Free Trade Agreement Between The Government of Canada and The Government of The State of Israel

Preamble

THE GOVERNMENT OF CANADA (“Canada”) AND THE GOVERNMENT OF THE STATE OF ISRAEL (“Israel”), hereinafter referred to as “the Parties”, resolved to:

STRENGTHEN their economic relations and promote economic development;

REINFORCE the special bonds of friendship and cooperation between their peoples;

CONTRIBUTE to the harmonious development and expansion of world and regional trade and to provide a catalyst to broader international cooperation;

BUILD on their respective rights and obligations under the Marrakesh Agreement Establishing the World Trade Organization, done on 15 April 1994, and other multilateral agreements, bilateral agreements, or instruments of cooperation to which they are both parties;

CREATE an expanded and secure market for their goods and establish clear, transparent and mutually advantageous rules having due regard to fair conditions of competition in order to foster a predictable environment for their trade;

REDUCE obstacles to trade;

PROMOTE a predictable commercial framework for business planning;

ENHANCE the competitiveness of their firms in global markets;

SEEK TO SUPPORT the growth and development of small and medium-sized enterprises by enhancing their ability to participate in and benefit from the opportunities created by this Agreement;

UNDERTAKE each of the preceding in a manner that is consistent with the enhancement of environmental protection and conservation and sustainable development, the enforcement of environmental laws and regulations, and strengthened cooperation on environmental matters;

PROTECT AND ENFORCE basic workers’ rights, strengthen cooperation on labour matters and build on their respective international commitments on labour matters;

SEEK TO INCREASE women’s access to and benefit from the opportunities created by this Agreement by advancing cooperative activities and removing constraints to their full participation in their economies and international trade;

ENCOURAGE enterprises to respect, on a voluntary basis, corporate social responsibility standards and principles and pursue best practices;

PROMOTE broad-based economic development in order to reduce poverty and improve living standards; and

PRESERVE in a manner consistent with this Agreement their flexibility to safeguard the public welfare;

while also:

RECOGNISING that states have the right to preserve, develop and implement their cultural policies for the purpose of strengthening cultural diversity, given the essential role that cultural goods and services play in the identity and diversity of societies and the lives of individuals;

WISHING to create a framework for promoting investment and cooperation;

RECALLING the mutual interest of Israel and Canada in reinforcement of the multilateral trading system as reflected in the WTO;

RECALLING that the Parties entered into a Memorandum of Understanding on 27 September 1976 establishing a Joint Economic Commission, which was continued under a Memorandum of Understanding on Economic Cooperation entered into on 5 August 1993;

FURTHER RECALLING that this Agreement, which entered into force on 1 January 1997, established a free trade area consistent with Article XXIV of GATT 1994; and

DECLARING their readiness to explore other possibilities for extending their economic relations to other fields not covered by this Agreement;

HAVE AGREED as follows:

CHAPTER ONE
INITIAL PROVISIONS AND GENERAL DEFINITIONS

Section A – Initial Provisions

Article 1.1: Establishment of the Free Trade Area

The Parties to this Agreement, consistent with Article XXIV of the GATT 1994, hereby establish a free trade area.

Article 1.2: Objective

The objective of this Agreement, as elaborated more specifically in its provisions, is to eliminate obstacles to trade in, and facilitate the movement of, goods between the Parties, thereby to promote conditions of fair competition and increase substantially investment opportunities in the free trade area.

Article 1.3: Relation to Other Agreements

1. The Parties affirm their existing rights and obligations with respect to each other under the WTO Agreement and other agreements to which both Parties are party.


2. In the event of any inconsistency between this Agreement and the agreements referred to in paragraph 1, this Agreement prevails, except as otherwise provided in this Agreement.

Article 1.4: Extent of Obligations

The rights and obligations of the Parties relating to the observance of this Agreement by regional and local governments shall be governed by Article XXIV:12 of the GATT 1994.

Article 1.5: Relation to Environmental and Conservation Agreements

In the event of an inconsistency between an obligation of a Party under this Agreement and an obligation of that Party under an agreement listed in Annex 1.5, the latter obligation prevails provided that the measure taken is necessary to comply with that obligation and is not applied in a manner that would constitute, when the same conditions prevail, arbitrary or unjustifiable discrimination, or a disguised restriction on international trade.

Article 1.6: Reference to Other Agreements

1. When this Agreement refers to or incorporates by reference other agreements or legal instruments in whole or in part, those references include related footnotes, interpretative notes, and explanatory notes that are binding on both Parties.


2. When this Agreement incorporates by reference other agreements or international legal instruments in whole or in part, except when the reference affirms existing rights, this reference also includes, as the case may be, a successor agreement or subsequent agreement to which both Parties are party or an amendment binding on both Parties.

Section B – General Definitions

Article 1.7: Definitions of General Application

For the purposes of this Agreement, unless otherwise specified:

Agreement on Mutual Assistance in Customs Matters means the Agreement between the Government of Canada and the Government of the State of Israel on Mutual Assistance in Customs Matters, done at Ottawa on 11 December 2012;

Commission means the Joint Commission established under Article 18.1 (Joint Commission);

Coordinators means the Coordinators established under Article 18.2 (Coordinators);

Customs Valuation Agreement means the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994, contained in Annex 1A to the WTO Agreement;

day means calendar day;

enterprise means any entity constituted or organised under applicable law, whether or not for profit, and whether privately-owned or governmentally-owned, including a corporation, trust, partnership, sole proprietorship, joint venture, or other association;

GATS means the General Agreement on Trade in Services, contained in Annex 1B of the WTO Agreement;

GATT 1994 means the General Agreement on Tariffs and Trade 1994, contained in Annex 1A of the WTO Agreement;

good or goods of a Party means domestic products as these are understood in the GATT 1994, or any other good that the Parties may decide, and includes any originating good of a Party;

Harmonized System (“HS”) means the Harmonized Commodity Description and Coding System, including its General Rules of Interpretation, Section Notes, Chapter Notes, and subheading notes;

heading means a four-digit number, or the first four digits of a number, used in the nomenclature of the Harmonized System;

measure covers any measure whether in form of a law, regulation, rule, procedure, decision, administrative action, practice, or any other form;

New York Convention means the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on 10 June 1958;

originating means qualifying under the rules of origin set out in Chapter Three (Rules of Origin);

person means a natural person or an enterprise;

sanitary or phytosanitary measure means any measure referred in paragraph 1 of Annex A of the SPS Agreement;

SPS Agreement means the Agreement on the Application of Sanitary and Phytosanitary Measures, contained in Annex 1A to the WTO Agreement;

subheading means a six-digit number, or the first six digits of a number, used in the nomenclature of the Harmonized System;

tariff classification means the classification of a good or material under a chapter, heading or subheading of the Harmonized System;

tariff elimination schedule means Annex 2.1 (Tariff Elimination) and its Schedules;

telecommunications means the transmission and reception of signals by electromagnetic means;

territory means:

1.  for Canada,
   the territory to which its customs laws apply, including any areas beyond the territorial sea of Canada within which, in accordance with international law and its domestic law, Canada may exercise rights with respect to the seabed and subsoil and their natural resources;



2.  for Israel,
   the territory where its customs laws are applied;

TRIPS Agreement means the Agreement on Trade-Related Aspects of Intellectual Property Rights, contained in Annex 1C to the WTO Agreement; and

WTO Agreement means the Marrakesh Agreement Establishing the World Trade Organization, done on 15 April 1994.

ANNEX 1.5
MULTILATERAL ENVIRONMENTAL AGREEMENTS

The multilateral environmental agreements are:

1.  the Convention on International Trade in Endangered Species of Wild Fauna and Flora, done at Washington on 3 March 1973, as amended on 22 June 1979;


2.  the Montreal Protocol on Substances that Deplete the Ozone Layer, done at Montreal on 16 September 1987, as amended 29 June 1990, as amended 25 November 1992, as amended 17 September 1997, as amended 3 December 1999;


3.  the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, done at Basel on 22 March 1989; and


4.   the Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, done at Rotterdam on 10 September 1998.

CHAPTER TWO
TARIFF ELIMINATION AND RELATED MATTERS

Article 2.1: Tariff Elimination

1. Except as otherwise provided in this Agreement, a Party shall not increase any existing customs duty, or adopt any customs duty, or any charge of equivalent effect on an originating good.


2. Except as otherwise provided in this Agreement, each Party shall reduce or eliminate its customs duties on originating goods in accordance with Annex 2.1 and its Schedule to Annex 2.1 (“Schedule”).


3. A Party shall apply to originating goods that are subject to tariff preferences listed in its Schedule the lesser of the customs duties resulting from the rate calculated in accordance with its Schedule and its applied Most Favoured Nation rate.


4. At the request of either Party, the Parties shall consult to consider accelerating and broadening the scope of the elimination of customs duties on originating goods. A decision by the Parties in the Joint Commission to accelerate or broaden the scope of the elimination of a customs duty on an originating good shall supersede any duty rate or staging category determined pursuant to their Schedules for that good when approved by each Party in accordance with its applicable legal procedures.


