standard accessories, spare parts or tools][,]] [standard part of same] shall be [considered as originating if the good originates and shall be] disregarded [in determining whether all the non-originating materials undergo the applicable change of tariff classification set out in Annex [yy][1.3]] , [to article 1.3]provided that:]

[[a)] the accessories, [spare parts {or}] { and} tools are not invoiced separately from the good, irrespective of whether each is broken down or detailed in the actual invoice[for the good]; [and]]

[[b)] the quantity and value of the accessories, [spare parts {or}] { and} tools are customary for the good [being classified.] [; and]]

[c) if the rule of Annex 1.3 applicable to the good contains a percentage for the maximum value of non-originating materials, the value of any non-originating accessories, [spare parts {or}] {and} tools shall be included in calculating the value of non-originating materials.]

[4.4.2] [Where the good is subject to a regional value content requirement, the accessories, [spare parts {or}] { and} tools shall be considered to be originating or non-originating materials, as appropriate, for calculating the regional value content of the good.] 

[Accessories, spare parts and tools, imported with a piece of equipment, machine, apparatus or vehicle which are part of the normal equipment and which are included in the price thereof or are not invoiced separately, shall be regarded as one with the piece of equipment, machine, apparatus or vehicle.]

[The corresponding rule of origin shall be applied separately to each of the accessories, spare parts and tools that do not meet the above conditions.]

4.5) Packaging materials and containers for retail sale. 

[Packaging materials and containers in which a good is packaged for retail sale shall [, if classified as one with the good,][in accordance with General Rule 5b) of the Harmonized System,] be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification [[described] in [the] Annex …]] [to Article 1.3] [as set out in Annex 1.3.]

[[Where the good is subject to a regional value content requirement] [However, if the rule of Annex 1.3 applicable to the good contains a percentage for the maximum value of non-originating materials], the value of [such] [any non-originating] packaging materials and containers shall be [taken into account] [included] in calculating the [regional value content of the good.] [value of non-originating materials].]

[Packaging materials and containers in which goods are packaged for retail sale shall be disregarded in determining the origin of the goods, where the packaging materials and containers are those used usually, and they are classified as one with the goods and are not priced separately.]

4.6) [Packaging] [Packing], materials and containers for shipment.

[4.6.1][[Packaging] [Packing] materials and containers [of a good] [in which a good is packed] for transport shall be disregarded [for the purpose of] [in] determining [whether [all]the non-originating materials used in the production of the good [comply with] the applicable change in tariff classification required [and [the good satisfies a regional value content requirement.]]]] [the origin of that good.] 

[4.6.2][If the good is subject to the regional value content requirement, the value of the [packaging] [packing] materials and containers for transport of the good shall be considered to be originating or non-originating, as appropriate, for calculating the regional value content of the good and the value of that material shall be the cost thereof reported in the accounting records of the producer of the good.] 

[Packaging materials and containers in which goods are packed for shipment shall be disregarded when determining the origin of the goods.]

4.7) Indirect materials used in production

[ An indirect material shall be considered to be an originating material without regard to where it was produced [[and the value of that material shall be the cost thereof reported in the accounting records of the producer of the good] [or other evidence providing a reasonable indication of its value]].]

[Indirect materials may include, among others, all those used in the production, verification or inspection of a good but that are not physically incorporated into it; or goods used for the maintenance of buildings or for operating equipment related to the production of the good, including:]

[In order to determine whether a good originates, it shall not be necessary to determine the origin of indirect materials used in production, testing or inspection of that good, but which have not entered into the final composition of the good or which have been used in the maintenance of equipment and buildings or the operation of equipment associated with the production of a good, including, but not limited to:]

[(a) energy and fuel;

(b) machines, 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/or buildings;

(e) gloves, glasses, footwear, clothing, safety equipment and safety supplies;

(f) equipment, devices and supplies used for testing or inspecting goods; and

(g) catalysts and solvents.

(h) any other goods not incorporated into the good but whose use in producing the good can be reasonably demonstrated.], ¹²

[Indirect materials shall be considered as originating materials for the purposes of this [Chapter].]

4.8) Intermediate materials used in production.

[An intermediate material means a material that is self-produced that contains non-originating inputs and satisfies the conditions required to qualify as originating, and which subsequently is used in the production of final goods in a Party. Non-originating inputs of intermediate materials shall be disregarded for classification of the origin of the final goods of which they are a part.]

[4.8.1 If a non-originating material undergoes {sufficient production}{substantial transformation} in the territory of one or more of the Parties, the resulting good shall be considered as originating and no account shall be taken of the non-originating material contained therein when that good is used in the subsequent production of another good.]

