Chapter Four

Rules of Origin

Article 401: Originating Goods

Except as otherwise provided in this Chapter, a good shall

originate in the territory of a Party provided that:

(a) the good is wholly obtained or produced in the

territory of one or more of the Parties as defined in

Article 415;

(b) each of the non-originating materials used in the

production of the good undergoes an applicable change

in tariff classification described in Annex 401.1 as a

result of production occurring entirely in the

territory of one or more of the Parties, and the good

satisfies all other applicable requirements of this

Chapter;

(c) the good is produced entirely in the territory of one

or more of the Parties exclusively from originating

materials; or

(d) with the exception of a good provided for in Chapters

61 through 63 of the Harmonized System, the good is

produced entirely in the territory of one or more of

the Parties but one or more of the non-originating

parts used in the production of the good does not

undergo a change in tariff classification because

(i) the good was imported into the territory of a

Party in an unassembled or a disassembled form but

was classified as an assembled good pursuant to

General Rule of Interpretation 2(a) of the

Harmonized System, or

(ii) the tariff heading for the good provides for both

the good itself and its parts and is not further

subdivided into subheadings, or the tariff

subheading for the good provides for both the good

itself and its parts,

provided that the good is the good specifically

described by the nomenclature of the heading or

subheading and that the regional value content of the

good, determined in accordance with Article 402, is not

less than 60 percent where the transaction value method

is used, or 50 percent where the net cost method is

used, and that the good satisfies all other applicable

requirements of this Chapter.

Article 402: Regional Value Content

1. Except as provided in paragraph 5, each Party shall provide

that the regional value content of a good shall be calculated, at

the choice of the exporter or producer of the good, on the basis

of either the transaction value method described in paragraph 2

or the net cost method described in paragraph 3.

2. The regional value content of a good, where calculated on

the basis of the transaction value method, shall be determined as

follows:

TV - VNM

RVC = --------- x 100

TV

where:

RVC is the regional value content, expressed as a

percentage;

TV is the transaction value of the good;

and

VNM is the value of non-originating materials

used by the producer in the production of the

good.

3. The regional value content of a good, where calculated on

the basis of the net cost method, shall be determined as follows:

NC - VNM

RVC = --------- x 100

NC

where:

RVC is the regional value content, expressed as a

percentage;

NC is the net cost of the good; and

VNM is the value of non-originating materials

used by the producer in the production of the

good.

4. For purposes of paragraphs 2 and 3, and except as provided

in Articles 403(1) and 403(2)(a)(i), the value of non-originating

materials used by the producer in the production of the good

shall not include the value of non-originating materials used to

produce originating materials that are subsequently used in the

production of the good.

5. The regional value content of a good shall be calculated

solely on the basis of the net cost method described in paragraph

3, where:

(a) there is no transaction value for the good;

(b) the transaction value of the good is unacceptable under

Article 1 of the Customs Valuation Code;

(c) the good is sold by the producer to a related person

and the volume, by units of quantity, of sales of

identical or similar goods to related persons, during

the six-month period immediately preceding the month in

which the good is sold, exceeds 85 percent of the

producer's total sales with respect to such goods;

(d) the good is

(i) identified in Article 403(1) or 403(2),

(ii) provided for in headings 64.01 through 64.05, or

(iii) provided for in tariff item 8469.10.a1 (word

processing machines);

(e) the exporter or producer chooses to accumulate the

regional value content of the good in accordance with

Article 404; or

(f) the good has been designated as an intermediate

material under paragraph 10 and is subject to a

regional value-content requirement.

6. If an exporter or producer calculates the regional value

content of a good using the transaction value method described in

paragraph 2 and a Party subsequently notifies the exporter or

producer during the course of a verification pursuant to Chapter

Five (Customs Procedures) that the transaction value of the good,

or the value of any material used in the production of the good,

or both, is required to be adjusted or is unacceptable under

Article 1 of the Customs Valuation Code, the exporter or producer

of the good may then calculate the regional value content of the

good using the net cost method described in paragraph 3.

