PART NINE

OTHER PROVISIONS

Chapter Twenty-One

Exceptions

Article 2101: General Exceptions

1. For purposes of:

(a) Part Two (Trade in Goods), except to the extent that a

provision of that Part applies to services or

investment, and

(b) Part Three (Technical Barriers to Trade), except to the

extent that a provision of that Part applies to

services,

GATT Article XX and its interpretative notes, or any equivalent

provision of a successor agreement to which all Parties are

party, are incorporated into and made part of this Agreement.

The Parties understand that the measures referred to in GATT

Article XX(b) include environmental measures necessary to protect

human, animal or plant life or health, and that GATT Article

XX(g) applies to measures relating to the conservation of living

and non-living exhaustible natural resources.

2. Provided that such measures are not applied in a manner that

would constitute a means of arbitrary or unjustifiable

discrimination between countries where the same conditions

prevail or a disguised restriction on trade between the Parties,

nothing in:

(a) Part Two (Trade in Goods), to the extent that a

provision of that Part applies to services,

(b) Part Three (Technical Barriers to Trade), to the extent

that a provision of that Part applies to services,

(c) Chapter Twelve (Cross-Border Trade in Services), and

(d) Chapter Thirteen (Telecommunications),

shall be construed to prevent the adoption or enforcement by any

Party of measures necessary to secure compliance with laws or

regulations that are not inconsistent with the provisions of this

Agreement, including those relating to health and safety and

consumer protection, or

3. Provided that such measures are not applied in an arbitrary

or unjustifiable manner, or do not constitute a disguised

restriction on international trade or investment, nothing in

Article 1106(1)(b) or (c) or (3)(a) or (b) (Performance

Requirements) shall be construed to prevent any Party from

adopting or maintaining measures, including environmental

measures:

(a) necessary to secure compliance with laws and

regulations that are not inconsistent with the

provisions of this Agreement;

(b) necessary to protect human, animal or plant life or

health; or

(c) necessary for the conservation of living or non-living

exhaustible natural resources.

Article 2102: National Security

1. Subject to Articles 607 (Energy) and 1018 (Government

Procurement), nothing in this Agreement shall be construed:

(a) to require any Party to furnish or allow access to any

information the disclosure of which it determines to be

contrary to its essential security interests;

(b) to prevent any Party from taking any actions that it

considers necessary for the protection of its essential

security interests

(i) relating to the traffic in arms, ammunition and

implements of war and to such traffic and

transactions in other goods, materials, services

and technology undertaken directly or indirectly

for the purpose of supplying a military or other

security establishment,

(ii) taken in time of war or other emergency in

international relations, or

(iii) relating to the implementation of national

policies or international agreements

respecting the non-proliferation of nuclear

weapons or other nuclear explosive devices;

or

(c) to prevent any Party from taking action in pursuance of

its obligations under the United Nations Charter for

the maintenance of international peace and security.

Article 2103: Taxation

1. Except as set out in this Article, nothing in this Agreement

shall apply to taxation measures.

2. Nothing in this Agreement shall affect the rights and

obligations of any Party under any tax convention. In the event

of any inconsistency between the provisions of this Agreement and

any such convention, the provisions of that convention shall

prevail to the extent of the inconsistency.

3. Notwithstanding paragraph 2:

(a) Article 301 (Market Access - National Treatment) and

such other provisions of this Agreement as are

necessary to give effect to that Article shall apply to

taxation measures to the same extent as does Article

III of the GATT, and

(b) Article 315 (Market Access - Export Taxes) and Article

604 (Energy - Export Taxes),

shall apply to taxation measures.

