SICE - Economic Partnership Agreement between Japan and Mexico

Agreement Between Japan and the United Mexican States
for the Strengthening of the Economic Partnership

Japan and the United Mexican States,

Conscious of their longstanding friendship and strong economic and political ties that have developed through growing trade and investment and mutually beneficial cooperation between the Parties;

Realizing that a dynamic and rapidly changing global environment brought about by globalization and closer integration among economies in the world presents many new economic challenges and opportunities to the Parties;

Recognizing that the economies of the Parties are endowed with conditions to complement each other and that this complementarity should contribute to further promoting the economic development in the Parties, by making use of their respective economic strengths through bilateral trade and investment activities;

Recognizing that creating a clearly established and secured trade and investment framework through mutually advantageous rules to govern trade and investment between the Parties would enhance the competitiveness of the economies of the Parties, make their markets more efficient and vibrant and ensure predictable commercial environment for further expansion of trade and investment between them;

Noting that such a framework would promote the economic relations between the Parties;

Recalling Article XXIV of the General Agreement on Tariffs and Trade 1994 and Article V of the General Agreement on Trade in Services in Annex 1A and Annex 1B, respectively, to the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh, April 15, 1994;

Realizing that enhancing economic ties between the Parties would contribute to increasing trade and investment flows across the Pacific;

Convinced that this Agreement would open a new era for the relationship between the Parties; and

Determined to establish a legal framework for strengthening the economic partnership between the Parties;

HAVE AGREED as follows:

Chapter 1
Objectives

Article 1
Objectives

The objectives of this Agreement are to:

(a) liberalize and facilitate trade in goods and services between the Parties;
(b) increase investment opportunities and strengthen protection for investments and investment activities in the Parties;
(c) enhance opportunities for suppliers to participate in government procurement in the Parties;
(d) promote cooperation and coordination for the effective enforcement of competition laws in each Party;
(e) create effective procedures for the implementation and operation of this Agreement and for the resolution of disputes; and
(f) establish a framework for further bilateral cooperation and improvement of business environment.

Chapter 2
General Definitions

Article 2
General Definitions

1. For the purposes of this Agreement, unless otherwise specified:

(a) the term “Area” means:
with respect to the United Mexican States (hereinafter referred to as “Mexico”):

(i) the States of the Federation and the Federal District;
(ii) the islands, including the reefs and keys, in adjacent seas;
(iii) the islands of Guadalupe and Revillagigedo situated in the Pacific Ocean;
(iv) the continental shelf and the submarine shelf of such islands, keys and reefs;
(v) the waters of the territorial seas, in accordance with international law, and its interior maritime waters;
(vi) the space located above the national territory, in accordance with international law; and
(vii) any areas beyond the territorial seas of Mexico within which, in accordance with international law, including the United Nations Convention on the Law of the Sea, as may be amended, and its domestic law, Mexico may exercise rights with respect to the seabed and subsoil and their natural resources; and

with respect to Japan:

(viii) the territory of Japan which means the land areas, internal waters, and territorial seas and the airspace above such areas, waters and seas, under the sovereignty of Japan in accordance with international law; and
(ix) any areas beyond the territorial seas of Japan within which, in accordance with international law, including the United Nations Convention on the Law of the Sea, as may be amended, and its domestic law, Japan may exercise rights with respect to the seabed and subsoil and their natural resources.

Nothing in this subparagraph shall affect the rights and obligations of the Parties under the United Nations Convention on the Law of the Sea, as may be amended;
(b) the term “days” means calendar days, including weekends and holidays;
(c) the term “enterprise” means any entity constituted or organized under applicable law, whether or not for profit, and whether privately- owned or governmentally-owned, including any corporation, trust, partnership, or other association or sole proprietorship;
(d) the term “enterprise of a Party” means an enterprise constituted or organized under the law of a Party;
(e) the term “existing” means in effect on the date of entry into force of this Agreement;
(f) the term “GATS” means the General Agreement on Trade in Services in Annex 1B to the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh, April 15, 1994, as may be amended;
(g) the term “GATT 1994” means the General Agreement on Tariffs and Trade 1994 in Annex 1A to the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh, April 15, 1994, as may be amended. For the purposes of this Agreement, references to Articles in the GATT 1994 include the interpretative notes;
(h) the term “goods of a Party” means domestic products as these are understood in the GATT 1994, and includes originating goods of that Party;
(i) the term “Harmonized System (HS)” means the Harmonized Commodity Description and Coding System set out in the Annex to the International Convention on the Harmonized Commodity Description and Coding System, as may be amended, and adopted and implemented by the Parties in their respective domestic laws;
(j) the term “Joint Committee” means the Joint Committee established under Article 165;
(k) the term “measure” means any measure by a Party, whether in the form of a law, regulation, rule, procedure, decision, administrative action or any other form;
(l) the term “national” means a natural person possessing the nationality of a Party under its domestic laws;
(m) the term “originating goods” means goods qualifying as originating under the provisions of Chapter 4;
(n) the term “originating materials” means materials qualifying as originating under the provisions of Chapter 4;
(o) the term “person” means a natural person or enterprise;
(p) the term “person of a Party” means a national or an enterprise of a Party;
(q) the term “state enterprise” means an enterprise owned or controlled through ownership interests by a Party; and
(r) the term “WTO Agreement” means the Marrakesh Agreement Establishing the World Trade Organization, done at Marrakesh, April 15, 1994, as may be amended.

2. For the purposes of this Agreement, unless otherwise specified:

(a) in the case of Mexico, a reference to a state includes local governments of that state; and
(b) in the case of Japan, a reference to a local government means a prefecture or any other local authority.

Chapter 3
Trade in Goods

Section 1
General Rules

Article 3
National Treatment

1. Each Party shall accord national treatment to the goods of the other Party in accordance with Article III of the GATT 1994 and to this end Article III of the GATT 1994 is incorporated into and made part of this Agreement.

2. The provisions of paragraph 1 above regarding national treatment shall mean, with respect to a local government in the case of Japan, and with respect to a state in the case of Mexico, treatment no less favorable than the most favorable treatment accorded by that local government or state to any like goods or, directly competitive or substitutable goods, as the case may be, of the Party of which it forms a part.

Article 4
Classification of Goods

The classification of goods in trade between the Parties shall be in conformity with the Harmonized System.

Article 5
Elimination of Customs Duties

1. Except as otherwise provided for in this Agreement, each Party shall eliminate or reduce its Customs Duties on originating goods designated for such purposes in its Schedule in Annex 1, in accordance with the terms and conditions set out therein.

2. Except as otherwise provided for in this Agreement, neither Party shall increase any Customs Duty on originating goods from the level provided for in its Schedule in Annex 1.

Note: The term “level” means the level of Customs Duty that shall be implemented by each Party in accordance with its Schedule and does not mean the Base Rate specified in such Schedule.

(a) On the request of either Party, the Parties shall consult to consider:

(i) issues such as improving market access conditions on originating goods designated for consultation in the Schedule in Annex 1, in accordance with the terms and conditions set out in such Schedule; or
(ii) further steps in the process of liberalization of trade between the Parties in respect of goods after 4 years of the date of entry into force of this Agreement.

(b) Subparagraph (a)(ii) above shall not apply to the originating goods referred to in subparagraph (a)(i) above while the consultation on the originating goods is held under the terms and conditions referred to in subparagraph (a)(i) above.

4. The Parties shall consult to consider further steps in the process of liberalization of trade between the Parties in respect of originating goods set out in the Schedule in Annex 1, in light of the result of the multilateral trade negotiations under the World Trade Organization (WTO).

5. Any amendment to the Schedules as a result of the consultations referred to in paragraph 3 or 4 above shall be approved by both Parties in accordance with their respective legal procedures, and shall supersede any corresponding concession provided for in their respective Schedules.

Article 6
Export Duties

Neither Party shall adopt or maintain any duties on goods exported from a Party into the other Party.

Article 7
Import and Export Restrictions

1. Except as otherwise provided for in this Agreement, each Party shall not institute or maintain any prohibition or restriction other than Customs Duties on the importation of any good of the other Party or on the exportation or sale for export of any good destined to the other Party, which is inconsistent with its obligations under Article XI of the GATT 1994 and its relevant provisions under the WTO Agreement.

2. The measures specified in Annex 2 may be maintained, provided that such measures are consistent with the rights and obligations of the Party taking such measures under the WTO Agreement.

Article 8
Protection of Geographical Indications for Spirits

1. The Parties agree that indications for spirits listed in Annex 3 are geographical indications referred to in paragraph 1 of Article 22 of the Agreement on Trade-Related Aspects of Intellectual Property Rights in Annex 1C to the WTO Agreement, as may be amended, and shall abide by the obligations under the relevant provisions of the said Agreement with respect to the protection of geographical indications, and for this purpose, they shall take appropriate measures to prohibit the use of any geographical indications listed in Annex 3 for spirits not originating in the place indicated by the respective geographical indication.

2. Modifications to Annex 3 proposed by both Parties may be adopted by the Joint Committee pursuant to subparagraph 2(e)(i) of Article 165. The adopted modifications shall be confirmed by an exchange of diplomatic notes and shall enter into force on the date specified in the said notes. The modified part of Annex 3 shall supersede the corresponding part provided for in Annex 3.

Article 9
Sub-Committee on Trade in Goods

1. For the purposes of the effective implementation and operation of this Section, a Sub-Committee on Trade in Goods (hereinafter referred to in this Article as “the Sub- Committee”) shall be established pursuant to Article 165.

2. The Sub-Committee shall meet at such venue and times as may be agreed by the Parties.

3. The functions of the Sub-Committee shall be:

(a) reviewing the implementation and operation of this Section;
(b) reporting the findings of the Sub-Committee to the Joint Committee; and
(c) carrying out other functions which may be delegated by the Joint Committee pursuant to Article 165.

(a) For the purposes of the effective implementation and operation of this Section, the Sub-Committee shall establish a Special Sub-Committee on Steel Products. If necessary, the Sub-Committee may establish any other Special Sub-Committees.
(b) The Special Sub-Committees shall be held at such venue and times as may be agreed by the Parties.
(c) The functions of the Special Sub-Committees shall be:

(i) analyzing relevant matters on the relevant products and its sector, including trade in such products; and
(ii) reporting the findings of the Special Sub- Committees, through the Sub-Committee, to the Joint Committee.

