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Canada-Chile Free Trade Agreement

Chapter D - Rules of Origin

Article D-01: Originating Goods

Except as otherwise provided in this Chapter, a good shall originate in the territory of a Party where:

a. the good is wholly obtained or produced entirely in the territory of one or both of the Parties, as defined in Article D-17;

b. each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification set out in Annex D-01 as a result of production occurring entirely in the territory of one or both of the Parties, or the good otherwise satisfies the applicable requirements of that Annex where no change in tariff classification is required, and the good satisfies all other applicable requirements of this Chapter;

c. the good is produced entirely in the territory of one or both of the Parties exclusively from originating materials; or

d. except as provided in Annex D-01 (Specific Rules of Origin) or except for a good of heading 39.01 through 39.15 or Chapter 50 through 63 of the Harmonized System,

Article D-02: Regional Value Content

1. Except as provided in paragraph 5, each Party shall provide that the regional value content of a good shall be calculated, at the choice of the exporter or producer of the good, on the basis of either the transaction value method set out in paragraph 2 or the net cost method set out in paragraph 3.

2. Each Party shall provide that an exporter or producer may calculate the regional value content of a good on the basis of the following transaction value method:

  TV - VNM
RVC = -------------- x 100

        TV

where

RVC is the regional value content, expressed as a percentage;

TV is the transaction value of the good adjusted to a F.O.B. basis; and

VNM is the value of non-originating materials used by the producer in the production of the good.

3. Each Party shall provide that an exporter or producer may calculate the regional value content of a good on the basis of the following net cost method:

   NC - VNM
RVC = -------------- x 100

        NC

where

RVC is the regional value content, expressed as a percentage;

NC is the net cost of the good; and

VNM is the value of non-originating materials used by the producer in the production of the good.

4. The value of non-originating materials used by the producer in the production of a good shall not, for purposes of calculating the regional value content of the good under paragraph 2 or 3, include the value of non-originating materials used to produce originating materials that are subsequently used in the production of the good1.

5. Each Party shall provide that an exporter or producer shall calculate the regional value content of a good solely on the basis of the net cost method set out in paragraph 3 where:

6. If an exporter or producer of a good calculates the regional value content of the good on the basis of the transaction value method set out in paragraph 2 and a Party subsequently notifies the exporter or producer, during the course of a verification pursuant to Chapter E (Customs Procedures), that the transaction value of the good, or the value of any material used in the production of the good, is required to be adjusted or is unacceptable under Article 1 of the Customs Valuation Code, the exporter or producer may then also calculate the regional value content of the good on the basis of the net cost method set out in paragraph 3.

7. Nothing in paragraph 6 shall be construed to prevent any review or appeal available under Article E-10 (Review and Appeal) of an adjustment to or a rejection of:

8. For purposes of calculating the net cost of a good under paragraph 3, the producer of the good may:

provided that the allocation of all such costs is consistent with the provisions regarding the reasonable allocation of costs set out in the Uniform Regulations, established under Article E-11 (Customs Procedures - Uniform Regulations)2.

9. Except as provided in paragraph 11, the value of a material used in the production of a good shall:

10. Any self-produced material that is used in the production of a good may be designated by the producer of the good as an intermediate material for the purpose of calculating the regional value content of the good under paragraph 2 or 3, provided that where the intermediate material is subject to a regional value-content requirement, no other self-produced material subject to a regional value-content requirement used in the production of that intermediate material may itself be designated by the producer as an intermediate material3.

11. The value of an intermediate material shall be:

12. The value of an indirect material shall be based on the Generally Accepted Accounting Principles applicable in the territory of the Party in which the good is produced.