[4.8.2 For purposes of determining the origin of a good, a producer of a good may, at the producer's choice, designate any self-produced material used in the production of the good as a material to be taken into account as an originating or non-originating material, as the case may be, in determining whether the good satisfies the applicable requirements of the rules of origin.]

[Where materials containing any non-originating elements meet the conditions for being considered as originating specified in this [Chapter], and these materials are used in the production of final products in a Party, these materials shall be regarded as containing no such elements.]

[4.8.1 For purposes of calculating the regional value content in accordance with article 1.4, the producer of a good may designate as an intermediate material any self-produced material used in the production of the good, provided said material complies with the provisions of articles 1.1 to 1.3 and article 3.

4.8.2 When the intermediate good is subject to a regional value content requirement in accordance with the annex to article 1.3, it shall be calculated on the basis of the net cost methods established in article 1.4 and the good must satisfy all other applicable requirements of this chapter.

4.8.3 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 allocated to such intermediate material in accordance with the annex to article 1.4; moreover, the value of the intermediate goods used by the producer in the production of the good shall be the sum of the values of the non-originating materials, determined in accordance with article 1.5, imported from outside the territory of the party and that are used in the production of the good or that are used in the production of any material used in the production of the good.

4.8.4 If a material designated as an intermediate material is subject to a regional value content requirement, no other self-produced material subject to a regional value content used in the production of such intermediate material can, in turn, be designated by the producer as an intermediate material.]

5 ) OPERATIONS THAT DO NOT CONFER ORIGIN

[5.1] [ A good shall not be considered to be an originating good simply by: 

a) mere dilution with [in]water or another substance that does not materially alter the characteristics of the good. ]

[b) simple operations for conserving the goods during transport or storage, such as airing, refrigeration, removal of damaged parts, drying or the addition of substances;

c) dusting, screening, classification, selection, washing, cutting;

d) packing, repacking or packaging for retail sale;

e) the collection of goods to make sets or assortments;

f) the application of marks, labels or other distinguising signs, and

g) cleaning, including the removal of rust, grease, paint or other coverings.]

[5.2. Any pricing activity or practice, the objective of which it can be sufficiently demonstrated is to circumvent the provisions of this chapter, shall not confer origin on a good]

[b) any production or pricing practice, in respect of which it is demonstrated on the basis of a preponderance of evidence, that the object was to circumvent the application of this [Chapter].]

[The following operations or processes, among others, alone or in combination, shall be considered insufficient to confer origin, when non-originating goods or materials are used:]

[A good shall not be considered to be an originating good simply by:

[a) operations or processes to ensure the preservation of the goods in good conditions for shipment or storage,

b) operations to facilitate shipping,

c) operations or processes related to packing or the presentation of goods for sale.]

For example:]

[- filtration and dilution with water or another substance that do not materially alter the characteristics of the good;
- operations intended to ensure the preservation of the good during its transport or warehousing, such as refrigeration, freezing or drying; 
- classification, 
- selection;
- packaging and repackaging;
- affixing of marks, labels and other like distinguishing signs; 
- division into lots or volumes; 
- husking or unshelling;] 

[Minimal processing operations or a combination of such operations shall not prevent the conferring of origin to a good if it has been sufficiently transformed as a result of other operations or processes.]

[For the purposes of Article 1.3 and except for sets of Article 4.3 or of Annex 1.3, a good shall not be considered as having undergone sufficient production merely by reason of a change in tariff classification that is the result of:

(a) disassembly of the good into its parts; 

(b) a change in the end use of the good; 

(c) the mere separation of one or more individual materials or components from an artificial mixture; or

(d) packaging or repackaging of the good.] 

[For the purposes of this [Chapter], the following operations or processes shall not be considered production or transformation processes:

a) handling to ensure conservation of the goods during transportation or storage, such as aeration, refrigeration, addition of substances, salting, extraction of damaged parts and similar operations;

b) operations such as dusting, washing or cleaning, sifting, peeling, husking, shelling, maceration, drying, thinning, classifying, selecting, dividing, screening, sifting, filtering, diluting in water, painting and thinning,

c) the formation of sets of goods, notwithstanding Article 4.3;

d) packing, packaging or repackaging;

e) combining or dividing packages;

f) the application of similar brands, labels or distinctive marks;

g) combinations of goods, provided the characteristics of the goods obtained are not essentially different from the characteristics of the goods that were combined;

h) the slaughtering of animals;

i) the application of oil; and

j) the accumulation of two or more of these operations.]

