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Canada-Honduras Free Trade Agreement

Chapter Four: Rules of Origin

Article 4.1: Definitions

For the 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, or protection from predators;

ex-factory price means the total value of materials, parts, factory overhead, labour, any other reasonable costs incurred during the normal manufacturing process, and a reasonable profit. Any costs incurred subsequent to the goods leaving the factory, such as freight, loading, and temporary storage, are not included in the ex-factory price calculation;

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

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

Generally Accepted Accounting Principles means accounting principles accepted and commonly used in the territory of each Party with regard to the recording of income, costs, expenses, assets, and liabilities involved in the disclosure of information and preparation of financial statements. These principles may be broad guidelines of general application, as well as those standards, practices, and procedures usually employed in accounting;

good includes a product, article, or material;

good wholly obtained or produced entirely in the territory of one or bothof the Parties means:

identical goods means “identical goods” as defined in Article 15.2(a) of the Customs Valuation Agreement;

indirect material means a good used in the production, testing, or inspection of a good but which is 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 produced by a producer of a good and used in the production of that good;

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

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 4.3(6);

non-allowable interest cost means interest cost incurred by a producer that exceed, by 700 basis points or more, the applicable national government interest rate identified for comparable maturities;

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

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

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

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

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

recovered good means a material in the form of an individual part that is the result of:

remanufactured good means a good classified under Chapter 84, 85, 87, or 90 of the Harmonized System, except goods classified under heading 84.18, 84.24, or 85.16, subheading 8414.51 or 8414.59, or parts of fans classified under subheading 8414.90, that:

royalty means a payment, including a payment under a technical assistance or similar agreement, made as consideration for the use or right to use a copyright, literary, artistic, or scientific work, patent, trademark, design, model, plan, secret formula, or process; but does not include a payment under a technical assistance or similar agreement that is related to specific services, such as:

sales promotion, marketing and after-sales service cost means a cost related to:

shipping and packing cost means a cost incurred for packing a good for shipment and for shipping the good from the point of direct shipment to the buyer, but does not include the cost of preparing or packaging the good for retail sale;

similar goods means “similar goods” as defined in Article 15.2(b) of the Customs Valuation Agreement;

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

transaction value means:

used means used or consumed in the production of a good.

Article 4.2: Originating Goods

Except as otherwise provided in this Chapter, a good originates in the territory of a Party if:

Article 4.3: Regional Value Content

1. For the purposes of this Article:

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

NC means the net cost of the good;

TV means the transaction value of the goodadjusted on an ex-factory price basis as defined in Article 4.1; and

VNM means the value of non-originating materials used by the producer in the production of the good calculated in accordance with paragraph 8.

2. Except as provided in paragraphs 3 and 4, each Party shall provide that an exporter or a producer calculates the regional value content of a good on the basis of the following transaction value method:

RVC = TV – VNMx 100
TV

3. Each Party shall provide that an exporter or a producer of an automotive good of heading 87.01, subheading 8703.21 through 8703.90, or heading 87.04 through 87.08 may calculate the regional value content on the basis of the following net cost method:

RVC = NC - VNMx 100
NC

4. Each Party shall provide that an exporter or a producer of an automotive good of subheading 8407.31 through 8407.34, heading 87.02, or subheading 8703.10 may calculate the regional value content 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.

5. For the purposes of calculating the regional value content of a good under paragraph 2 or 3, the value of non-originating materials used by the producer in the production of a good does not include the value of:

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

7. If a producer calculates the net cost in accordance with paragraph 6, any sales promotion, marketing and after-sales service cost, royalty, shipping and packing cost, and non-allowable interest cost that are included in the value of a material used in the production of the good are not subtracted from the net cost in the calculation under paragraph 3.

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

9. The value of an intermediate material is:

10. The value of an indirect material is based on the Generally Accepted Accounting Principles applicable in the territory of the Party in which the indirect material is used in the production, testing, or inspection of a good, or in the maintenance of buildings or the operation of equipment associated with the production of a good.