Article D-03: Automotive Goods

1. For purposes of calculating the regional value content of a motor vehicle, the producer may average its calculation over its fiscal year using any one of the following categories, on the basis of either all motor vehicles in the category or only those motor vehicles in the category that are exported to the territory of the other Party:

2. For purposes of calculating the regional value content for any or all goods provided for in a tariff provision listed in Annex D-03.2 produced in the same plant, the producer of the good may:

Article D-04: Accumulation

1. For purposes of determining whether a good is an originating good, the production of the good in the territory of one or both of the Parties by one or more producers shall, at the choice of the exporter or producer of the good for which preferential tariff treatment is claimed, be considered to have been performed in the territory of either of the Parties by that exporter or producer, provided that:

2. Subject to paragraph 3, where each Party has a trade agreement that, as contemplated by the WTO Agreement, leads to the establishment of a free trade area with the same non-Party, the territory of that non-Party shall be deemed to form part of the territory of the free trade area established by this Agreement, for purposes of determining whether a good is an originating good under this Agreement.

3. A Party shall give effect to paragraph 2 only once provisions with effect equivalent to paragraph 2 are in force between each Party and the non-Party and upon agreement by the Parties on whether to limit such provisions to specified goods or under specified conditions.

Article D-05: De Minimis

1. Except as provided in paragraphs 3 through 5, 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 D-01 is not more than 10 per cent of the transaction value of the good, adjusted to a F.O.B. basis or, if the transaction value of the good is unacceptable under Article 1 of the Customs Valuation Agreement, the value of all such non originating materials is not more than 10 per cent of the total cost of the good, provided that:

2. A good that is otherwise subject to a regional value-content requirement shall not be required to satisfy such requirement if the value of all non-originating materials used in the production of the good is not more than 10 per cent of the transaction value of the good, adjusted to a F.O.B. basis, or, if the transaction value of the good is unacceptable under Article 1 of the Customs Valuation Agreement, the value of all non originating materials is not more than 10 per cent of the total cost of the good, provided that the good satisfies all other applicable requirements of this Chapter.

3. Paragraph 1 does not apply to a non-originating material used in the production of a good provided for in Chapter 1 through 21 of the Harmonized System unless the non-originating material is provided for in a different subheading than the good for which origin is being determined under this Article.

4. A good of Chapter 50 through 60 of the Harmonized System that does not originate because certain non-originating fibres or yarns used in the production of the good do not fulfil the conditions set out for that good in Annex D-01 (Specific Rules of Origin), shall nonetheless be considered to originate if the total weight of all such fibres or yarns does not exceed 10 per cent of the total weight of that good.

5. A good of Chapter 61 through 63 of the Harmonized System that does not originate because certain non-originating fibres or yarns used in the production of the component of the good that determines the tariff classification of that good do not fulfil the conditions set out for that good in Annex D-01 (Specific Rules of Origin), shall nonetheless be considered to originate if the total weight of all such fibres or yarns in that component does not exceed 10 per cent of the total weight of that component.

Article D-06: Fungible Goods and Materials

For purposes of determining whether a good is an originating good:

Article D-07: Accessories, Spare Parts and Tools

Accessories, spare parts or tools delivered with the good that form part of the good's standard accessories, spare parts, or tools, shall be considered as originating if the good originates and shall be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex D-01, provided that:

Article D-08: Indirect Materials

An indirect material shall be considered to be an originating material without regard to where it is produced.

Article D-09: Packaging Materials and Containers for Retail Sale

Packaging materials and containers in which a good is packaged for retail sale shall, if classified with the good, be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in Annex D-01, and, if the good is subject to a regional value-content requirement, the value of such packaging materials and containers shall be taken into account as originating or non-originating materials, as the case may be, in calculating the regional value content of the good.

Article D-10: Packing Materials and Containers for Shipment

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

Article D-11: Transshipment

A good shall not be considered to be an originating good by reason of having undergone production that satisfies the requirements of Article D-01 if, subsequent to that production, the good undergoes further production or any other operation outside the territories of the Parties, other than unloading, reloading or any other operation necessary to preserve it in good condition or to transport the good to the territory of a Party.

Article D-12: Non-Qualifying Operations

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

Article D-13: Interpretation and Application

For purposes of this Chapter:

Article D-14: Consultation and Modifications

1. The Parties shall consult regularly to ensure that this Chapter is administered effectively, uniformly and consistently with the spirit and objectives of this Agreement, and shall cooperate in the administration of this Chapter in accordance with Chapter E.

2. A Party that considers that this Chapter requires modification to take into account developments in production processes or other matters may submit a proposed modification along with supporting rationale and any studies to the other Party for consideration and any appropriate action under Chapter E.