Article 10
Uniform Regulations

Upon the date of entry into force of this Agreement, the Joint Committee shall adopt the Uniform Regulations that provide detailed regulations pursuant to which the customs authorities, the competent governmental authorities defined in Article 49 and the relevant authorities of the Parties shall implement their functions under this Section, Chapter 4 and Chapter 5, except Section 3.

Article 11
Definition

For the purposes of this Section, the term “Customs Duty” means any customs or import duty and a charge of any kind, imposed in connection with the importation of a good, but does not include any:

(a) charge equivalent to an internal tax imposed consistently with the provisions of paragraph 2 of Article III of the GATT 1994, in respect of the like goods or, directly competitive or substitutable goods of the Party or in respect of goods from which the imported goods have been manufactured or produced in whole or in part;
(b) anti-dumping or countervailing duty applied pursuant to a Party’s domestic law and applied consistently with the provisions of Article VI of the GATT 1994, the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, as may be amended, and the Agreement on Subsidies and Countervailing Measures in Annex 1A to the WTO Agreement, as may be amended; or
(c) fees or other charges commensurate with the cost of services rendered.

Section 2
Sanitary and Phytosanitary Measures

Article 12
Reaffirmation of Rights and Obligations

The Parties reaffirm their rights and obligations relating to sanitary and phytosanitary (hereinafter referred to in this Chapter as “SPS”) measures under the Agreement on the Application of Sanitary and Phytosanitary Measures in Annex 1A to the WTO Agreement, as may be amended.

Article 13
Enquiry Points

Each Party shall designate an enquiry point which is able to answer all reasonable enquiries from the other Party regarding SPS measures referred to in Article 12 and, if appropriate, to provide their relevant information.

Article 14
Sub-Committee on SPS Measures

1. For the purposes of the effective implementation and operation of this Section, a Sub-Committee on SPS Measures (hereinafter referred to in this Article as “the Sub- Committee”) shall be established pursuant to Article 165.

2. The Sub-Committee shall meet at such venue and times as may be agreed by the Parties.

3. The functions of the Sub-Committee shall be:

(a) exchange of information on such matters as occurrences of SPS incidents in the Parties and non-Parties, and change or introduction of SPS- related regulations and standards of the Parties, which may, directly or indirectly, affect trade in goods between the Parties;
(b) notification to either Party of information on potential SPS risks recognized by the other Party;
(c) science-based consultation to identify and address specific issues that may arise from the application of SPS measures with the objective of obtaining mutually acceptable solutions;
(d) discussing technical cooperation in relation to SPS measures;
(e) consulting cooperative efforts between the Parties in international fora in relation to SPS measures;
(f) reporting the findings of the Sub-Committee to the Joint Committee; and
(g) carrying out other functions which may be delegated by the Joint Committee pursuant to Article 165.

4. The Sub-Committee may, if necessary, establish ad hoc technical advisory groups as its subsidiary bodies. The groups shall provide the Sub-Committee with technical information and advice at the request of the Sub-Committee.

Article 15
Non-Application of Chapter 15

The dispute settlement procedure provided for in Chapter 15 shall not apply to this Section.

Section 3
Technical Regulations, Standards and Conformity Assessment Procedures

Article 16
Reaffirmation of Rights and Obligations

The Parties reaffirm their rights and obligations relating to technical regulations, standards and conformity assessment procedures under the Agreement on Technical Barriers to Trade in Annex 1A to the WTO Agreement, as may be amended.

Article 17
Cooperation in the Field of Technical Regulations, Standards and Conformity Assessment Procedures

1. The Parties shall develop cooperation between the Governments of the Parties in the field of technical regulations, standards and conformity assessment procedures (hereinafter referred to in this Article as “the Cooperation”) with a view to facilitating trade in goods between them.

2. The forms of the Cooperation may include the following:

(a) conducting joint studies and holding seminars and symposia, in order to enhance mutual understanding of their domestic technical regulations, standards and conformity assessment procedures;
(b) exchanging government officials for training purpose;
(c) contributing jointly to activities related to technical regulations, standards and conformity assessment procedures in international and regional fora; and
(d) encouraging entities related to technical regulations, standards and conformity assessment procedures other than the Governments of the Parties to participate in the Cooperation and to implement cooperation between such entities.

3. The implementation of this Article shall be subject to the availability of appropriated funds and the applicable laws and regulations of each Party.

Article 18
Enquiry Points

Each Party shall designate an enquiry point which is able to answer all reasonable enquiries from the other Party regarding technical regulations, standards and conformity assessment procedures and, if appropriate, to provide their relevant information.

Article 19
Sub-Committee on Technical Regulations, Standards and Conformity Assessment Procedures

1. For the purposes of the effective implementation and operation of this Section, a Sub-Committee on Technical Regulations, Standards and Conformity Assessment Procedures (hereinafter referred to in this Article as “the Sub- Committee”) shall be established pursuant to Article 165.

2. The Sub-Committee shall meet at such venue as may be agreed by the Parties and shall make efforts to meet once a year.

3. The functions of the Sub-Committee shall be:

(a) exchanging information on technical regulations, standards and conformity assessment procedures;
(b) reviewing the implementation and operation of this Section;
(c) discussing any issues related to this Section;
(d) reporting the findings of the Sub-Committee to the Joint Committee; and
(e) carrying out other functions which may be delegated by the Joint Committee pursuant to Article 165.

Article 20
Non-Application of Chapter 15

The dispute settlement procedure provided for in Chapter 15 shall not apply to this Section.

Article 21
Relation to Section 2

This Section shall not apply to SPS measures referred to in Section 2.

Chapter 4
Rules of Origin

Article 22
Originating Goods

1. Except as otherwise provided for in this Chapter, a good shall be an originating good where:

(a) the good is wholly obtained or produced entirely in the Area of one or both Parties, as defined in Article 38;
(b) the good is produced entirely in the Area of one or both Parties exclusively from originating materials;
(c) the good satisfies the requirements set out in Annex 4, as well as all other applicable requirements of this Chapter, when the good is produced entirely in the Area of one or both Parties using non-originating materials; or
(d) except for a good provided for in Chapters 61 through 63 of the Harmonized System, the good is produced entirely in the Area of one or both Parties, but one or more of the non-originating materials that are used in the production of the good does not undergo an applicable change in tariff classification because:

(i) the good was imported into a Party in an unassembled or a disassembled form but was classified as an assembled good pursuant to Rule 2(a) of the General Rules for the Interpretation of the Harmonized System; or
(ii) the heading for the good provides for and specifically describes both the good itself and its parts and is not further subdivided into subheadings, or the subheading for the good provides for and specifically describes both the good itself and its parts;

provided that the regional value content of the good, determined in accordance with Article 23, is not less than 50 percent, unless otherwise provided for in Annex 4, and that the good satisfies all other applicable requirements of this Chapter.

2. For the purposes of this Chapter, the production of a good using non-originating materials that undergo an applicable change in tariff classification and satisfying other requirements, as set out in Annex 4, shall occur entirely in the Area of one or both Parties and every regional value content of a good shall be entirely satisfied in the Area of one or both Parties.

Article 23
Regional Value Content

1. Except as provided for in paragraph 4 below and Article 26, the regional value content of a good shall be calculated on the basis of the transaction value method set out in paragraph 2 below.

2. For the purposes of calculating the regional value content of a good on the basis of the transaction value method, the following formula shall be applied:

TV - VNM
RVC= -------------- x 100
TV

where:

RVC: the regional value content, expressed as a percentage;
TV: transaction value of the good adjusted to a F.O.B. basis, except as provided for in paragraph 3 below; and
VNM: value of non-originating materials used by the producer in the production of the good determined pursuant to Article 24.

3. For the purposes of paragraph 2 above, when the producer of the good does not export it directly, the transaction value of the good shall be adjusted to the point where the buyer receives the good from the producer in the Area of a Party where the producer is located.

4. In the event that there is no transaction value or the transaction value of the good is unacceptable under Article 1 of the Customs Valuation Code, the value of the good shall be determined in accordance with Articles 2 through 7 of the Customs Valuation Code.

5. A producer may average the regional value content for one or more goods classified in the same subheading under the Harmonized System that he produces in the same plant or in more than one plant in the Area of one Party, on the basis of either all the goods produced by the producer or only those goods exported to the other Party:

(a) in its fiscal year or period; or
(b) in any period of 1, 2, 3, 4 or 6 months.

Article 24
Value of Materials

1. The value of a material:

(a) shall be the transaction value of the material; or
(b) in the event that there is no transaction value or the transaction value of the material is unacceptable under Article 1 of the Customs Valuation Code, shall be determined in accordance with Articles 2 through 7 of the Customs Valuation Code.

2. Where not included under subparagraph 1(a) or 1(b) above, the value of a material:

(a) shall include freight, insurance, packing and all other costs incurred in transporting the material to the importation port in the Party where the producer of the good is located, except as provided for in paragraph 3 below; and
(b) may include the cost of waste and spoilage resulting from the use of the material in the production of the good, less the value of reusable scrap or by-product.

3. The value of a non-originating material shall not include, where the producer acquires the material in the Area of the Party where the producer is located, freight, insurance, packing and all other costs incurred in transporting the material from the warehouse of the supplier of the material to the place where the producer is located; as well as any other known and ascertainable cost incurred in the Area of the producer of the good.

4. The value of non-originating materials used by the producer in the production of the good shall not include the value of the non-originating materials used by:

(a) another producer in the production of an originating material which is acquired and used by the producer of the good in the production of such good; or
(b) the producer of the good in the production of a self-produced originating material, which is designated by the producer as an intermediate material under Article 26.

Article 25
De Minimis

1. A good shall be considered to be an originating good if the value of all non-originating materials used in the production of the good that do not undergo an applicable change in tariff classification set out in Annex 4 is not more than 10 percent of the transaction value of the good, adjusted to the basis set out in paragraph 2 or 3, as the case may be, of Article 23, and the good satisfies all other applicable requirements of this Chapter.