7. Nothing in paragraph 6 shall be construed to preclude a

review and appeal, pursuant to Chapter Five (Customs Procedures),

of an adjustment or rejection of a transaction value for a good

or the value of any material used in the production of the good,

or both.

8. For purposes of calculating the net cost of a good pursuant

to paragraph 3, the producer of the good may use any one of the

following methods:

(a) calculate the total cost incurred with respect to all

goods produced by that producer minus any 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 of all goods and then reasonably allocate the

resulting net cost of those goods to the good;

(b) reasonably allocate the total cost incurred with

respect to all goods produced by that producer to the

good minus any sales promotion, marketing and after-

sales service costs, royalties, shipping and packing

costs and non-allowable interest costs that are

included in the portion of the total cost allocated to

the good; or

(c) reasonably allocate the individual costs that are part

of the total cost incurred with respect to the good so

that the aggregate of these costs does not include any

sales promotion, marketing and after-sales service

costs, royalties, shipping and packing costs, and non-

allowable interest costs,

provided that the allocation of all such costs are consistent

with the provisions regarding the reasonable allocation of costs

set out in the Uniform Regulations.

9. With the exception of an intermediate material described in

paragraph 10 and except as provided in Article 403(1) and

(2)(a)(i), the value of a material used in the production of a

good shall be:

(a) the price actually paid or payable by the producer for

the material, provided that the price is acceptable

under Article 1 of the Customs Valuation Code; or

(b) if the price actually paid or payable is unacceptable

under Article 1 of the Customs Valuation Code, the

value shall be determined in accordance with the other

Articles of the Customs Valuation Code; and

(c) when not included under subparagraph (a) or (b)

(i) freight, insurance, packing and all other costs

incurred in transporting such materials to the

location of the producer,

(ii) duties, taxes and customs brokerage fees on such

materials paid in the territory of one or more of

the Parties,

(iii) the cost of waste and spoilage resulting from

the use or consumption, or both, of such

materials, less the value of renewable scrap

or by-product, and

(iv) the value of goods and services relating to such

materials determined in accordance with

subparagraph 1(b) of Article 8 of the Customs

Valuation Code.

10. Except as provided in Article 403, the producer of a good

may designate any self-produced material used in the production

of the good as an intermediate material, provided that, when the

intermediate material is subject to a regional value-content

requirement, no other intermediate material subject to a regional

value-content requirement is used in the production of that

intermediate material.

11. For purposes of determining the value of an intermediate

material, the producer of the intermediate material may use

either of the following methods:

(a) calculate the total cost incurred with respect to all

goods produced by that producer and then reasonably

allocate the resulting cost to the intermediate

material; or

(b) reasonably allocate to the intermediate material the

individual costs that are part of the total cost

incurred with respect to that intermediate material.

Article 403: Automotive Goods

1. Where applying the net cost method under Article 402(3) for

purposes of calculating the regional value content of any one of

the following goods:

(a) a motor vehicle provided for in subheadings 8702.xx

(vehicles for the transport of 15 or fewer persons),

8703.21 through 8703.90, 8704.21 or 8704.31; or

(b) a good provided for in the tariff provisions listed in

Annex 403.1 where the good is subject to a regional

value-content requirement and is for use as original

equipment in the production of a good provided for in

subheadings 8703.21 through 8703.90, 8704.21 or

8704.31,

the value of non-originating materials used by the producer in

the production of the good shall be the sum of the customs values

of non-originating materials imported from outside the

territories of the Parties under the tariff provisions listed in

Annex 403.1.

2. (a) Where applying the net cost method under Article 402(3)

with respect to a good identified in subparagraph (b),

the producer of the good shall include in the value of

non-originating materials used by the producer in the

production of the good the sum of

(i) for each material used by the producer that is

listed in Annex 403.2, at the choice of the

producer, either

(A) the value of such material that is non-

originating, or

(B) the value of non-originating materials

used in the production of such material,

and

(ii) the value of any non-originating material used by

the producer that is not in listed in Annex 403.2.

