(b) visits to the premises of an exporter or a producer in the territory of another Party to review the records and observe the facilities used in the production of the good; or
(c) such other procedure as the Parties may agree.
2. Prior to conducting a verification visit pursuant to paragraph (1)(b), a Party shall, through its customs administration:
(a) deliver a written notification of its intention toconduct such visit;
(i) to the exporter or producer whose premises are tobe visited,
(ii) to the customs administration of the Party inwhose territory the visit is to occur, and
(iii) to, if requested by the Party in whose territory the visit is to occur, the embassy of such Party in the territory of the Party proposing to conduct the visit; and
(b) obtain the written consent of the exporter or producer whose premises are to be visited.
3. The notification referred to in paragraph 2 shall include:
(a) the identity of the customs administration issuing thenotification;
(b) the name of the exporter or producer whose premises areto be visited;
(c) the date and place of the proposed verification visit;
(d) the object and scope of the proposed verification visit, including specific reference to the good subject to the verification;
(e) the names and titles of the officials performing the verification visit; and
(f) the legal authority for the verification visit.
4. Where an exporter or a producer has not given its written consent to a proposed verification visit within 30 days of receipt of notification pursuant to paragraph 2, the notifying Party may deny preferential tariff treatment to the good that would have been the subject of the visit.
5. Each Party shall provide that, where its customs administration receives notification pursuant to paragraph 2, it may, within 15 days from the date of receipt of such notification, postpone the proposed verification visit for a period not exceeding 60 days from the date of such receipt, or for such longer period as the Parties may otherwise agree.
6. A Party shall not deny preferential tariff treatment to a good based solely on the postponement of a verification visit pursuant to paragraph 5.
7. Each Party shall permit an exporter or a producer whose good is the subject of a verification visit by another Party to designate two observers to be present during such visit, provided that:
(a) the observers do not participate in a manner other than as observers; and
(b) the failure of such exporter or producer to designate observers shall not result in the postponement of the visit.
8. Each Party shall, through its customs administration, conduct a verification of a regional value-content requirement in accordance with the Generally Accepted Accounting Principles applied in the territory of the Party from which the good was exported.
9. The Party conducting a verification shall provide the exporter or producer whose good is subject to the verification with a written determination of whether the good qualifies as an originating good, including findings of fact and the legal basis for the determination.
10. Where verifications by a Party indicate a pattern of conduct by an exporter or a producer of false or unsupported representations that a good imported into its territory qualifies as an originating good, such Party may withhold preferential tariff treatment to identical goods exported or produced by such person until that person establishes compliance with the provisions of Chapter Four (Rules of Origin).
11. Each Party shall provide that where it determines that a certain good imported into its territory does not qualify as an originating good based on a tariff classification or a customs value applied by the Party to one or more materials used in the production of the good, which differs from the tariff classification or customs value applied to such materials by the Party from whose territory the good was exported, the Party's determination shall not become effective until it notifies in writing both the importer of the good and the person that completed and signed the Certificate of Origin for the good of its determination.
12. A Party shall not apply a determination made under paragraph 11 to an importation made before the effective date of the determination, provided that:
(a) the customs administration of the Party from whose territory the good was exported has issued an advance ruling on the tariff classification or on the customs value of such materials, or has given consistent treatment to the entry of such materials under the tariff classification or customs value at issue, on which a person is entitled to rely; and
(b) the advance ruling or consistent treatment was given prior to notification of the determination.
13. Where a Party denies preferential tariff treatment to a good pursuant to a determination made under paragraph 11, it shall postpone the effective date of the denial for a period not exceeding 90 days, provided that the importer of the good, or the person who completed and signed the Certificate of Origin for the good, demonstrates that it has relied in good faith to its detriment on the tariff classification or customs value applied to such materials by the customs administration of the Party from whose territory the good was exported.
Article 507: Confidentiality
1. Each Party shall maintain, in accordance with its laws and regulations, the confidentiality of confidential business information collected pursuant to this Chapter and shall protect that business information from disclosure that could prejudice the competitive position of the persons providing the information.
2. The confidential business information collected pursuant to this Chapter may only be disclosed to those authorities responsible for the administration and enforcement of determinations of origin, and of customs and revenue matters.
Article 508: Penalties
1. Each Party shall maintain measures imposing criminal, civil or administrative penalties for violations of its laws and regulations relating to this Chapter.
2. Nothing in Articles 502(1)(d) and (f), 504(e) and 506(6) shall be construed to prevent a Party from applying such measures as the circumstances may warrant.
Subchapter C - Advance Rulings
Articles 509: Advance Rulings
1. Each Party shall, through its customs administration, provide for the expeditious issuance of written advance rulings, prior to the importation of a good into its territory, to an importer in its territory or an exporter or a producer in the territory of another Party, on the basis of the facts and circumstances presented by such importer, exporter or producer of the good, concerning:
(a) whether materials imported from the territory of a non- Party undergo, as a result of production in the territory of one or more of the Parties, the applicable change in tariff classification under Chapter Four (Rules of Origin) to qualify as an originating good;
(b) whether a good satisfies a regional value-content requirement under either the transaction value method or the net cost method set out in Chapter Four;
(c) the appropriate basis or method for customs value to be applied by an exporter or a producer in the territory of another Party, in accordance with the principles of the Customs Valuation Code, in calculating the transaction value of a good, or the value of materials used in the production of a good, for which an advance ruling is requested, for the purpose of determining whether the good satisfies a regional value-content requirement under Chapter Four;
(d) the appropriate basis or method for reasonably allocating costs, in accordance with the allocation methods set out in the Uniform Regulations, for calculating the net cost of a good, or the value of an intermediate material, for which an advance ruling is requested, for the purposes of determining whether the good satisfies a regional value-content requirement under Chapter Four;
(e) whether a good that re-enters its territory after the good has been exported from its territory to the territory of another Party for repair or alteration qualifies for duty-free treatment in accordance with Article 307 (Goods Re-entered After Repair or Alteration);
(f) whether the proposed or actual marking of a good satisfies country of origin marking requirements under Article 312 (Country of Origin Marking); or
(g) whether a good to be imported qualifies as a good of aParty under Annexes 300-B or 302.2.