5. For greater certainty, a Party may:


1. modify a tariff on a good for which no tariff preference is claimed under this Agreement;


2. raise a customs duty to the level established in its Schedule following a unilateral reduction; or


3. maintain or increase a customs duty as authorised by the Dispute Settlement Body established by Annex 2 of the WTO Agreement or as authorised by an Agreement under the WTO Agreement.

Article 2.2: Implementation and Administration of Tariff Rate Quotas

1. Each Party shall implement and administer the tariff rate quotas set out in its Schedule in accordance with Article XIII of the GATT 1994, including its Interpretative Notes, and the Agreement on Import Licensing Procedures, contained in Annex 1A to the WTO Agreement.


2. Upon the request of the exporting Party, the importing Party shall provide information regarding the administration of its tariff rate quotas to the exporting Party.

Article 2.3: Customs Duties: Repair and Alteration

1. A Party shall not apply a customs duty to a good, regardless of its origin, that re-enters its territory after that good has been exported from its territory to the territory of the other Party for repair or alteration, regardless of whether that repair or alteration could have been performed in its territory.


2. A Party shall not apply a customs duty to a good, regardless of its origin, imported temporarily from the territory of the other Party for repair or alteration.


3. Each Party shall comply with the requirements set out in Annex 2.3 to verify that the repair or alteration has been performed in the territory of one of the Parties.

Article 2.4: Definitions

For the purposes of this Chapter:

customs duty includes any customs or import duty and a charge of any kind imposed in connection with the importation of a good, including any form of surtax or surcharge in connection with such importation, but does not include any:

1. charge equivalent to an internal tax imposed consistent with Article III:2 of the GATT 1994, or any equivalent provision of a successor agreement to which both Parties are party, in respect of like, directly competitive or substitutable goods of the Party, or in respect of goods from which the imported good has been manufactured or produced in whole or in part;


2. antidumping or countervailing duty that is applied in accordance with the WTO Agreement, including the GATT 1994, pursuant to a Party’s law; and


3. fee or other charge in connection with importation commensurate with the cost of services rendered;

existing customs duty means the rate of duty applicable to imports from the other Party on the date of entry into force of this Agreement; and

repair or alteration does not include an operation or process that either destroys the essential characteristics of a good or creates a new or commercially different good. does not include an operation or process that either destroys the essential characteristics of a good or creates a new or commercially different good.

ANNEX 2.1
TARIFF ELIMINATION

1. The classification of goods by a Party shall be that set out in its tariff nomenclature in conformity with the Harmonized System.


2. Except as otherwise provided in this Agreement or in a Party’s Schedule, each Party shall eliminate, on the date of entry into force of this Agreement, all customs duties on originating goods, of Chapters 1 through 97 of the Harmonized System, that provide for a Most Favoured Nation rate of customs duty.


3. Customs duties on originating goods are excluded from tariff elimination by:


1. Canada if listed on Canada’s Schedule; and


2. Israel if listed on List A of Israel’s Schedule.


4. As provided for in List B of Israel’s Schedule, customs duties for originating goods from Canada shall be eliminated or reduced, as the case may be, in accordance with the specific provisions set out therein and subparagraphs (a) and (b) below:


1. customs duties for originating goods imported under a tariff rate quota established under this Agreement shall be eliminated on the date of entry into force of this Agreement, and the base rate of customs duties for originating goods imported in excess of the tariff rate quota annual volumes shall be reduced by the specified percentage if applicable; and


2. the base rate of customs duties for originating goods shall be reduced by the specified percentage upon the date of entry into force of this Agreement, or over a specified number of years beginning upon the date of entry into force of this Agreement.


5. Any quantity of originating goods imported from Canada under a tariff rate quota listed in List B of Israel’s Schedule shall not be counted towards, or reduce the quantity of, any tariff rate quota established by Israel outside of this Agreement.


6. For Year 1, Israel shall calculate the volume of each tariff rate quota listed in List B of its Schedule by discounting the volume corresponding to the period running between 1 January and the date of entry into force of this Agreement.


7. For the purposes of this Annex and Israel’s Schedule, Year 1 means the year this Agreement enters into force.


8. For the purposes of this Annex and Israel’s Schedule, Year 2 begins on 1 January following the date of entry into force of this Agreement, and each annual stage of tariff reduction shall take effect on 1 January of each subsequent year.


9. The base rate for determining the interim staged rate of customs duty for an item shall be the Most Favoured Nation duty rate applied on 1 October 2013, listed as the base rate in List B of Israel’s Schedule.


10. For the purpose of the elimination of customs duties in accordance with Article 2.1, interim staged rates shall be rounded down at least to the nearest tenth of a percentage point or, if the rate of duty is expressed in monetary units, at least to the nearest 0.001 of the official monetary unit of the Party.


11. The Parties concur that:


1. Canada’s Schedule is authentic in the English and French languages; and


2. Israel’s Schedule is authentic in the English and Hebrew languages.

SCHEDULES TO ANNEX 2.1

Canada’s Tariff Schedule

With respect to goods of Chapters 1 through 97 of the Harmonized System as at 1 January 2013 that provide for a Most Favoured Nation rate of customs duty and that are not listed in Canada’s Tariff Schedule, duties on these originating goods shall be eliminated entirely and these goods shall be duty-free on the date this Agreement enters into force. For greater certainty, Canada shall maintain the elimination of customs duties on originating goods provided for prior to the date of entry into force of this Agreement.

Pursuant to Article 2.1.2 and paragraph 3 of Annex 2.1, customs duties on originating goods listed in the following table are excluded from tariff elimination:

Israel’s Tariff Schedule

List A

Israel’s Tariff Schedule

List B

ANNEX 2.3
REQUIREMENTS CONCERNING VERIFICATION OF REPAIRS OR ALTERATIONS

Upon re-importation into the territory of a Party of a good that has been exported to the territory of the other Party for repair or alteration, an importer must submit:

1. an invoice or a written statement from the person who performed the repair or alteration, setting out a detailed description of and the value of the repair or alteration; and
2. proof of exportation of the good to the territory of the other Party.

CHAPTER THREE
RULES OF ORIGIN

Article 3.1: General Requirements

1. For the purposes of this Agreement, a good originates in a Party if, in the territory of one or both of the Parties, it:


1. has been wholly obtained or produced as defined in Article 3.3;


2. has been produced exclusively from originating materials; or


3. has undergone sufficient production as defined in Article 3.4.


2. Except as provided in Articles 3.2.2 and 3.2.3, the conditions for acquiring originating status set out in this Chapter must be fulfilled without interruption in the territory of one or both of the Parties.

Article 3.2: Cumulation

1. For the purposes of determining the originating status of a good:


1. a good that originates in the territory of one or both of the Parties is considered as originating in the territory of either Party;


2. an exporter may take into account production carried out on a non-originating material in the other Party.


2. Subject to paragraph 3, if each Party has a free trade agreement that establishes or 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 the purposes of determining whether a good is originating under this Agreement.


3. A Party shall give effect to paragraph 2 upon agreement by the Parties on the applicable conditions.

Article 3.3: Wholly Obtained or Produced Goods

For the purposes of Article 3.1, the following goods shall be considered as wholly obtained or produced entirely in the territory of one or both of the Parties:

1. a mineral or other non-living natural resource good extracted or taken from the territory of one or both of the Parties;


2. a vegetable, a plant or other good harvested or gathered in the territory of one or both of the Parties;


3. a live animal born and raised in the territory of one or both of the Parties;


4. a good obtained from a live animal in the territory of one or both of the Parties;


5. a good obtained from hunting, trapping, fishing or aquaculture conducted in the territory of one or both of the Parties;



6. fish, shellfish or other marine life taken from the sea by a vessel registered, recorded or listed with a Party and flying its flag;


7. a good produced on board a factory vessel from a good referred to in subparagraph (f), provided such a factory vessel is registered, recorded or listed with that Party and flying its flag;


8. a good, other than fish, shellfish or other marine life, taken by a Party or a person of a Party from the seabed or beneath the seabed beyond territorial waters, provided that the Party or person of the Party has rights to exploit that seabed;


9. a good taken from outer space, provided that the good is obtained by a Party or a person of a Party and does not undergo production outside the territory of either Party;


10. waste and scrap derived from:


1. production in the territory of one or both of the Parties, or


2. a used good collected in the territory of one or both of the Parties, provided such a good is fit only for the recovery of raw material;
11. a recovered material collected for use in the production of a remanufactured good in the territory of one or both of the Parties; and


12. a good produced in the territory of one or both of the Parties exclusively from goods referred to in subparagraphs (a) through (k), or from their derivatives, at any stage of production.