(b) Subparagraph (a) shall apply to the following goods

(i) a motor vehicle provided for in heading 8701 or

subheading 8702.yy (vehicles for the transport of

16 or more persons),

(ii) a motor vehicle provided for in subheadings

8704.10, 8704.22, 8704.23, 8704.32 or 8704.90,

(iii) a motor vehicle provided for in headings 8705

or 8706, and

(iv) any of the components identified in Annex 403.2

for use in such motor vehicles.

3. A producer may designate a self-produced material used in

the production of any material listed in Annex 403.2 as an

intermediate material, provided that, when the intermediate

material is subject to a regional value-content requirement, no

other intermediate material subject to a regional value-content

requirement is used in the production of that intermediate

material.

4. In calculating the regional value content of a motor vehicle

described in paragraphs 1 and 2, 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 one or more of the other Parties:

(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) the basis described in Annex 403.4.

5. In calculating the regional value content for any or all

goods provided for in a tariff provision listed in Annex 403.1

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, or over any quarter or

month, or

(ii) over its fiscal year, if the good is sold as an

after-market part;

(b) calculate the average referred to in subparagraph (a)

separately for any or all goods sold to one or more

motor vehicle producers; and

(c) with respect to any calculation under this paragraph,

calculate separately those goods that are exported to

the territory of one or more of the Parties.

6. Notwithstanding Annex 401.1,

(a) the regional value-content requirement shall be, for a

producer's fiscal year beginning nearest to January 1,

1998 and thereafter, 56 percent under the net cost

method, and for a producers's fiscal year beginning

nearest to January 1, 2002 and thereafter, 62.5 percent

under the net cost method, for the following

(i) a motor vehicle provided for in subheading 8702.xx

(vehicles for the transport of 15 or fewer

persons), 8703.21 through 8703.90, 8704.21 or

8704.31, and

(ii) a good provided for in heading 8407 or 8408 or

subheading 8708.40 which is for use as original

equipment in the production of a motor vehicle

identified in subparagraph (a)(i); and

(b) the regional value-content requirement shall be, for a

producer's fiscal year beginning nearest to January 1,

1998 and thereafter, 55 percent under the net cost

method, and for a motor vehicle producers's fiscal year

beginning nearest to January 1, 2002 and thereafter, 60

percent under the net cost method, for the following

(i) a motor vehicle provided for in heading 8701,

subheadings 8702.yy (vehicles for the transport of

16 or more persons), 8704.10, 8704.22, 8704.23,

8704.32 and 8704.90, and heading 8705 or 8706,

(ii) a good provided for in heading 8407 or 8408 or

subheading 8708.40 which is for use as original

equipment in the production of a motor vehicle

identified in subparagraph (b)(i), and

(iii) except for a good identified in subparagraph

(a)(ii) or provided for in subheadings

8482.10 through 8482.80 or subheadings

8483.10 through 8483.40, a good identified in

Annex 403.1 which is for use as original

equipment in the production of a motor

vehicle identified in subparagraphs (a)(i) or

(b)(i).

7. Notwithstanding paragraph 6,

(a) the regional value content of a motor vehicle referred

to in Article 403(1) or 403(2) shall not be less than

50 percent for a period of five years from the date on

which the first motor vehicle prototype is produced in

a plant by a motor vehicle assembler, provided that

(i) it is a motor vehicle of a class, or marque, or,

for a motor vehicle identified in Article

403(1)(a), size and underbody, not previously

produced by the motor vehicle assembler in the

territory of any of the Parties,

(ii) the plant consists of a new building in which the

motor vehicle is assembled, and

(iii) the plant contains substantially all new

machinery that is used in the assembly of the

motor vehicle;