2. Each Party shall provide that an advance ruling issued pursuant to paragraph 1 shall be based on:
(a) for the purpose of determining the origin of a good, Chapter Four (Rules of Origin), the principles of the Customs Valuation Code and the Uniform Regulations;
(b) for the purpose of determining country of originmarking, Article 312 (Country of Origin Marking); and
(c) for the purpose of determining whether a good qualifiesas a good of a Party, Annex 302.2.
3. Each Party shall adopt or maintain procedures for the issuance of advance rulings, including a detailed description of the information reasonably required to process an application.
4. Each Party shall provide that its customs administration:
(a) may, at any time during the course of an evaluation ofan application for an advance ruling, requestsupplemental information from the person requesting theruling;
(b) after it has obtained all necessary information fromthe person requesting an advance ruling, shall issuethe ruling in accordance with the time periodsspecified in the Uniform Regulations; and
(c) where the advance ruling is unfavorable to the person requesting it, shall provide that person with a full explanation of the reasons for the ruling.
5. Subject to paragraph 7, each Party shall apply an advance ruling to importations into its territory of the good for which the ruling was requested, commencing on the date of its issuance or such later date as may be specified therein.
6. Each Party shall provide to any person requesting an advance ruling the same treatment, including the same interpretation and application of the provisions of Chapter Four (Rules of Origin) regarding a determination of origin of a good, as it provided to any other person to whom it issued an advance ruling, provided that the facts and circumstances are identical in all material respects.
7. The issuing Party may modify or revoke an advance ruling:
(a) if the ruling is based on an error
(i) of fact,
(ii) in the tariff classification of a good or the materials subject to the ruling,
(iii) in the application of a regional value-content requirement under Chapter Four (Rulesof Origin), or
(iv) in the application of the rules for determiningwhether a good qualifies as a good of a Partyunder Annexes 300-B or 302.2;
(b) if the ruling is not in accordance with an interpretation agreed by the Parties regarding Chapter Three (National Treatment and Market Access for Goods) and Chapter Four (Rules of Origin);
(c) if there is a change in the material facts orcircumstances on which the ruling is based;
(d) to conform with an amendment of Chapter Three, ChapterFour, Marking Rules or Uniform Regulations; or
(e) to conform with a judicial decision or a change in itsdomestic law.
8. Each Party shall provide that any modification or revocation of an advance ruling shall be effective on the date on which the modification or revocation is issued, or on such later date as may be specified therein, and shall not be applied to importations of a good that have occurred prior to that date, unless the person to whom the advance ruling was issued has not acted in accordance with its terms and conditions.
9. Notwithstanding paragraph 8, the issuing Party shall postpone the effective date of such modification or revocation for a period not exceeding 90 days where the person to whom the advance ruling was issued has in good faith relied to its detriment on that ruling.
10. Each Party shall provide that where its customs administration examines the regional value-content of a good for which it has issued an advance ruling with respect to an approved basis or method of customs value under Article 509(1)(c), or with respect to an approved basis or method for reasonably allocating costs under Article 509(1)(d), or with respect to whether a good qualifies for duty-free treatment under Article 509(1)(e), it may evaluate whether:
(a) the exporter or producer has complied with the terms and conditions of the advance ruling;
(b) the exporter's or producer's operations are consistentwith the material facts and circumstances upon whichthe advance ruling is based; and
(c) the supporting data and computations used in applyingthe basis or method of customs valuation were correctin all material respects.
11. Each Party shall provide that where its customs administration determines that any requirement in paragraph 10 has not been satisfied, it may modify or revoke the advance ruling as the circumstances may warrant.
12. Each Party shall provide that, where a person can demonstrate that it used reasonable care and acted in good faith in presenting the facts and circumstances on which an advance ruling was based, and where the customs administration of a Party determines that the ruling was based on incorrect information, the person to whom such advance ruling was issued shall not be subject to penalties.
13. Where a Party issues an advance ruling to a person that has misrepresented or omitted material facts or circumstances upon which the ruling is based or has failed to act in accordance with the terms and conditions of such ruling, it may apply such measures as the circumstances may warrant.
Subchapter D - Review And Appeal of Origin Determinations andAdvance Rulings
Article 510: Review and Appeal
1. Each Party shall grant substantially the same rights of review and appeal of determinations of origins and advance rulings by its customs administration as it provides to importers in its territory to any person:
(a) who completes and signs a Certificate of Origin for agood that has been subject to a determination oforigin;
(b) whose good has been subject to a country of originmarking determination pursuant to Article 312 (Countryof Origin Marking); or
(c) who has received an advance ruling pursuant to Article 509(1).
2. Further to Articles 1804 (Administrative Proceedings) and 1805 (Review and Appeal), each Party shall provide that the rights of review and appeal referred to in paragraph 1 shall include access to:
(a) at least one level of administrative review,independent of the official or office responsible forthe determination under review; and
(b) in accordance with its domestic law, judicial or quasi-judicial review of the determination or decision takenat the final level of administrative review.