Article D-15: NAFTA Accession

Upon the accession of Chile to the NAFTA, the rules of origin in this Chapter shall be replaced by the rules of origin to be negotiated as part of the terms of the accession of Chile to the NAFTA.

Article D-16: Sets or Assortments of Goods

1. Except as provided in Annex D-01 (Specific Rules of Origin), an assortment of goods, or a set as referred to in Rule 3 of the General Rules for the Interpretation of the Harmonized System, shall be considered as originating, provided that:

2.  For purposes of subparagraph 1(b), the value of packaging materials and containers for the set shall be taken into account as originating or non-originating materials, as the case may be, in calculating the regional value content of the set.

Article D-17: Definitions

For purposes of this Chapter:

aquaculture means the farming of aquatic organisms including fish, molluscs, crustaceans, other aquatic invertebrates, and aquatic plants from seedstock such as eggs, fry, fingerlings, and larvae by intervention in the rearing or growth processes to enhance production, such as regular stocking, feeding, protection from predators, etc.;

class of motor vehicles means any one of the following categories of motor vehicles:

F.O.B. means free on board, regardless of the mode of transportation, at the point of direct shipment by the seller to the buyer;

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

goods wholly obtained or produced entirely in the territory of one or both of the Parties means:

identical or similar goods means "identical goods" and "similar goods", respectively, as defined in the Customs Valuation Code;

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

intermediate material means a material that is self-produced and used in the production of a good, and designated pursuant to Article D-02(10);

material means a good that is used in the production of another good, and includes a part or an ingredient;

model line means a group of motor vehicles having the same platform or model name;

motor vehicle means a motor vehicle provided for in heading 87.01 or 87.02, subheading 8703.21 through 8703.90 or heading 87.04 and 87.05;

net cost means total cost minus sales promotion, marketing and after-sales service costs, royalties, shipping and packing costs, and non-allowable interest costs that are included in the total cost;

net cost of a good means the net cost that can be reasonably allocated to a good using one of the methods set out in Article D-02(8);

non-allowable interest costs means interest costs incurred by a producer that exceed 700 basis points above the applicable national government interest rate identified in the Uniform Regulations for comparable maturities;

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

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

production means growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing, assembling or disassembling a good;

reasonably allocate means to apportion in a manner appropriate to the circumstances;

related person means a person related to another person on the basis that:

royalties means payments of any kind, including payments under technical assistance or similar agreements, made as consideration for the use or right to use any copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, secret formula or process, excluding those payments under technical assistance or similar agreements that can be related to specific services such as:

sales promotion, marketing and after-sales service costs means the following costs related to sales promotion, marketing and after-sales service:

a. sales and marketing promotion; media advertising; advertising and market research; promotional and demonstration materials; exhibits; sales conferences, trade shows and conventions; banners; marketing displays; free samples; sales, marketing and after-sales service literature (product brochures, catalogues, technical literature, price lists, service manuals, sales aid information); establishment and protection of logos and trademarks; sponsorships; wholesale and retail restocking charges; entertainment;

b. sales and marketing incentives; consumer, retailer or wholesaler rebates; merchandise incentives;

c. salaries and wages, sales commissions, bonuses, benefits (for example, medical, insurance, pension), travelling and living expenses, membership and professional fees, for sales promotion, marketing and after-sales service personnel;

d. recruiting and training of sales promotion, marketing and after-sales service personnel, and after-sales training of customers' employees, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

e. product liability insurance;

f. office supplies for sales promotion, marketing and after-sales service of goods, where such costs are identified separately for sales promotion,marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

g. telephone, mail and other communications, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer;

h. rent and depreciation of sales promotion, marketing and after-sales service offices and distribution centres;

i. property insurance premiums, taxes, cost of utilities, and repair and maintenance of sales promotion, marketing and after-sales service offices and distribution centres, where such costs are identified separately for sales promotion, marketing and after-sales service of goods on the financial statements or cost accounts of the producer; and

j. payments by the producer to other persons for warranty repairs;

self-produced material means a material that is produced by the producer of a good and used in the production of that good;

shipping and packing costs means the costs incurred in packing a good for shipment and shipping the good from the point of direct shipment to the buyer, excluding costs of preparing and packaging the good for retail sale;

total cost means all product costs, period costs and other costs incurred in the territory of one or both of the Parties;

transaction value means the price actually paid or payable for a good or material with respect to a transaction of the producer of the good, 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 or material is sold for export; and

used means used or consumed in the production of goods.