2. Where the good referred to in paragraph 1 above is also subject to a regional value content, the value of such non-originating materials shall be taken into account in determining the regional value of the good and the good shall be required to satisfy all other applicable requirements of this Chapter.

3. A good that is subject to a regional value content requirement pursuant to Annex 4 shall not be required to satisfy such requirement if the value of all non- originating materials is not more than 10 percent of the transaction value of the good, adjusted to the basis set out in paragraph 2 or 3, as the case may be, of Article 23.

4. Paragraph 1 above shall not apply to:

(a) a good provided for in Chapters 50 through 63 of the Harmonized System; or
(b) a good provided for in Chapters 1 through 27 of the Harmonized System, except where the non- originating material used in the production of the good is provided for in a different subheading to the good classified in Chapter 1, 4 through 15, or 17 through 27 of the Harmonized System for which the origin is being determined under this Article.

5. A good provided for in Chapters 50 through 63 of the Harmonized System that does not originate because certain fibers or yarns used in the production of the material that determines the tariff classification of the good do not undergo an applicable change in tariff classification set out in Annex 4, shall nonetheless be considered to originate if the total weight of all such fibers or yarns in that material is not more than 7 percent of the total weight of such material.

Article 26
Intermediate Materials

1. For the purposes of determining the regional value content of a good under Article 23, the producer of the good may designate as an intermediate material, any self- produced material used in the production of the good.

2. Where an intermediate material is subject to a regional value content requirement under subparagraph 1(d) of Article 22 or Annex 4, the value of the intermediate material shall be:

(a) the total cost incurred with respect to all goods produced by the producer of the good which may be reasonably allocated to such intermediate material, in accordance with the Uniform Regulations referred to in Article 10; or
(b) the sum of each cost which are part of the total cost incurred with respect to such intermediate material, in accordance with the Uniform Regulations referred to in Article 10.

In this case, the regional value content of such material shall be not less than the percentage set out in Annex 4 minus 5 percent.

Article 27
Accumulation

For the purposes of determining whether a good is an originating good, a producer of the good may accumulate his production with the production of one or more producers in the Area of one or both Parties, of materials incorporated in the good, in a manner that the production of the materials is considered to have been performed by that producer, provided that the provisions of Article 22 are satisfied.

Article 28
Fungible Goods and Materials

1. For the purposes of determining whether a good is an originating good, where originating and non-originating fungible materials that are commingled in an inventory, are used in the production of a good, the origin of the materials may be determined pursuant to an inventory management method set out in paragraph 3 below.

2. Where originating and non-originating fungible goods are commingled in an inventory and, prior to exportation do not undergo any production process or any operation in the Area of the Party where they were commingled other than unloading, loading or any other operation necessary to preserve it in good condition or to transport the good to the other Party, the origin of the good may be determined pursuant to an inventory management method set out in paragraph 3 below.

3. The inventory management methods for fungible goods or materials shall be the following:

(a) “FIFO method” (first in-first out) is the inventory management method by which the origin of the number of fungible goods or materials first received in the inventory is considered to be the origin of the same number of fungible goods or materials first withdrawn from the inventory;
(b) “LIFO method” (last in-first out) is the inventory management method by which the origin of the number of fungible goods or materials last received in the inventory is considered to be the origin of the same number of fungible goods or materials first withdrawn from the inventory; or
(c) “average method” is the inventory management method by which, except as provided for in paragraph 4 below, the origin of fungible goods or materials withdrawn from an inventory is based on the ratio, calculated under the following formula:

TOM
ROM= --------------- x 100
TONM

where:
ROM: ratio of originating fungible goods or materials;
TOM: total units of originating fungible goods or materials in the inventory prior to the shipment; and
TONM: total sum of units of originating and non-originating fungible goods or materials in the inventory prior to the shipment.

4. Where a good is subject to a regional value content requirement, the determination of value of non-originating fungible materials shall be made through the following formula:

TNM
RNM= --------------- x 100
TONM

where:

RNM: ratio of value of non-originating fungible materials;
TNM: total value of fungible non-originating materials in the inventory prior to the shipment; and
TONM: total value of originating and non-originating fungible materials in the inventory prior to the shipment.

5. Once an inventory management method set out in paragraph 3 above has been chosen, it shall be used through all the fiscal year or period.

Article 29
Sets, Kits or Composite Goods

1. Sets, kits and composite goods classified pursuant to Rule 3 of the General Rules for the Interpretation of the Harmonized System, and the goods specifically described as sets, kits or composite goods in the nomenclature of the Harmonized System, shall qualify as originating, where every good contained in the sets, kits or composite goods satisfies the applicable rule of origin for each of them under this Chapter.

2. Notwithstanding paragraph 1 above, a set, kit or composite good shall be considered as originating, if the value of all non-originating goods used in the collection of the set, kit or composite good does not exceed 10 percent of the transaction value of the set, kit or composite good, adjusted to the basis set out in paragraph 2 or 3, as the case may be, of Article 23, and such set, kit or composite good satisfies all other applicable requirements of this Chapter.

3. The provisions of this Article shall prevail over the specific rules of origin set out in Annex 4.

Article 30
Indirect Materials

Indirect materials shall be considered to be originating without regard to where they are produced and the value of such materials shall be their cost as reported in the accounting records of the producer of the good.

Article 31
Accessories, Spare Parts and Tools

1. Accessories, spare parts or tools delivered with the good that form part of the good’s standard accessories, spare parts or tools, shall be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex 4, provided that:

(a) the accessories, spare parts or tools are not invoiced separately from the good, without regard of whether they are separately detached in the commercial invoice; and
(b) the quantities and value of the accessories, spare parts or tools are customary for the good.

2. 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 the value of originating or non-originating materials, as the case may be, in calculating the regional value content of the good.

Article 32
Packaging Materials and Containers for Retail Sale

1. Packaging materials and containers in which a good is packaged for retail sale shall, if classified with the good pursuant to Rule 5 of the General Rules for the Interpretation of the Harmonized System, be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex 4.

2. If the good is subject to a regional value content requirement, the value of such packaging materials and containers for retail sale shall be taken into account as the value of originating or non-originating materials, as the case may be, in calculating the regional value content of the good.

Article 33
Packing Materials and Containers for Shipment

Packing materials and containers in which a good is packed for shipment shall be disregarded in determining whether:

(a) all non-originating materials used in the production of the good undergo an applicable change in tariff classification set out in Annex 4; and
(b) the good satisfies a regional value content requirement.

Article 34
Non-Qualifying Operations

1. A good shall not be considered to be an originating good merely by reason of:

(a) dilution with water or another substance that does not materially alter the characteristics of the good;
(b) simple operations for the maintenance of the good during transportation or storing, such as ventilation, refrigeration, removal of damaged parts, drying or addition of substances;
(c) sieving, classification, selection;
(d) packing, repacking or packaging for retail sale;
(e) collection of goods to form sets, kits or composite goods;
(f) application of stamps, labels or similar distinctive signs;
(g) washing, including removal of dust, oxide, oil, paint or other coverings;
(h) mere collection of parts and components classified as a good, according to Rule 2(a) of the General Rules for the Interpretation of the Harmonized System. Mere collection does not include the collection of parts and components of disassembled originating goods that were previously disassembled for consideration of packaging, handling or transportation; or
(i) mere disassembly of the good into parts or components. Disassembling originating goods that were previously assembled, for consideration of packaging, handling or transportation, shall not be considered as mere disassembly.

2. The provisions of this Article shall prevail over the specific rules of origin set out in Annex 4.

Article 35
Transshipment

1. An originating good shall be considered as non- originating, even if it has undergone production that satisfies the requirements of Article 22 if, subsequent to that production, outside the Areas of the Parties, the good:

(a) undergoes further production, or operations other than unloading, reloading or any other operation necessary to preserve it in good condition or to transport it to the other Party; or
(b) does not remain under surveillance of the customs authorities in one or more non-Parties where it undergoes transshipment or temporary storage in those non-Parties.

2. Evidence that an originating good has not lost its originating condition by means of paragraph 1 above shall be provided to the customs authority of the importing Party.

Article 36
Application and Interpretation

1. For the purposes of this Chapter:

(a) the basis for tariff classification is the Harmonized System;
(b) the determination of transaction value of a good or of a material shall be made in accordance with the Customs Valuation Code; and
(c) all costs referred to in this Chapter shall be recorded and maintained in accordance with the Generally Accepted Accounting Principles applicable in the Party in which the good is produced.

2. For the purposes of this Chapter, in applying the Customs Valuation Code to determine the transaction value of a good or a material:

(a) the principles of the Customs Valuation Code shall apply to domestic transactions, with such modifications as may be required by the circumstances, as would apply to international transactions; and
(b) the provisions of this Chapter shall prevail over the Customs Valuation Code to the extent of any difference.

Article 37
Sub-Committee, Consultation and Modifications

1. For the purposes of the effective implementation and operation of this Chapter and Chapter 5, a Sub-Committee on Rules of Origin, Certificate of Origin and Customs Procedures (hereinafter referred to in this Article as “the Sub-Committee”) shall be established pursuant to Article 165.

2. The Sub-Committee shall meet at such venue and times as may be agreed by the Parties.

3. The functions of the Sub-Committee shall be:

(a) reviewing and making appropriate recommendations, as needed, to the Joint Committee on the implementation and operation of this Chapter and Chapter 5;
(b) reviewing and making appropriate recommendations, as needed, to the Joint Committee on the:

(i) tariff classification and customs valuation matters relating to determinations of origin;
(ii) certificate of origin referred to in Article 39;

(c) reviewing and making appropriate recommendations, as needed, to the Joint Committee on any modification to Annex 4, proposed by either Party, duly based on issues related with the determination of origin;
(d) reviewing and making appropriate recommendations, as needed, to the Joint Committee on the Uniform Regulations referred to in Article 10;
(e) considering any other matter as the Parties may agree related to this Chapter and Chapter 5;
(f) reporting the findings of the Sub-Committee to the Joint Committee; and
(g) carrying out other functions which may be delegated by the Joint Committee pursuant to Article 165.