Subchapter E - Uniform Regulations
Article 511: Uniform Regulations
1. Upon the date of entry into force of this Agreement, the Parties shall establish, and implement through their respective domestic laws or regulations, Uniform Regulations regarding the interpretation, application and administration of the provisions of Chapter Four (Rules of Origin).
2. Each Party shall implement any modification of or addition to the Uniform Regulations no later than 180 days after the Parties agree on such modification or addition, or such other period as the Parties may agree.
Subchapter F - Cooperation
Article 512: Cooperation
1. Each Party shall notify the other Parties of the following determinations, measures and rulings, including to the greatest extent practicable those that are prospective in application:
(a) a determination of origin issued as the result of averification conducted pursuant to Article 506(1);
(b) a determination of origin that such Party is aware iscontrary to:
(i) a ruling issued by the customs administration ofanother Party with respect to the tariffclassification or customs value of a good, or ofmaterials used in the production of a good, or thereasonable allocation of costs where calculatingthe net cost of a good, that is the subject of adetermination of origin, or
(ii) consistent treatment given by the customsadministration of another Party with respect tothe tariff classification or customs value of agood, or of materials used in the production of agood, or the reasonable allocation of costs wherecalculating the net cost of a good, that is thesubject of a determination of origin;
(c) a measure establishing or significantly modifying an administrative policy that is likely to affect future determinations of origin, country of origin marking requirements or determinations as to whether a good qualifies as a good of a Party under the Marking Rules; and
(d) an advance ruling, or a ruling modifying or revoking an advance ruling pursuant to Article 509(1).
2. The Parties shall cooperate:
(a) in the enforcement of their respective customs-related laws or regulations implementing this Agreement, and under any customs mutual assistance agreements or other customs-related agreements to which they are party;
(b) for purposes of the detection and prevention of unlawful transshipments of textile and apparel goods of a non-Party in the enforcement of prohibitions or quantitative restrictions, including the verification by a Party, in accordance with the procedures set out in this Chapter, of the capacity for production of goods by an exporter or a producer in the territory of another Party, provided that the customs administration of the Party proposing to conduct such verification, prior to conducting the verification
(i) obtains the consent of the Party in whoseterritory the verification is to occur, and
(ii) provides notification to the exporter or producerwhose premises are to be visited,
except that procedures for notifying the exporter or producer whose premises are to be visited shall be in accordance with other procedures as the Parties may agree;
(c) to the extent practicable, for purposes of facilitating the flow of trade between their territories, in customs-related matters, such as the collection and exchange of statistics regarding the importation and exportation of goods, the harmonization of documentation used in trade, the standardization of data elements, the acceptance of an international data syntax and the exchange of information; and
(d) to the extent practicable, in the storage and transmission of customs-related documentation.
Article 513: Working Group and Customs Subgroup
1. The Parties hereby establish a Working Group on Rules of Origin, comprising representatives of each Party, to ensure:
(a) the effective implementation and administration ofArticles 303, 308 and 312, Chapter Four (Rules ofOrigin), this Chapter, the Marking Rules and theUniform Regulations; and
(b) the effective administration of the customs-related aspects of Chapter Three (National Treatment and Market Access).
2. The Working Group shall meet at least four times a year and at the request of any Party.
3. The Working Group shall:
(a) monitor the implementation and administration by the customs administrations of the Parties of Articles 303, 308 and 312, Chapter Four, this Chapter, the Marking Rules and the Uniform Regulations to ensure their uniform interpretation;
(b) endeavor to agree, upon the request of any Party, on any proposed modification of or addition to Articles 303, 308 and 312, Chapter Four, this Chapter, the Marking Rules and the Uniform Regulations;
(c) notify the Commission of any agreed modification of or addition to the Uniform Regulations;
(d) propose to the Commission any modification of or addition to Articles 303, 308 and 312, Chapter Three, Chapter Four, this Chapter, the Marking Rules, the Uniform Regulations or other provision of this Agreement as required to conform with any change to the Harmonized System; and
(e) consider any other matter referred to it by a Party, or by the Customs Subgroup established under paragraph 6.
4. Each Party shall, to the greatest extent practicable, take all necessary measures to implement any modification of or addition to this Agreement within 180 days after the Commission agrees on any such modification or addition.
5. If the Working Group fails to resolve a matter referred to it pursuant to paragraph 2(f) within 30 days of such referral, any Party may request a meeting of the Commission pursuant to Article 2007.
6. The Working Group shall establish, and monitor the work of, a Customs Subgroup comprising representatives of each Party. The Subgroup shall meet at least four times a year and on the request of any Party and shall:
(a) endeavor to agree on
(i) the uniform interpretation, application and administration of the provisions of Articles 303, 308 and 312, Chapter Four, this Chapter, the Marking Rules and the Uniform Regulations,
(ii) tariff classification and valuation matters relating to determinations of origin,
(iii) equivalent procedures and criteria for the request, approval, modification, revocation and implementation of advance rulings,
(iv) revisions to the Certificate of Origin,
(v) any other matter referred to it by a Party, the Working Group or the Committee on Trade in Goods established under Chapter Three, and
(vi) any other customs-related matter arising under this Agreement;
(b) consider
(i) the harmonization of customs-related automation requirements and documentation, and
(ii) proposed customs-related administrative and operational changes that could affect the flow of trade between the Parties' territories;
(c) report periodically to the Working Group and notify it of any agreement reached under this paragraph; and
(d) refer to the Working Group any matter on which it has been unable to reach agreement within 60 days after the matter was referred to it pursuant to subparagraph (a)(v).