Annex D-03.1

Regional Value-Content Calculation for Related Motor Vehicle Producer

1. For the purpose of Article D-03, in determining whether motor vehicles produced by a motor vehicle producer in the territory of a Party and imported into the territory of the other Party qualify as originating goods, the producer may average its calculation of the regional value content of a class of motor vehicles or a model line of motor vehicles produced in a fiscal year in the territory of a Party ("the territory of production") by that producer for sale in the territory of the other Party with the calculation of the regional value content of the corresponding class of motor vehicles or model line of motor vehicles produced in the territory of production by a related producer in the fiscal year that corresponds most closely to the producer's fiscal year, provided that:

a. the related group acquires 75 per cent or more by unit of quantity of the class of motor vehicles or model line of motor vehicles, as the case may be, that the producer has produced in the territory of a Party in that fiscal year for sale in the territory of the other Party;

b. the producer and the related producer each produced motor vehicles in the territory of the same Party at any time up to two years from the date of coming into force of this Agreement; and

c. where a producer otherwise qualifies under this Annex, notice of such qualification has been provided by the Party referred to in paragraph (b) to the other Party no later than two years from the date of coming into force of this Agreement.

2. If the related group acquires less than 75 per cent by unit by quantity of the class of motor vehicles or model line of motor vehicles, as the case may be, that the producer has produced in the territory of a Party in that fiscal year for sale in the territory of the other Party, the producer may average in the manner set out in paragraph 1 only those motor vehicles that are acquired by the related producer for distribution under the marque of either the producer or the related group.

3. In calculating the regional value content of motor vehicles produced by the producer in the territory of a Party, the producer may choose to average the calculation in paragraph 1 or 2 over a period of two fiscal years in the event that any motor vehicle assembly plant operated by the producer or any motor vehicle assembly plant operated by the related producer with which the producer is averaging its regional value content is closed for more than two consecutive months:

The averaging may be for the producer's fiscal year in which a motor vehicle producer's or a related producer's plant with which the producer is averaging is closed and either theprevious or subsequent fiscal year. In the event that the period of closure spans two fiscal years, the averaging may be only for those two fiscal years.

4. For the purposes of this Annex, where as a result of an amalgamation, reorganization, division or similar transaction:

the successor producer shall be deemed to be the related producer.