Article 3.4: Sufficient Production

1. Subject to Article 3.6, for the purposes of Article 3.1, a good that is not wholly obtained or produced exclusively from originating materials is considered to have undergone sufficient production when the conditions set out in Annex 3.4 are fulfilled.


2. 2. Except for a good of Chapters 61 through 63 of the Harmonized System, a good that does not satisfy the requirements of Annex 3.4 because both the good and the non-originating materials provided for as parts under the Harmonized System that are used in its production are classified in the same subheading, or heading that is not further subdivided into subheadings, is considered to have undergone sufficient production, provided that:


1. it is produced entirely in the territory of one or both of the Parties;


2. the value of the non-originating materials provided for as parts classified in that subheading, or heading that is not further subdivided into subheadings, does not exceed 65 percent of the transaction value of the good; and


3. the good satisfies all other applicable requirements of this Chapter.


3. 3. If a non-originating material undergoes sufficient production, the resulting good is considered as originating and no account shall be taken of the non-originating material contained therein when that good is used in the subsequent production of another good.

Article 3.5: De Minimis Rule for Originating Goods

1. Notwithstanding Article 3.4.1, and except as provided in paragraph 2, a good originates in the territory of a Party if the value of the non-originating materials used in its production that do not undergo an applicable change in tariff classification, as set out in the rule for the good in Annex 3.4, is not more than 10 percent of the transaction value of the good, provided that the good satisfies all other applicable requirements of this Chapter.


2. Paragraph 1 does not apply to a non-originating material provided for in Chapters 50 through 63 of the Harmonized System that is used in the production of a good provided for in Chapters 50 through 63 of the Harmonized System.

Article 3.6: Minor Processing Operations

The following operations are considered minor processing and are insufficient to confer the status of an originating good, whether or not the requirements of Article 3.4 are satisfied:

1. mere dilution with water or any other substance that does not materially alter the characteristics of the good;


2. cleaning, including removal of rust, grease, paint or any other coating;


3. applying any preservative or decorative coating, including any lubricant, protective encapsulation, preservative or decorative paint, or metallic coating;


4. trimming, filing or cutting off small amounts of excess material;


5. packing, repacking, labelling or relabeling of the good for transport, storage or sale; and


6. repairs or alterations, washing, laundering or sterilising.

Article 3.7: Fungible Goods and Materials

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


1. if originating materials and non-originating materials that are fungible materials are used in the production of the good, the determination of whether the materials are originating materials may, at the choice of the producer of the good, be made in accordance with an inventory management method recognised in, or otherwise accepted by, the Generally Accepted Accounting Principles of the Party in which the production takes place; and


2. if originating goods and non-originating goods that are fungible goods are physically combined or mixed in inventory in the territory of a Party and exported in the same form to the other Party, the determination of whether the good is an originating good may, at the choice of the exporter of the good, be made in accordance with an inventory management method recognised in, or otherwise accepted by, the Generally Accepted Accounting Principles of the Party from which the good is exported.


2. The inventory management method must be able to ensure that the number of goods that are considered as originating is the same as that which would have been the case if the fungible materials or fungible goods had been physically segregated.

Article 3.8: Neutral Elements

In order to determine whether a good is originating, it shall not be necessary to determine the origin of the following:

1. fuel and energy;


2. tools, dies and moulds;


3. spare parts and materials used in the maintenance of equipment and buildings;


4. lubricants, greases, compounding materials and other materials used in production or used to operate equipment and buildings;


5. gloves, glasses, footwear, clothing, safety equipment and supplies;


6. equipment, devices and supplies used for testing or inspecting other goods;


7. catalysts and solvents; and


8. any other goods that are not incorporated into the good but the use of which in the production of the good can reasonably be demonstrated to be part of that production.

Article 3.9: Unit of Qualification

For the purposes of this Chapter:

1. the tariff classification of a particular good or material shall be determined according to the Harmonized System;


2. if a good composed of a group or assembly of articles or components is classified pursuant to the terms of the Harmonized System under a single tariff provision, the whole shall constitute the particular good; and


3. if a shipment consists of a number of identical goods classified under the same tariff provision of the Harmonized System, each good shall be considered separately.

Article 3.10: Accessories, Spare Parts and Tools, Packaging and Packing Materials and Containers

For the purposes of determining whether a good is an originating good, the following materials shall be deemed to be originating materials without regard to where the materials are produced:

1. accessories, spare parts or tools delivered with the good that form part of the good's standard accessories, spare parts or tools, provided that the accessories, spare parts or tools are not invoiced separately from the good and the quantities and value of the accessories, spare parts or tools are customary for the good;


2. packaging materials and containers in which the good is packaged for retail sale, provided that the packaging materials and containers are classified under the Harmonized System with the good that is packaged within; and


3. packing materials and containers in which the good is packed for shipment.

Article 3.11: Returned Originating Goods

1. If an originating good exported from Israel or from Canada to a non-Party is returned to the exporting Party, it shall be considered as non-originating, unless it can be demonstrated to the satisfaction of the customs authorities that:


1. the returning good is the same as that exported; and


2. it has not undergone any operation beyond that necessary to preserve it in good condition while in that non-Party or while being exported.


2. The Parties shall, no later than five years after the date of entry into force of this Agreement, explore whether and under what conditions an originating good that undergoes further production in the territory of a non-Party and is returned to the territory of a Party may retain its originating status.

Article 3.12: Direct Shipment and Shipment Through a Non-Party

1. Except as provided in paragraph 2, an originating good that is exported from the territory of a Party shall maintain its originating status only if:


1. the good is shipped directly from the territory of one Party to the territory of the other Party;


2. the good is shipped through the territory of a non-Party, provided that


1. the good does not undergo further production or any other operation in the territory of that non-Party, other than unloading, splitting up of loads, reloading or any other operation necessary to preserve it in good condition or to transport the good to the territory of a Party, and


2. the good remains under customs control in the territory of any non-Party through which the good is transported to the territory of a Party; or


3. subject to Article 5.12.4 (Working Group on Rules of Origin and Other Customs-Related Market Access Issues) and except for a good listed in Chapters 50 through 63, the good is shipped through the territory of a non-Party with which each Party has entered separately into a free trade agreement as specified in Annex 3.12, and:


1. does not undergo further production other than minor processing in the territory of that non-Party, or


2. production that occurs in the territory of that non-Party with respect to that good does not increase the transaction value of the good by more than 10 percent.


4. Subject to Article 5.12.5 (Working Group on Rules of Origin and Other Customs-Related Market Access Issues), the Parties may decide to identify an originating good that, if shipped through the territory of a non-Party specified in Annex 3.12, may undergo more than minor processing in the territory of that non-Party if the good meets conditions determined by the Partiesregarding the production of that good in the territory of that non-Party.

Article 3.13: Non-Party Materials for Originating Goods

If each Party has entered separately into a free trade agreement under Article XXIV of the GATT 1994 with the same non-Party ¹ before 1 January 1997, a good which, if imported into the territory of one of the Parties under such free trade agreement with that non-Party, would qualify for tariff preferences under the agreement, is considered to be an originating good under this Chapter when imported into the territory of the other Party and used as a material in the production of another good in the territory of that other Party.

Article 3.14: Definitions

For the purposes of this Chapter:

alteration means a modification, other than a repair, that does not include an operation or process that either destroys the essential characteristics of a good or creates a new or commercially different good;

aquaculture means the farming of aquatic organisms, including fish, molluscs, crustaceans, other aquatic invertebrates and aquatic plants, from originating or non-originating seedstock such as eggs, fry, fingerlings and larvae, by intervening in the rearing or growth processes to enhance production;

fungible goods or materials means goods or materials that are interchangeable for commercial purposes with other goods or materials, as the case may be, and the properties of which are essentially identical;

Generally Accepted Accounting Principles means the principles 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 means the result of production, including any material used in the production of another good;

material means any ingredient, raw material, component, part, or other good that is used in the production of a good;

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

producer means a person who carries out any kind of manufacturing or processing, including such operations as growing, mining, raising, harvesting, fishing, trapping, hunting, assembling or disassembling a good;

production means any kind of manufacturing or processing, including such operations as growing, mining, raising, harvesting, fishing, trapping, hunting, assembling or disassembling a good;

recovered material means a material that is the result of the disassembly of a used good fit only for such recovery;

remanufactured good means a good that:

1. is entirely or partially comprised of recovered material that has undergone processing, cleaning, inspecting or other processes for improvement to working condition; and


2. performs the same as or similar to a like new good;

repair means the adjustment of a machine, instrument, electrical device or other article, including replacing or refitting parts to restore the article to its original operating condition;

transaction value of the good means the price paid or payable to the producer of the good at the place where the last production was carried out, and shall include the value of all materials, whether such materials are sourced directly or indirectly. If there is no price paid or payable or if the price paid or payable does not include the value of all materials, the transaction value of the good:

1. shall include the value of all materials and the cost of production employed in producing the good, calculated in accordance with Generally Accepted Accounting Principles; and


2. may include amounts for general expenses and profit to the producer that can be reasonably allocated to the good.