7. Nothing in this Chapter shall be construed to prevent a Party from issuing a determination of origin or an advance ruling related to a matter under consideration by the Customs Subgroup or the Working Group or from taking such other action as it considers necessary pending a resolution of the matter pursuant to this Agreement.
Article 514: Definitions
For purposes of this Chapter:
advance ruling means a written interpretation issued by the customs administration of a Party on the application of a measure to a given set of facts and circumstances regarding a prospective importation of a good into its territory;
commercial importation means the importation of a good into the territory of any Party for the purpose of sale, or any commercial, industrial, or other like use;
customs administration means the competent authority that is responsible under the domestic law of a Party for the administration of customs laws and regulations;
customs value means "customs value" as defined in Article 415;
determination of origin means a determination as to whether a good qualifies as an originating good in accordance with Chapter Four (Rules of Origin);
exporter in the territory of a Party includes an exporter located in the territory of a Party or an exporter required under this Chapter to maintain records in the territory of that Party regarding exportations of a good;
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 the determination of origin of such goods under Chapter Four (Rules of Origin);
importer in the territory of a Party includes an importer located in the territory of a Party or an importer required under this Chapter to maintain records in the territory of that Party regarding importations of a good;
preferential tariff treatment means the duty rate applicable to an originating good; and
producer includes a person that grows, mines, harvests, manufactures, processes, or assembles a good, or any combination thereof.
NAFTA Chapter Six Energy and Basic Petrochemicals
Article 601: Principles
1. The Parties confirm their full respect for their Constitutions.
2. The Parties recognize that it is desirable to strengthen the important role that trade in energy and basic petrochemical goods play in the North American region and to enhance this role through sustained and gradual liberalization.
3. The Parties recognize the importance of having viable and internationally competitive energy and petrochemical sectors to further their individual national interests.
Article 602: Scope and Coverage
1. This Chapter applies to measures relating to energy and basic petrochemical goods originating in the territories of the Parties and to measures relating to investment and services associated with such energy and basic petrochemical goods, as set forth in this Chapter.
2. For purposes of this Chapter, energy and basic petrochemical goods refer to those goods classified under the Harmonized System as:
(a) Chapter 27 (excluding: subheadings 2707.10, 2707.20, 2707.30, 2707.40, 2707.60, 2707.91, 2707.99 (except solvent naphtha, rubber extender oils and carbon black feedstocks), and in subheading 2710.00 (only normal paraffin mixtures in the range of C9 to C15), and in heading 2711 (only ethylene, propylene, butylene and butadiene, in purities over 50 percent));
(b) subheading 2612.10;
(c) subheadings 2844.10 through 2844.50 (only with respect to uranium compounds classified under those subheadings);
(d) subheading 2845.10;
(e) subheading: 2901.10 (ethane, butanes, pentanes, hexanes, and heptanes only);
3. Except as otherwise specified in Annex 602.3, energy and petrochemical goods and activities shall be governed by the provisions of this Agreement.
Article 603: Import and Export Restrictions
1. Subject to the further rights and obligations of this Agreement, the Parties incorporate the provisions of the General Agreement on Tariffs and Trade (GATT), with respect to prohibitions or restrictions on trade in energy and basic petrochemical goods. The Parties agree that this language does not incorporate their respective protocols of provisional application to the GATT.
2. The Parties understand that the provisions of the GATT incorporated in paragraph 1 prohibit, in any circumstances in which any other form of quantitative restriction is prohibited, minimum or maximum export-price requirements and, except as permitted in enforcement of countervailing and antidumping orders and undertakings, minimum or maximum import-price requirements.
3. In circumstances where a Party imposes a restriction on importation from or exportation to a non-Party of an energy or basic petrochemical good, nothing in this Agreement shall be construed to prevent the Party from:
(a) limiting or prohibiting the importation from the territory of any Party of such energy or basic petrochemical good of the non-Party; or
(b) requiring as a condition of export of such energy or basic petrochemical good of the Party to the territory of any other Party that the good be consumed within the territory of the other Party.
4. In the event that a Party imposes a restriction on imports of an energy or basic petrochemical good from non-Party countries, the Parties, upon request of any Party, shall consult with a view to avoiding undue interference with or distortion of pricing, marketing and distribution arrangements in another Party.
5. Parties may administer a system of import and export licensing for energy and basic petrochemical goods provided that such system is operated in a manner consistent with the provisions of this Agreement, including paragraph 1 and Article 1502 (Monopolies and State Enterprises).
6. In addition, the Parties recognize the provisions of Annex 603.6.
Article 604: Export Taxes
No Party shall maintain or introduce any tax, duty, or charge on the export of any energy or basic petrochemical good to the territory of any other Party, unless such tax, duty, or charge is also maintained or introduced on such energy or basic petrochemical good when destined for domestic consumption.