4. The recommendation of the Sub-Committee shall be sent to the Joint Committee for necessary action under Article 165.

5. The Parties shall consult and cooperate to ensure that this Chapter and Chapter 5 are applied in an effective and uniform manner in accordance with the provisions, the spirit and the objectives of this Agreement.

6. Modifications to Annex 4 recommended by the Sub- Committee pursuant to subparagraph 3(c) above and proposed by both Parties may be adopted by the Joint Committee pursuant to subparagraph 2(e)(i) of Article 165. The adopted modifications shall be confirmed by an exchange of diplomatic notes and shall enter into force on the date specified in the said notes. The modified part of Annex 4 shall supersede the corresponding part provided for in Annex 4.

Article 38
Definitions

For the purposes of this Chapter:

(a) the term “Customs Valuation Code” means the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement, as may be amended, including its interpretative notes;
(b) the term “direct overhead” means overhead incurred during a period, directly related to the good, other than direct material costs and direct labor costs;
(c) the term “factory ships of a Party” and “vessels of a Party” respectively means factory ships and vessels:

(i) which are registered in the Party;
(ii) which sail under the flag of that Party;
(iii) which are owned to an extent of at least 50 percent by nationals of that Party, or by an enterprise with its head office in that Party, of which the managers or representatives, chairman of the board of directors or the supervisory board, and the majority of the members of such boards are nationals of that Party, and of which, in addition, in the case of partnerships or limited companies, at least half the capital belongs to that Party or to public bodies or nationals or enterprises of that Party;
(iv) of which the master and officers are all nationals of that Party; and
(v) of which at least 75 percent of the crew are nationals of that Party;

(d) the term “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;
(e) the term “fungible goods” means goods that are interchangeable for commercial purposes, whose properties are essentially identical, not practical to distinguish by the naked eye;
(f) the term “fungible materials” means materials that are interchangeable for commercial purposes and whose properties are essentially identical, not practical to distinguish by the naked eye;
(g) the term “Generally Accepted Accounting Principles” means the recognized consensus or substantial authoritative support in a Party with respect to the recording of revenues, expenses, costs, assets and liabilities, the disclosure of information and the preparation of financial statements. These standards may be broad guidelines of general application as well as detailed standards, practices and procedures;
(h) the term “goods wholly obtained or produced entirely in the Area of one or both Parties” means:

(i) mineral goods extracted in the Area of one or both Parties;
(ii) vegetable goods harvested in the Area of one or both Parties;
(iii) live animals born and raised in the Area of one or both Parties;
(iv) goods obtained from hunting or fishing in the Area of one or both Parties;
(v) fish, shellfish and other marine species taken by vessels of a Party from the sea outside the territorial seas of the Party;
(vi) goods produced on board factory ships of a Party from the goods referred to in subparagraph (v);
(vii) goods taken by a Party or a person of a Party from the seabed or beneath the seabed outside territorial seas of the Party, provided that the Party has rights to exploit such seabed;
(viii) waste and scrap derived from:

(AA) production in the Area of one or both Parties; or
(BB) used goods collected in the Area of one or both Parties, provided such goods are fit only for the recovery of raw materials; or

(ix) goods produced in the Area of one or both Parties exclusively from goods referred to in subparagraphs (i) through (viii), or from their derivatives, at any stage of production;

(i) the term “indirect material” means a good used in the production, testing or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including:

(i) fuel and energy;
(ii) tools, dies and molds;
(iii) spare parts and materials used in the maintenance of equipment and buildings;
(iv) lubricants, greases, compounding materials and other materials used in production or used to operate equipment and buildings;
(v) gloves, glasses, footwear, clothing, safety equipment and supplies;
(vi) equipment, devices and supplies used for testing or inspecting the goods;
(vii) catalysts and solvents; and
(viii) 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;

(j) the term “indirect overhead” means overhead incurred during a period, other than direct overhead, direct labor costs and direct material costs;
(k) the term “intermediate material” means a material that is self-produced and used in the production of a good, and designated pursuant to Article 26;
(l) the term “material” means a good that is used in the production of another good;
(m) the term “packing materials and containers for shipment” means goods that are used to protect a good during transportation, other than packaging materials and containers for retail sale;
(n) the term “place where the producer is located” means in relation to a good, the production plant of that good;
(o) the term “producer” means a person who conducts a production of a good or material;
(p) the term “production” means methods of obtaining goods including manufacturing, assembling, processing, growing, mining, harvesting, fishing, and hunting;
(q) the term “self-produced material” means a material that is produced by the producer of a good and used in the production of that good;
(r) the term “total cost” means the sum of the following elements, calculated in accordance with the Generally Accepted Accounting Principles of the Party and the Uniform Regulations referred to in Article 10:

(i) the direct materials cost used in the production of the good;
(ii) the direct labor cost used in the production of the good; and
(iii) the amount of direct and indirect overhead of the good, reasonably allocated to the good, except for those not to be included in the cost of the good;

(s) the term “transaction value of a good” means the price actually paid or payable for a good with respect to a transaction of the producer of the good, pursuant to the principles of Article 1 of the Customs Valuation Code, adjusted in accordance with the principles of paragraphs 1, 3 and 4 of Article 8 of the Customs Valuation Code, regardless of whether the good is sold for export. For the purposes of this definition, the seller referred to in the Customs Valuation Code shall be the producer of the good;
(t) the term “transaction value of a material” means the price actually paid or payable for a material with respect to a transaction of the producer of the good, pursuant to the principles of Article 1 of the Customs Valuation Code, adjusted in accordance with the principles of paragraphs 1, 3 and 4 of Article 8 of the Customs Valuation Code, regardless of whether the material is sold for export. For the purposes of this definition, the seller referred to in the Customs Valuation Code shall be the supplier of the material, and the buyer referred to in the Customs Valuation Code shall be the producer of the good; and
(u) the term “used” means used or consumed in the production of goods.

Chapter 5
Certificate of Origin and Customs Procedures

Section 1
Certification of Origin

Article 39
Certificate of Origin

1. For the purposes of this Section and Section 2, upon the date of entry into force of this Agreement, the Parties shall establish a format for the certificate of origin in the Uniform Regulations referred to in Article 10.

2. The certificate of origin referred to in paragraph 1 above will have the purpose of certifying that a good being exported from one Party into the other Party qualifies as an originating good.

3. The certificate of origin referred to in paragraph 1 above shall be issued by the competent governmental authority of the exporting Party on request having been made in writing by the exporter or, under the exporter’s responsibility, by his authorized representative, in accordance with paragraph 4 below. The certificate of origin must be stamped and signed by the competent governmental authority of the exporting Party or its designees at the time of issue.

For the purposes of this Article, the competent governmental authority of the exporting Party may designate other entities or bodies to be responsible for the issuance of the certificate of origin, prior authorization given under its applicable laws and regulations.

Where the competent governmental authority of the exporting Party designates other entities or bodies to carry out the issuance of the certificate of origin, the exporting Party shall notify in writing the other Party of its designees.

The exporting Party shall revoke the designation, where the issuance of certificates of origin by a designee is not in conformity with the provisions provided for in this Section and the situation warrants the revocation. For this purpose, the exporting Party shall consider views expressed by the importing Party in deciding on revoking the designation.

4. Prior to the issuance of a certificate of origin, an exporter that requests a certificate of origin must prove to the competent governmental authority of the exporting Party or its designees, that the good to be exported qualifies as an originating good.

Where an exporter is not the producer of the good, the exporter may request a certificate of origin on the basis of a declaration voluntarily provided by the producer of the good that demonstrates that such producer has proved to the competent governmental authority or its designees, that the good concerned qualifies as an originating good. Nothing in this paragraph shall be construed to oblige the producer of the good to certificate that the good qualifies as an originating good. If the producer decides not to provide the declaration concerned, the exporter shall be required to prove to the competent governmental authority or its designees that the good to be exported qualifies as an originating good.

5. The competent governmental authority or its designees shall issue a certificate of origin after the exportation of a good when it is requested by the exporter in accordance with paragraph 4 above. The certificate of origin issued retrospectively must be endorsed with the phrase set out in the Uniform Regulations referred to in Article 10.

6. In the event of theft, loss or destruction of a certificate of origin, the exporter may request to the competent governmental authority or its designees which issued it a duplicate made out on the basis of the export documents in their possession. The duplicate issued in this way must be endorsed with the phrase set out in the Uniform Regulations referred to in Article 10.

7. The certificate of origin for a good imported into the importing Party shall be completed in the English language. If the certificate of origin is not completed in the English language, a translation into the official language of the importing Party shall be attached thereto. If the certificate of origin is completed in the English language, a translation into the Spanish or the Japanese language shall not be required.

8. Each Party shall provide that a valid certificate of origin that fulfills the requirements of this Section that is applicable to a single importation of a good into the other Party, shall be accepted by the customs authority of the importing Party for 1 year or another period that the Parties may agree, after the date on which the certificate was issued.

9. The competent governmental authority of the exporting Party shall:

(a) determine the administrative mechanisms for the issuing of the certificate of origin;
(b) provide, at the request of the importing Party in accordance with Article 44 information relating to the origin of the goods for which preferential tariff treatment was claimed; and
(c) provide the other Party with specimen impressions of stamps used in the offices of the competent governmental authority or its designees for the issue of the certificate of origin.

Article 40
Obligations Regarding Importations

1. Except as otherwise provided for in this Section, each Party shall require an importer that claims preferential tariff treatment for a good imported from the other Party to:

(a) make a written declaration, based on a valid certificate of origin, that the good qualifies as an originating good;
(b) have the certificate in its possession at the time the declaration is made;
(c) provide the certificate on the request of the customs authority; and
(d) promptly make a corrected declaration and pay any duties owing where the importer has reason to believe that a certificate on which a declaration was based contains information that is not correct.

2. Where an importer claims preferential tariff treatment for a good imported into a Party from the other Party, the customs authority of the importing Party may deny preferential tariff treatment to the good if the importer fails to comply with any requirement under this Article.