Any internal taxes which are, or may be, repaid when the good obtained is exported shall be excluded. If the transaction value of the good includes costs incurred subsequent to the good leaving the place of production, such as costs for transportation, loading, unloading, handling or insurance, those costs shall  be excluded; and

value of non-originating material means the customs value of the material at the time of its importation into the territory of a Party, as determined in accordance with the Customs Valuation Agreement. The value of the non-originating material shall include any costs incurred in transporting the material to the place of importation, such as transportation, loading, unloading, handling or insurance. If the customs value is not known or cannot be ascertained, the value of the non-originating material shall be the first ascertainable price paid for the material in Canada or in Israel.

ANNEX 3.4
PRODUCT SPECIFIC RULES OF ORIGIN

Section A – General Interpretative Notes

1. For the purposes of interpreting the rules of origin set out in this Annex:


1. the specific rule of origin, or specific set of rules of origin, that applies to a particular heading, subheading or group of headings or subheadings is set out immediately adjacent to that heading, subheading or group of headings or subheadings;


2. a requirement of a change in tariff classification or any other condition set out in a specific rule of origin applies only to non-originating materials;


3. the expression “a change from any other heading” or “a change from any other subheading” means a change from any other heading (or subheading) of the Harmonized System, including, where applicable, any other heading (or subheading) within the group of headings (or subheadings) to which the rule of origin is applicable;


4. the expression “a change from any heading outside this group” or “a change from any subheading outside this group” means a change from any other heading (or subheading) of the Harmonized System, except from any other heading (or subheading) within the group of headings (or subheadings) to which the rule is applicable;


5. the expressions “a change from within this heading”, “a change from within this subheading”, “a change from within any one of these headings”, and “a change from within any one of these subheadings” mean a change from any other good or material of that same heading or subheading of the Harmonized System;


6. the expression “no change in tariff classification required” means that production may include any material, including material classified in the same subheading as the final good, material classified in any other subheading within the same heading as the final good, or material classified in any other heading or chapter;


7. the expression “provided that the value of the non-originating materials of [tariff provision] does not exceed [x] percent of the transaction value of the good” means that only the value of the non-originating materials of the tariff provision specified in the rule of origin is considered when calculating the value of non-originating materials. The percentage for the maximum value of non-originating materials specified in the rule of origin may not be exceeded through the use of Article 3.5 (De Minimis Rule for Originating Goods);


8. the expression “provided that the value of the non-originating materials classified in the same [tariff provision] as the final good does not exceed [x] percent of the transaction value of the good” means that only the value of the non-originating materials classified in the same [tariff provision] as the final good, as specified in the rule of origin, is considered when calculating the value of non-originating material. The percentage for the maximum value of non-originating materials specified in the rule of origin may not be exceeded through the use of Article 3.5 (De Minimis Rule for Originating Goods); and


9. the expression “provided that the value of the non-originating materials does not exceed [x] percent of the transaction value of the good” means that all non-originating materials are considered when calculating the value of non-originating materials. The percentage for the maximum value of non-originating materials specified in the rule of origin may not be exceeded through the use of Article 3.5 (De Minimis Rule for Originating Goods).


2. A product specific rule of origin set out in this Annex represents the minimum amount of production required to be carried out on non-originating materials for the resulting good to achieve originating status. A greater amount of production than that required by the rule of origin for that good shall also confer originating status.


3. The product specific rules of origin set out in this Annex also apply to used goods.


4. For the purposes of this Annex:

chapter means a chapter of the Harmonized System;

heading means any four-digit number, or the first four digits of any number, used in the Harmonized System;

section means a section of the Harmonized System;

subheading means any six-digit number, or the first six digits of any number, used in the Harmonized System; and

tariff provision means a chapter, heading or subheading of the Harmonized System.

Section B – Product Specific Rules of Origin

ANNEX 3.12
SPECIFIED NON-PARTIES UNDER PARAGRAPHS 1(C)
AND 2 OF ARTICLE 3.12

1. Paragraphs 1(c) and 2 of Article 3.12 shall only apply to the following non-Parties with which each Party has entered separately into a free trade agreement:
1. the Member States of the European Free Trade Association;


2. the Member States of the European Union ²;


3. the Hashemite Kingdom of Jordan;


4. Mexico;


5. the United States of America.
2. Upon agreement by the Parties, the list of non-Parties in paragraph 1 may be revised to include other non-Parties with which each Party has entered separately into a free trade agreement.

CHAPTER FOUR
NATIONAL TREATMENT AND MARKET ACCESS FOR GOODS

Section A – National Treatment

Article 4.1: National Treatment

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


2. Paragraph 1 does not apply to the measures set out in Annex 4.1.

Section B – Non-Tariff Measures

Article 4.2: Import and Export Restrictions

1. Except as otherwise provided in this Agreement, a Party shall not adopt or maintain any prohibition or restriction on the importation of any good of the other Party, or on the exportation or sale for export of any good destined for the territory of the other Party, except in accordance with Article XI of GATT 1994, which is incorporated into and made a part of this Agreement.


2. The Parties reaffirm that the GATT 1994 rights and obligations incorporated into and made part of this Agreement by paragraph 1 prohibit export price requirements in any circumstances in which any other form of restriction is prohibited and import price requirements except as permitted in enforcement of countervailing and antidumping orders and undertakings,.


3. If a Party adopts or maintains a prohibition or restriction on the importation from, or exportation to, a non-Party of a good, this Agreement does not prevent that Party from:


1. limiting or prohibiting the importation from the territory of the other Party of a good of that non-Party; or


2. requiring, as a condition of export of a good of that Party to the territory of the other Party, that the good not be re-exported to the non-Party, directly or indirectly, without being consumed in the territory of the other Party.


4. If  a Party adopts or maintains a prohibition or restriction on the importation of a good from a non-Party, on request of the other Party, the Parties shall consult with a view to avoiding undue interference with, or distortion of, pricing, marketing, and distribution arrangements in the other Party.


5. Paragraphs 1 through 4 shall not apply to the measures set out in Annex 4.1.

Article 4.3: Customs User Fees and Similar Charges

1. A Party shall not adopt or maintain a fee or charge on, or in connection with, the importation of a good of the other Party, except in accordance with Article VIII of the GATT 1994, which is incorporated into this Agreement.


2. Paragraph 1 does not prevent a Party from imposing a customs duty or a charge set out in subparagraphs (a) or (b) of the definition of “customs duty” in Article 2.4 (Definitions).

Article 4.4: Distilled Spirits

A Party shall not adopt or maintain a measure requiring that distilled spirits imported from the territory of the other Party for bottling be blended with distilled spirits of the Party.

Article 4.5: Customs Valuation

The Customs Valuation Agreement governs the customs valuation rules applied by the Parties to their bilateral trade.

Article 4.6: Global Emergency Actions

1. The Parties retain their rights and obligations under Article XIX of the GATT 1994 or any safeguard agreement pursuant thereto, except those regarding compensation or retaliation and exclusion from an emergency action to the extent that these rights or obligations are inconsistent with this Article. A Party taking emergency action under Article XIX of the GATT 1994 or any  safeguard agreement pursuant thereto shall exclude from the action imports of a good from the other Party unless:


1. imports from the other Party account for a substantial share of total imports; and
2. imports from the other Party, contribute importantly to the serious injury, or threat thereof, caused by imports.


2. In determining whether:


1. imports from the other Party account for a substantial share of total imports, those imports normally shall not be considered to account for a substantial share of total imports if the other Party is not among the top five suppliers of the good subject to the proceeding, measured in terms of import share during the most recent three-year period; and


2. imports from the other Party contribute importantly to the serious injury, or threat thereof, the competent investigating authority shall consider such factors as the change in the import share of the other Party, and the level and change in the level of imports from the other Party. In this regard, imports from the other Party normally shall not be deemed to contribute importantly to a serious injury or threat thereof, if the growth rate of imports from the other Party during the period in which the injurious surge in imports occurred is appreciably lower than the growth rate of total imports from all sources over the same period.


3. A Party taking an emergency action excluding a good from the other Party pursuant to paragraph 1, shall have the right to include that good subsequently in that action in the event that the competent investigating authority determines that a surge in imports of that good from the other Party undermines the effectiveness of the action.


4. A Party shall, without delay, deliver to the other Party a written notice of the institution of a proceeding that may result in an emergency action pursuant to paragraph 1 or 3.


5. A Party shall not impose restrictions on a good in an emergency action pursuant to paragraph 1 or 3:


1. without delivery of prior written notice to the Commission, and without adequate opportunity for consultation with the other Party against whose good the action is proposed to be taken, as far in advance of taking the action as practicable; and


2. that would have the effect of reducing imports of the good from the other Party below the trend of imports of the good from that other Party over a recent representative base period with allowance for reasonable growth.