Article 4.4: Accumulation

1. For the purposes of determining whether a good is originating, the production of the good in the territory of one or both of the Parties by one or more producers is, at the choice of the exporter or producer of the good, considered to have been performed in the territory of either of the Parties by that exporter or producer, if:

2. Subject to paragraph 3, if each Party has a trade agreement that establishes or that leads to the establishment of a free trade area or customs union with the same non-Party, as permitted by the WTO Agreement, the territory of that non-Party is deemed to form part of the territory of the free trade area established by this Agreement for the purposes of determining whether a good is originating under this Agreement.

3. A Party shall give effect to paragraph 2 only once provisions with an 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 those provisions to specified goods or under specified conditions.

Article 4.5: De Minimis

1. Except as provided in paragraphs 2 through 4, a good is originating if the value of all non-originating material used in the production of the good that does not undergo an applicable change in tariff classification, set out in Annex 4.1, does not exceed 10% of the transaction value of the good, calculated in accordance with Article 4.3, provided that:

2. Except as provided in Annex 4.1, paragraph 1 does not apply to a non-originating material used in the production of a good of Chapters 1 through 24 of the Harmonized System unless the non-originating material is provided for in a different subheading from the good for which origin is being determined under this Article.

3. A good of Chapters 50 through 60 of the Harmonized System that does not originate because certain non-originating yarn used in the production of the good does not fulfil the requirements set out for that good in Annex 4.1 is nonetheless originating if the total weight of all such yarn does not exceed 10% of the total weight of that good.

4. A good of Chapters 61 through 63 or subheading 9404.90 of the Harmonized System that does not originate because certain non-originating yarn used in the production of the component of the good that determines the tariff classification of that good does not fulfil the requirements set out for that good in Annex 4.1 is nonetheless originating if the total weight of all such yarn in that component does not exceed 10% of the total weight of that component.

Article 4.6: Fungible Goods and Materials

For the purposes of determining whether a good is originating:

Article 4.7: Sets or Assortments of Goods

Except as provided in Annex 4.1, a set as referred to in Rule 3 of the General Rules for the Interpretation of the Harmonized System, or an assortment of goods is originating if:

Article 4.8: Accessories, Spare Parts and Tools

1. An accessory, spare part, or tool delivered with a good that forms part of the good’s standard accessories, spare parts, or tools, is originating if the good is originating.

2. The accessory, spare part, or tool is disregarded in determining whether all non-originating material used in the production of the good undergoes the applicable change in tariff classification set out in Annex 4.1, provided that:

Article 4.9: Indirect Materials

An indirect material is originating regardless of where it is produced.

Article 4.10: Packaging Materials and Containers for Retail Sale

If classified with a good, a packaging material or container in which a good is packaged for retail sale is disregarded in determining whether the non-originating material used in the production of the good undergoes the applicable change in tariff classification set out in Annex 4.1.

Article 4.11: Packing Materials and Containers for Shipment

A packing material or container in which a good is packed for shipment is disregarded in determining:

Article 4.12: Transshipment

An originating good that is exported from a Party maintains its originating status only if the good:

Article 4.13: Interpretation and Application

For the purposes of this Chapter:

Article 4.14: Discussions and Modifications

1. The Parties shall discuss regularly to ensure that this Chapter is administered effectively, uniformly, and consistently with the spirit and objectives of this Agreement, and cooperate in the administration of this Chapter in accordance with Chapter Five (Customs Procedures).

2. If problems arise between the Parties concerning the interpretation of this Chapter, the Parties shall discuss establishing and implementing, through their respective laws or regulations, Uniform Regulations regarding the interpretation, application, and administration of this Chapter.

3. 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 Article 3.19 (National Treatment and Market Access of Goods – Committee on Trade in Goods and Rules of Origin).

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