(b) the regional value content of a motor vehicle referred

to in Article 403(1) or 403(2) shall not be less than

50 percent for a period of two years from the date on

which the first motor vehicle prototype is produced at

a plant following a refit, provided that it is a

different motor vehicle of a class, or marque, or, for

a motor vehicle identified in Article 403(1)(a), size

and underbody, than was assembled by the motor vehicle

assembler in the plant before the refit; and

(c) for the purposes of subparagraphs (a) and (b) sizes

means in the case of a motor vehicle identified in

Article 403(1)(a)

(i) minicompacts -- less than 85 cubic feet of

passenger and luggage volume,

(ii) subcompacts -- between 85 and 100 cubic feet of

passenger and luggage volume,

(iii) compacts -- between 100 and 110 cubic feet of

passenger and luggage volume,

(iv) midsize -- between 110 and 120 cubic feet of

passenger and luggage volume, and

(v) large -- between 120 or more cubic feet of

passenger and luggage volume.

Article 404: Accumulation

For purposes of determining whether a good is an originating

good, the production of the good in the territory of one or more

of the Parties by one or more producers shall, at the choice of

the exporter or producer of the good, be considered to have been

performed in the territory of a Party by that exporter or

producer, provided that:

(a) the applicable tariff classification change has

occurred, or the regional value-content requirement has

been satisfied, or both, entirely in the territory of

one or more of the Parties;

(b) the good satisfies all other applicable requirements of

this Chapter; and

(c) the production of the producer that chooses to

accumulate its production with that of other producers

is deemed to be the production of a single producer for

purposes of Article 402(10).

Article 405: De Minimis

1. Notwithstanding Article 401(b), 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

the applicable change in tariff classification is not more than

seven percent of the transaction value of the good or, if the

transaction value of the good is unacceptable under Article 1 of

the Customs Valuation Code, seven percent 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 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 seven percent of the transaction

value of the good 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 seven

percent of the total cost of the good, provided that the good

satisfies all other applicable requirements of this Chapter.

3. Paragraphs 1 and 2 shall not apply to:

(a) a material provided for in Chapter 4 of the Harmonized

System or tariff item 1901.90.a1 (dairy preparations

containing over 10 percent 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 material provided for in Chapter 4 of the Harmonized

System or tariff item 1901.90.a1 (dairy preparations

containing over 10 percent by weight of milk solids)

that is used in the production of a good provided for

in heading 21.05, subheading 2202.90, or tariff items

1901.10.a1 (infant preparations containing over 10

percent by weight of milk solids), 1901.20.a1 (mixes

and doughs, containing over 25 percent by weight of

butterfat, not put up for retail sale), 1901.90.a1

(dairy preparations containing over 10 percent by

weight of milk solids), 2106.90.a4 (preparations

containing over 10 percent by weight of milk solids) or

2309.90.a1 (animal feeds containing over 10 percent by

weight of milk solids and less than 6 percent by weight

of grain or grain products);

(c) a material provided for in heading 17.01 that is used

in the production of a good provided for in headings

17.01 through 17.03;

(d) a material provided for in Chapter 15 of the Harmonized

System that is used in the production of a good

provided for in headings 15.01 through 15.08, 15.12,

15.14 or 15.15;

(e) a material provided for in heading 08.05 and

subheadings 2009.11 through 2009.30 that is used in the

production of a good provided for in subheadings

2009.11 through 2009.30 or tariff item 2106.90.a2

(concentrated fruit or vegetable juice of any single

fruit or vegetable, fortified with minerals or

vitamins) or 2202.90.a1 (fruit or vegetable juice of

any single fruit or vegetable, fortified with minerals

or vitamins); and

(f) a material provided for in headings 22.03 through 22.08

that is used in the production of a good provided for

in headings 22.07 through 22.08.

4. Paragraph 1 shall not apply for purposes of calculating the

volume or weight of:

(a) a non-originating material of Chapter 17 of the

Harmonized System or heading 18.05 that are used in the

production of a good provided for in subheading

1806.10;

(b) a non-originating material of Chapter 9 of the

Harmonized System that is used in the production of a

good provided for in tariff item 2101.10.a1 (instant

coffee, not flavored); and

(c) a non-originating material of heading 20.09 that is

used in the production of a good provided for in

subheading 2009.90, or 2106.90.a3 (concentrated

mixtures of fruit or vegetable juice, fortified with

minerals or vitamins) 2202.90.a2 (mixtures of fruit or

vegetable juices, fortified with minerals or vitamins).