3. Each Party shall ensure that, in the case that the importer at the time of importation does not have in his possession a certificate of origin, the importer of the good may, in accordance with the domestic laws and regulations of the importing Party, provide the certificate of origin and if required such other documentation relating to the importation of the good at a later stage, within a period not exceeding 1 year after the time of importation.

Article 41
Obligations Regarding Exportations

1. Each Party shall ensure that an exporter or a producer that has completed and signed a certificate of origin, and that has reasons to believe that the certificate contains incorrect information, shall promptly notify in writing, of any change that could affect the accuracy or validity of the certificate of origin to all persons to whom he gave the certificate, as well as to its competent governmental authority or its designees and to the customs authority of the importing Party. The notification shall be sent by one of the methods stipulated in paragraph 4 of Article 44. If this is done prior to the commencement of a verification referred to in Article 44 and if the exporter or producer demonstrates that at time of issuance of the certificate of origin he possessed facts upon which he could reasonably rely to the effect that the good qualified as an originating good, the exporter or producer shall not be subject to penalties for having submitted an incorrect certificate.

2. Each Party shall ensure that providing false declarations or documents to its competent governmental authority or its designees by its exporters or producers stating that the good qualifies as an originating good shall be subject to penalties or other appropriate sanctions as provided for in Article 46.

3. Each Party shall ensure that the exporter referred to in paragraph 3 of Article 39 or the producer referred to in paragraph 4 of Article 39, as the case may be, shall be prepared to submit at any time, at the request of the competent governmental authority or its designees of the exporting Party, all appropriate documents proving the originating status of the goods concerned as well as the fulfillment of other requirements under this Agreement.

Article 42
Exceptions

Each Party shall ensure that a certificate of origin shall not be required for:

(a) a commercial importation of a good whose value does not exceed 1,000 United States dollars or its equivalent amount in the Party’s currency, or such higher amount as it may establish, provided that it may require that the invoice accompanying the importation includes a statement indicating that the good qualifies as an originating good;
(b) a non-commercial importation of a good whose value does not exceed 1,000 United States dollars or its equivalent amount in the Party’s currency, or such higher amount as it may establish; or
(c) an importation of a good for which the importing Party has waived the requirement for a certificate of origin,

provided that the importation does not form part of a series of importations that may reasonably be considered to have been undertaken or arranged for the purposes of avoiding the certification requirements of Articles 39 and 40.

Section 2
Administration and Enforcement

Article 43
Records

1. Each Party shall ensure that:

(a) an exporter referred to in paragraph 3 of Article 39 or a producer referred to in paragraph 4 of Article 39, that has the documentation that proves that the good qualifies as an originating good for the purposes of requesting a certificate of origin shall maintain in that Party, for 5 years after the date on which the certificate was issued or for such longer period as the Party may specify, the records relating to the origin of a good for which preferential tariff treatment was claimed in the other Party, including records associated with:

(i) the purchase of, cost of, value of, and payment for, the good that is exported;
(ii) the purchase of, cost of, value of, and payment for, all materials, including indirect materials, used in the production of the good that is exported; and
(iii) the production of the good in the form in which the good is exported; and

(b) an importer claiming preferential tariff treatment for an imported good shall maintain for 5 years after the date of importation of the good or for such longer period as the Party may specify, such documentation as the Party may require relating to the importation of the good.

2. Each Party shall ensure that the competent governmental authority or its designees shall keep a record of the certificate of origin issued for a minimum period of 5 years after the date on which the certificate was issued. Such record will include all antecedents, which were presented to prove the qualification as an originating good.

Article 44
Origin Verifications

1. For the purposes of determining whether a good imported from the other Party under preferential tariff treatment qualifies as an originating good, the importing Party may conduct a verification through its customs authority, by means of:

(a) request of information relating to the origin of a good to the competent governmental authority of the exporting Party on the basis of a certificate of origin;
(b) written questionnaires to an exporter or a producer of the good in the other Party;
(c) request to the exporting Party to collect information, including that contained in the documents maintained pursuant to Article 43, that demonstrate the compliance with Chapter 4 and to check, for that purpose, the facilities used in the production of the good, through a visit by its competent governmental authority along with the customs authority of the importing Party to the premises of an exporter or a producer of the good in the exporting Party, and to provide the collected information in the English language to the customs authority of the importing Party; or
(d) such other procedure as the Parties may agree.

2. Where the customs authority of the importing Party has initiated a verification in accordance with this Article, the provisions of Annex 5 shall be applied as appropriate.

3. For the purposes of subparagraph 1(a), the competent governmental authority of the exporting Party shall provide the information requested, in a period not exceeding 4 months, after the date of the request.

If the customs authority of the importing Party considers necessary, it may require additional information relating to the origin of the good. If additional information is requested by the customs authority of the importing Party, the competent governmental authority of the exporting Party shall provide the information requested in a period not exceeding 2 months after the date of the request.

If the competent governmental authority of the exporting Party fails to respond to the request within the period specified therein, the customs authority of the importing Party shall determine that the good subject to the verification does not qualify as an originating good, therefore considering the certificate of origin as not valid, and shall deny it preferential tariff treatment.

4. The customs authority of the importing Party shall send the questionnaires referred to in subparagraph 1(b), to the exporters or producers in the exporting Party, by any of the following means:

(a) certified or registered mail with confirmation of receipt;
(b) any other method that produces a confirmation of receipt by the exporter or producer; or
(c) such other method that the Parties may agree.

The customs authority of the importing Party shall immediately communicate to the competent governmental authority of the exporting Party whenever it sends a questionnaire referred to in subparagraph 1(b).

5. The provisions of paragraph 1 above shall not prevent the customs authority or the competent governmental authority, as the case may be, of the importing Party from exercising its powers to take action in that Party, in relation with the compliance with its domestic laws and regulations by its own importers, exporters or producers.

6. The exporter or producer who receives a questionnaire pursuant to subparagraph 1(b) shall have 30 days from the date of its receipt to answer such questionnaire and return it.

7. Where the importing Party has received the answer to the questionnaire referred to in subparagraph 1(b) within the period specified in paragraph 6 above, and considers that it requires more information to determine whether the good subject to the verification qualifies as an originating good, it may, through its customs authority, request additional information from the exporter or producer, by means of a subsequent questionnaire, in which case, the exporter or producer shall have 30 days from the date of its receipt to answer and return it.

(a) If the response by the exporter or producer to any of the questionnaires referred to in paragraph 6 or 7 above does not contain sufficient information to determine that the good is originating, the customs authority of the importing Party may determine that the good subject to the verification does not qualify as an originating good and may deny it preferential tariff treatment, upon written determination under paragraph 22 below.
(b) If the response to the questionnaire referred to in paragraph 6 above is not returned within the period specified therein, the customs authority of the importing Party shall determine that the good subject to the verification does not qualify as an originating good, therefore considering the certificate of origin as not valid, and shall deny it preferential tariff treatment.

9. The conducting of a verification in accordance with one of the methods set forth in paragraph 1 above shall not preclude the use of another verification method provided for in paragraph 1 above.

10. When requesting the exporting Party to conduct a visit pursuant to subparagraph 1(c), the importing Party shall deliver a written communication with such request to the exporting Party, the receipt of which is to be confirmed by the latter Party, at least 30 days in advance of the proposed date of the visit. The competent governmental authority of the exporting Party shall request the written consent of the exporter or producer whose premises are to be visited.

11. The communication referred to in paragraph 10 above shall include:

(a) the identity of the customs authority issuing the communication;
(b) the name of the exporter or producer whose premises are requested to be visited;
(c) the proposed date and place of the visit;
(d) the object and scope of the proposed visit, including specific reference to the good or goods subject of the verification referred to in the certificate of origin; and
(e) the names and titles of the officials of the customs authority of the importing Party to be present during the visit.

12. Any modification to the information referred to in paragraph 11 above shall be notified in writing, prior to the proposed date of the visit referred to in subparagraph 11(c).

If the proposed date referred to in subparagraph 11(c) is to be modified, this shall be notified in writing at least 10 days prior to the date of the visit.

13. The exporting Party shall respond in writing to the importing Party, within 20 days of the receipt of the communication referred to in paragraph 10 above, if it accepts or refuses to conduct a visit requested pursuant to subparagraph 1(c).

14. Where the exporting Party refuses to conduct a visit, or that Party fails to respond to the communication referred to in paragraph 10 above within the period referred to in paragraph 13 above, the customs authority of the importing Party shall determine that the good or goods that would have been the subject of the visit do not qualify as originating goods, therefore considering the certificate of origin as not valid, and shall deny them preferential tariff treatment.

15. The competent governmental authority of the exporting Party shall provide, within 45 days, or any other mutually agreed period, from the last day of the visit, to the customs authority of the importing Party the information obtained through the visit.

16. It is confirmed by both Parties that during the course of a verification referred to in paragraph 1 above, the customs authority of the importing Party may request information necessary for determining the origin of a material used in the production of the good.

17. For the purposes of obtaining information on the origin of the material used in the production of the good, the exporter or producer of the good referred to in paragraph 1 above may request a producer of the material to provide voluntarily the former with information relating to the origin of such material. In case the producer of such material desires, such information may be sent to the competent governmental authority of the exporting Party for the provision to the customs authority of the importing Party, without the involvement of the exporter or producer of the good.

18. Where the customs authority of the importing Party requests information relating to the origin of a material pursuant to paragraph 16 above, during the course of a verification in accordance with the method set forth in subparagraph 1(a), the information shall be provided by the competent governmental authority of the exporting Party in accordance with paragraph 3 above.

Where the customs authority of the importing Party requests information relating to the origin of a material pursuant to paragraph 16 above, during the course of a verification in accordance with the method set forth in subparagraph 1(b), the information shall be provided by the exporter or producer of the good or the competent governmental authority of the exporting Party, as the case may be, in accordance with paragraph 6 or 7 above, as appropriate and mutatis mutandis , provided that in case the information is provided by the competent governmental authority, the 30 day period referred to in paragraph 6 or 7 above shall mean the period beginning on the date of the receipt of the questionnaire by that exporter or producer.