6. A Party taking an emergency action pursuant to paragraph 1 or 3 may provide to the Party against whose good the action is taken a mutually agreed trade liberalising compensation in the form of concessions having substantially equivalent trade effects or equivalent to the value of the additional duties expected to result from the action. If the Parties are unable to agree on compensation, the Party against whose good the action is taken may take action having trade effects substantially equivalent to the action taken pursuant to paragraph 1 or 3.

Article 4.7: Export Taxes

1. A Party shall not adopt or maintain a duty, tax or other charge on the export of any good to the territory of the other Party, unless the duty, tax or other charge is adopted or maintained on the good when destined for domestic consumption.


2. Paragraph 1 does not apply to the measures set out in Annex 4.1.

Section C – Committee on Trade in Goods

Article 4.8: Committee on Trade in Goods

1. The Parties hereby establish a Committee on Trade in Goods (“Committee”) composed of relevant representatives of each Party.


2. The Committee shall meet at the request of a Party or the Commission to consider any matter arising under this Chapter, Chapter Two (Tariff Elimination and Related Matters), and any matter referred to the Committee pursuant to paragraph 4 of Article 8.8 (Contact Points and Committee on Trade in Goods) of Chapter Eight (Technical Barriers to Trade) or Article 7.8 (Oversight Body) of Chapter Seven (Sanitary and Phytosanitary Measures).


3. The Committee’s functions shall include ¹:


1. promoting trade in goods between the Parties, including through consultations on accelerating tariff elimination under this Agreement and other issues as appropriate;


2. promptly addressing matters that affect trade in goods between the Parties, including those related to the application of non-tariff measures, and referring such matters to the Commission for its consideration;


3. recommending to the Commission a modification of or addition to the Chapters referred to in paragraph 2, or any other provision of this Agreement related to the Harmonized System; and


4. considering any other matter referred to it by a Party relating to the implementation and administration by the Parties of any provision set out in the Chapters referred to in paragraph 2.


4. The Parties hereby establish a Sub-Committee on Trade in Agricultural Goods composed of relevant representatives of each Party that:


1. shall meet at the request of a Party as soon as possible for perishable goods and within 90 days for other agricultural goods;


2. shall provide a forum for the Parties to discuss issues covered by this Agreement related to agricultural goods covered by this Agreement ²;


3. shall refer to the Committee any matter under sub-paragraph (b) on which it has been unable to reach agreement; and


4. shall report to the Committee for its consideration any agreement reached under this paragraph.

For the purposes of this paragraph, “agricultural good” means a product listed in Annex 1 of the Agreement on Agriculture, contained in Annex 1A to the WTO Agreement.

5. At the request of a Party, the Parties shall convene a meeting of their relevant officials to address issues related to the movement of goods through a Party’s ports of entry.
6. The Parties may decide to hold any of the meetings referred to in this Article in person or by using any means available.

ANNEX 4.1
EXCEPTIONS TO ARTICLES 4.1 (NATIONAL TREATMENT),
4.2 (IMPORT AND EXPORT RESTRICTIONS) AND 4.7 (EXPORT TAXES)

Section A – Canadian Measures

Articles 4.1 (National Treatment), 4.2 (Import and Export Restrictions) and 4.7 (Export Taxes) do not apply to:

1. a measure, including that measure’s continuation, prompt renewal or amendment, in respect of the following:
   
   
   
   1. the export of logs of all species,
   
   
   2. the export of unprocessed fish pursuant to applicable provincial legislation,
   
   
   3. the importation of goods of the prohibited provisions of tariff lines 9897.00.00, 9898.00.00 and 9899.00.00 referred to in the Schedule of the Customs Tariff  (S.C. 1997, c. 36), as amended,
   
   
   4. Canadian excise duties on absolute alcohol, as listed under tariff item 2207.10.90 in Canada’s Schedule of Concessions annexed to the Marrakesh Protocol to the GATT 1994 (Schedule V), used in manufacturing under the provisions of the  Excise Act, 2001, 2002, c. 22, as amended,
   
   
   5. the use of ships in the coasting trade of Canada, or
   
   
   6. the internal sale and distribution of wine and distilled spirits; and


2. an action authorised by the Dispute Settlement Body of the WTO in a dispute between the Parties under the WTO Agreement.

Section B - Israeli Measures

Articles 4.1 (National Treatment), 4.2 (Import and Export Restrictions) and 4.7 (Export Taxes) do not apply to:

1. a measure, including that measure’s continuation, prompt renewal or amendment, in respect of the following:
   
   1. controls and charges maintained by Israel on the export of metal waste and scrap; or
   
   
   2. subject to Israeli law, imports of non-kosher meat; and


2. an action authorized by the Dispute Settlement Body of the WTO in a dispute between the Parties under the WTO Agreement.

CHAPTER FIVE
CUSTOMS PROCEDURES

Section A – Certification of Origin

Article 5.1: Certificate of Origin

1. The Parties shall establish a Certificate of Origin for the purpose of certifying that a good being exported from the territory of a Party into the territory of the other Party qualifies as an originating good, and may thereafter revise the Certificate by mutual consent.


2. Each Party may require that a Certificate of Origin for a good imported into its territory be completed at the option of the exporter in an official language of either Party.


3. Each Party shall:
   
   
   1. require that, for a Certificate of Origin to be considered valid by the Party into whose territory a good is imported with respect to which a claim for preferential tariff treatment is made, the Certificate of Origin be completed and signed by the exporter of that good in the territory of the Party from which the good is exported; and
   
   
   2. provide that, where an exporter in its territory is not the producer of the good, the exporter may complete and sign a Certificate of Origin on the basis of:
   
   
   1. its knowledge of whether the good qualifies as an originating good, or
   
   
   2. its reasonable reliance on the producer’s written representation that the good qualifies as an originating good.
   
   
4. Each Party shall provide that a Certificate of Origin that has been completed and signed by an exporter in the territory of the other Party may, at the option of that exporter, be applicable to:


1. a single importation of a good into the Party’s territory; or


2. multiple importations of identical goods into the Party’s territory that occur within a specified period, not exceeding 12 months, set out therein by the exporter.

Article 5.2: Obligations Regarding Importations

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


1. make a written declaration, based on a valid Certificate of Origin, that the good qualifies as an originating good;


2. have the Certificate of Origin in its possession at the time the declaration is made;


3. provide, at the request of that Party’s customs administration:


1. a copy of the Certificate of Origin,


2. documentary evidence such as bills of lading or waybills that indicate the shipping route and all points of shipment and transhipment prior to the importation of the good into its territory, and


3. when the good is shipped through or transhipped in the territory of a non-Party referred to in Article 3.12.1(b) (Direct Shipment and Shipment Through a Non-Party), a copy of the customs control documents that indicate, to the satisfaction of the customs administration, that the good remained under customs control while in the territory of  that non-Party; and


4. promptly make a corrected declaration and pay any duties owing where the importer has reason to believe that a Certificate of Origin on which a declaration was based contains information that is not correct.


2. Each Party shall provide that, where an importer in its territory claims preferential tariff treatment for a good imported into its territory from the territory of the other Party, the Party may deny preferential tariff treatment to the good if the importer fails to comply with any requirement under this Chapter.


3. Each Party shall provide that, where a good would have qualified as an originating good when it was imported into the territory of that Party but the importer of the good did not have a valid Certificate of Origin for the good at the time of its importation, the importer of the good may, within a period of not less than three months after the date on which the good was imported, apply for a refund of any excess duties paid as the result of the good not having been accorded preferential tariff treatment, provided that the importer:


1. if required by that Party, declared at the time of importation of the good that the good would qualify as an originating good; and


2. presents:
   
   1. a written declaration that the good qualified as an originating good at the time of importation,
   
   
   2. a copy of the Certificate of Origin, and
   
   
   3. any other documentation relating to the importation of the good as that Party may require.

Article 5.3: Obligations Regarding Exportations

1. Each Party shall provide that:
   1. at the request of its customs administration, an exporter in its territory shall provide a copy of the Certificate of Origin to that customs administration; and
   
   
   2. an exporter in its territory that has completed and signed a Certificate of Origin, and that has reason to believe that the Certificate of Origin contains information that is not correct, must promptly notify in writing all persons to whom the Certificate of Origin was given by the exporter of any change that could affect the accuracy or validity of the Certificate of Origin.
   
   
2. Each Party:


1. shall provide that a false certification by an exporter in its territory that a good to be exported to the territory of the other Party qualifies as an originating good shall have the same legal consequences, with appropriate modifications, as would apply to an importer in its territory for a contravention of its customs laws regarding the making of a false statement or representation; and


2. may apply measures warranted by the circumstances if an exporter in its territory fails to comply with any requirement of this Chapter.