5. A good of Chapters 50 through 63 of the Harmonized System

that does not originate because certain fibers or yarns used in

the production of the component of the good that gives the good

its essential character do not undergo the applicable change in

tariff classification described in Annex 401.1 for the good,

shall nonetheless be considered to originate if the weight of all

such fibers or yarns in the good is not more than seven percent

of the weight of that component.

6. Paragraphs 1 and 2 shall not apply to a good of Chapters 1

through 44 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.

Article 406: 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

origin of the materials need not be determined through

the identification of any specific fungible material,

but may be determined on the basis of any of the

inventory management methods provided for in the

Uniform Regulations; and

(b) where originating and non-originating fungible goods

are commingled and exported in the same form, the

origin of the good may be determined on the basis of

any of the inventory management methods provided for in

the Uniform Regulations.

Article 407: Accessories, Spare Parts, or Tools

For purposes of determining whether a good, is an

originating good, 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 one with the good

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 described in Annex

401.1, 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 either

originating or non-originating materials in calculating

the regional value content of the good.

Article 408: Indirect Materials

An indirect material shall be considered to be an

originating material without regard to where it is produced.

Article 409: 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, 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 Annex

401.1, 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 in calculating the regional value

content of the good.

Article 410: Packing Materials and Containers for Shipment

For the purpose of determining whether a good is an

originating good, packing materials and containers in which the

good is packed for shipment shall be disregarded in determining

whether:

(a) the non-originating materials used in the production of

the good undergo the applicable change in tariff

classification described in Annex 401.1; and

(b) the good satisfies a regional value-content

requirement.

Article 411: Transshipment

A good shall not be considered to be an originating good by

virtue of having undergone production that satisfies the

requirements of Article 401 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 412: Non-Qualifying Operations

A good shall not be considered to be an originating good

merely by virtue of having undergone:

(a) mere dilution with water or another substance that does

not materially alter the characteristics of the good;

or

(b) any process, work or pricing practice, or any

combination thereof, in respect of which it is

demonstrated, on the basis of a preponderance of

evidence, that the object was to circumvent the

provisions of this Chapter.

Article 413: Interpretation

For purposes of this Chapter, the following rules of

interpretation shall apply:

(a) the basis for tariff classification in Article 401 is

the Harmonized System;

(b) a more specific rule in Annex 401.1 shall take

precedence over a general requirement under Article

401;

(c) for purposes of applying Article 401(d), when

determining whether a tariff heading or subheading

provides for both a good and its parts, reference shall

be made both to the nomenclature of the heading or

subheading and to any legal note provided in the

Harmonized System;

(d) the principles of the Customs Valuation Code shall

apply to domestic transactions as well as international

transactions;

(e) in the event of any inconsistency between the

provisions of this Chapter and the Customs Valuation

Code, the provisions of this Chapter shall prevail to

the extent of the inconsistency;

(f) in applying Customs Valuation Code under this Chapter,

the definitions in Article 415 shall take precedence

over the definitions of the Customs Valuation Code to

the extent of any difference; and

(g) all costs referred to in this Chapter shall be recorded

and maintained in accordance with the Generally

Accepted Accounting Principles in the territory of the

Party in which the good is produced.

Article 414: Consultation and Revision

1. The Parties shall consult regularly to ensure that the

provisions of this Chapter are administered effectively,

uniformly and consistently with the spirit and intent of this

Agreement, and shall cooperate in the administration of the

provisions of this Chapter in accordance with the provisions of

Chapter Five (Customs Procedures).