19. The requesting of information relating to the origin of a material pursuant to paragraph 16 above during the course of a verification in accordance with one of the methods set forth in paragraph 1 above shall not preclude the requesting of information relating to the origin of a material during the course of a verification in accordance with another verification method provided for in paragraph 1 above.

20. The customs authority of the importing Party shall determine that a material used in the production of the good is a non-originating material where the exporter or producer of the good or the competent governmental authority of the exporting Party, as the case may be, does not provide the information that demonstrates that the material in question qualifies as originating, or where the information provided is not sufficient to determine whether that material is originating. Such a determination shall not necessarily lead to a decision that the good itself is not originating.

21. Each Party shall, through its customs authority, conduct a verification of a regional value content requirement in accordance with the Generally Accepted Accounting Principles applied in the Party from which the good was exported.

22. After carrying out the verification procedures outlined in paragraph 1 above, the customs authority of the importing Party shall in the manner specified in paragraph 4 above, provide the exporter or producer whose good is subject to the verification, a written determination of whether or not the good qualifies as an originating good under Chapter 4, including findings of fact and the legal basis for the determination.

23. Where the customs authority of the importing Party denies preferential tariff treatment to the good in question in the cases of paragraph 3, 8(b) or 14 above, a written determination thereof shall be sent to the exporter or producer, in the manner specified in paragraph 4 above.

24. When the Party conducting a verification referred to in paragraph 1 above determines, based on the information obtained during the verification, that a good does not qualify as an originating good, and provides the exporter or producer with a written determination pursuant to paragraph 22 above, it shall grant the exporter or producer whose good was the subject of the verification, 30 days from the date of receipt of the written determination, to provide any comments or additional information before denying preferential tariff treatment to the good, and shall issue a final determination after taking into consideration any comments or additional information received from the exporter or producer during the above- mentioned period, and shall send it to the exporter or producer in the manner specified in paragraph 4 above.

25. Where the verification completed by the customs authority of the importing Party indicates that an exporter or a producer has repeatedly made false representations that a good imported into the Party qualifies as an originating good, the customs authority of the importing Party may withhold preferential tariff treatment to identical goods exported or produced by such person until that person establishes compliance with Chapter 4 to that authority. In taking such an action, the customs authority of the importing Party shall notify the person who completed and signed the certificate of origin and the competent governmental authority of the exporting Party.

26. Communications from the importing Party to an exporter or producer in the exporting Party as well as the response to the questionnaire referred to in subparagraph 1(b) to the importing Party shall be conducted in the English language.

Article 45
Confidentiality

1. Each Party shall maintain, in accordance with its domestic laws and regulations, the confidentiality of information provided to it as confidential pursuant to Section 1 and this Section and shall protect that information from disclosure that could prejudice the competitive position of the persons providing the information.

2. Information obtained pursuant to Section 1 and this Section may only be disclosed, for the purposes of Section 1 and this Section, to those competent authorities of the Parties responsible for the administration and enforcement of determinations of origin and of customs duties and other indirect taxes on imports, and shall not be used by a Party in any criminal proceedings carried out by a court or a judge, unless the information is requested to the other Party and provided to the former Party, in accordance with the applicable laws of the requested Party or appropriate international cooperation agreements to which both Parties are parties.

Article 46
Penalties

Each Party shall ensure that criminal, civil or administrative penalties or other appropriate sanctions against its importers, exporters and producers for providing false declaration or documents relating to Section 1 and this Section to its customs authority, competent governmental authority or its designees, shall be established or maintained.

Article 47
Review and Appeal

Each Party shall ensure that its importers have access to:

(a) at least one level of administrative review of a decision by its customs authority, provided that such review is done by an official or office different from the official or office making the decision subject to review; and
(b) judicial or quasi-judicial review of the decision referred to in subparagraph (a),

in accordance with its domestic laws and regulations.

Article 48
Goods in Transit or Storage

The provisions of this Agreement may be applied to goods which comply with the provisions of Chapter 4 and Section 1, and which on the date of entry into force of this Agreement are in transit, in Japan or Mexico, or in temporary storage in bonded area, subject to the submission to the customs authority of the importing Party in accordance with the domestic laws and regulations of that Party, within 4 months of that date, of a certificate of origin issued retrospectively, in accordance with paragraph 5 of Article 39, by the competent governmental authority or its designees of the exporting Party together with the documents showing that the goods have been transported directly.

Article 49
Definitions

1. For the purposes of Section 1 and this Section:

(a) the term “authorized representative“ means the person designated in accordance with its domestic laws and regulations by the exporter to be responsible for completing and signing the certificate of origin on his behalf;
(b) the term “commercial importation“ means the importation of a good into a Party for the purposes of sale, or any commercial, industrial or other like use;
(c) the term “competent governmental authority“ means the authority that, according to the legislation of each Party, is responsible for the issuing of the certificate of origin or for the designation of the certification entities or bodies. In the case of Japan, the Minister of Economy, Trade and Industry or his authorized representative, and in the case of Mexico, the Ministry of Economy;
(d) the term “customs authority“ means the authority that, according to the legislation of each Party, is responsible for the administration of its customs laws and regulations. In the case of Japan, the Minister of Finance or his authorized representative, and in the case of Mexico, the Ministry of Finance and Public Credit;
(e) the term “determination of origin“ means a determination whether a good qualifies as an originating good in accordance with Chapter 4;
(f) the term “exporter“ means a person located in an exporting Party who exports a good from the exporting Party;
(g) the term “identical goods“ means goods that are the same in all respects, including physical characteristics, quality and reputation, irrespective of minor differences in appearance that are not relevant to a determination of origin;
(h) the term “importer“ means a person located in an importing Party who imports a good into the importing Party;
(i) the term “preferential tariff treatment“ means the duty rate applicable to an originating good in accordance with this Agreement;
(j) the term “producer“ means “producer”, as defined in Article 38, located in a Party;
(k) the term “valid certificate of origin“ means a certificate of origin in the format referred to in paragraph 1 of Article 39, completed and signed by the exporter or the producer and stamped and signed by the competent governmental authority of the exporting Party or its designees, in accordance with the provisions of Section 1 and with the instructions indicated in the format; and
(l) the term “value“ means the value of a good or material for the purposes of applying Chapter 4.

2. Except as otherwise defined in this Article, the definitions of Chapter 4 shall apply.

Section 3
Customs Cooperation for Trade Facilitation

Article 50
Customs Cooperation for Trade Facilitation

For prompt customs clearance of goods traded between the Parties, each Party, recognizing the significant role of customs authorities and the importance of customs procedures in promoting trade facilitation, shall make cooperative efforts to:

(a) make use of information and communications technology;
(b) simplify its customs procedures; and
(c) make its customs procedures conform, as far as possible, to relevant international standards and recommended practices such as those made under the auspices of the Customs Cooperation Council.

Chapter 6
Bilateral Safeguard Measures

Article 51
General Provision

1. This Chapter establishes rules for the application of bilateral safeguard measures to originating goods, which shall be applied only between the Parties (hereinafter referred to as “bilateral safeguard measures”).

2. Nothing in this Agreement shall prevent a Party from applying safeguard measures in accordance with Article XIX of the GATT 1994 and the Agreement on Safeguards in Annex 1A to the WTO Agreement, as may be amended. Except for the bilateral safeguard measures provided for in this Chapter, no Party shall apply safeguard measures to originating goods which are accorded the preferential tariff treatment in accordance with Article 5, outside the scope of Article XIX of the GATT 1994 and the Agreement on Safeguards in Annex 1A to the WTO Agreement, as may be amended.

Article 52
Consistency

Each Party shall ensure the consistent, impartial and reasonable administration of its laws, regulations, decisions and rulings governing proceedings of bilateral safeguard measures.

Article 53
Conditions

1. Subject to the provisions of this Chapter, each Party may apply a bilateral safeguard measure, to the minimum extent necessary to prevent or remedy the serious injury and to facilitate adjustment if an originating good imported from the other Party, which is accorded the preferential tariff treatment in accordance with Article 5, as a result of the elimination or reduction of a customs duty, is being imported into the former Party in such increased quantities, in absolute terms, and under such conditions that the imports of that originating good constitute a substantial cause of serious injury, or threat thereof, to a domestic industry of the former Party.

2. A Party proposing to apply a bilateral safeguard measure may (a) suspend the further reduction of any rate of customs duty on the originating good referred to in paragraph 1 above in accordance with Article 5; or (b) increase the rate of customs duty on the originating good to a level not to exceed the lesser of:

(i) the most-favored-nation applied rate of customs duty in effect at the time when the bilateral safeguard measure is taken; and
(ii) the most-favored-nation applied rate of customs duty in effect on the day immediately preceding the date of entry into force of this Agreement.

3. A bilateral safeguard measure shall consist of tariff measures, including application of tariff rate quotas.

4. Each Party shall not apply bilateral safeguard measures on an originating good imported up to the limit of quota quantities granted under tariff rate quotas applied in accordance with Schedule in Annex 1.

5. No bilateral safeguard measure shall be maintained for a period exceeding 3 years. However, in very exceptional circumstances, after the prior consultations referred to in paragraph 9 below, a bilateral safeguard measure may be maintained for up to a total maximum period of 4 years. A Party taking such measure shall present to the other Party a schedule leading to its progressive elimination.

6. No bilateral safeguard measure shall be applied again to the imports of the same originating good which has been subject to a bilateral safeguard measure, for a period of time equal to the duration of the previous measure or 1 year, whichever is longer.

7. A Party shall deliver a written notice in English to the other Party immediately upon initiation of an investigation referred to in Article 55. Such written notice shall include the reason for the initiation of the investigation, a precise description of the originating good involved and its subheading or a more detailed level of the Harmonized System.

8. A Party shall deliver a written notice in English to the other Party prior to applying a bilateral safeguard measure. Such written notice shall include a description of evidence of the serious injury or threat thereof caused by the increased imports, a precise description of the originating good involved and its subheading or a more detailed level of the Harmonized System, a precise description of the proposed bilateral safeguard measure, its date of entry into force, and its expected duration.