4. Subject to paragraph 2:

(a) Article 1202 (Cross-Border Trade in Services - National

Treatment) and Article 1407 (Financial Services -

National Treatment) shall apply to taxation measures on

income, capital gains or on the taxable capital of

corporations, and to those taxation measures set out in

Annex 2103.4 that relate to the purchase or consumption

of particular services, and

(b) Articles 1102 and 1103 (Investment - National Treatment

and MFN), Articles 1202 and 1203 (Cross-Border Trade in

Services - National Treatment and MFN) and Articles

1407 and 1408 (Financial Services - National Treatment

and MFN) and shall apply to all taxation measures,

other than those on income, capital gains or on the

taxable capital of corporations and those taxes listed

in Annex 2103.4,

except that nothing in those Articles shall apply

(c) any most-favored-nation obligation with respect to an

advantage accorded by a Party pursuant to a tax

convention,

(d) to a non-conforming provision of any existing taxation

measure,

(e) to the continuation or prompt renewal of a non-

conforming provision of any existing taxation measure,

(f) to an amendment to a non-conforming provision of any

existing taxation measure to the extent that the

amendment does not decrease its conformity, at the time

of the amendment, with any of those Articles,

(g) to any new taxation measure aimed at ensuring the

equitable and effective imposition or collection of

taxes and that does not arbitrarily discriminate

between persons, goods or services of the Parties or

arbitrarily nullify or impair benefits accorded under

those Articles, in the sense of Annex 2004, or

(h) to the measures set out in Annex 2103.4.

5. Subject to paragraph 2 and without prejudice to the rights

and obligations of the Parties, Article 1106(3), (4), (5) and (6)

(Performance Requirements) shall apply to taxation measures.

6. Article 1110 (Expropriation) shall apply to taxation

measures except that no investor may invoke that Article as the

basis for a claim under Article 1116 or 1117, where it has been

determined pursuant to this paragraph that the measure is not an

expropriation. The investor shall refer the issue of whether the

measure is not an expropriation for a determination to the

appropriate competent authorities set out in Annex 2104.6 at the

time that it gives notice under Article 1119. If the competent

authorities do not agree to consider the issue or, having agreed

to consider it, fail to agree that the measure is not an

expropriation within a period of six months after such referral,

the investor may submit its claim to arbitration under Article

1120.

Article 2104: Balance of Payments

1. Nothing in this Agreement shall prevent a Party from

adopting or maintaining measures that restrict international

transactions or related international transfers and payments

("transfers") where the Party experiences serious balance of

payments difficulties, or the threat thereof, and such

restrictions are:

(a) consistent with paragraphs 4 through 8 when imposed on

cross-border trade in financial services; or

(b) consistent with paragraphs 2 through 6 when imposed on

any other transaction or transfer.

2. Restrictions imposed on transactions or transfers other than

cross-border trade in financial services shall:

(a) when imposed on payments for current international

transactions, be consistent with Article VIII(3) of the

Articles of Agreement of the International Monetary

Fund ("IMF");

(b) when imposed on international capital transactions, be

consistent with Article VI of the Articles of Agreement

of the IMF and imposed only in conjunction with

measures imposed on current international transactions

under paragraphs 2(a) and 4(a); and

(c) when imposed on transfers covered by Article 1109

(Investment - Transfers) and transfers related to trade

in goods, be made in a freely usable currency at a

market rate of exchange such that the payments and

transfers are not substantially impeded.

3. No Party may adopt or maintain measures such as tariff

surcharges, quotas or licenses under this Article.

4. As soon as practicable after imposing a restriction under

this Article, the Party imposing the restriction shall:

(a) submit any current account exchange restrictions to the

IMF for review under Article VIII of the Articles of

Agreement of the IMF; and

(b) enter into good faith consultations with the IMF on

economic adjustment measures to address the fundamental

underlying economic problems causing the difficulties

and receive endorsement of such measures by the IMF.

5. Each Party shall ensure that any measure that it adopts or

maintains under this Article shall:

(a) avoid unnecessary damage to the commercial, economic

and financial interests of another Party;

(b) not be more burdensome than necessary to deal with the

balance of payments difficulties or threat thereof;

(c) be temporary and be phased out progressively as the

situation improves;

(d) be consistent with any economic adjustment measures

endorsed by the IMF under paragraph 4(b) and consistent

with the Articles of Agreement of the IMF; and

(e) be applied on a national treatment and

most-favored-nation treatment basis.