2. If any Party concludes that the provisions of this Chapter

require revision to take into account developments in production

processes or other matters, the proposed revision along with

supporting rationale and any studies shall be submitted to the

other Parties for consideration and any appropriate action

pursuant to Chapter Five (Customs Procedures).

Article 415: Definitions

For purposes of this Chapter:

class of motor vehicles means any one of the following categories

of motor vehicles:

(a) motor vehicles provided for in subheadings 8701.20 and

8702.yy (vehicles for the transport of 16 or more

persons), subheadings 8704.22, 8704.23, 8704.32 and

8704.90, and headings 87.05 and 87.06;

(b) motor vehicles provided for in subheadings 8701.10 and

8701.30 through 8701.90;

(c) motor vehicles provided for in subheadings 8702.xx

(vehicles for the transport of 15 or fewer persons) and

8704.21 and 8704.31; or

(d) motor vehicles provided for in subheadings 8703.21

through 8703.90;

customs value means the value of a good for the purposes of

levying duties of customs on an imported good;

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;

identical or similar goods has the same meaning as prescribed for

identical goods and similar goods, respectively, 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 used in the maintenance or operation of equipment or

buildings 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 by labor or used to operate equipment

and buildings, or both;

(e) gloves, glasses, footwear, clothing, safety equipment

and supplies;

(f) equipment, other 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;

marque means the trade name used by a separate marketing division

of a motor vehicle assembler;

material means a good, other than an indirect material, that is

used in the production of another good;

model line means a group of motor vehicles having the same

platform or model name;

motor vehicle assembler means a producer of motor vehicles and

any related persons or joint ventures in which the producer

participates;

new building means new construction, including at least the

pouring or construction of new foundations and floors, erection

of new structure and roof, and installation of new plumbing,

electrical and other utilities to house the complete vehicle

assembly process (need definition of complete vehicle assembly

process);

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 the good using one of the methods set forth in

Article 402 (8) (a);

non-allowable interest costs means interest costs actually

incurred by the producer in excess of the applicable federal

government rate identified in the Uniform Regulations for

comparable maturities, plus seven percentage points;

non-originating good or non-originating material means a good or

material that has not satisfied the rule of origin applicable to

the good or material under this Chapter;

producer means a person who grows, mines, harvests, manufactures,

processes or assembles a good, or any combination thereof;

production means growing, mining, harvesting, manufacturing,

processing or assembling a good, or any combination thereof;

reasonably allocate means to apportion in a manner appropriate to

the circumstances;

refit means a plant closure for the purposes of plant conversion

or retooling that lasts at least three months;

related person means persons who are related only if:

(a) they are officers or directors of one another's

business;

(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 both 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 and 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 more 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, 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 (e.g., 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 customer 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 centers;

(i) property insurance premiums, taxes, cost of utilities,

and repair and maintenance of sales promotion,

marketing and after-sales service offices and

distribution centers, 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 the good;

shipping and packing costs means the costs incurred in packing

the 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 more of the Parties;

transaction value means the price of a good actually paid or

payable to the producer of the good, adjusted to a F.O.B. basis

and in accordance with the principles of paragraphs 1, 3 and 4 of

Article 8 of the Customs Valuation Code;

used means used or consumed, or both, in the production of goods;

and

wholly obtained or produced in the territory of one or more of

the Parties means goods that are:

(a) mineral goods extracted in the territory of one or more

of the Parties;

(b) goods harvested in the territory of one or more of the

Parties;

(c) live animals born and raised in the territory of one or

more of the Parties;

(d) goods (fish, shellfish and other marine life) taken

from the sea by vessels registered or recorded with a

Party and flying its flag;

(e) goods produced on board factory ships from the goods

referred to in subparagraph (d) provided such factory

ships are registered or recorded with that Party and

fly its flag;

(f) 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;

(g) 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; and

(h) waste and scrap derived from

(i) production in the territory of one or more of the

Parties,

(ii) used goods collected in the territory of one or

more of the Parties, provided such goods are fit

only for the recovery of raw materials, or

(iii) goods produced in the territory of one or

more of the Parties exclusively from goods

referred to in subparagraphs (a) through (h)

inclusive or from their derivatives, at any

stage of production.