Article 605: Other Export Measures
A Party may maintain or introduce a restriction otherwise justified under the provisions of Articles XI:2(a) and XX(g), (i) and (j) of the GATT with respect to the export of an energy or basic petrochemical good to the territory of another Party, only if:
(a) the restriction does not reduce the proportion of the total export shipments of a specific energy or basic petrochemical good made available to such other Party relative to the total supply of that good of the Party maintaining the restriction as compared to the proportion prevailing in the most recent 36-month period for which data are available prior to the imposition of the measure, or in such other representative period on which the Parties involved may agree;
(b) the Party does not impose a higher price for exports of an energy or basic petrochemical good to such other Party than the price charged for such energy good when consumed domestically, by means of any measure such as licenses, fees, taxation and minimum price requirements. The foregoing provision does not apply to a higher price which may result from a measure taken pursuant to subparagraph (a) that only restricts the volume of exports; and
(c) the restriction does not require the disruption of normal channels of supply to such other Party or normal proportions among specific energy or basic petrochemical goods supplied to the other Party such as, for example, between crude oil and refined products and among different categories of crude oil and of refined products.
Article 606: Energy Regulatory Measures
1. The Parties recognize that energy regulatory measures are subject to the disciplines of:
(a) national treatment, as provided in Article 301;
(b) import and export restrictions, as provided in Article 603; or
(c) export taxes, as provided in Article 604.
2. Each Party shall seek to ensure that in the application of any energy regulatory measure, energy regulatory bodies within its territory avoid disruption of contractual relationships to the maximum extent practicable, and provide for orderly and equitable implementation appropriate to such measures.
Article 607: National Security Measures
1. No Party shall maintain or introduce a measure restricting imports of an energy or basic petrochemical good from, or exports of an energy or basic petrochemical good to, another Party under Article XXI of the GATT or under Article 2102 (National Security), except to the extent necessary to:
(a) supply a military establishment of a Party or enablefulfillment of a critical defense contract of a Party;
(b) respond to a situation of armed conflict involving theParty taking the measure;
(c) implement national policies or international agreements relating to the non-proliferation of nuclear weapons or other nuclear explosive devices; or
(d) respond to direct threats of disruption in the supply of nuclear materials for defense purposes.
2. The Parties recognize the provisions of Annex 607.2.
Article 608: Miscellaneous Provisions
1. Canada and the United States shall act in accordance with the terms of Annexes 902.5 and 905.2 of the Canada - United States Free Trade Agreement.
2. The Parties agree to allow existing or future incentives for oil and gas exploration, development and related activities in order to maintain the reserve base for these energy resources.
3. Canada and the United States intend no inconsistency between the provisions of this Chapter and the Agreement on an International Energy Program (IEP). In the event of any unavoidable inconsistency between the IEP and this Chapter, the provisions of the IEP shall prevail to the extent of that inconsistency as between Canada and the United States.
Article 609: Definitions
For purposes of this Chapter:
consumed means transformed so as to qualify under the rules of origin set out in Chapter Four (Rules of Origin), or actually consumed;
restriction means any limitation, whether made effective through quotas, licenses, permits, minimum or maximum price requirements or any other means;
energy regulatory measure means any measure by federal or sub- federal entities that directly affects the transportation, transmission or distribution, purchase or sale, of an energy or basic petrochemical good;
first hand sale refers to the first commercial transaction affecting the good in question;
Independent Power Producer (IPP) means a facility that is used for the generation of electric energy exclusively for sale to an electric utility for further resale;
investment means investment as defined in Chapter Eleven (Investment);
total supply means shipments to domestic users and foreign users from:
(a) domestic production;
(b) domestic inventory; and
(c) other imports, as appropriate; and
total export shipments means the total shipments from total supply to users located in the territory of the other Party.
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1. The Mexican State reserves to itself the following strategic activities and investment in such activities:
(a) exploration and exploitation of crude oil and natural gas; refining or processing of crude oil and natural gas; and production of artificial gas, basic petrochemicals and their feedstocks; and pipelines; and
(b) foreign trade; transportation, storage and distribution, up to and including first hand sales of the following goods: crude oil; natural and artificial gas; goods covered by this Chapter obtained from the refining or processing of crude oil and natural gas; and basic petrochemicals.
2. In the event of an inconsistency between Annex 602.3, paragraphs 1, 5(a) and 6, and another provision of this Agreement, the provisions of Annex 602.3, paragraphs 1, 5(a) and 6, shall prevail to the extent of that inconsistency.
3. Natural Gas and Petrochemical Feedstock Trade
Where end-users and suppliers of natural gas or basic petrochemical goods consider that cross-border trade in such goods may be in their interests, the Parties agree that such end-users and suppliers, and state enterprises of the Parties as may be required under their domestic law, shall have the right to negotiate supply contracts.
The modalities of implementing such arrangements are left to the end-users, suppliers and state enterprises of the Parties as may be required under their domestic law and may take the form of individual contracts between the state enterprise and each of the other entities. Such contracts may be subject to regulatory approval.
4. Performance Contracts
The Parties shall allow state enterprises to negotiate performance clauses in their service contracts.
5. Electricity
(a) In Mexico the supply of electricity as a public service is a strategic area reserved to the State. Except as provided in subparagraph (b) below the activities encompassed by the supply of electricity as a public service in Mexico include the generation, transmission, transformation, distribution and sale of electricity.
(b) The opportunities for private investment in Mexico in electricity generating facilities include:
(i) Production for Own Use
Enterprises of the other Parties may acquire, establish, and/or operate an electrical generating facility to meet its own supply needs. Electricity generated in excess of the enterprise's own supply requirements must be sold to CFE and CFE shall purchase such electricity under terms and conditions agreed to by CFE and the enterprise.
(ii) Co-generation
Enterprises of the other Parties may acquire, establish, and/or operate co-generation facilities which generate electricity using heat, steam or other energy sources associated with an industrial process. Owners of the industrial facility need not be the owners of the co-generating facility. Electricity generated in excess of the enterprise's own supply requirements must be sold to CFE and CFE shall purchase such electricity under terms and conditions agreed to by CFE and the enterprise.
