1. Except as otherwise provided in a Party's Schedule attached
to this Annex, the following staging categories apply to the elimination
of customs duties by each Party pursuant to Article 302(2):
a) duties on goods provided for in the items in staging category
A in a Party's Schedule shall be eliminated entirely and such
goods shall be duty-free, effective January 1, 1994;
b) duties on goods provided for in the items in staging category
B in a Party's Schedule shall be removed in five equal annual
stages beginning on January 1, 1994, and such goods shall be duty-free,
effective January 1, 1998;
c) duties on goods provided for in the items in staging category
C in a Party's Schedule shall be removed in 10 equal annual stages
beginning on January 1, 1994, and such goods shall be duty-free,
effective January 1, 2003;
d) duties on goods provided for in the items in staging category
C+ in a Party's Schedule shall be removed in 15 equal annual stages
beginning on January 1, 1994, and such goods shall be duty-free,
effective January 1, 2008; and
e) goods provided for in the items in staging category D
in a Party's Schedule shall continue to receive duty-free treatment.
2. The base rate of customs duty and staging category for
determining the interim rate of customs duty at each stage of
the U.S. Generalized System of Preferences and the General Preferential
Tariff of Canada.
3. For the purpose of the elimination of customs duties in
accordance with Article 302, interim staged rates shall be rounded
down, except as set out in each Party's Schedule attached to this
Annex, 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 .001 of the official monetary unit of the Party.
4. Canada shall apply a rate of customs duty no higher than
the rate applicable under the staging category set out for an
item in Annex 401.2, as amended, of the Canada-United States Free
Trade Agreement which Annex is hereby incorporated into and made
a part of this Agreement, to an originating good provided that:
a) notwithstanding any provision in Chapter Four, in determining
whether such good is an originating good, operations performed
in or materials obtained from Mexico are considered as if they
were performed in or obtained from a non-Party; and
b) any processing that occurs in Mexico after the good would
qualify as an originating good in accordance with subparagraph
(a) does not increase the transaction value of the good by greater
than seven percent.
5. Canada shall apply a rate of customs duty no higher than
the rate applicable under the staging category set out for an
item in Column I of its Schedule to this Annex to an originating
good provided that:
a) notwithstanding any provision in Chapter Four, in determining
whether such good is an originating good, operations performed
in or materials obtained from the United States are considered
as if they were performed in or obtained from a non-Party; and
b) any processing that occurs in the United States after
subparagraph (a) does not increase the transaction value of the
good by greater than seven percent.
6. Canada shall apply to an originating good to which neither
paragraph 4 nor 5 applies a rate of customs duty no higher than
the rate indicated for its corresponding item in Column II of
its Schedule to this Annex. The rate of customs duty in Column
II for such good shall be:
a) in each year of the staging category indicated in Column
I, the higher of
(i) the rate of customs duty under the staging category set
out for the item in Annex 401.2, as amended, of the Canada-United
States Free Trade Agreement, and
(ii) the General Preferential Tariff rate of customs duty
for the item applied on July 1, 1991, reduced in accordance with
the applicable staging category set out for the item in Column
I of its Schedule to this Annex; or
b) where specified in Column II of its Schedule to this Annex,
the most-favored-nation rate of customs duty for the item applied
on July 1, 1991, reduced in accordance with the applicable staging
category set out for the item in Column I of its Schedule to this
Annex, or reduced in accordance with the applicable staging category
otherwise indicated.
7. Paragraphs 4 through 6 and 10 through 13 shall not apply
to textile and apparel goods identified in Appendix 1.1 of Annex
300-B (Textiles and Apparel Goods).
8. Paragraphs 4, 5 and 6 shall not apply to agricultural goods
as defined in Article 708. For these goods, Canada shall apply
the rate applicable under the staging category set out for an
item in Annex 401.2, as amended, of the Canada-United States Free
Trade Agreement to an originating good when the good qualifies
to be marked as a good of the United States pursuant to Annex
311, without regard to whether the good is marked. When an originating
good qualifies to be marked as a good of Mexico, pursuant to Annex
311, whether or not the good is marked, Canada shall apply the
rate applicable under the staging category set out for an item
in Column I of its Schedule to this Annex.
9. As between the United States and Canada, Articles 401(7) and 401(8) of the Canada-United States Free Trade Agreement is
hereby incorporated and made a part of this Annex. The term "goods
originating in the territory of the United States of America"
in Article 401(7) of that agreement shall be determined in accordance
with paragraph 4 of this Annex. The term "goods originating
shall be determined in accordance with paragraph 12 of this Annex.
10. Mexico shall apply a rate of customs duty no higher than
the rate applicable under the staging category set out for an
item in Column I of its Schedule to this Annex to an originating
good when the good qualifies to be marked as a good of the United
States, pursuant to Annex 311, without regard to whether the good
is marked.
11. Mexico shall apply a rate of customs duty no higher than
the rate applicable under the staging category set out for an
item in Column II of its Schedule to this Annex to an originating
good when the good qualifies to be marked as a good of Canada,
pursuant to Annex 311, without regard to whether the good is marked.
12. The United States shall apply a rate of customs duty no
higher than the rate applicable under the staging category set
out for an item in Annex 401.2, as amended, of the Canada-United
States Free Trade Agreement to an originating good when the good
qualifies to be marked as a good of Canada pursuant to Annex 311,
without regard to whether the good is marked.
13. The United States shall apply a rate of customs duty no
higher than the rate applicable under the staging category set
out for an item in its Schedule to this Annex to an originating
good when the good qualifies to be marked as a good of Mexico
pursuant to Annex 311, whether or not the good is marked.