6. A Party may adopt or maintain a measure under this Article

that gives priority to services which are more essential to its

economic program, provided that, except as specifically approved

under an IMF-endorsed adjustment program in effect under

paragraph 4, no such measure is imposed for the purpose of

protecting a specific industry or sector.

7. A Party imposing a restriction on cross-border trade in

financial services shall:

(a) not impose more than one measure on any given

transaction and its related transfer, except as

specifically approved under an IMF-endorsed adjustment

program;

(b) promptly notify the other Parties; and

(c) consult promptly with the other Parties to assess the

balance of payments situation of the Party and the

measures it has adopted, taking into account among

other elements

(i) the nature and extent of the balance of payments

and external financial difficulties of the Party,

(ii) the external economic and trading environment of

the Party, and

(iii) alternative corrective measures that may be

available.

8. In consultations under paragraph 7(c), the Parties shall:

(a) consider if measures adopted under this Article comply

with paragraph 5, in particular subparagraph 5(c); and

(b) accept all findings of statistical and other facts

presented by the IMF relating to foreign exchange,

monetary reserves and balance of payments, and shall

base their conclusions on the assessment by the IMF of

the balance of payments and external financial

situation of the Party adopting the measures.

Article 2105: Disclosure of Information

Nothing in this Agreement shall be construed to require a

Party to furnish or allow access to information the disclosure of

which would impede law enforcement or would be contrary to laws

protecting personal privacy.

Article 2106: Cultural Industries

Annex 2106 applies to cultural industries.

Article 2107: Definitions

For purposes of this Chapter:

cultural industries means any person engaged in any of the

following activities:

(a) the publication, distribution, or sale of books,

magazines, periodicals or newspapers in print or

machine readable form but not including the sole

activity of printing or typesetting any of the

foregoing;

(b) the production, distribution, sale or exhibition of

film or video recordings;

(c) the production, distribution, sale or exhibition of

audio or video music recordings;

(d) the publication, distribution or sale of music in print

or machine readable form; or

(e) radio communication in which the transmissions are

intended for direct reception by the general public,

and all radio, television and cable broadcasting

undertakings and all satellite programming and

broadcast network services;

international capital transactions means "international capital

transactions" as defined under the Articles of Agreement of the

IMF;

payments for current international transactions means "payments

for current international transactions" as defined under the

Articles of Agreement of the IMF;

tax convention means a convention for the avoidance of double

taxation or other international taxation agreement or

arrangement; and

taxes and taxation measures do not include:

(a) a "customs duty" as defined in Article 319; or

(b) the measures listed in exceptions (b), (c), (d) and (e)

of that definition.

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ANNEX 2103.4

Specific Taxation Measures

1. Article 2103(4)(a) (Taxation) shall apply to an asset tax

under the Asset Tax Law ("Ley del Impuesto al Activo") of Mexico.

2. Article 2103(4)(a) and (b) shall not apply to any excise tax

on insurance premiums adopted by Mexico to the extent that such

tax would, if levied by Canada or the United States, be covered

by Article 2103(4)(d), (e) or (f).

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ANNEX 2104.6

Competent Authorities

1. The competent authority for Canada is the Assistant Deputy

Minister for Tax Policy, Department of Finance.

2. The competent authority for Mexico is the Deputy Minister of

Revenue of the Ministry of Finance and Public Credit.

(Secretaria de Hacienda y Credito Publico)

3. The competent authority for the United States is the

Assistant Secretary of the Treasury (Tax Policy), U.S. Department

of the Treasury.

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ANNEX 2106

Cultural Industries

Notwithstanding any other provision of this Agreement, as

between the United States and Canada, any measure adopted or

maintained with respect to cultural industries, except as

specifically provided in Article 302 (Market Access - Tariff

Elimination), and any measure of equivalent commercial effect

taken in response, shall be governed exclusively in accordance

with the terms of the Canada - United States Free Trade

Agreement. The rights and obligations between Canada and any

other Party with respect to such measures shall be identical to

those applying between Canada and the United States.