(iii) Independent Power Production
Enterprises of the other Parties may acquire, establish, and/or operate electricity generating facilities for independent power production (IPP) in Mexico. Electricity generated by IPP facilities for sale in Mexico shall be sold to CFE and CFE shall purchase such electricity under terms and conditions agreed to by CFE and the enterprise. Where an IPP located in Mexico and an electric utility of another Party consider that cross- border trade in electricity may be in their interest, the Parties agree that these entities and CFE shall have the right to negotiate the terms and conditions of power purchase and power sale contracts. The modalities of implementing such supply arrangements is left to the end-users, suppliers and CFE and may take the form of individual contracts between the state enterprise and each of the other entities. Such contracts shall be subject to regulatory approval.
6. Nuclear
The generation of nuclear energy; the exploration, exploitation and processing of radioactive minerals; the nuclear fuel cycle; the use and reprocessing of nuclear fuels and the regulation of their applications for other purposes; the transportation and storage of nuclear wastes; and the production of heavy water, are reserved to the Mexican state.
7. Pursuant to Article 1101(3), private investment is not permitted in reserved activities listed above in paragraphs 1, 5(a) and 6. Chapter Twelve (Cross Border Trade in Services) shall only apply to activities involving the provision of services covered in paragraphs 1, 5(a) and 6 when Mexico permits a contract to be granted in respect of such activities and only to the extent of that contract.
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United Mexican States:
1. For only those goods listed below, Mexico may restrict the granting of import and export licenses for the sole purpose of reserving foreign trade in these goods to itself.
2707.50 Other aromatic hydrocarbon mixtures of which 65% or more by volume (including losses) distills at 250 C by the ASTM D 86 method.
2707.99 Rubber extender oils, solvent naphtha and carbon black feedstocks only.
2709 Petroleum oils and oils obtained from bituminous minerals, crude.
2710 aviation gasoline; gasoline and motor fuel blending stocks (except aviation gasoline) and reformates when used as motor fuel blending stocks; kerosene; gas oil and diesel oil; petroleum ether; fuel oil; paraffinic oils other than for lubricating purposes; pentanes; carbon black feedstocks; hexanes; heptanes and naphthas.
2711 Petroleum gases and other gaseous hydrocarbons other than: ethylene, propylene, butylene and butadiene, in purities over 50 percent.
2712.90 only paraffin wax containing by weight more than 0.75% of oil, in bulk (Mexico classifies these goods under HS 2712.90.02) and only when imported to be used for further refining.
2713.11 Petroleum coke not calcined.
2713.20 Petroleum bitumen (except when used for road surfacingpurposes under HS 2713.20.01).
2713.90 Other residues of petroleum oils obtained frombituminous materials.
2714 Bitumen and asphalt, natural; bituminous or oil shale and tar sands, asphaltites and asphaltic rocks (except when used for road surfacing purposes under HS 2714.90.01).
2901.10 Ethane, butanes, pentanes, hexanes, and heptanes only.
2. Notwithstanding any other provision of this Chapter, the provisions of Article 605 shall not apply as between the other Parties and Mexico.
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1. The provisions of Article 607(1) shall impose no obligations and confer no rights on Mexico.
2. Nothwithstanding Article 607(1), the provisions of Article 2102 (National Security) shall apply as between the other Parties and Mexico.
NAFTA Chapter Seven Agriculture
Article 701: Scope
1. This Chapter applies to trade in agricultural goods and to sanitary and phytosanitary measures.
Subchapter A - Market access
Article 702: Scope
1. Further to Article 102 (Objectives), the provisions of this Subchapter address import barriers, domestic support, export subsidies, and grading and marketing standards and measures that affect trade of agricultural goods between the Parties.
2. To the extent of any inconsistency in this Agreement with the provisions of this Subchapter, this Subchapter shall prevail.
Article 703: International obligations
1. Each Party shall comply with Annex 703.1 with respect to its agricultural trade under other international agreements, to the extent set out in that Annex.
2. When a Party desires to adopt a measure pursuant to any international commodity agreement with respect to an agricultural good, it shall consult with the other Parties in order to avoid nullification or impairment of a concession granted by such Party in its Schedule set out in Annex 302.2.
3. Each Party shall comply with Annex 703.3 with respect to actions taken pursuant to any international coffee agreement.
Article 704: Market Access
General Provisions
1. In order to facilitate trade in agricultural goods, the Parties shall work together to improve access to their respective markets through the reduction or elimination of import barriers.
Tariffs and Quantitative Restrictions
2. Each Party shall comply with Annex 704.2 with respect to tariffs and quantitative restrictions, including GATT market access requirements and trade in sugar.
Agricultural Grading and Marketing Standards
3. Each Party shall comply with Annex 704.3 with respect to agricultural grading and marketing standards.
Special Safeguard Provisions
4. Each Party may, during the applicable period of transition, adopt or maintain special safeguards in the form of tariff quotas on specific agricultural goods, as specified in its Schedule set out in Annex 302.2, and further described in Annex 704.4.
5. A Party may not apply, at the same time, measures under paragraph 4 and Chapter 8 (Emergency Action) with respect to the same agricultural good.
Article 705: Domestic Support
The Parties recognize that domestic support measures can be of crucial importance to their agricultural sectors but may also have trade distorting effects and effects on production. The Parties further recognize that domestic support commitments may result from the agriculture negotiations in the Uruguay Round of multilateral trade negotiations under the GATT. Accordingly, to the extent a Party decides to support its agricultural producers, such Party should endeavor to move toward domestic support policies that:
(a) have minimal or no trade distortion effects or effectson production; or
(b) are exempt from domestic support reduction commitmentsunder the GATT.