Article 5.4: Exceptions

Each Party shall provide that a Certificate of Origin shall not be required for:

1. a commercial importation of a good whose value does not exceed Can$1,600 or its equivalent amount in New Israeli Shekels (NIS) or such higher amount as it may establish, except that it may require that the invoice accompanying the importation include a statement by the exporter of the good certifying that the good qualifies as an originating good; or


2. an importation of a good for which the Party into whose territory the good is imported has waived the requirement for a Certificate of Origin;

provided that the importation does not form part of a series of importations that may reasonably be considered to have been undertaken or arranged for the purpose of avoiding the certification requirements of this Chapter.

Section B – Administration and Enforcement

Article 5.5: Records

Each Party shall provide that:

1. an exporter in its territory that completes and signs a Certificate of Origin must maintain in its territory, for five years after the date on which the Certificate of Origin was signed or for a longer period the Party may specify, all records relating to the origin of a good for which preferential tariff treatment was claimed in the territory of the other Party, including records associated with:


1. the purchase of, cost of, value of, and payment for, the good that is exported from its territory,


2. the sourcing of, purchase of, cost of, value of, and payment for, materials, including neutral elements, used in the production of the good that is exported from its territory, and


3. the production of the good in the form in which the good is exported from its territory; and


2. an importer claiming preferential tariff treatment for a good imported into the Party’s territory must maintain in that territory, for five years after the date of importation of the good or for a longer period the Party may specify, any documentation, including a copy of the Certificate of Origin, the Party may require relating to the importation of the good.

Article 5.6: Origin Verifications

1. For the purposes of determining whether a good imported into its territory from the territory of the other Party qualifies as an originating good, a Party may, through its customs administration, conduct a verification of origin, subject to paragraph 2, by means of:
1. written questionnaires to an exporter or a producer in the territory of the other Party for the purposes of obtaining the information on the basis of which a Certificate of Origin referred to in Article 5.1 was completed and signed;


2. visits to the premises of an exporter or a producer in the territory of the other Party for the purposes of reviewing the records referred to in Article 5.5 and to observe the facilities used in the production of the good; or


3. other procedures as the Parties may decide.


2. Notwithstanding any other treaties, agreements or memorandums of understanding between the Parties as contemplated under Article 5.11.3, if, pursuant to paragraph 10, a Party notifies the other Party that the origin verification referred to in paragraph 1 is required to be conducted by its customs administration on behalf of the other Party, such verification shall be conducted, subject to the procedures, conditions and time frames set out in Annex 5.6, in accordance with the verification standards and framework established under Article 5.11.


3. Prior to conducting a verification visit referred to in subparagraph 1(b), the customs administration of the Party proposing to conduct the visit or, if the circumstances contemplated under paragraph 2 exist, the customs administration of the Party acting on behalf of the other Party, as the case may be, shall deliver a written notification of the intention to conduct a visit at least 30 days in advance of the  date of the proposed visit to the exporter or producer whose premises are to be visited and obtain the written consent of that exporter or producer to such visit.


4. The notification referred to in paragraph 3 must include:
1. the identity of the customs administration issuing the notification and, where the circumstances referred to under paragraph 2 exist, the identity of the customs administration on whose behalf the notification is being sent;


2. the name of the exporter or producer whose premises are to be visited;


3. the date and place of the proposed verification visit;


4. the object and scope of the proposed verification visit, including specific reference to the good that is the subject of the verification;


5. the names and titles of the officials performing the verification visit; and


6. the legal authority for the verification visit.


5. If an origin verification referred to under paragraph 1 is to be conducted by the customs administration of the Party into whose territory a good was imported, the customs administration of that Party shall:


1. in the case of a written questionnaire, deliver a copy of the questionnaire; or


2. in the case of a verification visit, not less than 30 days prior to conducting the visit, deliver a copy of the written notification referred to in paragraph 3;

to the customs administration of the Party from whose territory the good was exported.



6. If an exporter or producer does not respond to a written questionnaire or does not give its written consent to a proposed verification visit within 30 days of delivery to the exporter or producer of the questionnaire or of the notification referred to in paragraph 3, as the case may be, or fails to provide sufficient information in response to a questionnaire or denies access to the records referred to in Article 5.5 during the conduct of a visit, the Party into whose territory the good was imported may deny preferential tariff treatment to the good that was the subject of the origin verification.


7. Each Party shall provide that, if its customs administration receives notification, pursuant  to paragraph 5, from the customs administration of the other Party or is contacted to conduct a verification visit on behalf of that other Party, pursuant to Annex 5.6, it may, within 15 days of receipt of the notification or from the date of contact, as the case may be, postpone the proposed verification visit for a period not exceeding 60 days from the date of such receipt or contact, or for such longer period as the Parties may agree.


8. Each Party shall provide that, if its customs administration conducts a verification visit pursuant to subparagraph 1(b) or if a verification visit is required to be conducted on its behalf by the customs administration of the Party from whose territory the goods were exported pursuant to paragraph 2, the exporter or producer whose goods are the subject of the verification visit may designate two observers to be present during the visit, provided that:


1. the observers do not participate in a manner other than as observers; and


2. the failure by the exporter or producer to designate observers does not result in the postponement of the verification visit.


9. The customs administration of the Party into whose territory the good is imported, regardless of the manner in which, under either paragraph 1 or 2, a verification of origin is conducted, shall provide the exporter or producer whose good is the subject of the verification with a written determination of whether the good qualifies as an originating good, including the findings of fact and the legal basis on which the determination was made.


10. Each Party shall, before 1 January 1997, notify the other Party as to whether an origin verification referred to under paragraph 1 is required to be conducted in its territory by:


1. the customs administration of the other Party; or


2. its customs administration on behalf of that other Party.


11. Notwithstanding paragraph 10, either Party may, at any time after this Agreement enters into force, upon 60 days notice to the other Party, change the manner in which an origin verification is required to be conducted in its territory from subparagraph 10(a) to (b) or vice versa, as the case may be.

Article 5.7: Confidentiality

1. Each Party shall maintain, in accordance with its law, the confidentiality of confidential business information collected pursuant to this Chapter and shall protect that information from disclosure that could prejudice the competitive position of the persons providing the information.


2. The confidential business information collected by a Party pursuant to this Chapter may only be disclosed in accordance with the Agreement on Mutual Assistance in Customs Matters.

Article 5.8: Advance Rulings

1. Each Party shall, through its customs administration, provide for the 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 producer in the territory of the other Party, on the basis of the facts and circumstances presented by such importer, exporter or producer of the good, concerning whether the good qualifies as an originating good under the requirements of Chapter Three (Rules of Origin).


2. Each Party shall provide that its customs administration:


1. may, at any time during the course of an evaluation of an application for an advance ruling, request supplemental information from the person requesting the ruling; and


2. shall, after it has obtained all necessary information from the person requesting an advance ruling, issue the ruling within 120 days.


3. Subject to paragraph 4, each Party shall apply an advance ruling to importations into its territory of the good for which the ruling was requested, beginning on the date of its issuance or a later date that may be specified in the ruling.


4. The Party issuing an advance ruling may modify or revoke the ruling:


1. if the ruling is based on an error


1. of fact, or
2. in the tariff classification of a good or a material that is the subject of the ruling;


2. if there is a change in the material facts or circumstances on which the ruling is based;


3. to conform with a modification of Chapter Three (Rules of Origin); or


4. to conform with a judicial decision or a change in its laws.

Article 5.9: Penalties

Each Party shall maintain measures imposing criminal, civil or administrative penalties for violations of its laws and regulations relating to this Chapter.

Section C – Review and Appeal of Origin Determinations

Article 5.10: Review and Appeal

1. Each Party shall grant substantially the same rights of review and appeal with respect to a decision relating to the origin of imported goods represented as meeting the requirements of Chapter Three (Rules of Origin) as are provided with respect to the tariff classification of imported goods.


2. Each Party shall provide that the rights of review and appeal referred to in paragraph 1 include access to:


1. at least one level of administrative review independent of the official or office responsible for the determination under review; and


2. in accordance with its laws, judicial or quasi-judicial review of the determination or decision taken at the final level of administrative review.

Section D – Cooperation

Article 5.11: Cooperation

1. In furtherance of their mutual interest in ensuring the effective administration of the certification process established under Articles 5.1 through 5.3, the Parties shall cooperate fully in the verification of origin certification and in the enforcement of their respective laws in accordance with this Agreement.


2. Pursuant to paragraph 1, the Parties shall:


1. cooperate in developing verification standards and a framework to ensure that both Parties act consistently in determining that goods imported into their respective territories meet the rules of origin set out in Chapter Three (Rules of Origin); and


2. exchange information to assist each other in the tariff classification, valuation and determination of origin, for tariff preference and country of origin marking purposes, of imported and exported goods.


3. In furtherance of their mutual interest in the prevention, investigation and repression of unlawful acts, the Parties shall cooperate fully in the enforcement of their respective customs laws in accordance with this Agreement and with other treaties, agreements and memorandums of understanding between them.