=============================================================================

ANNEX 403.1

List of Tariff Provisions for Article 403(1)

INTERIM NOTE: The nomenclature that follows the tariff

provisions is for illustrative purposes only.

4009 (tubes, pipes and hoses)

4010.10 (rubber belts)

4011 (tires)

4016.93 (rubber, gaskets, washers and other seals)

4016.99.15.xx (seals)

7007.11 and 7007.21 (laminated safety glass)

7009.10 (mirrors)

8301.20 (locks)

8407.31 (engines of a cylinder capacity not exceeding 50cc)

8407.32 (engines of a cylinder capacity exceeding 50cc but not

exceeding 250cc)

8407.33 (engines of a cylinder capacity exceeding 250cc but not

exceeding 1000cc)

8407.34.xx (engines of a cylinder capacity exceeding 1000 cc but

not exceeding 2,000 cc);

8407.34.yy (engines of a cylinder capacity exceeding 2000 cc)

8408 (diesel engines)

8409 (parts of engines)

8413.30 (pumps)

8414.59 (turbochargers and supercharges)

8415.81 through 8415.83 (air conditioners)

8481.20, 8481.30 and 8481.80 (valves)

8482.10 through 8482.80 (ball bearings)

8483.10 through 8483.40 (transmission shafts)

8483.50 (flywheels)

8501.10 (electric motors)

8501.20 (electric motors)

8501.31 (electric motors)

8501.32.xx (electric motors that provide primary source for

electric powered vehicles of subheading 8703.90)

8507.10.xx, 8507.30.xx, 8507.40.xx and 8507.80.xx (batteries that

provide primary source for electric cars)

8511.30 (distributors)

8511.40 (starter motors)

8511.50 (other generators)

8512.20 (other lighting or visual signalling equipment)

8512.40 (windscreen wipers, defrosters)

8519.91 (cassette decks)

8527.21 (cassette players combined with radios)

8527.29 (radios)

8536.50 (switches)

8536.90 (junction boxes)

8537.10.99.10 (U.S. tariff provision 8537.10.00.40) (motor

control centres)

8539.10 (seal beamed headlamps)

8539.21 (tungsten halogen headlamps)

8544.30 (wire harnesses)

8706 (chassis)

8707 (bodies)

8708.10.xx (bumpers but not parts thereof)

8708.21 (safety seat belts)

8708.29.99.10 (U.S. tariff provision 8708.29.00.10) (body

stampings)

8708.29.xx (inflators and modules for airbags)

8708.39 (brakes and servo-brakes, and parts thereof)

8708.40 (gear boxes, transmissions)

8708.50 (drive axles with differential, whether or not provided

with other transmission components)

8708.60 (non-driving axles, and parts thereof)

8708.70.xx (road wheels, but not parts or accessories thereof)

8708.80 (suspension shock-absorbers)

8708.91 (radiators)

8708.92 (silencers (mufflers) and exhaust pipes)

8708.93.xx (clutches, but not parts thereof)

8708.94 (steering wheels, steering columns and steering boxes)

8708.99.50.xx (airbags)

8708.99.81 (catalytic convertors)

8708.99.99.11 (half-shafts and drive shafts)

8708.99.99.19 (other parts for powertrains)

8708.99.99.20 (parts for suspension systems)

8708.99.99.49 (parts for steering systems)

8708.99.xx (other parts not included above)

9031.80 (monitoring devices)

9031.80.xx (electronic diagnostics for air bag systems)

9032.89 (automatic regulating instruments)

9401.20 (seats)

=============================================================================

ANNEX 403.2

List of Components and Materials for Article 403(2)

1. Component: Engines of heading 8407 or 8408

Materials: cast block, cast head, fuel nozzle, fuel

injector pumps, glow plugs, turbochargers and superchargers,

electronic engine controls, intake manifold, exhaust

manifold, intake/exhaust valves, crankshaft/camshaft,

alternator, starter, air cleaner assembly, pistons,

connecting rods and assemblies made therefrom (or rotor

assemblies for rotary engines), flywheel (for manual

transmissions), flexplate (for automatic transmissions), oil

pan, oil pump and pressure regulator, water pump, crankshaft

and camshaft gears, and radiator assemblies or charge-air

coolers.