The Parties further recognize that the domestic support mechanisms of each Party, including those that are subject to reduction commitments, may be changed at the Party's discretion so long as such change is in compliance with its GATT rights and obligations.
Article 706: Export Subsidies
1. The Parties recognize that export subsidies may have serious prejudicial effects on importing and exporting Parties, and the Parties share the objective of achieving the multilateral elimination of export subsidies for agricultural goods. The Parties shall cooperate in an effort to achieve an agreement in the General Agreement on Tariffs and Trade which eliminates export subsidies on agricultural goods.
2. The Parties also recognize that export subsidies may cause disruption in the market of an importing Party. Accordingly, the Parties affirm that it is inappropriate for a Party to provide export subsidies for the export of an agricultural good to the territory of another Party when there are no other subsidized imports of that good into that other Party.
3. Except as provided in Annex 703.1, where an exporting Party considers that a non-Party is exporting an agricultural good into the territory of another Party with the benefit of export subsidies, the exporting Party may request consultations with the importing Party with a view toward agreeing on measures that the importing Party could adopt to counter the effect of such subsidized imports. If the importing Party adopts the agreed-upon measures, the exporting Party shall refrain from applying, or immediately cease to apply, any export subsidy to exports of such good into the territory of the importing Party.
4. Except as provided in Annex 703.1, a Party proposing to introduce an export subsidy on exports of an agricultural good to the territory of another Party shall notify such Party at least three days in advance, and shall upon request consult with such Party, within 72 hours of receipt of the request, with a view to eliminating the subsidy or minimizing any adverse impact on the importing Party's market for that good. Another Party may request to join such consultations.
5. Each Party shall take into account the interests of the other Parties in the use of any export subsidy on an agricultural good exported to a Party or non-Party, recognizing that such subsidies may have prejudicial effects on the interests of the other Parties.
6. The Parties shall establish a Working Group on Agricultural Subsidies which shall meet at least semi-annually, or at such other times as the Parties may agree, to work toward elimination of all export subsidies in connection with trade in agricultural goods between the Parties. The functions of the Working Group on Agricultural Subsidies shall include:
(a) monitoring the volume and price of imports of agricultural goods that have benefitted from export subsidies into the territory of any Party;
(b) providing a forum for the Parties to develop mutually acceptable criteria and procedures for reaching agreement on the limitation or elimination of the provision of export subsidies in connection with importation of agricultural goods into the territories of the Parties; and
(c) reporting annually to the Committee on Agricultural Trade, established under Article 708, with respect to implementation of this Article.
7. Notwithstanding any other provision of this Article:
(a) if the Parties agree to a particular export subsidy measure on an agricultural good for export to the territory of a Party, the exporting Party may adopt or maintain such measure; and
(b) each Party shall retain its rights to apply countervailing duties to subsidized imports from any source.
Article 707: Resolution of Private Commercial DisputesRegarding Transactions in Agricultural Goods
The advisory committee established pursuant to Article 2022(4) shall work toward a system for resolving private commercial disputes that arise in connection with transactions in agricultural goods. The system of each Party shall be designed to achieve prompt and effective resolution of such disputes with attention to special circumstances, including the perishability of the goods involved.
Article 708: Committee on Agricultural Trade
1. The Parties hereby establish a Committee on Agricultural Trade, comprising representatives of each Party.
2. The Committee's functions shall include:
(a) monitoring and promoting cooperation on the implementation and administration of this Subchapter;
(b) providing a forum for the Parties to consult at least semi-annually and at such other times as the Parties may agree on issues related to this Subchapter; and
(c) reporting annually to the Commission on the implementation of this Subchapter.
Article 709: Definitions
For purposes of this Subchapter:
agricultural goods means:
(i) HS Chapters 1 to 24 less fish and fish products, plus
(ii) HS Code 29.05.43 (manitol)HS Code 29.05.44 (sorbitol)HS Heading 33.01 (essentialoils)HS Headings 35.01 to 35.05 (albuminoidalsubstances, modifiedstarches, glues)HS Code 38.09.10 (finishing agents)HS Code 38.23.60 (sorbitol n.e.p.)HS Headings 41.01 to 41.03 (hides and skins)HS Heading 43.01 (raw furskins)HS Headings 50.01 to 50.03 (raw silk and silk waste)HS Headings 51.01 to 51.03 (wool and animal hair)HS Headings 52.01 to 52.03 (raw cotton, waste and cotton carded orcombed)HS Heading 53.01 (raw flax)HS Heading 53.02 (raw hemp);
fish and fish products for purposes of the definition of agricultural goods means fish or crustaceans, molluscs or other aquatic invertebrates, marine mammals, and their products within the following headings of the Harmonized System:
HS Heading 05.07 (tortoise-shell, whalebone and whalebone hair and those fish or crustaceans, molluscs or other aquatic invertebrates, marine mammals, and their products within this heading)
HS Heading 05.08 (all goods (coral and similar materials))HS Heading 05.09 (all goods (natural sponges of animal origin))HS Heading 05.11 (products of fish or crustaceans,molluscs or otheraquatic invertebrates; dead animals of Chapter 3)HS Heading 15.04 (all goods (fats and oils and their fractions, offish or marine mammals))HS Heading 16.03 ("non-meat" extracts and juices)HS Heading 16.04 (all goods (prepared or preserved fish))HS Heading 16.05 (all goods (prepared preserved crustaceans,molluscs and other aquatic invertebrates));
net production surplus means the quantity by which a Party's domestic production of sugar exceeds its total consumption of sugar for a marketing year;
net surplus producer means that a Party has been determined to have a net production surplus in accordance with Schedule 704.2(I)(B)(3);
plantation white sugar means crystalline sugar which has not been refined and is intended for human consumption without further processing or refining;
raw value means the equivalent of a quantity of sugar in terms of raw sugar testing 96 degrees by the polariscope, determined as follows:
(a) the raw value of plantation white sugar equals the number of kilograms thereof multiplied by 1.03;
(b) the raw value of liquid sugar and invert sugar equals the number of kilograms of the total sugars thereof multiplied by 1.07; and
(c) the raw value of other imported sugar and syrup goods equals the number of kilograms thereof multiplied by the greater of 0.93, or 1.07 less 0.0175 for each degree of polarization under 100 degrees (and fractions of a degree in proportion);
sugar means raw or refined sugar derived directly or indirectly from sugar cane or sugar beets, including liquid refined sugar; and
sugar and syrup goods means "sugar and syrup goods" as defined in Annex 709.