4. Each Party shall, to the extent allowed by its law with respect to the confidentiality of information, notify the other Party of any determination, measure or ruling, including, to the greatest extent practicable, any that is prospective in application, that:


1. establishes an administrative policy or principle that is likely to influence future determinations of origin; or


2. changes the scope of an existing administrative policy, principle, precedential decision, regulation or rule of general application regarding determinations of origin.

Article 5.12: Working Group on Rules of Origin and Other Customs-Related Market Access Issues

1. The Parties hereby establish a Working Group on Rules of Origin and Other Customs-Related Market Access Issues (“Working Group”), composed of representatives of each Party, to ensure the effective administration of Chapter Three (Rules of Origin) and this Chapter and any other customs-related provisions of this Agreement.


2. The Working Group shall meet at the request of either Party.


3. The Working Group shall:


1. monitor the administration by the Parties of Chapter Three (Rules of Origin) and this Chapter to ensure uniform interpretation;


2. endeavour to agree, at the request of either Party, on any proposed modification of or addition to Annex 2.3 (Requirements Concerning Verification of Repairs and Alterations), Chapter Three (Rules of Origin) or this Chapter;


3. propose to the Parties any modification of or addition to Chapter Three (Rules of Origin), this Chapter or any other provision of this Agreement as may be required to conform with any change to the Harmonized System;


4. endeavour to decide on:


1. the uniform interpretation, application and administration of Chapter Three (Rules of Origin) and this Chapter,


2. tariff classification and valuation matters relating to determinations of origin,


3. revisions to the Certificate of Origin,


4. any other matter referred to it by either Party,


5. any other customs-related matter arising under this Agreement; and


5. consider any proposed customs-related administrative and operational change that may affect the flow of trade between the Parties.


4. The Parties agree that Article 3.12.1(c) (Direct Shipment and Shipment Through a Non-Party) shall enter into effect only upon:


1. the decision by the Parties on the method of verification by a customs administration that a good has undergone no further production other than minor processing in the territory of a non-Party referred to in Article 3.12.1(c) (Direct Shipment and Shipment Through a Non-Party) or that any processing that occurs in the territory of that non-Party with respect to that good does not increase the transaction value of the good by greater than 10 percent, based on the principles of Article 5.6;


2. the establishment by the Parties of a Declaration of Minor Processing for the purpose of certifying that the good has undergone no further production other than minor processing in the territory of a non-Party referred to in Article 3.12.1(c) (Direct Shipment and Shipment Through a Non-Party) or that any processing that occurs in the territory of that non-Party with respect to that good does not increase the transaction value of the good by greater than 10 per cent; and


3. the establishment by the Parties of an obligation regarding the completion of the Declaration of Minor Processing and the obligations regarding importations, exportations and record-keeping with regard to a good that undergoes minor processing or any processing that does not increase the transaction value of the good by greater than 10 per cent referred to Article 3.12.1(c) (Direct Shipment and Shipment Through a Non-Party), based on the principles set out in Articles 5.1 through 5.5.


5. The Parties agree that Article 3.12.2 (Direct Shipment and Shipment Through a Non-Party) shall enter into effect only upon:


1. the decision by the Parties on the method of verification by a customs administration that a good has undergone more than minor processing in the territory of a non-Party referred to in Article 3.12.2 (Direct Shipment and Shipment Through a Non-Party), based on the principles of Article 5.6;


2. the establishment by the Parties of a Declaration of Major Processing for the purpose of certifying that the good has undergone more than minor processing in the territory of a non-Party referred to in Article 3.12.2 (Direct Shipment and Shipment Through a Non-Party); and


3. the establishment by the Parties of an obligation regarding the completion of the Declaration of Major Processing and the obligations regarding importations, exportations and record-keeping with regard to a good that undergoes more than minor processing referred to Article 3.12.2 (Direct Shipment and Shipment Through a Non-Party), based on the principles set out in Articles 5.1 through 5.5.


6. The Parties shall endeavour to reach a decision on the matters described in paragraph 4 before this Agreement enters into force.


7. If a Party considers that a rule of origin for a good requires modification on the basis that the good undergoes significant production in its territory, it shall submit a proposed modification along with supporting rationale and studies to the other Party for that other Party’s consideration.

Article 5.13: Definitions

For the purposes of this Chapter:

good means “good” as defined in Article 3.14 (Definitions);

identical goods means goods that are the same in all respects, including physical characteristics, quality and reputation, irrespective of minor differences in appearance that are not relevant to a determination of origin of those goods under Chapter Three (Rules of Origin);

material means “material” as defined in Article 3.14 (Definitions);

neutral elements has the same meaning as “neutral elements” in Article 3.8 (Neutral Elements);

producer means “producer” as defined in Article 3.14 (Definitions); and

production means “production” as defined in Article 3.14 (Definitions).

ANNEX 5.6
PROCEDURES REGARDING AN ORIGIN VERIFICATION CONDUCTED
BY THE CUSTOMS ADMINISTRATION OF A PARTY ON BEHALF
OF THE OTHER PARTY PURSUANT TO ARTICLE 5.6.2

1. If the circumstances contemplated under Article 5.6.2 exist, the customs administration of the Party into whose territory a good is imported shall initiate an origin verification by sending:


1. the written questionnaire; or


2. a letter requesting that a verification visit be conducted on its behalf,

to the office designated for that purpose by the customs administration of the Party from whose territory the good is exported.


2. On receipt of a written questionnaire or a letter referred to in paragraph 1, the customs administration of the Party from whose territory the good was exported shall:


1. in the case of a questionnaire, forward a true copy thereof to the exporter or producer whose good is subject to the origin verification for completion and signature within 30 days from the date of delivery to such exporter or producer; and


2. in the case of a letter, on the basis of information provided therein, prepare and send the notification referred to in Article 5.6.3 to the exporter or producer whose good is subject to the verification visit and obtain the written consent thereof within 30 days from the date of delivery of the notification to that exporter or producer.


3. The customs administration of the Party from whose territory the good was exported shall:


1. notify the customs administration of the Party that initiated the origin verification under paragraph 1 of the date on which the questionnaire or the written notification referred to under paragraph 2 was delivered to the exporter or producer whose good is the subject of the origin verification; and


2. upon the 30th day after the date referred to in subparagraph 3(a), either:
1. forward the completed questionnaire or written consent, as the case may be, to the customs administration of the Party that initiated the origin verification under paragraph 1, or


2. advise the customs administration of that Party that the questionnaire or written consent, as the case may be, has not been received from the exporter or producer whose good is the subject of the origin verification.


4. If the exporter or producer of the good that is the subject of the verification consents to a verification visit as contemplated by Article 5.6.3, officials of the customs administration of the Party that initiated the verification under paragraph 1 may be present in the offices of the customs administration of the other Party for purposes of directing the manner in which the verification visit is to proceed.


5. The customs administration of the Party from whose territory a good is exported shall, in conducting an origin verification on behalf of the other Party pursuant to this Annex, assume all ordinary expenses associated with conducting the origin verification within its territory except travel and incidental expenses of officials travelling to the territory of that Party as contemplated under paragraph 4.


6. The customs administration of the Party from whose territory a good is exported shall, in conducting an origin verification on behalf of the other Party pursuant to this Annex, if requested by that other Party pursuant to the Agreement on Mutual Assistance in Customs Matters, certify or authenticate, in the manner required by that other Party, copies of any documents and records obtained during the course of conducting the origin verification.

CHAPTER SIX
TRADE FACILITATION

Article 6.1: Objectives and Principles

1. The Parties acknowledge the importance of customs and trade facilitation matters in the evolving global trading environment.


2. The Parties shall, to the extent possible, cooperate and exchange information on best practices for the purpose of promoting the application of and compliance with the trade facilitation measures agreed upon under this Agreement.


3. Each Party shall ensure that its import, export, and transit requirements and procedures are no more trade restrictive than necessary to achieve legitimate objectives.


4. The Parties shall use international trade instruments or international standards, as determined by the Parties, as the basis for import, export and transit requirements and procedures, if these instruments and standards exist, except when they would be an inappropriate or ineffective means for the fulfillment of the legitimate objectives pursued.

Article 6.2: Transparency

1. Each Party shall  publish or otherwise make available, including by electronic means, all its laws, regulations, judicial decisions and policies, as well as administrative rulings of general application relating to its requirements for imported or exported goods, in accordance with its law.


2. Each Party shall, to the extent possible, publish in advance, including on the internet, any regulation of general application governing customs matters that it proposes to adopt and provide interested persons with the opportunity to comment prior to its adoption.


3. Each Party shall designate or maintain one or more contact points to address enquiries by interested persons concerning customs matters and make available on the internet information concerning the procedures for making these enquiries.

Article 6.3: Risk Management

1. Each Party shall adopt and apply import, export, and transit requirements and procedures for goods on the basis of risk management principles that focus compliance measures, including release, examination and post-release verification procedures, on transactions that merit attention rather than examining each shipment.


