Electronic Bookshelf/Electronic Bookshelf.iso/govern/nafta/nafta009.txt

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                               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.