[Goods shall not be treated as originating if they are produced by an operation or process which consists only of one or more of the following: 

- operations to ensure the preservation of goods during transport and storage (ventilation, spreading out, drying, chilling, placing in salt, sulphur dioxide or other aqueous solution, removal of damaged parts, and like operations); 

- simple operations consisting of removal of dust, sifting or screening, sorting, grading, classifying, matching (including the making up of sets of articles), washing, painting or cutting up; 

- changes of packing; 

- affixing of marks, labels or other distinguishing signs on goods or their packaging; 

- simple mixing of non-originating materials if the characteristics of the goods as a whole are not essentially different from the characteristics of the materials which have been mixed.]

[5.3 The provisions of this article shall prevail over the specific rules established in the annex to article 1.3.]

6) DIRECT SHIPMENT, TRANSIT AND TRANSSHIPMENT

[In order for originating goods to receive preferential treatment, they must have been shipped directly from the exporting Party to the importing Party. For such purpose, direct shipment shall be considered: 

Goods transported without passing through the territory of [a] [another] State [not] [whether or not it is] a Party to the Agreement; or

Goods in transit through one or more States that are [or not] not Party[ies] to the Agreement, with or without transshipment or temporary warehousing, under the supervision of the competent customs authority, provided that:]

[- the transit is justified for geographical reasons or considerations related to transport requirements; 

- they are not [destined]{[designed for]} [commercial] [trade or]use [or application] in the transit State;] 

- they do not undergo, during their transport or [warehousing] [storage], any operation other than [packing. packaging] loading, unloading or [handling] [or operations] to keep them in good condition or ensure their conservation.] 

[6.1 A good shall not be considered to be originating even when it has been produced in accordance with the requirements of article ro/a.1.1. if, subsequent to its 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 when transporting the good to the territory of the other party.

6.2 A good shall not lose its originating condition when, while in transit through the territory of one or more non-party countries, with or without transshipment or temporary storage, and under the supervision of the competent customs authority in those countries:]

[Goods shall be considered originating even if they have been produced in accordance with the necessary requirements if, subsequent to such production, outside the territory of the Parties, the goods undergo a subsequent transformation or any other operation, except their commercialization, unloading, reloading, and whatever other operation is deemed necessary to maintain the condition of the good or to transport it to the territory of the other Party.] 

[An originating good that is transported through the territory of a non-Party shall be considered as non-originating unless it can be demonstrated that:

(a) the good undergoes no further production or other operation in the territory of that non-Party, other than unloading, splitting up of loads, reloading or any other operation necessary to preserve it in good condition; and

(b) the good remains under customs control while outside the territory of one or more of the Parties.]

[A good shall not be considered to be an originating good if the good undergoes subsequent 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.]

[7) INVOICING CARRIED OUT BY THIRD PARTIES]

[Pursuant to the provisions of this [Chapter], goods that are originating shall receive tariff preferences, irrespective of the form or destination of the payment made by the importing Party. In this respect, the commercial invoice may be issued by a third party, [whether or not a member of the Agreement,] provided that the goods are shipped directly pursuant to the provisions of [this article.... ] [Article 6].]

[8) DIFFERENTIAL TREATMENT]

[9) GENERAL PROVISIONS]

[9.1 Application]

[For purposes of this chapter: 

a) the basis for tariff classification is the harmonized system; 

b) the transaction value of a good or material shall be determined in accordance with the principles of the customs valuation code; and

c) 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.]

[9.2 Interpretation]

[In applying the customs valuation code under this chapter,

a) the principles of the customs valuation code shall apply to domestic transactions, with such modifications as may be required by the circumstances, as would apply to international transactions; and

b) the provisions of this chapter shall take precedence over the customs valuation code to the extent of any difference.]

[10. DEFINITIONS]

[For the purpose of this chapter,

customs authority follows the definition set out in the chapter on customs procedures; 

direct production costs and expenditures means the costs and expenditures incurred during a period in which they are directly to the good, other than the cost or value of direct materials and the cost of direct labor;

f.o.b. means free on board; 

fungible goods means goods that are interchangeable for commercial purposes, whose properties are essentially identical and for which it is impractical to differentiate one from another by a mere visual examination; 

fungible materials means materials that are interchangeable for commercial purposes and whose properties are essentially identical;

generally accepted accounting principles means the recognized consensus to the substantial authoritative support in the territory of a party, with regard to the recording of income, expenditures, costs, assets and liabilities, disclosure of information and preparation of financial statements. these standards can include both broad guidelines for general application and detailed practical standards and procedures.