2. The procedures described in paragraph 1 must distinguish between goods of low, high and unknown risk, with the objective of facilitating and simplifying the processes and procedures for the release of low risk goods, while improving controls on the release of high or unknown risk goods.


3. Paragraphs 1 and 2 do not preclude a Party from conducting quality control and compliance reviews, which may require more extensive examinations.

Article 6.4: Release of Goods

1. Each Party shall adopt or maintain simplified customs procedures for the efficient release of goods in order to facilitate trade between the Parties and reduce costs for importers and exporters. Each Party shall ensure that its procedures:


1. allow for the release of goods within a period no greater than that required to ensure compliance with its law;


2. allow goods, and, to the extent possible, controlled or regulated goods, to be released at the first point of arrival;


3. allow for the expeditious release of goods in emergency situations, such as natural disasters; and


4. allow for the withdrawal of goods from customs control before the final determination of the applicable customs duties, taxes and fees, by its customs administration, in accordance with its law. Before releasing . the goods, a Party may, in accordance with its law, require the payment of customs duties, taxes, fees and charges determined prior to or upon arrival of goods or require an importer to provide sufficient guarantee in the form of a surety, a deposit or other appropriate instrument, provided for in its laws and regulations, to cover the ultimate payment of customs duties, taxes or fees in connection with the importation of the goods. The guarantee must be limited to an amount calculated to ensure compliance with payment of customs duties, taxes and fees, and must not represent an indirect protection of domestic products or a taxation of imports for fiscal purposes.


2. Each Party may require the submission of more extensive information through post-release accounting and verification, as appropriate.


3. Each Party shall, to the extent possible, ensure that its authorities involved in border and other import and export controls cooperate and coordinate to facilitate trade by, among other things, harmonising import and export data and documentation requirements, and establishing a single location for one-time documentary and physical verification of consignments.


4. Each Party shall ensure, to the extent possible, that requirements related to the import and export of goods are coordinated to facilitate trade, regardless of whether these requirements are administered by one or more of its authorities.

Article 6.5: Express Shipments

Each Party shall adopt or maintain separate customs procedures for the expedited release of express shipments. These procedures shall:

1. if applicable, use the World Customs Organization’s Guidelines for the Immediate Release of Consignments by Customs;


2. to the extent possible or if applicable, provide for advance electronic submission and processing of information before the physical arrival of express shipments to enable their release upon arrival;


3. to the extent possible, provide for clearance of certain goods with a minimum of documentation; and


4. provide for, in accordance with a Party’s law, simplified documentation requirements for the release of low-value goods as determined by that Party.

Article 6.6: Automation

1. Each Party shall use information technologies that expedite itsprocedures for the release of goods in order to facilitate trade, including trade between the Parties.


2. Each Party shall:
1. endeavour to make available by electronic means customs forms that are required for the import or export of goods;


2. allow customs forms to be submitted in electronic format in accordance with its law; and


3. if possible, through its customs administration, establish a means of providing for the electronic exchange of information with its trading community for the purpose of encouraging efficient release procedures.


3. Each Party shall endeavour to:


1. develop or maintain a fully interconnected single window;


2. develop a set of common data elements and processes in accordance with the World Customs Organization’s Data Model and related recommendations and guidelines of the World Customs Organization; and


3. harmonise the data requirements of its respective authorities with the objective of allowing importers and exporters to present all required data to one authority.

Article 6.7: Advance Rulings for Tariff Classification

1. A Party shall issue a written ruling prior to importation regarding tariff classification applicable upon importation, except for any form of surtax or surcharge, in response to a written request from one of the following applicants:
   1. an importer in its territory;
   
   
   2. an exporter or producer in the territory of the other Party; or
   
   
   3. a representative of a person in subparagraph (a) or (b).
   
   
2. An advance ruling issued by a Party shall be binding on that Party only in respect of the applicant that requested it.


3. In accordance with its law, each Party shall:


1. adopt or maintain procedures regarding the issuance of advance rulings, including:  the request for, application of and modification or revocation of an advance ruling, as well as the request by a Party for supplementary information and instances when an advance ruling may be postponed or declined;


2. ensure that an advance ruling is issued within a period of 120 days after the Party has obtained all necessary information from the applicant;


3. provide that an advance ruling is in effect from its date of issuance, or another date specified in the ruling, and remains in effect unless relevant facts or circumstances change; and


4. provide consistent treatment with respect to the application for advance rulings, provided that the facts and circumstances are identical in all material respects.


4. Each Party may modify or revoke an advance ruling retroactively only if the advance ruling was based on inaccurate or false information.

Article 6.8: Review and Appeal

1. Regarding decisions on tariff classification of imported goods, value for duty of imported goods, advance rulings for tariff classification pursuant to Article 6.7, administrative penalties pursuant to Article 6.9, and any seizures of imported or exported goods, each Party shall, in accordance with its law, grant access to:


1. at least one level of administrative review within the same authority of the official or office responsible for the decision under review; and


2. judicial review or appeal of the decision taken at the final level of administrative review.


2. For all other decisions on customs matters, each Party shall, in accordance with its law, grant access to either an administrative review or judicial review or appeal of the decision, or both.


3. Each Party shall ensure that the official or office responsible for the administrative review is independent of the official or office responsible for issuing the decision under review.


4. Each Party shall ensure that the official or office responsible for the administrative or judicial review or appeal has the authority to maintain, modify or reverse the decision under review.

Article 6.9: Administrative Penalty Regime

1. Each Party shall adopt or maintain measures that allow for the imposition of administrative penalties for violations of its customs laws.


2. Each Party shall ensure that any penalties imposed for a breach of its customs laws, regulations or procedural requirements are proportionate and non-discriminatory and, in their application, do not result in unwarranted delays.

Article 6.10: Authorised Economic Operators

1. The Parties shall implement Authorised Economic Operator (“AEO”) programmes that aim to ensure international supply chain security while facilitating trade. To that end, the Parties recognise the importance and value of the World Customs Organization’s SAFE Framework of Standards to Secure and Facilitate Global Trade.


2. Each Party shall promote the granting of AEO status to its economic operators with a view of achieving trade facilitation benefits and international supply chain security.


3. In order to further enhance the trade facilitation measures provided to its authorised economic operators, the Parties shall explore the possibility of negotiating a mutual recognition arrangement of the respective AEO programmes.

Article 6.11: Protection of Information

1. Each Party shall ensure that confidential information collected pursuant to this Chapter is used only for purposes related to the administration or enforcement of customs matters.


2. A Party shall maintain the confidentiality of the information provided by the other Party pursuant to this Chapter and protect it from disclosure that could prejudice the competitive position of the person to whom the information relates. Each Party shall treat a violation of confidentiality in accordance with its law.


3. A Party shall not disclose the information referred to in paragraph 2 without the specific permission of the other Party, except as required for the purposes of administering or enforcing customs-related laws and regulations, in which case the disclosing Party shall notify the other Party in advance of this disclosure.


4. A Party shall promptly notify the other Party of any unauthorised use or disclosure of information received pursuant to this Chapter and shall provide details of this unauthorised use or disclosure.  In the event of such an occurrence the Party responsible for the safeguarding of the information shall:


1. take the necessary steps to address the incident;


2. notify the Party whose information was compromised of the measures that were taken to correct the breach; and


3. take all reasonable steps necessary to prevent a re-occurrence.


5. A Party shall not provide to the other Party certain information pursuant to this Chapter, including:


1. information provided in confidence by another government;


2. confidential scientific or technical information provided by a third party;


3. information subject to solicitor/client privilege;


4. information the disclosure of which is prohibited by a treaty or convention;


5. information that will compromise an ongoing investigation; or


6. personal data concerning an identified or identifiable natural person.

Article 6.12: Cooperation

1. The Parties shall continue to cooperate in international forums, such as the World Customs Organization, to achieve mutually recognised goals, such as those set out in the World Customs Organization’s SAFE Framework of Standards to Secure and Facilitate Global Trade and the International Convention on the Simplification and Harmonization of Customs Procedures (as amended).


2. The Parties recognise that technical cooperation between the Parties in customs matters under mutually agreed terms, including scope, timing and cost of cooperative measures is fundamental to facilitating compliance with the obligations set forth in this Agreement and for reaching a better degree of trade facilitation.


3. The Parties shall continue to cooperate in accordance with the Agreement on Mutual Assistance in Customs Matters.

Article 6.13: Future Work Programme

1. In order to identify other measures for facilitating trade under this Agreement, the Parties shall, as appropriate, identify and submit new measures for consideration by the Working Group on Rules of Origin and Other Customs-Related Market Access Issues.


2. The Parties shall regularly review relevant international initiatives on trade facilitation, including the Compendium of Trade Facilitation Recommendations, developed by the United Nations Conference on Trade and Development and the United Nations Economic Commission for Europe, to identify areas where further joint action would facilitate trade between the Parties and promote shared multilateral objectives.