9. A Party proposing to apply a bilateral safeguard measure shall provide adequate opportunity for prior consultations with the other Party on such measure with a view to, inter alia , reaching an agreement on compensation set out in paragraph 10 below.

10. A Party proposing to apply a bilateral safeguard measure shall offer the other Party adequate means of trade compensation in the form of additional concessions of customs duties whose levels are substantially equivalent to the value of the additional customs duties expected to result from such measure, and, in the case that room for such sufficient additional concessions of customs duties is already exhausted through overall reduction of customs duties, other concessions which the Parties may agree upon.

11. If the Parties are unable to agree on compensation within 60 days after the date when a Party initiates the application of the bilateral safeguard measure, the other Party shall be free to suspend, to the trade of the Party applying such measure, the application of concessions of customs duties under Article 5, which are substantially equivalent to such measure applied. For this purpose, the Party exercising the right of suspension may suspend the application of concessions of customs duties only for the minimum period necessary.

12. Upon termination of a bilateral safeguard measure, the rate of customs duty shall be the rate which would have been in effect but for such measure.

13. The Parties shall review the provisions of this Chapter, if necessary, after 10 years of the date of entry into force of this Agreement.

Article 54
Provisional Bilateral Safeguard Measures

1. In critical circumstances, where delay would cause damage which it would be difficult to repair, a Party may take a provisional bilateral safeguard measure pursuant to a preliminary determination that there is clear evidence that increased imports have caused or are threatening to cause serious injury to a domestic industry.

2. A Party shall deliver a written notice in English to the other Party prior to applying a provisional bilateral safeguard measure. Consultations on such measure shall take place promptly after such measure is taken.

3. The duration of the provisional bilateral safeguard measure shall not exceed 200 days. During that period, the pertinent requirements of Articles 52 and 55 shall be met. The duration of such measure shall be counted as a part of the period referred to in paragraph 5 of Article 53.

4. Paragraphs 2 through 4 and 12 of Article 53 shall be applied mutatis mutandis to the provisional bilateral safeguard measure. The customs duty imposed as a result of such measure shall be refunded within 60 days if the subsequent investigation referred to in Article 55 does not determine that increased imports have caused or threatened to cause serious injury to a domestic industry.

Article 55
Bilateral Safeguard Measures Proceedings

1. Each Party shall adopt or maintain equitable, timely, transparent and effective proceedings relating to bilateral safeguard measures.

2. A Party shall apply a bilateral safeguard measure only following an investigation by its investigating authority pursuant to the provisions of this Chapter.

3. The investigating authority of a Party shall examine and ensure the existence of sufficient evidence that the increased imports of an originating good are causing serious injury or threat thereof to the domestic industry concerned, to justify the initiation of an investigation.

4. An investigation shall, except in special circumstances, be completed within 1 year, and in no case more than 18 months, following its date of initiation.

5. Upon initiation of an investigation, the investigating authority of a Party shall give a public notice of the initiation of the investigation through the official journal of that Party. The public notice shall identify the originating good subject to the investigation and its subheading or a more detailed level of the Harmonized System, the period of investigation, the date of initiation of the investigation, deadlines for filing statements and other documents, and the place at which documents filed during the investigation may be inspected.

6. Each Party shall establish procedure to allow an interested party to have access to information submitted by other interested parties to the investigating authority of that Party after submission of such information. The investigating authority shall, upon request of an interested party, provide timely access to the information, including documents, items of evidence, and non- confidential written summaries referred to in paragraph 7 below, which were submitted by other interested parties during the investigation. In particular, the investigating authority shall grant access to the interested parties to the following information related to the investigation:

(a) production processes for the good concerned;
(b) production costs of the good concerned and specifications of its components;
(c) distribution costs of the good concerned;
(d) terms and conditions of sale of the good concerned;
(e) selling prices of the good concerned;
(f) description of the category of individual customers, distributors, suppliers, and any other enterprises related to the good concerned;
(g) data considered for the injury analysis such as the level of sales, production, productivity, capacity utilization, profits and losses, and employment related to the domestic industry concerned; and
(h) any other information about the enterprise related to the good concerned.

7. Notwithstanding paragraph 6 above, each Party shall adopt or maintain procedures for the treatment of confidential information as specified by that Party in accordance with its domestic laws and regulations and which is provided in the course of an investigation. When the interested parties provide such information, they shall be required to furnish non-confidential written summaries thereof, or if they indicate that the information cannot be summarized, the reasons why a summary cannot be provided.

8. During the course of each investigation, the investigating authority of a Party shall endeavor to hold a public hearing after providing reasonable notice, so that opposite views may be presented and rebuttal arguments offered. Such public hearing should allow interested parties to defend their interest and to question the other parties.

9. In the investigation to determine whether increased imports have caused serious injury or are threatening to cause serious injury to a domestic industry, the investigating authority of a Party shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that domestic industry, in particular, the rate and amount of the increase in imports of the originating good, in absolute terms, the share of the domestic market taken by increased imports, and changes in the level of sales, production, productivity, capacity utilization, profits and losses, employment, and prices.

10. The determination that increased imports have caused serious injury or are threatening to cause serious injury to a domestic industry shall not be made unless this investigation demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports of the originating good and serious injury or threat thereof. When factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports.

11. With regard to determination on whether increased imports have caused serious injury or are threatening to cause serious injury to a domestic industry, the investigating authority of a Party shall not arbitrarily modify a negative injury determination.

12. Upon decision to apply a bilateral safeguard measure, investigating authority of a Party shall give a public notice through the official journal of that Party. The public notice shall identify the originating good subject to such measure and its subheading or a more detailed level of the Harmonized System, the duration of such measure, and the findings and reasoned conclusions reached on all pertinent issues of law and fact.

13. In the public notice the investigating authority of a Party shall not disclose any confidential information referred to in paragraph 7 above.

Article 56
Definitions

For the purposes of this Chapter:

(a) the term “domestic industry” means the producers as a whole of the like or directly competitive goods operating in the Area of a Party, or those whose collective output of the like or directly competitive goods constitutes a major proportion of the total domestic production of those goods;
(b) the term “serious injury” means a significant overall impairment in the position of a domestic industry; and
(c) the term “threat of serious injury” means serious injury that is clearly imminent, based on facts and not merely on allegation, conjecture or remote possibility.

Chapter 7
Investment

Section 1
Investment

Article 57
Scope and Coverage

1. This Chapter shall apply to measures adopted or maintained by a Party relating to:

(a) investors of the other Party;
(b) investments of investors of the other Party in the Area of the former Party; and
(c) with respect to Articles 65 and 74, all investments in the Area of the former Party.

2. A Party has the right to perform exclusively the economic activities set out in Annex 8 and to refuse to permit the establishment of investment in such activities.

3. This Chapter shall not apply to measures adopted or maintained by a Party to the extent that they are covered by Chapter 9.

4. Nothing in this Chapter shall impose any obligation on either Party regarding measures pursuant to immigration laws and regulations.

Note: Nothing in this Chapter shall be construed to prevent a Party from providing a service or performing a function such as law enforcement, correctional services, income security or insurance, social security or insurance, social welfare, public education, public training, health, and child care, in a manner that is not inconsistent with this Chapter.

Article 58
National Treatment

1. Each Party shall accord to investors of the other Party and to their investments treatment no less favorable than the treatment it accords, in like circumstances, to its own investors and to their investments with respect to the establishment, acquisition, expansion, management, conduct, operation, maintenance, use, enjoyment and sale or other disposition of investments (hereinafter referred to in this Chapter as “investment activities”).

2. The treatment accorded by a Party under paragraph 1 above means, with respect to a local government in the case of Japan, and with respect to a state in the case of Mexico, treatment no less favorable than the most favorable treatment accorded, in like circumstances, by that local government or state to investors, and to investments of investors, of the Party of which it forms a part.

Article 59
Most-Favored-Nation Treatment

Each Party shall accord to investors of the other Party and to their investments, treatment no less favorable than the treatment it accords, in like circumstances, to investors of a non-Party and to their investments with respect to investment activities.

Note 1: Each Party shall accord to investors of the other Party and to their investments the better of the treatment required by Articles 58 and 59.
Note 2: For greater certainty, it is confirmed by both Parties that in the application of Articles 58 and 59 a Party:

(a) may not impose on an investor of the other Party a requirement that a minimum level of equity in an enterprise in the Area of the former Party be held by its nationals; or
(b) may not require an investor of the other Party, by reason of its nationality, to sell or otherwise dispose of an investment in the Area of the former Party.

Note 3: Each Party shall in its Area accord to investors of the other Party treatment no less favorable than the treatment which it accords, in like circumstances, to its own investors or investors of a non-Party with respect to access to the courts of justice and administrative tribunals and agencies in all degrees of jurisdiction, both in pursuit and in defense of such investor’s rights.

Article 60
General Treatment

Each Party shall accord to investments of investors of the other Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.

Note: This Article prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to investments of investors of the other Party. The concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens. A determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article.

Article 61
Expropriation and Compensation

1. Neither Party shall expropriate or nationalize an investment of an investor of the other Party in its Area either directly or indirectly through measures tantamount to expropriation or nationalization (hereinafter referred to as “expropriation”) except: (a) for a public purpose; (b) on a non-discriminatory basis; (c) in accordance with due process of law and Article 60; and (d) on payment of compensation pursuant to paragraphs 2 through 5 below.

2. Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriation occurred. The fair market value shall not reflect any change in value occurring because the expropriatory action had become known earlier. Valuation criteria to determine the fair market value may include declared tax value of tangible property. The compensation shall be paid without delay and be fully realizable.

3. If payment is made in a freely usable currency, compensation shall include interest at a commercially reasonable rate for that currency from the date of expropriation until the date of actual payment.

4. If a Party elects to pay in a currency other than a freely usable currency, the compensation paid, converted into the currency of payment at the market rate of exchange prevailing on the date of payment, shall be no less than:

(a) the fair market value on the date of expropriation, converted into a freely usable currency at the market rate of exchange prevailing on that date, plus
(b) interest, at a commercially reasonable rate for that freely usable currency, accrued from the date of expropriation until the actual date of payment.