Incorporation of Trade Provisions
1. Articles 701.1, 701.2, 701.3, 701.5, 702, 704, 705, 706, 707, 708.1, 708.4 710 and 711 [subject to review] of the Canada - U.S. Free Trade Agreement shall apply to trade in "agricultural goods", as that term is defined in Article 711 of that Agreement, between Canada and the United States, which Articles are hereby incorporated into and made a part of this Agreement for such purpose.
2. For purposes of this incorporation, any reference to Chapter 18 of the Canada - U.S. Free Trade Agreement shall be deemed to be a reference to Chapter 20 of this Agreement.
International Coffee Agreement
Neither Canada nor Mexico shall take actions pursuant to any international coffee agreement and measures authorized thereunder to restrict trade in coffee between them.
Market Access
Each Party shall comply with Sections I and II.
Mexico and the United States
1. This Section shall apply only between the United States and Mexico.
2. Each Party shall comply with Appendices A and B.
Appendix A
Tariffs, Quantitative Restrictions and GATT Market Access
1. The Parties recognize that, upon the date of entry into force of the Agreement, each Party, in accordance with the rights and obligations set forth in Chapter 3, will not adopt or maintain measures regarding quantitative restrictions on the importation of agricultural goods originating in each other's territory, but may apply tariff quotas as set forth in its Schedule set out in Annex 302.2. The Parties further recognize that the over-quota tariff rate applied by a Party in connection with such tariff quotas will be progressively eliminated in the manner set forth in its Schedule set out in Annex 302.2.
2. Each Party agrees to waive its rights under Article XI.2(c) of the General Agreement on Tariffs and Trade with respect to any measure taken in connection with the importation of agricultural goods originating in the territory of the other.
3. Except as provided in paragraph 4, to the extent a tariff applied by a Party in accordance with a tariff quota as set forth in its Schedule set out in Annex 302.2 at any time exceeds the applicable bound rate of duty for that agricultural good as set forth in its GATT Schedule of Tariff Concessions as of June 12, 1991, the other Party hereby waives its rights with respect to the applicable bound rate of duty under GATT Article II, notwithstanding the provisions of Article 103 of this Agreement.
4. If the GATT Uruguay Round Agreement on Agriculture enters into force with respect to a Party, pursuant to which that Party has agreed to convert its quantitative restrictions into tariff quotas, that Party shall ensure that the over-quota tariff rates it applies to agricultural goods of the other Party are not greater than the lower of (a) the applicable over-quota tariff rates set out in its Schedule set out in Annex 302.2 or (b) the applicable over-quota tariff rates set out in its GATT Schedule of Tariff Concessions.
5. Market access afforded by a Party in accordance with its Schedule set out in Annex 302.2 and applied to imports of agricultural goods of another Party shall count, as between the Parties, toward the satisfaction of market access commitments which have been agreed upon under its GATT Schedule of Tariff Concessions or which may be undertaken by the importing Party as a result of any GATT agreement entering into force as to that Party during the applicable transition period under this Agreement.
6. Neither Party shall seek a voluntary restraint agreement from the other Party with respect to the exportation of meat originating in the territory of that other Party.
7. Notwithstanding the provisions of Chapter 3 (Market Access), goods of subheading 2008.11 of the Harmonized System (HS) that originate in the territory of Mexico shall be subject upon importation into the territory of the United States to the rate of duty provided in the Schedule set out in Annex 302.2 for the United States only if all agricultural goods within heading 12.02 of the HS used in the production of such goods originate in the territory of one or more of the Parties.
8. A good provided for in item 1806.10.a1 or 2106.90.a1 that is:
(a) imported into the territory of the United States fromthe territory of Mexico; or
(b) imported into the territory of Mexico from theterritory of the United States,
shall be eligible for the rate of duty provided in Annex 302.2 only if all agricultural materials provided for in subheading 1701.99 used in the production of such good are originating materials.
9. The United States shall not adopt or maintain, with respect to imports into its territory of agricultural goods originating in the territory of Mexico, any fee applied pursuant to Section 22 of the Agricultural Adjustment Act of 1933, or any successor statute.
10. Agricultural goods entered into maquiladoras or foreign- trade zones and re-exported, including subsequent to processing, shall not count toward the fulfillment of market access commitments under a Party's Schedule set out in Annex 302.2.
Appendix B