2. Component: Gear boxes (transmissions) subheading 8708.40

Materials: (a) for manual transmissions - transmission case

and clutch housing; clutch; internal shifting mechanism;

gear sets, synchronizers and shafts; and (b) for torque

convertor type transmissions - transmission case and

convertor housing; torque convertor assembly; gear sets and

clutches; and electronic transmission controls.

=============================================================================

ANNEX 403.4

Regional Value-Content Calculation for CAMI

1. For purposes of Article 403, when determining the origin of

motor vehicles produced in the territory of Canada and imported

into the territory of the United States, CAMI Automotive, Inc.

("CAMI") may average its calculation of the regional value

content of a class of motor vehicles or a model line of motor

vehicles produced in a fiscal year in the territory of Canada by

CAMI for sale in the territory of one or more of the Parties with

the calculation of the regional value content of the

corresponding class of motor vehicles or model line of motor

vehicles produced in the territory of Canada by General Motors of

Canada Limited in a fiscal year that corresponds most closely to

CAMI's fiscal year, provided that:

(a) General Motors of Canada Limited owns 50 percent or

more of the voting common stock of CAMI; and

(b) General Motors of Canada Limited, General Motors

Corporation, General Motors de Mexico S.A., and any

subsidiary directly or indirectly owned by any of them,

or by any combination thereof, ("GM") acquires 75

percent (75 percent) or more by unit of the class of

motor vehicles or model line of motor vehicles, as the

case may be, that CAMI Automotive Inc. has produced in

the territory of Canada in CAMI's fiscal year for sale

in the territory of one or more of the Parties.

2. If GM acquires less than 75 percent by unit of the class of

motor vehicles or model line of motor vehicles, as the case may

be, that CAMI has produced in the territory of Canada in CAMI's

fiscal year for sale in the territory of one or more of the

Parties, CAMI may average in the manner described in paragraph 1

only those motor vehicles that are acquired by GM for

distribution under the GEO marque or other GM marque.

3. In calculating the regional value content of motor vehicles

produced by CAMI in the territory of Canada, CAMI may choose to

average the calculation in paragraph 1 or 2 over a period of two

fiscal years in the event that any motor vehicle assembly plant

operated by CAMI or any motor vehicle assembly plant operated by

General Motors of Canada Limited with which CAMI is averaging its

regional value content is closed for more than two consecutive

months:

(a) for the purpose of re-tooling for a model change, or

(b) as the result of any event or circumstance (other than

the imposition of antidumping and countervailing

duties, or an interruption of operations resulting from

a labour strike, lock-out, labour dispute, picketing or

boycott of or by employees of CAMI or GM), that CAMI or

GM could not reasonably have been expected to avert by

corrective action or by exercise of due care and

diligence, including a shortage of materials, failure

of utilities, or inability to obtain or delay in

obtaining raw materials, parts, fuel or utilities.

Such averaging may be for CAMI's fiscal year in which a CAMI or

the General Motors of Canada Limited plant with which CAMI is

averaging is closed and either the previous or subsequent fiscal

year. In the event that the period of closure spans two fiscal

year, the averaging may be only for those two fiscal years.

4. For the purposes of this Article, where by virtue of an

amalgamation, reorganization, division or similar transaction:

(a) a motor vehicle producer (the "successor producer")

acquires all or substantially all of the assets used by

GM; and

(b) the successor producer, directly or indirectly

controls, or is controlled by, GM, or both the

successor producer and GM are controlled by the same

person,

the successor producer shall be deemed to be the same person and

a continuation of GM from which it acquired the assets.