5. On payment, compensation shall be freely transferable as provided in Article 63.

Article 62
Protection from Strife

Without prejudice to Article 60 and notwithstanding Article 66, each Party shall accord to investors of the other Party and to their investments treatment no less favorable than the treatment it accords to its own investors or investors of a non-Party and to their investments, whichever is more favorable to the investor of the other Party or its investments, with respect to measures, such as restitution, indemnification, compensation or any other settlement, it adopts or maintains relating to losses suffered by investments in its Area owing to armed conflict, civil strife or any other similar event.

Article 63
Transfers

1. Each Party shall allow all transfers relating to an investment in its Area of an investor of the other Party to be made freely and without delay. Such transfers shall include:

(a) the initial capital and additional amounts to maintain or increase the investment;
(b) profits, dividends, interest, capital gains, royalty payments, management fees, technical assistance fees and other fees;
(c) proceeds from the sale or liquidation of all or any part of the investment;
(d) payments made under a contract including payments made pursuant to a loan agreement;
(e) payments made in accordance with Article 61; and
(f) payments arising out of the settlement of a dispute under Section 2.

2. Each Party shall allow transfers to be made without delay in a freely usable currency at the market rate of exchange prevailing on the date of the transfer with respect to spot transactions in the currency to be transferred.

3. Notwithstanding paragraphs 1 and 2 above, a Party may delay or prevent a transfer through the equitable, non- discriminatory and good faith application of its laws relating to:

(a) bankruptcy, insolvency or the protection of the rights of creditors;
(b) issuing, trading or dealing in securities;
(c) criminal or penal offenses;
(d) reports of transfers of currency or other monetary instruments; or
(e) ensuring compliance with orders or judgments in adjudicatory proceedings.

Article 64
Senior Management and Boards of Directors

1. Neither Party may require that an enterprise of that Party that is an investment of an investor of the other Party appoint to senior management positions individuals of any particular nationality.

2. A Party may require that a majority of the board of directors, or any committee thereof, of an enterprise of that Party that is an investment of an investor of the other Party, be of a particular nationality, or resident of the Party, provided that the requirement does not materially impair the ability of the investor to exercise control over its investment.

Article 65
Performance Requirements

1. Neither Party may impose or enforce any of the following requirements, or enforce any commitment or undertaking, in connection with the establishment, acquisition, expansion, management, conduct or operation of an investment of an investor of a Party or of a non-Party in its Area:

(a) to export a given level or percentage of goods or services;
(b) to achieve a given level or percentage of domestic content;
(c) to purchase, use or accord a preference to goods produced or services provided in its Area, or to purchase goods or services from persons in its Area;
(d) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment;
(e) to restrict sales of goods or services in its Area that such investment produces or provides by relating such sales in any way to the volume or value of its exports or foreign exchange earnings;
(f) to transfer technology, a production process or other proprietary knowledge to a person in its Area, except when the requirement is imposed or the commitment or undertaking is enforced by a court, administrative tribunal or competition authority to remedy an alleged violation of competition laws or to act in a manner not inconsistent with multilateral agreements in respect of protection of intellectual property rights. A measure that requires an investment to use a technology to meet generally applicable health, safety or environmental requirements shall not be construed to be inconsistent with this paragraph. For greater certainty, Articles 58 and 59 shall apply to the measure; or
(g) to act as the exclusive supplier of the goods it produces or services it provides to a specific region or world market.

2. Neither Party may condition the receipt or continued receipt of an advantage, in connection with an investment in its Area of an investor of a Party or of a non-Party, on compliance with any of the following requirements:

(a) to achieve a given level or percentage of domestic content;
(b) to purchase, use or accord a preference to goods produced in its Area, or to purchase goods from producers in its Area;
(c) to relate in any way the volume or value of imports to the volume or value of exports or to the amount of foreign exchange inflows associated with such investment; or
(d) to restrict sales of goods or services in its Area that such investment produces or provides by relating such sales in any way to the volume or value of its exports or foreign exchange earnings.

3. Nothing in paragraph 2 above shall be construed to prevent a Party from conditioning the receipt or continued receipt of an advantage, in connection with an investment in its Area of an investor of a Party or of a non-Party, on compliance with a requirement to:

(a) locate production;
(b) provide a service;
(c) train or employ workers;
(d) construct or expand particular facilities; or
(e) carry out research and development

in its Area.

4. Paragraphs 1 and 2 above shall not apply to any requirement other than the requirements set out in those paragraphs.

5. 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 activities, nothing in subparagraph 1(b) or (c) or 2(a) or (b) above shall be construed to prevent any Party from adopting or maintaining 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 66
Reservations and Exceptions

1. Articles 58, 59, 64 and 65 shall not apply to:

(a) any existing non-conforming measure that is maintained by a Party at the federal or central government level, as set out in its Schedule to Annex 6 or Annex 8; or
(b) any existing non-conforming measure that is maintained by:

(i) with respect to Mexico:

(AA) a state, for 6 months after the date of entry into force of this Agreement, and thereafter as to be set out by Mexico in its Schedule to Annex 6 in accordance with paragraph 2 below; or
(BB) a local government; and

(ii) with respect to Japan:

(AA) a prefecture, for 6 months after the date of entry into force of this Agreement, and thereafter as to be set out by Japan in its Schedule to Annex 6 in accordance with paragraph 2 below; or
(BB) a local authority other than prefectures;

(c) the continuation or prompt renewal of any non- conforming measure referred to in subparagraphs (a) and (b) above; or
(d) an amendment or a modification to any non- conforming measure referred to in subparagraphs (a) and (b) above provided that the amendment or modification does not decrease the conformity of the measure, as it existed immediately before the amendment or modification, with Articles 58, 59, 64 and 65.

2. Each Party shall set out in its Schedule to Annex 6, within 6 months of the date of entry into force of this Agreement, any existing non-conforming measure maintained by a state or a prefecture as referred to in subparagraphs 1(b)(i)(AA) and 1(b)(ii)(AA) above, and shall notify thereof the other Party by a diplomatic note.

3. Articles 58, 59, 64 and 65 shall not apply to any measure that a Party adopts or maintains with respect to sectors, subsectors or activities, as set out in its Schedule to Annex 7.

4. Neither Party may, under any measure adopted after the date of entry into force of this Agreement and covered by Annex 7, require an investor of the other Party, by reason of its nationality, to sell or otherwise dispose of an investment that exists at the time the measure becomes effective.

5. Article 59 shall not apply to treatment accorded by a Party pursuant to agreements, or with respect to sectors, set out in its Schedule to Annex 9.

6. Articles 58, 59 and 64 shall not apply to any measure adopted or maintained with respect to procurement by a Party or a state enterprise.

7. The provisions of:

(a) subparagraphs 1(a), (b) and (c), and 2(a) and (b) of Article 65 shall not apply to qualification requirements for goods or services with respect to export promotion and foreign aid programs;
(b) subparagraphs 1(b), (c), (f) and (g), and 2(a) and (b) of Article 65 shall not apply to procurement by a Party or a state enterprise; and
(c) subparagraphs 2(a) and (b) of Article 65 shall not apply to requirements imposed by an importing Party relating to the content of goods necessary to qualify for preferential tariffs or preferential quotas.

Article 67
Notification

To the maximum extent possible, each Party shall notify the other Party of any new measure that the former Party considers might materially affect the implementation and operation of this Chapter and of Annexes 6 to 9.

Article 68
Special Formalities and Information Requirements

1. Nothing in Article 58 shall be construed to prevent a Party from adopting or maintaining a measure that prescribes special formalities in connection with the establishment of investments by investors of the other Party, such as the compliance with registration requirements or that investments be legally constituted under the laws or regulations of the Party, provided that such formalities do not materially impair the protection afforded by a Party to investors of the other Party and investments of investors of the other Party pursuant to this Chapter.

2. Notwithstanding Article 58 or 59, a Party may require an investor of the other Party, or its investment in its Area, to provide routine information concerning that investment solely for information or statistical purposes. The Party shall protect such business information that is confidential from any disclosure that would prejudice the competitive position of the investor or the investment. Nothing in this paragraph shall be construed to prevent a Party from otherwise obtaining or disclosing information in connection with the equitable and good faith application of its law.

Article 69
Relation to Other Chapters

In the event of any inconsistency between this Chapter and another Chapter, the other Chapter shall prevail to the extent of the inconsistency.

Article 70
Denial of Benefits

1. A Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of such Party and to an investment of such investor if investors of a non-Party own or control the enterprise and the denying Party:

(a) does not maintain diplomatic relations with the non-Party; or
(b) adopts or maintains measures with respect to the non-Party that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of this Chapter were accorded to the enterprise or to its investments.

2. Subject to prior notification and consultation, a Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of such Party and to investments of such investor if investors of a non-Party own or control the enterprise and the enterprise has no substantial business activities in the Area of the Party under whose law it is constituted or organized.

Article 71
Investment Support

1. An issuer may provide to investors of any Party, investment support in connection with projects or activities in the Area of the other Party. Investors and investments of investors of a Party in the Area of the other Party may enter into agreements for investment support with the issuer. The issuer will undertake investment support only in respect of projects and activities allowed by this Agreement.

2. If the issuer makes a payment to any person or entity, or exercises its rights as a creditor or subrogee, in connection with any investment support, the other Party shall recognize the transfer to, or acquisition by, the issuer of any cash, accounts, credits, instruments or other assets in connection with such payment or the exercise of such rights, as well as the succession of the issuer to any right, title, claim, privilege or cause of action, existing, or which may arise, in connection therewith.

3. With respect to any interests transferred to or acquired by the issuer or any interests to which the issuer succeeds, under this Article, in its own right or otherwise by contract or operation of law, the issuer shall assert no greater rights than those of the person or entity from whom such interests were received.

4. To the extent that the laws of a Party partially or wholly restrict ownership or acquisition by, or transfer or succession to, the issuer of any interests as described in paragraph 3 above, the Party shall permit the issuer to make appropriate arrangements to transfer such assets, interests or rights to a person or entity permitted to own them under the laws of that Party.

Article 72
Tem

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