good means any merchandise, product, article or material;

goods wholly obtained or produced entirely in the territory of a party means: 

a) mineral goods extracted in the territory of a party; 

b) vegetables harvested in the territory of a party; 

c) live animals born and raised in the territory of one a party; 

d) goods obtained from hunting or fishing in the territory of a party; 

e) 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 a party and flying 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) waste and scrap derived from: 

i) production in the territory of a party, or 

ii) used goods collected in the territory of a party, provided such goods are fit only for the recovery of raw materials; and

i) goods produced in the territory of one or more of the parties exclusively from goods referred to in subparagraphs a) through h), 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 code; 

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 molds; 

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;

indirect production costs and expenditures means the costs and expenditures incurred during a period, other than the direct production costs and expenditures, direct cost of labor, and the cost or value of direct materials;

intermediate material means a material that is self-produced and used in the production of a good, and designated pursuant to article ro-a.4.8; 

material means a good that is used in the production of another good; 

net cost means total cost minus sales promotion, marketing and aftersales service costs, royalties, shipping and repacking costs, and nonallowable interest costs, in accordance with the provisions in the annex to this article; 

non-allowable interest costs means interest costs incurred by a producer on its financial obligations that exceed 10 percentage points above the highest interest rate of the debt obligations issued by the central or federal government of the party in which the producer is located, in accordance with the provisions of the annex to this article;

non-originating good or non-originating material means a good or material that does not qualify as originating under this chapter; 

packing containers and materials for shipment means goods used to protect another good during transportation, other than the containers and materials for retail sale;

producer means a person who grows, removes, harvests, fishes, hunts, manufactures, processes or assembles a good; 

production means growing, removing, harvesting, fishing, hunting, manufacturing, processing or assembling a good; 

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 percent 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; 

g) together they directly or indirectly control a third person; or 

h) they are members of the same family (children, brothers, sisters, parents, grandparents, or spouses); 

sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and aftersales 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, catalogs, 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 aftersales service personnel; 

d) recruiting and training of sales promotion, marketing and aftersales service personnel, and aftersales training of customers' employees; 

e) product liability insurance; 

f) office supplies for sales promotion, marketing and aftersales service of goods; 

g) telephone, mail and other communications for purposes of sales promotion, marketing and aftersales service; 

h) rent and depreciation of sales promotion, marketing and aftersales service offices and distribution centers; 

(i) property insurance premiums, taxes, cost of utilities, and repair and maintenance of offices and distribution centers; 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 repacking costs means the costs incurred in repacking a good and shipping the good outside the territory where the producer or exporter of the good is located; 

total cost means the sum of the following elements, in accordance with the provisions in the annex to this article: 

a) the cost or value of direct materials of production used in producing the good;

b) the cost of direct labor used in producing the good; and

c) {an} amount {for} direct and indirect production costs and {expenses} of the good reasonably allocated to same;

transaction value of a good means the price actually paid or payable for a good with respect to a 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{s} 8.1, 8.3 and 8.4 {of} said code, regardless of whether the good is sold for export. for the purpose of this definition, the seller referred to in the customs valuation code shall be the producer of the good;

transaction value of a material means the price actually paid or payable for a material with respect to a 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{s} 8.1, 8.3 and 8.4 {of}said code, regardless of whether the material is sold for export. for the purpose of this definition, the seller referred to in the customs valuation code shall be the supplier of the material and the buyer to which the customs valuation code refers to shall be the producer of the good;

used means used or consumed in the production of goods.]

[11) CONSULTATION AND MODIFICATIONS]

[11.1 The parties create the rules of origin committee, comprising representatives from each party, which shall meet at least twice a year, and at the request of any party.

11.2 The committee shall:

a) ensure effective implementation and administration of this chapter;

b) reach agreement on the interpretation, application and administration of this chapter;

c) in relation to non-allowable interest costs, revise on an annual basis, the percentage points on the highest interest rate of the debt obligations issued by the central or federal government, and

d) address any other matter agreed to by the parties. 

11.3. 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. 

11.4 Any party that considers that this chapter requires modification to take into account developments in production processes or other matters may submit to the consideration of the committee a proposed modification along with supporting rationale and any studies that support it. the committee shall present a report to the commission for making the pertinent recommendations to the parties.]

[ANNEX TO ARTICLE 1.3

SPECIFIC RULES OF ORIGIN

(to be defined)]

 

Continuation: [Annex to Article 1.4 Net Cost

Return to the Index

12 One delegation does not include machines in b), in c) instead of spare parts it says parts and in d) it changes “of” by “and”. Other delegation does not include numeral h).