5. For the purposes of this Annex:

Annex D-03.2

List of Tariff Provisions for Article D 03(2)
Tariff ProvisionDescription
4009.12;
4009.22;
4009.32;
4009.42
Tubes, pipes and hoses, of vulcanized rubber with fittings
4016.99.aaElements for controlling vibration, of a kind used in the vehicles of heading 87.01 through 87.05
8301.20Locks of a kind used for motor vehicles
8407.33Engines of a cylinder capacity exceeding 250cc but not exceeding 1000cc, for vehicles of Chapter 87
8407.34Engines of a cylinder capacity exceeding 1000cc, for vehicles of Chapter 87
8408.20Diesel engines, for vehicles of Chapter 87
8409.91Parts of spark-ignition engines
8409.99Parts of diesel or semi-diesel engines
8413.30.aaFuel pumps for internal combustion piston engines
8413.60Rotary positive displacement pumps
8414.59Fans
8414.80.aaTurbo-chargers and superchargers, for motor vehicles
8415.20Air conditioning machines, for motor vehicles
8421.23Oil or petrol-filters for internal combustion engines
8421.31.aaAir filters for motor vehicles
8421.39.aaCatalytic converters
8425.39.aaAutomotive winches
8425.42Jacks and hoists, hydraulic, for raising vehicles
8425.49Jacks and hoists, for raising vehicles
8431.10.aaParts used with certain machinery of heading 84.25
8481.20Valves for oleohydraulic or pneumatic transmissions
8481.30.aaCheck valves, for automotive use
8481.80.aaValves, for automotive use
8482.10Ball bearings
8482.20Tapered roller bearings
8482.30Spherical roller bearings
8482.40Needle roller bearings
8482.50Cylindrical roller bearings
8482.80.aaOther ball/roller bearings, for use in motor vehicles of Chapter 87
8483.10.aaTransmission shafts and cranks, for automotive use
8483.20Bearing housings
8483.30Bearing housings and plain shaft bearings
8483.40Gears and gearing
8483.50Flywheels and pulleys, for automotive use
8483.60.aaClutches and shaft couplings, for automotive use
8501.10Electric motors of an input not exceeding 37.5 W
8501.20Universal AC/DC motors of an output exceeding 37.5 W
8501.31DC motors and generators of an output not exceeding 750 W
8501.32DC motors and generators of an output exceeding 750 W but not exceeding 75 kW
8507.10Accumulators (lead-acid)
8507.20Accumulators (lead-acid)
8507.30Accumulators (nickel-cadmium)
8507.40Accumulators (nickel-iron)
8507.50Accumulators (nickel-metal hydride)
8507.60Accumulators (lithium-ion)
8507.80Other Accumulators
8511.10Spark plugs
8511.20Ignition magnetos, magneto-dynamos and magnetic flywheels for internal combustion engines
8511.30Distributors and ignition coils
8511.40Starter motors and dual purpose starter-generators
8511.50Other generators
8511.80Other electrical ignition or starting equipment
8512.20Lighting or visual signalling equipment
8512.30Sound signalling equipment
8512.40Windscreen wipers, defrosters and demisters
8516.10.aaImmersion heaters designed for automotive installation
8536.41.aaRelays (automotive signalling flashers)
8536.50.aaMotor starters, for automotive use
8536.50.bbOther switches, for automotive use
8536.90.aaOther apparatus, for automotive use
8537.10.bbMotor control centres, for automotive use
8539.10.aaSealed beam lamp units for use in motor vehicles of Chapter 87
8539.21.aaTungsten halogen, for automotive use
8539.29.aaOther filament lamps for voltage not exceeding 31 V
8544.30Wiring sets
8544.42.aaElectric conductors fitted with connectors for a voltage not exceeding 80V, for automotive use
87.06Chassis fitted with engines, for motor vehicles of heading 87.01 to 87.05
87.07Bodies (including cabs), for motor vehicles of heading 87.01 to 87.05
8708.10.aaBumpers, but not parts thereof
8708.29.aaBody stampings
8708.29.ccDoor assemblies
8708.29.eeOther parts and accessories not elsewhere classified under subheading 8708.29
8708.40.aaParts of gear boxes
8708.50.aaDrive‑axles with differential, whether or not provided with other transmission components, and parts thereof, for vehicles of heading 87.03
8708.50.bbNon-drive‑axles and parts thereof, for vehicles of heading 87.03
8708.50.ccHalf shafts
8708.70.aaRoad wheels, but not parts or accessories thereof
8708.80.aaMcPherson struts
8708.80.bbParts for suspension systems
8708.91.aaParts of radiators
8708.92.aaParts of silencers (mufflers) and exhaust pipes
8708.93.aaClutches, but not parts thereof
8708.94.aaParts of steering wheels, steering columns, and steering boxes
8708.95Safety airbags with inflator system; parts thereof
8708.99.aaVibration control goods containing rubber
8708.99.bbDoubled flanged wheel hub units incorporating ball bearings
8708.99.ddHalf-shafts and drive shafts
8708.99.eeOther parts of power trains
8708.99.ggParts for steering systems
8708.99.hhOther parts and accessories not elsewhere classified under subheading 8708.99
9017.80Other instruments, for measuring
9026.10Instruments for measuring or checking the flow or level of liquids
9031.80Other instruments, appliances and machines
9032.10Thermostats
9032.20Manostats
9032.89Other instruments and apparatus
9104.00Instrument panel clocks
9401.20Seats for motor vehicles
Date Modified: