WORLD TRADE WT/REG31/2
23January 1997
ORGANIZATION(97-0237)
Original: English/French
FREE TRADE AGREEMENT BETWEEN
CANADA AND ISRAEL
Thefollowing textreproduces theFreeTrade Agreement.1
_______________
FREE TRADE AGREEMENT BETWEEN
THE GOVERNMENT OFCANADA
AND
THE GOVERNMENT OFTHE STATE OFISRAEL
PREAMBLE
TheGovernment oftheState ofIsrael andtheGovernment ofCanada:
DESIRING tostrengthen theireconomic relations andtopromote economic development;
WISHING tocreate aframework forpromoting investment andcooperation;
RESOLVED tofoster thedevelopment oftheirtrade withdueregard tofairconditions of
competition;
RECALLING themutual interest oftheGovernment oftheStateofIsrael andtheGovernment
ofCanada inreinforcement ofthemultilateral trading system asreflected intheWTO;
RECALLING thattheGovernment ofCanada andtheGovernment oftheStateofIsrael entered
intoaMemorandum ofUnderstanding onSeptember 27,1976 which established aJoint
Economic Commission, which wascontinued under aMemorandum ofUnderstanding on
Economic Cooperation entered intoonAugust 5,1993;
WISHING toestablish afreetradeareabetween thetwocountries through theremoval oftrade
barriers;
DECLARINGtheirreadinesstoexploreotherpossibilitiesforextendingtheireconomicrelations
toother fields notcovered bythisAgreement;
HAVE AGREED asfollows:
1Annex3.1theretohasbeensubmittedtotheSecretariatforconsultationsbyinterestedMembers(Office3006).WT/REG31/2
Page2
PART ONE
GENERAL PART
Chapter One
Objectives
Article 1.1
Establishment oftheFreeTrade Area
TheParties tothisAgreement, consistent withArticle XXIV oftheGeneral Agreement on
Tariffs andTrade 1994,asspecified inAnnex 1AoftheAgreement Establishing theWorld Trade
Organization ,hereby establish afreetrade area.
Article 1.2
Objective
1. Theobjective ofthisAgreement, aselaborated morespecifically initsprovisions, istoeliminate
barriers totrade in,andfacilitate themovement of,goods between theterritories oftheParties, and
thereby topromote conditions offaircompetition andincrease substantially investment opportunities
inthefreetrade area.
2. TheParties shallinterpret andapply theprovisions ofthisAgreement inthelightofitsobjective
setoutinparagraph 1andinaccordance withapplicable rules ofinternational law.
3. EachPartyshalladministerinaconsistent,impartialandreasonablemanneralllaws,regulations,
decisions andrulings affecting matters covered bythisAgreement.
Article 1.3
Relation toOther Agreements
1. TheParties affirm theirexisting rights andobligations withrespect toeachother under the
Agreement Establishing theWorld Trade Organization ,(hereinafter referred toastheWTO Agreement),
including theGeneral Agreement onTariffs andTrade 1994, (hereinafter referred toasGATT 1994),
anditssuccessor agreements andother agreements towhich bothParties areparty.
2. Intheevent ofanyinconsistency between thisAgreement andsuchother agreements, this
Agreement shall prevail totheextent oftheinconsistency, except asotherwise provided inthis
Agreement.WT/REG31/2
Page3
Article 1.4
Definitions ofGeneral Application
1. Forthepurposes ofthisAgreement, unless otherwise specified:
enterprise means anyentity constituted ororganized under applicable law,whether ornotforprofit,
andwhether privately-owned orgovernmentally-owned, including anycorporation, trust, partnership,
soleproprietorship, jointventure orother association;
good ofaParty means adomestic good asthisisunderstood intheGATT 1994 orsuchagood as
theParties mayagree, andincludes anoriginating good ofthatParty;
Harmonized System means theHarmonized Commodity Description andCoding System, including
itsGeneral Rules ofInterpretation, Section Notes andChapter Notes, asadopted andimplemented
bytheParties intheirrespective tariff laws;
originating good ormaterial means agood ormaterial thatqualifies asoriginating under Chapter
Three;
person means anatural person oranenterprise; and
territory means:
(a) withrespect toCanada theterritory towhich itscustoms lawsapply, including any
areasbeyondtheterritorialseasofCanadawithinwhich,inaccordancewithinternational
lawanditsdomestic law,Canada mayexercise rights withrespect totheseabed and
subsoil andtheirnatural resources;
(b) withrespect toIsrael theterritory where itscustoms lawsareapplied;
2. Therights andobligations oftheParties relating totheobservance ofthisAgreement byregional
andlocalgovernments shallbegoverned byArticle XXIV:12 oftheGATT 1994.WT/REG31/2
Page4
PART TWO
TRADE INGOODS
Chapter Two
Tariff Elimination andRelated Matters
TARIFF ELIMINATION
Article 2.1
Tariff Elimination
1. ExceptasotherwiseprovidedinthisAgreement,neitherPartymayincreaseanyexistingcustoms
duty, oradopt anycustoms duty, oranycharge ofequivalent effect onanoriginating good towhich
paragraph 2applies.
2. Except asotherwise provided inthisAgreement, eachParty shall,
(a) byJanuary 1,1997, eliminate itscustoms duties onoriginating goods listed inChapters
25to97oftheHarmonized System withtheexception ofthetariffitems listed inAnnex
2.1.1 and
(b) inthecaseoforiginating goods listed inChapters 1to24oftheHarmonized System
eliminate orreduce duties ongoods inaccordance withAnnex 2.1.2.
RELATED MATTERS
Article 2.2
Customs Duties: Repair andAlteration
1. Neither Party mayapply acustoms dutytoagood, regardless ofitsorigin, thatre-enters its
territory afterthatgoodhasbeenexported fromitsterritory totheterritory oftheother Party forrepair
oralteration, regardless ofwhether suchrepair oralteration could beperformed initsterritory.
2. Neither Party mayapply acustoms dutytoagood, regardless ofitsorigin, imported temporarily
from theterritory oftheother Party forrepair oralteration.
3. TheParties shallcomply withtherequirements setoutinAnnex 2.2.3, asamended bythe
Parties from timetotime, toverify thattherepair oralteration hasbeenperformed intheterritory
ofoneoftheParties.WT/REG31/2
Page5
Article 2.3
Definitions
Forpurposes ofthisChapter:
customs dutyincludes anycustoms orimport dutyandacharge ofanykindimposed inconnection
withtheimportation ofagood, including anyform ofsurtax orsurcharge inconnection withsuch
importation, butdoesnotinclude any:
(a) charge equivalent toaninternal taximposed consistently withArticle III:2oftheGATT
1994 asspecified in,oranyequivalent provision ofasuccessor agreement towhich
bothParties areparty, inrespect oflike,directly competitive orsubstitutable goods
oftheParty, orinrespect ofgoods from which theimported good hasbeen
manufactured orproduced inwhole orinpart;
(b) antidumping orcountervailing dutythatisapplied inaccordance withtheWTO
Agreement, including theGATT 1994 pursuant toaParty'sdomestic law; and
(c) feeorother charge inconnection withimportation commensurate withthecostof
services rendered.
existing customs duty means therateofduty applicable toimports from theother Party on
January 1,1996.
repair oralteration does notinclude anoperation orprocess thateither destroys theessential
characteristics ofagood orcreates aneworcommercially different good.WT/REG31/2
Page6
Annex 2.1.1
1. Each Party agrees tophase outbyJuly1,1999, theMost Favoured Nation rateofdutyin
effect onJanuary 1,1996 onthegoods listed below, bythefollowing percentages ofthose rates:
(a) January 1,1997 10%
(b) July1,1997 30%
(c) July1,1998 30%
(d) July1,1999 30%
Canada
Women 'sorgirls'swimwear intariff items:
6112.41.00
6112.49.00
6211.12.00
Israel
Woven cotton fabric intariff items:
5209.32.00
5209.39.00
5209.42.00
2. Article 2.1(2) doesnotapply togoods provided forinheadings 35.01 and35.02.WT/REG31/2
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ANNEX 2.1.2A CANADA
HSNO. DESCRIPTION OFGOODS DUTY SPECIFIC PROVISIONS
06.01 to06.04 Liveplants, bulbs, cutflowers, foliage Free Except forroses setoutin
0603.10.20
0603.10.20 Roses, fresh Free Tariff Quota ofnotlessthan
90,000 dozen; anyroses over
quota aretobesubject tothe
MFN rateofduty
0701.10 Seed potatoes Free
0709.90 Other fresh vegetables Free Except forgoods setoutin
0709.90.51 and0709.90.52
(sweet corn-on-cob), which are
tobesubject totheGPTorMFN
rateofduty, whichever applies
07.12 Dried vegetables Free Except forgarlic
ex0712.90.90, which istobe
subject totheMFN rateofduty
0713.10 Peas, dried Free
0713.33 Kidney beans, dried, including white peabeans Free
0806.10 Grapes, fresh Free
0810.20 Raspberries, blackberries, mulberries andloganberries,
freshFree
0810.30 Black, white orredcurrants andgooseberries, fresh Free
0810.40 Cranberries, bilberries andother fruits ofthegenus
Vaccinium ,freshFree
09.04 Pepper ofthegenus Piper,dried orcrushed orground
fruits ofthegenus Capsicum orthegenus PimentaFree
09.10 Ginger andother spices Free
1001.10.10 Durum wheat, within access commitment Free
1001.90.10 Other wheat, within access commitment Free
1003.00.11 Barley, formalting, within access commitment Free
1003.00.91 Other barley, within access commitment Free
1005.90.10 Yellow dentcorn(maize) Free
1101.00.10 Wheat ormeslin flour, within access commitment Free
11.06 Flour, meal andpowder ofleguminous vegetables Free
1107.10.11 Malt, notroasted, whole, within access commitment Free
1107.10.91 Malt, notroasted, other, within access commitment Free
1107.20.11 Malt, roasted, whole, within access commitment Free
1107.20.91 Malt, roasted, other, within access commitment Free
1212.30 Apricot, peach orplum stones andkernels Free
1214.10 Lucerne (alfalfa) meal andpellets Free
13.02 Vegetable sapsandextracts; pectic substances,
mucilages andthickenersFree
1601.00.31 Sausages andsimilar products ofturkey, within access
commitmentFree
1601.00.99 Beefsausages andsimilar products Free
1602.31.92 Specially defined mixtures ofturkey 10%
1602.50.99 Other prepared meat ofbovine animals Free
1604.11 Prepared salmon FreeWT/REG31/2
Page8
HSNO. DESCRIPTION OFGOODS DUTY SPECIFIC PROVISIONS
ex1604.20.90 Gefilte fish Free
17.01 to17.04 Sugars andsugar confectionery Free Except forglucose andglucose
syrup setoutin1702.30, which
aretobesubject totheMFN rate
ofduty
18.01 to18.06 Cocoa andcocoa preparations Free Except for1806.20.32 and
1806.90.12 (chocolate icecream
mixoricemilkmix), over
access commitment ineachcase,
which aretobesubject tothe
MFN rateofduty
1901.10 Baby food(retail) Free
1902.11.11 Uncooked pasta, containing eggs, within access
commitment4%
1902.11.90 Uncooked pasta, containing eggs, withlessthan25%
wheat content4%
1902.19.91 Uncooked pasta, other, within access commitment 4%
1902.19.99 Uncooked pasta, other, withlessthan25%wheat
content4%
1902.40.10 Couscous, inpackages notexceeding 11.34 kg. 5%
1902.40.20 Couscous, bulkorpackages greater than11.34 kg. 3%
20.01 Vegetables, fruits, nuts, preserved byvinegar Free
2005.70.90 Olives, prepared orpreserved, other thanripeolives in
brine6% Duty tobereduced to5%on
January 1,1998
2005.90.99 Other vegetables, prepared orpreserved Free Except forcarrots which areto
besubject totheMFN rateof
duty
20.06 Fruit, vegetables, nutspreserved bysugar Free
20.07 Jams, fruitjellies andmarmalades Free
2008.11.10 Peanut butter Free
2008.11.20 Peanuts, blanched Free
2008.11.90 Peanuts, other Free
2008.19 Other nuts, including mixtures Free
ex2008.40 Pearchips Free
ex2008.99 Apple chips Free
2009.11 Orange juice, frozen Free
2009.19 Orange juice, notfrozen Free
2009.20 Grapefruit juice Free
2009.80.11 Passion fruitjuice Free
2009.80.12 Prune juice Free
2009.80.19 Juice ofother single fruit Free
2009.90.20 Orange andgrapefruit juice mixture, notdehydrated Free
21.01 Extracts, essences andconcentrates ofcoffee, teaor
maté, chicory andcoffee substitutesFree
2103.10 Soya sauce Free
2103.30 Mustard flour andmeal andprepared mustard Free
2103.90 Other sauces andpreparations FreeWT/REG31/2
Page9
HSNO. DESCRIPTION OFGOODS DUTY SPECIFIC PROVISIONS
21.04 Soups andbroths andpreparations therefor;
homogenized composite foodpreparations andsubstancesFree
2106.10 Protein concentrates Free
22.03 Beer Free
ex22.04 Kosher wine Free
ex22.05 Kosher vermouth Free
22.08 Spirits Free Except for2208.30.00 (whiskies)
which istobesubject totheGPT
orMFN rateofduty, whichever
appliesWT/REG31/2
Page10
ANNEX 2.1.2B ISRAEL
HSNO. DESCRIPTION OFGOODS DUTY SPECIFIC PROVISIONS
0105.12.90 Liveturkey chicks, parent andgrandparent stock 0% Noincrease indutywithout prior
consultation
02.02 Bovine meat, frozen
0%ATariff Quota ofnotlessthan
2,000 tonnes0206.20 Edible offalofbovine animals, frozen
0303.10 Pacific salmon, frozen 0%
0303.22 Atlantic salmon, frozen 0%
0304.20 Fishfillets frozen 0% Except fortroutsetoutinex
0304.20
0305.41 Pacific salmon, smoked 0%
0305.42 Herrings, smoked 0%
0511.10 Bovine semen 0% Noincrease indutywithout prior
consultation
06.01 to06.04 Liveplants, bulbs, cutflowers, foliage 0% Except forroses setoutin
0603.10
0603.10 Roses, fresh 0% ATariff Quota ofnotlessthan
10tonnes
0701.10 Seed potatoes 0% ATariff Quota ofnotlessthan
1,000 tonnes
07.12 Dried vegetables 0% Except forgarlic setoutin
0712.90.10
0713.10 Peas, dried
0%ATariff Quota ofnotlessthan
10,000 tonnes 0713.33 Kidney beans, dried, including white peabeans
0713.40 Lentils, dried
0810.20 Raspberries, blackberries, mulberries andloganberries,
fresh
0%ATariff Quota ofnotlessthan
150tonnes 0810.30 Black, white orredcurrants andgooseberries, fresh
0810.40 Cranberries, bilberries andother fruits ofthegenus
Vaccinium ,fresh
0811.20 Raspberries, blackberries, mulberries, loganberries,
black, white orredcurrants andgooseberries, frozen14%
ex0811.90 Blueberries, frozen 14%
1001.10 Durum wheat
0%ATariff Quota ofnotlessthan
150,000 tonnes. Non-feed wheat
of1001.90 issubject tolocal
purchase requirements1001.90 Other wheat andmeslin
10.02 Rye
0% ATariff Quota ofnotlessthan
200,000 tonnes10.03 Barley
10.04 Oats
1005.10.90
1005.90.00Maize (corn, except popping corn)
1008.30 Canary seed 0% ATariff Quota ofnotlessthan
100tonnes
11.01 Wheat ormeslin flour 0% ATariff Quota ofnotlessthan
10,000 tonnes
1105.10 Potato flour, meal andpowder 8%
1105.20 Potato flakes, granules andpellets 8%WT/REG31/2
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HSNO. DESCRIPTION OFGOODS DUTY SPECIFIC PROVISIONS
1106.10
1106.20Flour, meal andpowder ofleguminous vegetables 0%
11.07 Malt, whether ornotroasted 0% ATariff Quota ofnotlessthan
9,000 tonnes
12.05 Rape (canola) orcolza seeds 0%
1207.50 Mustard seeds 0%
1212.30 Apricot, peach orplum stones andkernels 0%
1214.10 Lucerne (alfalfa) meal andpellets 0%
1301.10 Lac 0%
13.02 Vegetable sapsandextracts; pectic substances,
mucilages andthickeners0%
15.14 Rape (canola), colza ormustard oil 13%
1601.00.90 Beefsausages andsimilar products 0%
ex
1602.50.90Other prepared meat ofbovine animals, excluding
containing over20percent poultry meat0%
1604.11 Prepared salmon 0%
17.01 to17.04 Sugars andsugar confectionery 0% Except forglucose andglucose
syrup setoutin1702.30, which
aretobesubject totheMFN rate
ofduty
18.01 to18.06 Cocoa andcocoa preparations 0%
1901.10 Baby food(retail) 0%
1902.11 Uncooked pasta, containing eggs 8¢US/kg
1902.19 Uncooked pasta, other 8¢US/kg
20.01 Vegetables, fruits, nutspreserved byvinegar 0%
2005.90 Other vegetables, prepared orpreserved 0% Except forcarrots setoutin
2005.90.30, which aretobe
subject totheMFN rateofduty
20.06 Fruit, vegetables, nutspreserved bysugar 0%
20.07 Jams, fruitjellies andmarmalades 0%
2008.11.10 Ground nuts-foodpreparation (including peanut butter) 0%
2008.99 Fruits, other, prepared 12%
2009.80 Juice ofother single fruit 0%
21.01 Extracts, essences andconcentrates ofcoffee, teaor
maté, chicory andcoffee substitutes0%
2103.10 Soya sauce 0%
2103.30 Mustard flour andmeal andprepared mustard 0%
2103.90 Other sauces andpreparations 0%
21.04 Soups andbroths andpreparations therefor;
homogenized composite foodpreparations andsubstances0%
2106.10 Protein concentrates 0%
22.03 Beer 0%
22.08 Spirits 0% Except for2208.20.00 (Brandy)
which istobesubject tothe
MFN rateofdutyWT/REG31/2
Page12
HSNO. DESCRIPTION OFGOODS DUTY SPECIFIC PROVISIONS
2309.10.10
Animal feeds12%
2309.10.20 8%
2309.10.90 2%
2309.90.10 12%
2309.90.20 8%
2309.90.30 12%
2309.90.90 2%
General Notes toAnnexes 2.1.2A and2.1.2B
1. The"HSNo." column setsoutthose tariff items, subheadings, headings orchapters, as
appropriate, withrespect towhich dutyisbeing reduced orremoved.
2. Thegoods described inthecolumn entitled "Description ofGoods" arerepresentative only,
except where therespective HSNo.isprefaced by"ex", wherein thedescription setsoutallthose
goods subject tothelevelofdutyintheDuty column.
3. The"Duty" column setsouttherateofdutythatshallbeeffective byJanuary 1,1997, applicable
tothegoods classified within theappropriate HSNo.,subject tothespecific provisions.
4. The"Specific Provisions" column setsoutanyqualifications tothe"Description ofGoods"
andtherateofdutyforthatHSNo.
Annex 2.2.3
Requirements Concerning Verification ofRepairs andAlterations
Upon reimportation intotheterritory ofaParty ofagoodthathasbeenexported totheterritory
oftheother Party forrepair oralteration, animporter shallsubmit:
(a) aninvoiceorawrittenstatementfromthepersonwhoperformedtherepairoralteration,
setting outadetailed description ofandthevalue oftherepair oralteration; and
(b) proof ofexportation ofthegood totheterritory oftheother Party.WT/REG31/2
Page13
Chapter Three
Rules ofOrigin
Rules forOriginating Goods
Article 3.1
Basic Rules forOriginating Goods
Except asotherwise provided inthisChapter, agoodshalloriginate intheterritory ofaParty
where:
(a) thegood iswholly obtained orproduced entirely intheterritory ofoneorbothofthe
Parties, asdefined inArticle 3.13;
(b) eachofthenon-originating materials usedintheproduction ofthegood undergoes
anapplicable change intariffclassification setoutintheruleforthatgoodinAnnex 3.1,
andthegoodsatisfies anyother applicable requirement setoutinthatrule,asaresult
ofproduction occurring entirely intheterritory ofoneorbothoftheParties;
(c) thegood satisfies, asaresult ofproduction occurring entirely intheterritory ofone
orbothoftheParties, theapplicable requirements setoutintheruleforthegood in
Annex 3.1where nochange intariff classification isrequired inthatrule;
(d) thegoodisproduced entirely intheterritory ofoneorbothoftheParties exclusively
from originating materials; or
(e) except foragoodprovided forinChapters 61through 63oftheHarmonized System,
thegood isproduced entirely intheterritory ofoneorbothoftheParties butoneor
more ofthenon-originating materials provided forasparts under theHarmonized
System thatareusedintheproduction ofthegood donotundergo achange intariff
classification because
(i) theheading forthegoodprovides forandspecifically describes boththegood
itself anditsparts andisnotfurther subdivided intosubheadings, or
(ii) thesubheading forthegood provides forandspecifically describes boththe
good itself anditsparts,
provided thatatleastonecategory ofidentical orsimilar materials provided forinthat
heading orsubheading beoriginating;
andthegood satisfies allother applicable requirements ofthisChapter.WT/REG31/2
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Article 3.2
DeMinimis RuleforOriginating Goods
1. Except asprovided inparagraphs 2and3,agoodshallalsooriginate intheterritory ofaParty
where thevalue ofallthenon-originating materials usedintheproduction ofagoodthatdonotundergo
anapplicable change intariff classification setoutintheruleforthegood inAnnex 3.1isnotmore
thantenpercentofthevalue ofthegood, adjusted toanF.O.B. basisatthepoint ofdirect shipment,
provided thatthegood satisfies allother applicable requirements ofthisChapter.
2. Paragraph 1doesnotapply to:
(a) anon-originating material provided forinChapter 4ortariff item1901.90.aa ofthe
Harmonized System thatisusedintheproduction ofagoodprovided forinChapter 4,
tariffitem1901.20.aa, 1901.90.aa, heading 21.05, tariffitem2106.90.cc, 2202.90.cc
or2309.90.aa oftheHarmonized System;
(b) anon-originating material provided forinsubheading 0201.10 through 0201.30 or
0202.10 through 0202.30 oftheHarmonized System thatisusedintheproduction
ofagood provided forinChapter 16oftheHarmonized System;
(c) aprinted circuit assembly thatisanon-originating material usedintheproduction of
agoodwhere theapplicable ruleinAnnex 3.1places restrictions ontheconsideration
ofsuchnon-originating material forthepurpose ofdetermining whether thegood
originates;
(d) anon-originating material usedintheproduction ofagoodprovided forinChapters 1
through 19,heading 20.01 through 20.08, subheading 2009.90, heading 21.01 through
21.05, subheading 2106.10, tariff item 2106.90.bb, heading 22.01, tariff item
2202.90.bb orheading 22.03 through 22.07 oftheHarmonized System, unless that
non-originating material isprovided forinadifferent subheading thanthegood for
which origin isbeing determined under thisChapter;
(e) anon-originating material provided forinChapters 50through 64oftheHarmonized
System thatisusedintheproduction ofagood provided forinChapters 50through
64oftheHarmonized System; or
(f) anon-originating material usedintheproduction ofagoodprovided forinsubheading
3824.90, 8406.10 through 8406.82, 8415.10 through 8415.83, 8418.10 through
8418.69, 8421.12, 8422.11, 8450.11 through 8450.20, 8451.21 through 8451.29,
heading 84.56 through 84.61, 84.62 through 84.63, subheading 8477.10 through
8477.20, 8477.30, heading 84.83, 85.01, subheading 8502.11 through 8502.39,
8516.31, 8516.33, 8516.40, tariff item8516.60.aa, subheading 8516.72, 8526.10 or
8540.71 through 8540.79 oftheHarmonized System.
3. Where Annex 3.1setsouttwoormore alternative rules foragood, paragraph 1shallapply
onlyifthedetermination ofwhether thegoodisanoriginating goodisbeing made under thefirstrule
setoutforthatgood.WT/REG31/2
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Article 3.3
Rules Regarding Accessories, Spare Parts andTools, Indirect Materials,
andPackaging andPacking Materials andContainers
1. Forpurposes ofdetermining whether agood isanoriginating good, thefollowing materials
shallbedeemed tobeoriginating materials without regard towhere thematerials areproduced:
(a) accessories, spare partsortoolsdelivered withthegood thatformpartofthegood's
standard accessories, spare parts ortools, provided thattheaccessories, spare parts
ortoolsarenotinvoiced separately fromthegoodandthequantities andvalue ofthe
accessories, spare parts ortools arecustomary forthegood;
(b) indirect materials usedintheproduction ofthegood;
(c) packaging materials andcontainers inwhich thegood ispackaged forretail sale,
providedthatthepackagingmaterialsandcontainersareclassifiedundertheHarmonized
System withthegood thatispackaged within; and
(d) packing materials andcontainers inwhich thegood ispacked forshipment.
2. Forpurposes ofapplying other Chapters ofthisAgreement tothematerials referred toin
subparagraphs 1(a),(c)and(d),these materials shallbedeemed tooriginate ifthegood referred to
inparagraph 1originates.
Exceptions totheRules
Article 3.4
Non-Qualifying Operations
Agood shallnotbeconsidered tobeanoriginating good merely byreason of:
(a) anywork, process orpractice inrespect ofwhich itmaybedemonstrated, onthebasis
ofapreponderance ofevidence, thattheobject wastocircumvent thisChapter;
(b) minor processing; or
(c) achange intariff classification thatistheresult of
(i) achange inenduseofthegood, or
(ii) collecting parts sothatthecollection ofparts isclassified asifitwere an
assembled goodpursuant toRule2(a)oftheGeneral Rules fortheinterpretation
oftheHarmonized System.WT/REG31/2
Page16
Article 3.5
Direct Shipment andTranshipment
1. Except asprovided inparagraph 2,anoriginating good thatisexported fromtheterritory of
aParty shallmaintain itsoriginating status onlyif:
(a) thegoodisshipped directly fromtheterritory ofoneParty totheterritory oftheother
Party;
(b) thegood istranshipped through theterritory ofanon-Party, provided that
(i) thegood doesnotundergo further production oranyother operation inthe
territory ofthatnon-Party, otherthanunloading, splitting upofloads, reloading
oranyotheroperation necessary topreserve itingoodcondition ortotransport
thegood totheterritory ofaParty, and
(ii) thegood remains under customs control intheterritory ofanynon-Party
through which thegood istransported totheterritory ofaParty; or
(c) subject toArticle 5.12(4), thegoodistranshipped through theterritory ofanon-Party
withwhich each Party hasentered separately intoafreetrade agreement under
Article XXIV oftheGATT 1994 before thisAgreement enters intoforce anddoes
notundergo further production other thanminor processing intheterritory ofthat
non-Party.
2. Subject toArticle 5.12(5), withregard toanyspecifically identified good thatisagreed upon
bytheParties afterthedateofentryintoforceofthisAgreement, anoriginating goodthatistranshipped
through theterritory ofanon-Party withwhich eachParty hasentered separately intoafreetrade
agreement under Article XXIV oftheGATT 1994before thisAgreement enters intoforcemayundergo
more thanminor processing intheterritory ofthatnon-Party, provided thatthegood meets any
specifically designated conditions, asagreed bytheParties, regarding theproduction intheterritory
ofthatnon-Party.
Article 3.6
Third Country Materials forOriginating Goods
Where eachParty hasentered separately intoafreetrade agreement under Article XXIV of
theGATT 1994 withthesame non-Party before thisAgreement enters intoforce, agood, which, if
imported intotheterritory ofoneoftheParties under suchfreetrade agreement withthatnon-Party,
would qualify fortariffpreferences under thatagreement, shallbeconsidered tobeanoriginating good
under thisChapter when imported intotheterritory oftheother Party andusedasamaterial inthe
production ofanother good intheterritory ofthatother Party.WT/REG31/2
Page17
Application andInterpretation
Article 3.7
Fungible Goods andMaterials
Forpurposes ofdetermining whether agood isanoriginating good,
(a) where originating materials andnon-originating materials thatarefungible materials
areusedintheproduction ofthegood, thedetermination ofwhether thematerials are
originating materials may, atthechoice oftheproducer ofthegood, bemade onthe
basis ofanyoftheapplicable inventory management methods setoutinAnnex 3.7;
(b) where originating goods andnon-originating goods thatarefungible goods are
physically combined ormixed ininventory intheterritory ofaParty and,prior to
exportation totheterritory oftheother Party, donotundergo production oranyother
operation intheterritory oftheParty inwhich theywerephysically combined ormixed
ininventory, other thanunloading, reloading oranyother operation necessary to
preserve thegoods ingood condition ortotransport thegoods totheterritory ofthe
other Party, thedetermination ofwhether thegoodisanoriginating goodmay, atthe
choice oftheexporter ofthegood, bemade onthebasis ofanyoftheapplicable
inventory management methods setoutinAnnex 3.7; and
(c) whereoriginatinggoodsandnon-originatinggoodsthatarefungiblegoodsarephysically
combined ormixed ininventory intheterritory ofaParty and,prior toacquisition
byaperson intheterritory ofthatParty, donotundergo production oranyother
operation intheterritory ofthatParty, other thanunloading, reloading oranyother
operation necessary topreserve thegoods ingoodcondition ortotransport thegoods
tothatperson, thedetermination ofwhether thegood isanoriginating good may, at
thechoice oftheperson whophysically combined ormixed ininventory thefungible
goods, bemade onthebasisofanyoftheapplicable inventory management methods
setoutinAnnex 3.7.
Article 3.8
Self-Produced Materials
Forpurposes ofdetermining whether agood isanoriginating good, theproducer ofagood
may, attheproducer 'schoice, designate anyself-produced material thatisusedintheproduction of
thegood asamaterial tobetaken intoaccount asanoriginating ornon-originating material, asthe
casemaybe,indetermining whether thegood satisfies theapplicable requirements ofArticle 3.1.
Article 3.9
Tariff Classification
Forpurposes ofthisChapter, thebasis fortariff classification istheHarmonized System.WT/REG31/2
Page18
Article 3.10
Category ofIdentical orSimilar Materials and
Other Requirements Under Articles 3.1(b) and(c)
1. Forpurposes ofdetermining whether agoodisanoriginating goodunder Article 3.1(b), where
aruleforagoodinAnnex 3.1specifies therequirement thatatleastonecategory ofidentical orsimilar
materials usedintheproduction ofthegood beoriginating:
(a) onlythose materials thatareprovided forinthespecific tariff provisions identified
asproviding forthose materials inthatruleandthatareusedintheproduction ofthe
good shall beconsidered asmaterials forthepurpose ofdetermining whether that
requirement issatisfied;
(b) acategory ofidentical orsimilar materials shallconsist ofasingle material onlyif
noother material usedintheproduction ofthegoodisidentical orsimilar tothatsingle
material; and
(c) thespecific tariffprovisions referred toinsubparagraph (a)shallnotinclude thetariff
provision which provides forthegood itself.
2. Forpurposes ofdetermining whether agoodisanoriginating goodunder Article 3.1(c), where
theruleforagoodinAnnex 3.1specifies thatnochange intariffclassification isrequired andspecifies
therequirement thatatleastonecategory ofidentical orsimilar materials usedintheproduction of
thegood beoriginating:
(a) onlythematerials thatareprovided forinthesame tariff provision asthegood and
thatareusedintheproduction ofthegood shallbeconsidered asmaterials forthe
purposes ofdetermining whether therequirement thatatleastonecategory ofidentical
orsimilar materials beoriginating issatisfied; and
(b) acategory ofidentical orsimilar materials shallconsist ofasingle material onlyif
noother material usedintheproduction ofthegoodisidentical orsimilar tothatsingle
material.
Article 3.11
Applying Article 3.1(e) When Goods andParts AreClassified Together
Forpurposes ofdetermining whether agood isanoriginating good under Article 3.1(e):
(a) onlytheparts thatareprovided forinthesame tariff provision asthegood andthat
areusedintheproduction ofthegood shallbeconsidered asparts forthepurposes
ofdetermining whether therequirement thatatleastonecategory ofidentical orsimilar
materials beoriginating issatisfied;WT/REG31/2
Page19
(b) thedetermination ofwhether aheading orsubheading under theHarmonized System
provides forandspecifically describes bothagood anditspartsshallbemade onthe
basis ofthenomenclature oftheheading orsubheading andtherelevant Section or
Chapter Notes, inaccordance withtheGeneral Rules fortheInterpretation ofthe
Harmonized System;
(c) acategory ofidentical orsimilar materials shallconsist ofasingle material onlyif
noother material usedintheproduction ofthegoodisidentical orsimilar tothatsingle
material; and
(d) Article 3.1(e) doesnotapply forpurposes ofdetermining whether apartprovided for
inaheading referred toinArticle 3.1(e)(i) orinasubheading referred toinArticle
3.1(e)(ii) isanoriginating good.
Article 3.12
DeMinimis Calculation andApplication
1. Forpurposes ofapplying theCustoms Valuation Code under Article 3.2(1) andparagraphs 2
through 6,theprinciples oftheCustoms Valuation Code shallapply todomestic transactions, with
suchmodifications asmayberequired bythecircumstances, aswould apply tointernational transactions.
2. Forpurposes ofArticle 3.2(1), thedeminimis content ofagoodshallbecalculated asfollows:
VNM
DMC = -------------- x100
VG
where
DMC isthedeminimis content ofthegood, expressed asapercentage,
VG isthevalue ofthegood, determined inaccordance withparagraph 3,adjusted
toaF.O.B. basis atthepoint ofdirect shipment, and
VNM isthevalue ofallthenon-originating materials usedintheproduction ofthe
good, determined inaccordance withparagraph 6,thatdonotundergo an
applicable change intariff classification setoutinAnnex 3.1.
3. Forpurposes ofArticle 3.2(1) andparagraph 2,thevalue ofagood shallbe:
(a) thetransaction value ofthegood, determined inaccordance withArticle 1ofthe
Customs Valuation Code; or
(b) intheevent thatthere isnotransaction value orthetransaction value ofthematerial
isunacceptable under Article 1oftheCustoms Valuation Code, determined in
accordance withArticles 2through 7oftheCustoms Valuation Code.WT/REG31/2
Page20
4. Forpurposes ofparagraph 2,VNM shallnotinclude thevalue ofnon-originating materials
usedtoproduceoriginatingmaterials,includingoriginatingself-producedmaterials,thataresubsequently
usedbytheproducer intheproduction ofthegood.
5. Forpurposes ofparagraph 2,where identical materials orfungible materials areusedinthe
production ofthegood, thevalue ofthenon-originating materials maybedetermined, atthechoice
oftheproducer ofthegood, byoneofthemethods setoutinAnnex 3.12.5.
6. Forpurposes ofparagraphs 2,4and5,thevalue ofanon-originating material shall:
(a) bethetransaction value ofthematerial, determined inaccordance withArticle 1of
theCustoms Valuation Code; or
(b) intheevent thatthere isnotransaction value orthetransaction value ofthematerial
isunacceptable under Article 1oftheCustoms Valuation Code, bedetermined in
accordance withArticles 2through 7oftheCustoms Valuation Code; and
(c) where notincluded under subparagraph (a)or(b),include
(i) freight, insurance, packing andallother costs incurred intransporting the
material tothelocation oftheproducer,
(ii) duties andtaxes paidorpayable withrespect tothematerial intheterritory
ofoneorbothoftheParties, other thanduties andtaxes thatarewaived,
refunded, refundable orotherwise recoverable, including credit against duty
ortaxpaidorpayable,
(iii) thecostsofcustoms brokerage services, including thecostofin-house customs
brokerage services, incurred withrespect tothematerial intheterritory of
oneorbothoftheParties, and
(iv) thecostofwaste andspoilage resulting from theuseofthematerial inthe
production ofthegood, minus thevalue ofanyreusable scrap orby-product.
7. ExceptasprovidedinArticle3.2(2)or(3),Article3.2(1)shallapplyforpurposesofdetermining
whether agood satisfies therequirements ofArticle 3.1(b) where thatgood isclassified asaset,a
mixture oracomposite good under theHarmonized System.WT/REG31/2
Page21
Article 3.13
Definitions
Forpurposes ofthisChapter:
adjusted toanF.O.B. basis means, withrespect toagood, adjusted by
(a) deducting
(i) thecosts oftransporting thegood afteritisshipped from thepoint ofdirect
shipment,
(ii) thecostsofunloading, loading, handling andinsurance thatareassociated with
thattransportation, and
(iii) thecostofpacking materials andcontainers,
where those costs areincluded inthetransaction value ofthegood, and
(b) adding
(i) thecosts oftransporting thegood from theplace ofproduction tothepoint
ofdirect shipment,
(ii) thecostsofloading, unloading, handling andinsurance thatareassociated with
thattransportation, and
(iii) thecosts ofloading thegood forshipment atthepoint ofdirect shipment,
where those costs arenotincluded inthetransaction value ofthegood;
category ofidentical orsimilar materials means those materials thatareidentical materials orsimilar
materials withrespect toeachother andthatareusedintheproduction ofthegood forwhich origin
isbeing determined under thisChapter;
Customs Valuation Code means theAgreement onImplementation ofArticle VIIoftheGeneral
Agreement onTariffs andTrade 1994under theFinal ActEmbodying theResults oftheUruguay Round
ofMultilateral Trade Negotiations;
direct shipment means transporting orconveying agoodfromoneParty totheotherParty onathrough
billoflading toaconsignee inthatother Party;
fungible goods ormaterials means goods ormaterials thatareinterchangeable forcommercial purposes
withother goods ormaterials, asthecasemaybe,andtheproperties ofwhich areessentially identical;WT/REG31/2
Page22
good iswholly obtained orproduced entirely intheterritory ofoneorbothoftheParties means:
(a) amineral good extracted intheterritory ofoneorbothoftheParties;
(b) avegetable andother good harvested intheterritory ofoneorbothoftheParties;
(c) aliveanimal bornandraised intheterritory ofoneorbothoftheParties;
(d) agood obtained from hunting, trapping orfishing intheterritory ofoneorbothof
theParties;
(e) afish,shellfish andother marine lifetaken from theseabyvessels registered or
recorded withaParty andflying itsflag;
(f) agoodproduced onboard factory ships fromagoodreferred toinsubparagraph (e),
provided suchfactory ships areregistered orrecorded withthatParty andflyitsflag;
(g) agood taken byaParty oraperson ofaParty fromtheseabed orbeneath theseabed
outside territorial waters, provided thataParty hasrights toexploit suchseabed;
(h) agoodtaken fromouter space, provided thatthegoodisobtained byaParty oraperson
ofaParty anddoesnotundergo production outside theterritories oftheParties;
(i) waste andscrap derived from
(i) production intheterritory ofoneorbothoftheParties, or
(ii) usedgoods collected intheterritory ofoneorbothoftheParties, provided
suchgoods arefitonlyfortherecovery ofrawmaterials; and
(j) agood produced intheterritory ofoneorbothoftheParties exclusively fromgoods
referred toinsubparagraphs (a)through (i),orfrom theirderivatives, atanystage
ofproduction;
identical materials means, withrespect toamaterial, materials thatarethesame asthatmaterial in
allrespects, including physical characteristics, quality andreputation butexcluding minor differences
inappearance;
indirect material means agoodusedintheproduction, testing orinspection ofagoodbutnotphysically
incorporated intothegood, oragoodusedinthemaintenance ofbuildings ortheoperation ofequipment
associated withtheproduction ofagood, andincludes
(a) fuelandenergy,
(b) tools, diesandmoulds,
(c) spare parts andmaterials usedinthemaintenance ofequipment andbuildings,WT/REG31/2
Page23
(d) lubricants, greases, compounding materials andother materials usedinproduction or
usedtooperate equipment andbuildings,
(e) gloves, glasses, footwear, clothing, safety equipment andsupplies,
(f) equipment, devices andsupplies usedfortesting orinspecting theother goods,
(g) catalysts andsolvents, and
(h) anyother goods thatarenotincorporated intothegood buttheuseofwhich inthe
production ofthegoodcanreasonably bedemonstrated tobepartofthatproduction;
material means agood thatisusedintheproduction ofanother good, andincludes apartoran
ingredient;
minor processing means, withrespect toagood:
(a) mere dilution withwater oranyother substance thatdoesnotmaterially alterthe
characteristics ofthegood,
(b) cleaning, including removal ofrust,grease, paint oranyother coating,
(c) applying anypreservative ordecorative coating, including anylubricant, protective
encapsulation, preservative ordecorative paint, ormetallic coating,
(d) trimming, filing orcutting offsmall amounts ofexcess material,
(e) packing orrepacking ofthegood fortransport, storage orsale,
(f) packaging orrepackaging ofthegood forretail sale,
(g) repairs oralterations, washing, laundering orsterilizing,
(h) textile decorative processes incidental totheproduction oftextile goods, other than
apparel, suchasedgepinking, whipping, folding androlling, fringing, fringe knotting,
piping, bordering, minor embroidery, hemstitching, embossing, dyeing orprinting,
orother similar processes, or
(i) ornamental orfinishing operations incidental toapparel assembly anddesigned to
enhance themarketing appeal ortheeaseofcareofthegood, suchasembroidery,
hemstitching, sewn appliqué work, stone oracidwashing, printing, piece dyeing,
preshrinking, permanent pressing, theattachment ofaccessories, notions, trimmings
orfindings, orother similar operations;
non-originating good ormaterial means agoodormaterial thatdoesnotqualify asoriginating under
thisChapter;
point ofdirect shipment means thelocation from which aproducer ofagood normally ships that
good tothebuyer ofthegood;WT/REG31/2
Page24
packaging materials andcontainers means materials andcontainers inwhich agood ispackaged
forretail sale;
packing materials andcontainers means materials andcontainers thatareusedtoprotect agoodduring
transportation, butdoesnotinclude packaging materials andcontainers;
producer means aperson whogrows, mines, harvests, fishes, traps, hunts, manufactures, processes
orassembles agood;
production means growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing
orassembling agood;
self-produced material means amaterial thatisproduced bytheproducer ofagood andusedinthe
production ofthatgood;
similar materials means, withrespect toamaterial, materials that,although notalikeinallrespects,
havesimilar characteristics andcomponent materials thatenable thematerials toperform thesame
functions andtobecommercially interchangeable withthatmaterial when usedintheproduction of
agood;
transaction value means theprice actually paidorpayable forthegood ormaterial withrespect to
thetransaction between theproducer ofthegoodandthebuyer ofthegoodortheseller ofthematerial,
respectively, adjusted inaccordance withparagraphs 1,3and4ofArticle 8oftheCustoms Valuation
Code; and
usedmeans usedorconsumed intheproduction ofagood.WT/REG31/2
Page25
Annex 3.7
Inventory Management Methods
Part1
Fungible Materials
1. Definitions andInterpretation
Forpurposes ofthisPart,
average method means themethod bywhich theorigin offungible materials withdrawn frommaterials
inventory isbased ontheratio, calculated under Section 4,oforiginating materials andnon-originating
materials inmaterials inventory;
FIFO method means themethod bywhich theorigin offungible materials firstreceived inmaterials
inventory isconsidered tobetheorigin offungible materials firstwithdrawn frommaterials inventory;
LIFO method means themethod bywhich theorigin offungible materials lastreceived inmaterials
inventory isconsidered tobetheorigin offungible materials firstwithdrawn frommaterials inventory;
materials inventory means,
(a) withrespect toaproducer ofagood, aninventory offungible materials thatareused
intheproduction ofthegood, and
(b) withrespect toaperson fromwhom theproducer ofthegoodacquired suchfungible
materials, aninventory fromwhich fungible materials aresoldorotherwise transferred
totheproducer ofthegood;
openinginventorymeansthematerialsinventoryatthetimeaninventorymanagementmethodischosen;
and
origin identifier means anymark thatidentifies fungible materials asoriginating materials ornon-
originating materials.
2. General
1. Theinventory management methods fordetermining whether fungible materials referred to
inArticle 3.7(1)(a) areoriginating materials arethefollowing:
(a) specific identification method;
(b) FIFO method;WT/REG31/2
Page26
(c) LIFO method; and
(d) average method.
2. Where aproducer ofagood oraperson fromwhom theproducer acquired thematerials that
areusedintheproduction ofthegood chooses aninventory management method referred toin
paragraph 1,thatmethod, including theaveraging period chosen inthecaseoftheaveraging method,
shallbeusedfromthetimethechoice ismade untiltheendofthefiscal yearoftheproducer orperson.
3. Specific Identification Method
1. Except asotherwise provided under paragraph 2,where theproducer orperson referred to
inSection 2(2)chooses thespecific identification method, theproducer orperson shall physically
segregate, inmaterials inventory, originating materials thatarefungible materials fromnon-originating
materials thatarefungible materials.
2. Where originating materials ornon-originating materials thatarefungible materials aremarked
withanorigin identifier, theproducer orperson neednotphysically segregate those materials under
paragraph 1iftheorigin identifier remains visible throughout theproduction ofthegood.
4. Average Method
1. Where theproducer orperson referred toinSection 2(2)chooses theaverage method, theorigin
offungible materials withdrawn from materials inventory isdetermined onthebasis oftheratioof
originating materials andnon-originating materials inmaterials inventory thatiscalculated under
paragraphs 2and3.
2. Theratioiscalculated withrespect toaone-month orthree-month period, atthechoice of
theproducer orperson, bydividing
(a) thesumof
(i) thetotalunits oforiginating materials ornon-originating materials thatare
fungible materials andthatwereinmaterials inventory atthebeginning ofthe
preceding one-month orthree-month period, and
(ii) thetotalunits oforiginating materials ornon-originating materials thatare
fungible materials andthatwere received inmaterials inventory during that
preceding one-month orthree-month period,
by
(b) thesumof
(i) thetotalunitsoforiginating materials andnon-originating materials thatare
fungible materials andthatwereinmaterials inventory atthebeginning ofthe
preceding one-month orthree-month period, andWT/REG31/2
Page27
(ii) thetotalunitsoforiginating materials andnon-originating materials thatare
fungible materials andthatwere received inmaterials inventory during that
preceding one-month orthree-month period.
3. Theratio calculated withrespect toapreceding one-month orthree-month period under
paragraph 2isapplied tothefungible materials remaining inmaterials inventory attheendofthe
preceding one-month orthree-month period.
5. Manner ofDealing withOpening Inventory
1. Except asotherwise provided under paragraphs 2and3,where theproducer orperson referred
toinSection 2(2)hasfungible materials inopening inventory, theorigin ofthose fungible materials
isdetermined by
(a) identifying, inthebooks oftheproducer orperson, thelatest receipts offungible
materials thatadduptotheamount offungible materials inopening inventory;
(b) determining theorigin ofthefungible materials thatmake upthose receipts; and
(c) considering theorigin ofthose fungible materials tobetheorigin ofthefungible
materials inopening inventory.
2. Where theproducer orperson chooses thespecific identification method andhas,inopening
inventory, originating materials ornon-originating materials thatarefungible materials andthatare
marked withanorigin identifier, theorigin ofthose fungible materials isdetermined onthebasis of
theorigin identifier.
3. Theproducer orperson mayconsider allfungible materials inopening inventory tobenon-
originating materials.
PartII
Fungible Goods
6. Definitions andInterpretation
Forpurposes ofthisPart,
average method means themethod bywhich theorigin offungible goods withdrawn from finished
goodsinventoryisbasedontheratio,calculatedunderSection9,oforiginatinggoodsandnon-originating
goods infinished goods inventory;
FIFO method means themethod bywhich theorigin offungible goods firstreceived infinished goods
inventory isconsidered tobetheorigin offungible goods firstwithdrawn fromfinished goods inventory;
finished goods inventory means aninventory from which fungible goods aresoldorotherwise
transferred toanother person;WT/REG31/2
Page28
LIFO method means themethod bywhich theorigin offungible goods lastreceived infinished goods
inventory isconsidered tobetheorigin offungible goods firstwithdrawn fromfinished goods inventory;
opening inventory means thefinished goods inventory atthetimeaninventory management method
ischosen; and
origin identifier means anymark thatidentifies fungible goods asoriginating goods ornon-originating
goods.
7. General
1. Theinventory management methods fordetermining whether fungible goods referred toin
Article 3.7(1)(b) or(c)areoriginating goods arethefollowing:
(a) specific identification method;
(b) FIFO method;
(c) LIFO method; and
(d) average method.
2. Where anexporter ofagood oraperson fromwhom theexporter acquired thegood chooses
aninventory management method referred toinparagraph 1,thatmethod, including theaveraging
period chosen inthecaseoftheaveraging method, shallbeusedfrom thetimethechoice ismade
untiltheendofthefiscal yearoftheexporter orperson.
8. Specific Identification Method
1. Except asprovided under paragraph 2,where theexporter orperson referred toinSection 7(2)
chooses thespecific identification method, theexporter orperson shallphysically segregate, infinished
goods inventory, originating goods thatarefungible goods fromnon-originating goods thatarefungible
goods.
2. Where originating goods ornon-originating goods thatarefungible goods aremarked with
anorigin identifier, theexporter orperson neednotphysically segregate those goods under paragraph
1iftheorigin identifier isvisible onthefungible goods.
9. Average Method
1. Where theexporter orperson referred toinSection 7(2)chooses theaverage method, theorigin
ofeachshipment offungible goods withdrawn from finished goods inventory during aone-month or
three-month period, atthechoice oftheexporter orperson, isdetermined onthebasis oftheratio
oforiginating goods andnon-originating goods infinished goods inventory forthepreceding one-month
orthree-month period thatiscalculated bydividingWT/REG31/2
Page29
(a) thesumof
(i) thetotalunitsoforiginating goods ornon-originating goods thatarefungible
goods andthatwere infinished goods inventory atthebeginning ofthe
preceding one-month orthree-month period, and
(ii) thetotalunitsoforiginating goods ornon-originating goods thatarefungible
goods andthatwerereceived infinished goods inventory during thatpreceding
one-month orthree-month period,
by
(b) thesumof
(i) thetotalunitsoforiginating goods andnon-originating goods thatarefungible
goods andthatwere infinished goods inventory atthebeginning ofthe
preceding one-month orthree-month period, and
(ii) thetotalunitsoforiginating goods andnon-originating goods thatarefungible
goods andthatwerereceived infinished goods inventory during thatpreceding
one-month orthree-month period.
2. Theratiocalculated withrespect toapreceding month orthree-month period under paragraph 1
isapplied tothefungible goods remaining infinished goods inventory attheendofthepreceding month
orthree-month period.
10. Manner ofDealing withOpening Inventory
1. Except asotherwise provided under paragraphs 2and3,where theexporter orperson referred
toinSection 7(2)hasfungible goods inopening inventory, theorigin ofthose fungible goods is
determined by
(a) identifying, inthebooks oftheexporter orperson, thelatest receipts offungible goods
thatadduptotheamount offungible goods inopening inventory;
(b) determining theorigin ofthefungible goods thatmake upthose receipts; and
(c) considering theorigin ofthose fungible goods tobetheorigin ofthefungible goods
inopening inventory.
2. Where theexporter orperson chooses thespecific identification method andhas,inopening
inventory, originating goods ornon-originating goods thatarefungible goods andthataremarked with
anorigin identifier, theorigin ofthose fungible goods isdetermined onthebasisoftheorigin identifier.
3. Theexporter orperson mayconsider allfungible goods inopening inventory tobenon-
originating goods.WT/REG31/2
Page30
Annex 3.12.5
Methods forDetermining theValue ofNon-Originating Materials Under Article 3.2(1)
Where Identical Materials orFungible Materials AreUsed intheProduction oftheGood
1. Definitions andInterpretation
ForpurposesofthisAnnex,withrespecttonon-originatingmaterialsreferredtoinArticle3.2(1):
FIFO method means themethod bywhich thevalue ofnon-originating materials firstreceived in
materials inventory, determined inaccordance withArticle 3.12(6), isconsidered tobethevalue of
non-originating materials usedintheproduction ofthegood firstshipped tothebuyer ofthegood;
LIFO method means themethod bywhich thevalue ofnon-originating materials lastreceived in
materials inventory, determined inaccordance withArticle 3.12(6), isconsidered tobethevalue of
non-originating materials usedintheproduction ofthegood firstshipped tothebuyer ofthegood;
materials inventory means, withrespect toasingle plant oftheproducer ofagood, aninventory
ofnon-originating materials thatareidentical materials andthatareusedintheproduction ofthegood;
and
rolling average method means themethod bywhich thevalue ofnon-originating materials usedin
theproduction ofagoodthatisshipped tothebuyer ofthegoodisbased ontheaverage value, calculated
inaccordance withparagraph 3,ofthenon-originating materials inmaterials inventory.
2. General
1. Themethods fordetermining thevalue ofnon-originating materials thatareidentical materials
orfungible materials andthatarereferred toinArticle 3.12(5) arethefollowing:
(a) FIFO method;
(b) LIFO method; and
(c) rolling average method.
2. Where aproducer ofagoodchooses, withrespect tonon-originating materials thatareidentical
materials orfungible materials, anyofthemethods referred toinparagraph 1,theproducer maynot
useanother ofthose methods withrespect toanyother non-originating materials thatareidentical
materials orfungible materials, asthecasemaybe,andthatareusedintheproduction ofthatgood
orintheproduction ofanyother goodwithrespect towhich thecalculation under Article 3.12(2) has
beenmade.
3. Where aproducer ofagood produces thegood inmore thanoneplant, themethod chosen
bytheproducer shallbeusedwithrespect toallplants oftheproducer inwhich thegoodisproduced.
4. Themethod chosen bytheproducer todetermine thevalue ofnon-originating materials may
bechosen atanytimeduring theproducer 'sfiscal yearandmaynotbechanged during thatfiscal year.WT/REG31/2
Page31
3. Average Value forRolling Average Method
1. Theaverage value ofnon-originating materials thatareidentical materials orfungible materials
andthatareusedintheproduction ofagood thatisshipped tothebuyer ofthegoods iscalculated
bydividing
(a) thetotalvalue ofnon-originating materials thatareidentical materials orfungible
materials, asthecasemaybe,andthatareinmaterials inventory priortotheshipment
ofthegood, determined inaccordance withArticle 3.12(6),
by
(b) thetotalunits ofthose non-originating materials inmaterials inventory prior tothe
shipment ofthegood.
2. Theaverage value calculated under paragraph 1isapplied totheremaining units ofnon-
originating materials inmaterials inventory.WT/REG31/2
Page32
Chapter Four
National Treatment andOther Border Measures
NATIONAL TREATMENT
Article 4.1
National Treatment
1. Each Party shallaccord national treatment tothegoods oftheother Party inaccordance with
Article IIIoftheGATT 1994, including itsinterpretative notes, andtothisendArticle IIIofGATT
1994anditsinterpretative notes, oranyequivalent provision ofasuccessor agreement towhich both
Parties areparty, areincorporated intoandmade partofthisAgreement.
2. Paragraph 1doesnotapply tothemeasures setoutinAnnex 4.1.
TECHNICAL BARRIERS TOTRADE
Article 4.2
Technical Barriers toTrade
1. Therights andobligations oftheParties relating tostandards-related measures shallbegoverned
bytheAgreement onTechnical Barriers toTrade ,partofAnnex 1AoftheWTO Agreement .
2. TheParties shall endeavour toenter intoanagreement onmutual recognition respecting
conformity assessment.
Article 4.3
Sanitary andPhytosanitary Measures
1. Therights andobligations oftheParties relating tosanitary andphytosanitary measures shall
begoverned bytheAgreement ontheApplication ofSanitary andPhytosanitary Measures ,partof
Annex 1AoftheWTO Agreement .WT/REG31/2
Page33
BORDER MEASURES
Article 4.4
Import andExport Restrictions
1. Except asotherwise provided inthisAgreement, neither Party mayadopt ormaintain any
prohibition orrestriction ontheimportation ofanygood oftheother Party orontheexportation or
saleforexport ofanygood destined fortheterritory oftheother Party, except inaccordance with
Article XIofGATT 1994, including itsinterpretative notes. TothisendArticle XIofGATT 1994
anditsinterpretative notes, oranyequivalent provisions ofasuccessor agreements towhich bothParties
areparty, areincorporated intoandmade apartofthisAgreement.
2. TheParties reaffirm thattheGATT 1994 rights andobligations incorporated byparagraph 1
prohibit, inanycircumstances inwhich anyother form ofrestriction isprohibited, export price
requirements and,except aspermitted inenforcement ofcountervailing andantidumping orders and
undertakings, import price requirements.
3. Intheevent thataParty adopts ormaintains aprohibition orrestriction ontheimportation
fromorexportation toanon-Party ofagood, nothing inthisAgreement shallbeconstrued toprevent
theParty from:
(a) limiting orprohibiting theimportation from theterritory oftheother Party ofsuch
good ofthatnon-Party; or
(b) requiring asacondition ofexport ofsuchgoodoftheParty totheterritory oftheother
Party, thatthegoodnotbere-exported tothenon-Party, directly orindirectly, without
being consumed intheterritory oftheother Party.
4. Intheevent thataParty adopts ormaintains aprohibition orrestriction ontheimportation
ofagood from anon-Party, theParties shallconsult, onrequest oftheother Party, withaviewto
avoiding undue interference withordistortion ofpricing, marketing anddistribution arrangements in
theother Party.
5. Paragraphs 1through 4shallnotapply tothemeasures setoutinAnnex 4.1.
EMERGENCY ACTION
Article 4.5
Bilateral Emergency Actions
1. Subject toparagraphs 2and3,ifagoodoriginating intheterritory ofoneParty is,asaresult
ofthereduction orelimination ofadutyprovided forinChapter Two, being imported intotheterritory
oftheother Party insuchincreased quantities, inabsolute terms, andunder suchconditions sothat
theimports ofsuchgoodfromtheexporting Party alone constitute asubstantial cause ofserious injury
toadomestic industry producing alikeordirectly competitive good, theimporting Party may, tothe
extent necessary toremedy theinjury:WT/REG31/2
Page34
(a) suspend thefurther reduction ofanyrateofdutyprovided forunder thisAgreement
onsuchgood; or
(b) increase therateofdutyonsuchgood toalevelnottoexceed thelesser of:
(i) themost-favoured nation (MFN) rateofdutyineffect atthetime,
(ii) theapplicable MFN orGPTrateofdutyineffect onthedayimmediately
preceding thedateoftheentry intoforce ofthisAgreement.
2. Thefollowing conditions andlimitations shallapply toanaction authorized byparagraph 1:
(a) notification andconsultation shallprecede theaction;
(b) noaction shallbemaintained foraperiod exceeding three years;
(c) noaction maybetaken ormaintained byaParty against anyparticular goodoriginating
intheterritory oftheother Party afterJuly1,1999; and
(d) uponthetermination oftheaction, therateofdutyshallbetheratewhich would have
beenineffect butfortheaction.
3. TheParty taking anaction pursuant tothisArticle mayprovide totheParty against whose
good theaction istaken mutually agreed trade liberalizing compensation intheform ofconcessions
having substantially equivalent tradeeffects orequivalent tothevalue oftheadditional duties expected
toresult fromtheaction. IftheParties areunable toagree oncompensation, theParty against whose
goodtheaction istaken maytakeaction having tradeeffects substantially equivalent totheaction taken
under paragraph 1.
Article 4.6
Global Emergency Actions
1. TheParties retain theirrights andobligations under Article XIXoftheGATT 1994 orany
safeguard agreement pursuant thereto except those regarding compensation orretaliation andexclusion
fromanaction totheextent thatsuchrights orobligations areinconsistent withthisArticle. AParty
taking emergency action under Article XIXoranysuchagreement shallexclude fromtheaction imports
ofagood from theother Party unless:
(a) imports from theother Party account forasubstantial share oftotalimports; and
(b) imports from theother Party, contribute importantly totheserious injury, orthreat
thereof, caused byimports.WT/REG31/2
Page35
2. Indetermining whether:
(a) imports from theother Party account forasubstantial share oftotalimports, those
imports normally shallnotbeconsidered toaccount forasubstantial share oftotal
imports iftheother Party isnotamong thetopfivesuppliers ofthegood subject to
theproceeding, measured interms ofimport share during themostrecent three-year
period; and
(b) imports from theother Party contribute importantly totheserious injury, orthreat
thereof, thecompetent investigating authority shallconsider suchfactors asthechange
intheimport share oftheother Party, andthelevelandchange inthelevelofimports
fromtheother Party. Inthisregard, imports fromtheother Party normally shallnot
bedeemed tocontribute importantly toaserious injury orthreat thereof ifthegrowth
rateofimports from theother Party during theperiod inwhich theinjurious surge
inimports occurred isappreciably lower thanthegrowth rateoftotalimports from
allsources overthesame period.
3. APartytakingsuchaction,fromwhichagoodfromtheotherPartyisinitiallyexcluded,pursuant
toparagraph 1,shallhavetherightsubsequently toinclude thatgoodfromtheother Party intheaction
intheevent thatthecompetent investigating authority determines thatasurge inimports ofsuchgood
from theother Party undermines theeffectiveness oftheaction.
4. AParty shall, without delay, deliver written notice totheother Party oftheinstitution ofa
proceeding thatmayresult inemergency action under paragraph 1or3.
5. Neither Party mayimpose restrictions onagood inanaction under paragraph 1or3:
(a) without delivery ofprior written notice totheCommission, andwithout adequate
opportunity forconsultation withtheother Party against whose good theaction is
proposed tobetaken, asfarinadvance oftaking theaction aspracticable; and
(b) thatwould havetheeffect ofreducing imports ofsuchgood from aParty below the
trend ofimports ofthegood fromthatParty overarecent representative baseperiod
withallowance forreasonable growth.
6. TheParty taking anaction pursuant tothisArticle mayprovide totheParty against whose
good theaction istaken mutually agreed trade liberalizing compensation intheform ofconcessions
having substantially equivalent tradeeffects orequivalent tothevalue oftheadditional duties expected
toresult fromtheaction. IftheParties areunable toagree oncompensation, theParty against whose
goodtheaction istaken maytakeaction having tradeeffects substantially equivalent totheaction taken
under paragraph 1or3.
Article 4.7
Export Taxes
1. Neither Party mayadopt ormaintain anyduty, taxorother charge ontheexport ofanygood
totheterritory oftheother Party, unless suchduty, taxorcharge isadopted ormaintained onany
suchgood when destined fordomestic consumption.WT/REG31/2
Page36
2. Paragraph 1doesnotapply tothemeasures setoutinAnnex 4.1.
Article 4.8
Temporary Entry ofBusiness Persons
Inviewofthepreferential trading relationship between theParties, theParties willfacilitate
temporary entry onareciprocal basisforbusiness persons whoareotherwise qualified forentry under
applicable measures oftheParties relating topublic health, safety andnational security andgoverned
bytheprinciples established intheGeneral Agreement onTrade inServices ,Annex 1BoftheWTO
Agreement, inparticular theAnnex onMovement ofNatural Persons Supplying Services under the
Agreement .
CONSULTATIONS
Article 4.9
Consultations
1. TheParties shallmeetontherequest ofeither Party toconsider anymatter arising under this
Chapter.
2. Where aParty requests consultations under paragraph 1,theParties mayreferthematter for
non-binding technical advice orrecommendations toacommittee orworking group, including anad
hoccommittee orworking group, ortoanother forum.
3. Where theParties have consulted pursuant tothisArticle, theconsultations shall, onthe
agreement oftheParties, constitute consultations under Article 8.6.
Annex 4.1
Exceptions toArticle 4.1
Section A-Canadian Measures
1. Article 4.1shallnotapply tocontrols byCanada ontheexport oflogsofallspecies.
2. Article 4.1shallnotapply tocontrols byCanada ontheexport ofunprocessed fishpursuant
tothefollowing existing statutes, asamended asofAugust 12,1992:
(a) NewBrunswick FishProcessing Act,R.S.N.B. c.F-18.01 (1982), andFisheries
Development Act,S.N.B. c.F-15.1 (1977);
(b) Newfoundland FishInspection Act,R.S.N. 1990, c.F-12;
(c) Nova Scotia Fisheries Act,S.N.S. 1977, c.9;WT/REG31/2
Page37
(d) Prince Edward Island FishInspection Act,R.S.P.E.I. 1988, c.F-13; and
(e) Quebec Marine Products Processing Act,No.38,S.Q.1987, c.51.
3. Article 4.1shallnotapply to:
(a) measures byCanada respecting theexportation ofliquor fordelivery intoanycountry
intowhich theimportation ofliquor isprohibited bylawunder theexisting provisions
oftheExport Act,R.S.C. 1985, c.E-18, asamended,
(b) Canadian excise duties onabsolute alcohol usedinmanufacturing under theexisting
provisions oftheExcise Act,R.S.C. 1985, c.E-14, asamended, and
(c) measures byCanada prohibiting theuseofforeign ornon-duty paidshipsinthecoasting
trade ofCanada unless granted alicense under theCoasting Trade Act,S.C.1992,
c.31,
totheextent thatsuchprovisions weremandatory legislation atthetimeofCanada 'saccession tothe
GATT 1947 andhavenotbeenamended soastodecrease theirconformity withtheGATT 1994.
4. Article 4.1shallnotapply to:
(a) thecontinuationorpromptrenewalofanon-conformingprovisionofanystatutereferred
toinparagraph 2or3;and
(b) theamendment toanon-conforming provision ofanystatute referred toinparagraph 2
or3totheextent thattheamendment doesnotdecrease theconformity oftheprovision
withArticle 4.1.
Section B-Israeli Measures
1. Article 4.1shallnotapply to:
(a) controls andcharges maintained byIsrael ontheexport ofmetal waste andscrap;
(b) controls onimports ofplastic, rubber, paper, metal andglass thataremaintained by
Israel forecological purposes;
(c) subject toIsraeli law,imports ofmeatnotapproved bytheChief Rabbinate; and
(d) controlsmaintainedbyIsraelontheimportofusedclothingandmade-uptextileseconds.WT/REG31/2
Page38
Chapter Five
Customs Procedures
Section A-Certification ofOrigin
Article 5.1
Certificate ofOrigin
1. TheParties shallestablish, priortotheimplementation ofthisAgreement, aCertificate ofOrigin
forthepurpose ofcertifying thatagoodbeing exported fromtheterritory ofaParty intotheterritory
oftheotherPartyqualifiesasanoriginatinggood,andmaythereafterrevisetheCertificatebyagreement.
2. Each Party mayrequire thataCertificate ofOrigin foragood imported intoitsterritory be
completed attheoption oftheexporter inanofficial language ofeither Party.
3. Each Party shall:
(a) require that,foraCertificate ofOrigin tobeconsidered validbytheParty intowhose
territoryagoodisimportedwithrespecttowhichaclaimforpreferentialtarifftreatment
ismade, theCertificate becompleted andsigned bytheexporter ofthatgood inthe
territory oftheParty from which thegood isexported; and
(b) provide that,where anexporter initsterritory isnottheproducer ofthegood, the
exporter maycomplete andsignaCertificate onthebasis of
(i) itsknowledge ofwhether thegood qualifies asanoriginating good, or
(ii) itsreasonable reliance ontheproducer 'swritten representation thatthegood
qualifies asanoriginating good.
4. Each Party shallprovide thataCertificate ofOrigin thathasbeencompleted andsigned by
anexporter intheterritory oftheother Party may, attheoption ofthatexporter, beapplicable to:
(a) asingle importation ofagood intotheParty'sterritory, or
(b) multiple importations ofidentical goods intotheParty'sterritory thatoccur within a
specified period, notexceeding 12months, setouttherein bytheexporter.
Article 5.2
Obligations Regarding Importations
1. Except asotherwise provided inthisChapter, eachParty shallrequire animporter initsterritory
thatclaims preferential tariff treatment foragood imported intoitsterritory fromtheterritory ofthe
other Party to:WT/REG31/2
Page39
(a) make awritten declaration, based onavalidCertificate ofOrigin, thatthegoodqualifies
asanoriginating good;
(b) havetheCertificate initspossession atthetimethedeclaration ismade;
(c) provide, ontherequest ofthatParty'scustoms administration,
(i) acopyoftheCertificate,
(ii) documentary evidence suchasbillsoflading orwaybills thatindicate the
shipping route andallpoints ofshipment andtranshipment prior tothe
importation ofthegood intoitsterritory, and
(iii) where thegoodisshipped through ortranshipped intheterritory ofanon-Party
referred toinArticle 3.5(1)(b), acopyofthecustoms control documents that
indicate, tothesatisfaction ofthecustoms administration, thatthegood
remained under customs control while intheterritory ofsuchnon-Party; and
(d) promptly make acorrected declaration andpayanyduties owing where theimporter
hasreason tobelieve thataCertificate onwhich adeclaration wasbased contains
information thatisnotcorrect.
2. EachPartyshallprovidethat,whereanimporterinitsterritoryclaimspreferentialtarifftreatment
foragoodimported intoitsterritory fromtheterritory oftheotherParty, theParty maydenypreferential
tariff treatment tothegood iftheimporter failstocomply withanyrequirement under thisChapter.
3. EachParty shallprovide that,where agoodwould havequalified asanoriginating goodwhen
itwasimported intotheterritory ofthatParty buttheimporter ofthegood didnothaveavalid
Certificate ofOrigin forsuchgoodatthetimeofitsimportation, theimporter ofthegoodmay,within
aperiod ofnotlessthanthreemonths afterthedateonwhich thegoodwasimported, apply forarefund
ofanyexcess duties paidastheresult ofthegoodnothaving beenaccorded preferential tarifftreatment,
provided thattheimporter:
(a) ifrequired bythatParty, declared atthetimeofimportation ofthegoodthatsuchgood
would qualify asanoriginating good; and
(b) present
(i) awritten declaration thatthegoodqualified asanoriginating goodatthetime
ofimportation,
(ii) acopyoftheCertificate ofOrigin, and
(iii) suchother documentation relating totheimportation ofthegoodasthatParty
mayrequire.WT/REG31/2
Page40
Article 5.3
Obligations Regarding Exportations
1. Each Party shallprovide that:
(a) anexporter initsterritory shall provide acopy oftheCertificate toitscustoms
administration onrequest; and
(b) anexporter initsterritory thathascompleted andsigned aCertificate ofOrigin, and
thathasreason tobelieve thattheCertificate contains information thatisnotcorrect,
shallpromptly notify inwriting allpersons towhom theCertificate wasgiven bythe
exporter ofanychange thatcould affect theaccuracy orvalidity oftheCertificate.
2. Each Party:
(a) shallprovide thatafalsecertification byanexporter initsterritory thatagood tobe
exported totheterritory oftheother Party qualifies asanoriginating goodshallhave
thesame legal consequences, withappropriate modifications, aswould apply toan
importer initsterritory foracontravention ofitscustoms lawsandregulations regarding
themaking ofafalsestatement orrepresentation; and
(b) mayapply suchmeasures asthecircumstances maywarrant where anexporter inits
territory failstocomply withanyrequirement ofthisChapter.
Article 5.4
Exceptions
Each Party shallprovide thataCertificate ofOrigin shallnotberequired for:
(a) acommercial importation ofagood whose value doesnotexceed $1,600 Canadian
oritsequivalent amount inNewIsraeli Shekels (NIS) orsuchhigher amount asitmay
establish, except thatitmayrequire thattheinvoice accompanying theimportation
include astatement bytheexporter ofthegood certifying thatthegood qualifies as
anoriginating good, or
(b) animportation ofagoodforwhich theParty intowhose territory thegoodisimported
haswaived therequirement foraCertificate ofOrigin,
provided thattheimportation doesnotform partofaseries ofimportations thatmayreasonably be
consideredtohavebeenundertakenorarrangedforthepurposeofavoidingthecertificationrequirements
ofthisChapter.WT/REG31/2
Page41
Section B-Administration andEnforcement
Article 5.5
Records
Each Party shallprovide that:
(a) anexporter initsterritory thatcompletes andsignsaCertificate ofOrigin shallmaintain
initsterritory, forfiveyears afterthedateonwhich theCertificate wassigned orfor
suchlonger period astheParty mayspecify, allrecords relating totheorigin ofagood
forwhich preferential tariff treatment wasclaimed intheterritory oftheother Party,
including records associated with:
(i) thepurchase of,costof,value of,andpayment for,thegood thatisexported
from itsterritory,
(ii) thesourcing of,purchase of,costof,value of,andpayment for,allmaterials,
including indirect materials, usedintheproduction ofthegoodthatisexported
from itsterritory, and
(iii) theproduction ofthegood intheform inwhich thegood isexported from
itsterritory; and
(b) animporter claiming preferential tarifftreatment foragoodimported intotheParty's
territory shallmaintain inthatterritory, forfiveyears afterthedateofimportation
ofthegood orforsuchlonger period astheParty mayspecify, suchdocumentation,
including acopyoftheCertificate, astheParty mayrequire relating totheimportation
ofthegood.
Article 5.6
Origin Verifications
1. Forpurposes ofdetermining whether agood imported intoitsterritory from theterritory of
theotherParty qualifies asanoriginating good, aParty may,through itscustoms administration, conduct
averification oforigin, subject toparagraph 2,bymeans of:
(a) written questionnaires toanexporter oraproducer intheterritory ofthatother Party
forpurposes ofobtaining theinformation onthebasisofwhich aCertificate ofOrigin
referred toinArticle 5.1wascompleted andsigned;
(b) visits tothepremises ofanexporter oraproducer intheterritory ofthatother Party
forpurposes ofreviewing therecords referred toinArticle 5.5andtoobserve the
facilities usedintheproduction ofthegood; or
(c) suchother procedures astheParties mayagree.WT/REG31/2
Page42
2. Notwithstanding anyother treaties, agreements ormemoranda ofunderstanding between the
Parties ascontemplated under Article 5.11(3), where, pursuant toparagraph 10,aParty notifies the
other Party thattheorigin verifications referred toinparagraph 1arerequired tobeconducted byits
customs administration onbehalf oftheother Party, suchverifications shallbeconducted, subject to
theprocedures, conditions andtimeframes setoutinAnnex 5.6.2, inaccordance withtheverification
standards andframework established under Article 5.11.
3. Priortoconducting averification visitreferred toinparagraph 1(b),thecustoms administration
oftheParty proposing toconduct thevisitor,where thecircumstances contemplated under paragraph
2exist, thecustoms administration oftheParty acting onbehalf oftheother Party, asthecasemay
be,shalldeliver awritten notification oftheintention toconduct avisitatleast30daysinadvance
ofthedateoftheproposed visittotheexporter orproducer whose premises aretobevisited andobtain
thewritten consent ofthatexporter orproducer tosuchvisit.
4. Thenotification referred toinparagraph 3shallinclude:
(a) theidentity ofthecustoms administration issuing thenotification and,where the
circumstances referred tounder paragraph 2exist, theidentity ofthecustoms
administration onwhose behalf thenotification isbeing sent;
(b) thename oftheexporter orproducer whose premises aretobevisited;
(c) thedateandplace oftheproposed verification visit;
(d) theobject andscope oftheproposed verification visit, including specific reference
tothegood thatisthesubject oftheverification;
(e) thenames andtitles oftheofficials performing theverification visit; and
(f) thelegalauthority fortheverification visit.
5. Where anorigin verification referred tounder paragraph 1istobeconducted bythecustoms
administration oftheParty intowhose territory agood wasimported, thecustoms administration of
thatParty shall:
(a) inthecaseofawritten questionnaire, deliver acopyofthequestionnaire; or
(b) inthecaseofaverification visit, notlessthan30daysprior toconducting thevisit,
deliver acopyofthewritten notification referred toparagraph 3,
tothecustoms administration oftheParty from whose territory thegood wasexported.
6. Where anexporter orproducer doesnotrespond toawritten questionnaire ordoesnotgive
itswritten consent toaproposed verification visitwithin 30daysofdelivery totheexporter orproducer
ofthequestionnaire orofthenotification referred toinparagraph 3,asthecasemaybe,orfailsto
provide sufficient information inresponse toaquestionnaire ordenies access totherecords referred
toinArticle 5.5during theconduct ofavisit, theParty intowhose territory thegood wasimported
maydenypreferential tariff treatment tothegood thatwasthesubject oftheorigin verification.WT/REG31/2
Page43
7. EachParty shallprovide that,where itscustoms administration receives notification, pursuant
toparagraph 5,from thecustoms administration oftheother Party oriscontacted toconduct a
verification visitonbehalf ofthatother Party, pursuant toAnnex 5.6.2(1), itmay, within 15days
ofreceipt ofthenotification orfrom thedateofcontact, asthecasemaybe,postpone theproposed
verification visitforaperiod notexceeding 60daysfrom thedateofsuchreceipt orcontact, orfor
suchlonger period astheParties mayagree.
8. Each Party shallprovide that,where itscustoms administration conducts averification visit
pursuant toparagraph 1(b)orwhere averification visitisrequired tobeconducted onitsbehalf by
thecustoms administration oftheParty from whose territory thegoods were exported pursuant to
paragraph 2,theexporter orproducer whose goods arethesubject oftheverification visitmaydesignate
twoobservers tobepresent during thevisit, provided that:
(a) theobservers donotparticipate inamanner other thanasobservers; and
(b) thefailure bytheexporter orproducer todesignate observers shallnotresult inthe
postponement oftheverification visit.
9. Thecustoms administration oftheParty intowhose territory thegoodisimported, regardless
ofthemanner inwhich, under either paragraph 1or2,averification oforigin isconducted, shallprovide
theexporter orproducer whose good isthesubject oftheverification withawritten determination
ofwhether thegoodqualifies asanoriginating good, including thefindings offactandthelegalbasis
onwhich thedetermination wasmade.
10. EachParty shall, before thisAgreement enters intoforce, notify theother Party astowhether
anorigin verification referred tounder paragraph 1isrequired tobeconducted initsterritory by:
(a) thecustoms administration oftheother Party; or
(b) itscustoms administration onbehalf ofthatother Party.
11. Notwithstanding paragraph 10,either Party may, atanytimeaftertheAgreement enters into
force, upon 60daysnotice totheother Party, change themanner inwhich anorigin verification is
required tobeconducted initsterritory fromsubparagraph 10(a) to(b)orviceversa, asthecasemay
be.
Article 5.7
Confidentiality
1. EachParty shallmaintain, inaccordance withitslaw,theconfidentiality ofconfidential business
information collected pursuant tothisChapter andshallprotect thatinformation fromdisclosure that
could prejudice thecompetitive position ofthepersons providing theinformation.
2. Theconfidential business information collected byaParty pursuant tothisChapter mayonly
bedisclosed inaccordance withtheMutual Assistance Agreement concerning customs matters tobe
concluded bytheParties.WT/REG31/2
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Article 5.8
Advance Rulings
1. EachParty shall, through itscustoms administration, provide fortheissuance ofwritten advance
rulings, priortotheimportation ofagoodintoitsterritory, toanimporter initsterritory oranexporter
orproducer intheterritory oftheother Party, onthebasis ofthefactsandcircumstances presented
bysuchimporter, exporter orproducer ofthegood, concerning whether thegood qualifies asan
originating good under therequirements ofChapter Three.
2. Each Party shallprovide thatitscustoms administration:
(a) may, atanytimeduring thecourse ofanevaluation ofanapplication foranadvance
ruling, request supplemental information fromtheperson requesting theruling; and
(b) shall, afterithasobtained allnecessary information from theperson requesting an
advance ruling, issue theruling within 120days.
3. Subject toparagraph 4,eachParty shallapply anadvance ruling toimportations intoitsterritory
ofthegoodforwhich theruling wasrequested, beginning onthedateofitsissuance orsuchlaterdate
asmaybespecified intheruling.
4. TheParty issuing anadvance ruling maymodify orrevoke theruling:
(a) iftheruling isbased onanerror
(i) offact,or
(ii) inthetariffclassification ofagoodoramaterial thatisthesubject oftheruling;
(b) ifthereisachange inthematerial factsorcircumstances onwhich theruling isbased;
(c) toconform withamodification ofChapter Three; or
(d) toconform withajudicial decision orachange initsdomestic law.
Article 5.9
Penalties
Each Party shallmaintain measures imposing criminal, civiloradministrative penalties for
violations ofitslawsandregulations relating tothisChapter.WT/REG31/2
Page45
Section C-Review andAppeal ofOrigin Determinations
Article 5.10
Review andAppeal
1. Each Party shallgrant substantially thesame rights ofreview andappeal withrespect toa
decision relating totheorigin ofimported goods represented asmeeting therequirements ofChapter
Three asareprovided withrespect tothetariff classification ofimported goods.
2. Each Party shallprovide thattherights ofreview andappeal referred toin
paragraph 1shallinclude access to:
(a) atleast onelevel ofadministrative review independent oftheofficial oroffice
responsible forthedetermination under review; and
(b) inaccordancewithitsdomesticlaw,judicialorquasi-judicialreviewofthedetermination
ordecision taken atthefinallevelofadministrative review.
Section D-Cooperation
Article 5.11
Cooperation
1. Infurtherance oftheirmutual interest inensuring theeffective administration ofthecertification
process established under Articles 5.1,5.2and5.3,theParties shallcooperate fullyintheverification
oforigin certification andintheenforcement oftheirrespective lawsinaccordance withthisAgreement.
2. Pursuant toparagraph 1,theParties shall:
(a) cooperate indeveloping verification standards andaframework toensure thatboth
Partiesactconsistentlyindeterminingthatgoodsimportedintotheirrespectiveterritories
meettherules oforigin setoutinChapter Three; and
(b) exchange information toassist eachother inthetariff classification, valuation and
determination oforigin, fortariffpreference andcountry oforigin marking purposes,
ofimported andexported goods.
3. Infurtherance oftheirmutual interest intheprevention, investigation andrepression ofunlawful
acts,theParties shallcooperate fullyintheenforcement oftheirrespective customs lawsinaccordance
withthisAgreement andwithother treaties, agreements andmemoranda ofunderstanding between
them.
4. Each Party shall, totheextent allowed byitslawwithrespect totheconfidentiality of
information, notify theother Party ofanydetermination, measure orruling, including, tothegreatest
extent practicable, anythatisprospective inapplication, that:WT/REG31/2
Page46
(a) establishes anadministrative policy orprinciple thatislikely toinfluence future
determinations oforigin; or
(b) changes thescope ofanexisting administrative policy, principle, precedential decision,
regulation orruleofgeneral application regarding determinations oforigin.
Article 5.12
Working Group onRules ofOrigin and
Other Customs-Related Market Access Issues
1. TheParties hereby establish aWorking Group onRules ofOrigin andOther Customs-Related
Market Access Issues, comprising representatives ofeachParty, toensure theeffective administration
ofChapter Three andthisChapter andanyother customs-related provisions ofthisAgreement.
2. TheWorking Group shallmeetontherequest ofeither Party.
3. TheWorking Group shall:
(a) monitor theadministration bytheParties ofChapter Three andthisChapter toensure
uniform interpretation;
(b) endeavour toagree, attherequest ofeither Party, onanyproposed modification of
oraddition toAnnex 2.2.3, Chapter Three orthisChapter;
(c) propose totheParties anymodification oforaddition toChapter Three, thisChapter
oranyotherprovisionofthisAgreementasmayberequiredtoconformwithanychange
totheHarmonized System;
(d) endeavour toagree on:
(i) theuniform interpretation, application andadministration ofChapter Three
andthisChapter,
(ii) tariffclassification andvaluation matters relating todeterminations oforigin,
(iii) revisions totheCertificate ofOrigin,
(iv) anyother matter referred toitbyeither Party,
(v) anyother customs-related matter arising under thisAgreement; and
(e) consider anyproposed customs-related administrative andoperational change thatmay
effect theflowoftrade between theParties.WT/REG31/2
Page47
4. TheParties agree thatArticle 3.5(1)(c) shallenter intoeffect onlyupon:
(a) theagreement bytheParties onthemethod ofverification byacustoms administration
thatagood hasundergone nofurther production other thanminor processing inthe
territory ofanon-Party referred toinArticle 3.5(1)(c), based ontheprinciples of
Article 5.6;
(b) theestablishment bytheParties ofaDeclaration ofMinor Processing forthepurpose
ofcertifying thatthegood hasundergone nofurther production other thanminor
processing intheterritory ofanon-Party referred toinArticle 3.5(1)(c); and
(c) theestablishment bytheParties ofanobligation regarding thecompletion ofthe
DeclarationofMinorProcessingandtheobligationsregardingimportations,exportations
andrecord-keeping withregard toagood thatundergoes minor processing referred
toArticle 3.5(1)(c), based ontheprinciples setoutinArticles 5.1to5.5.
5. TheParties agree thatArticle 3.5(2) shallenter intoeffect onlyupon:
(a) theagreement bytheParties onthemethod ofverification byacustoms administration
thatagoodhasundergone more thanminor processing intheterritory ofanon-Party
referred toinArticle 3.5(2), based ontheprinciples ofArticle 5.6;
(b) theestablishment bytheParties ofaDeclaration ofMajor Processing forthepurpose
ofcertifying thatthegoodhasundergone more thanminor processing intheterritory
ofanon-Party referred toinArticle 3.5(2);
(c) theestablishment bytheParties ofanobligation regarding thecompletion ofthe
DeclarationofMajorProcessingandtheobligationsregardingimportations,exportations
andrecord-keeping withregard toagoodthatundergoes more thanminor processing
referred toArticle 3.5(2), based ontheprinciples setoutinArticles 5.1to5.5.
6. TheParties willendeavour toreach agreement onthematters described inparagraph 4before
thisAgreement enters intoforce.
7. TheParties shallreview therules oforigin within twoyears ofthedateofentry intoforce
ofthisAgreement, withaviewtofurther liberalization ofbilateral trade, withparticular regard to:
(a) further minor production inthird countries oforiginating goods withrespect to
specifically identified goods andspecifically designated production processes, including
minor processing andsimple assembly oftextile products; and
(b) specific goods thatundergo significant production intheterritory ofoneoftheParties.
8. Where aParty considers thataruleoforigin foragood requires modification onthebasis
thatthegoodundergoes significant production initsterritory, itshallsubmit aproposed modification
along withsupporting rationale andstudies totheother Party forthatother Party'sconsideration.WT/REG31/2
Page48
Article 5.13
Definitions
Forpurposes ofthisChapter:
identical goods means goods thatarethesameinallrespects, including physical characteristics, quality
andreputation, irrespective ofminor differences inappearance thatarenotrelevant toadetermination
oforigin ofthose goods under Chapter Three.
Annex 5.6.2
Procedures Regarding anOrigin Verification Conducted bythe
Customs Administration ofaParty onBehalf oftheOther Party
Pursuant toArticle 5.6(2)
1. Where thecircumstances contemplated under Article 5.6(2) exist, thecustoms administration
oftheParty intowhose territory agood isimported shallinitiate anorigin verification bysending
(a) thewritten questionnaire; or
(b) aletter requesting thataverification visitbeconducted onitsbehalf
totheoffice designated forsuchpurpose bythecustoms administration oftheParty fromwhose territory
thegood isexported.
2. Onreceipt ofawritten questionnaire oraletter referred toinparagraph 1,thecustoms
administration oftheParty from whose territory thegood wasexported shall:
(a) inthecaseofaquestionnaire, forward atruecopythereof totheexporter orproducer
whose good issubject totheorigin verification forcompletion andsignature within
30daysfrom thedateofdelivery tosuchexporter orproducer; and
(b) inthecaseofaletter, onthebasis ofinformation provided therein, prepare andsend
thenotification referred toinArticle 5.6(3) totheexporter orproducer whose good
issubject totheverification visitandobtain thewritten consent thereof within 30days
from thedateofdelivery ofthenotification tothatexporter orproducer.
3. Thecustoms administration oftheParty from whose territory thegood wasexported shall:
(a) notify thecustoms administration oftheParty thatinitiated theorigin verification under
paragraph 1ofthedateonwhich thequestionnaire orthewritten notification referred
tounderparagraph2wasdeliveredtotheexporterorproducerwhosegoodisthesubject
oftheorigin verification; and
(b) upon the30thdayafterthedatereferred toinsubparagraph 3(a),eitherWT/REG31/2
Page49
(i) forward thecompleted questionnaire orwritten consent, asthecasemaybe,
tothecustoms administration oftheParty thatinitiated theorigin verification
under paragraph 1,or
(ii) advise thecustoms administration ofthatParty thatthequestionnaire orwritten
consent, asthecasemaybe,hasnotbeen received from theexporter or
producer whose good isthesubject oftheorigin verification.
4. Where theexporter orproducer ofthegood thatisthesubject oftheverification consents to
averification visitascontemplated byArticle 5.6(3), officials ofthecustoms administration ofthe
Party thatinitiated theverification under paragraph 1maybepresent intheoffices ofthecustoms
administration oftheother Party forpurposes ofdirecting themanner inwhich theverification visit
istoproceed.
5. Thecustoms administration oftheParty from whose territory agood isexported shall, in
conducting aorigin verification onbehalf oftheother Party pursuant tothisAnnex, assume allordinary
expensesassociatedwithconductingtheoriginverificationwithinitsterritoryexcepttravelandincidental
expenses ofofficials travelling totheterritory ofthatParty ascontemplated under paragraph 4.
6. Thecustoms administration oftheParty from whose territory agood isexported shall, in
conducting anorigin verification onbehalf oftheother Party pursuant tothisAnnex, ifrequested by
thatother Party pursuant toaCustoms Mutual Assistance Agreement, certify orauthenticate, inthe
manner required bythatother Party, copies ofanydocuments andrecords obtained during thecourse
ofconducting theorigin verification.
PART THREE
GOVERNMENT PROCUREMENT
Chapter Six
Government Procurement
Article 6.1
Government Procurement
Therights andobligations oftheParties relating togovernment procurement shallbegoverned bythe
Agreement onGovernment Procurement, Annex 4oftheWTO Agreement, asofthedateofitsentry
intoforce fortheParties.
Article 6.2
Further Liberalization
TheParties willendeavour tonegotiate further liberalization ofaccess bysuppliers oftheother
Party totheirgovernment procurement.WT/REG31/2
Page50
PART FOUR
CONDUCT OFBUSINESS
Chapter Seven
Competition Policy
Article 7.1
Competition Law
1. Each Party shalladopt ormaintain measures toproscribe anti-competitive business conduct
andtakeappropriate action withrespect thereto, recognizing thatsuchmeasures willenhance the
fulfilment oftheobjectives ofthisAgreement. TothisendtheParties shallconsult fromtimetotime
about theeffectiveness ofmeasures undertaken byeachParty.
2. EachParty recognizes theimportance ofcooperation andcoordination between theirauthorities
tofurther effective competition lawenforcement inthefreetrade area. TheParties shallcooperate
onissues ofcompetition lawenforcement policy, including mutual legal assistance, notification,
consultation andexchange ofinformation relating totheenforcement ofcompetition lawsandpolicies
inthefreetrade area.
3. Neither Party mayhaverecourse todispute settlement under thisAgreement foranymatter
arising under thisArticle.
Article 7.2
Monopolies andState Enterprises
1. Nothing inthisAgreement shallbeconstrued toprevent aParty fromdesignating amonopoly.
2. Where aParty intends todesignate amonopoly andthedesignation mayaffect theinterests
ofpersons oftheother Party, theParty shall:
(a) wherever possible, provide prior written notification totheother Party ofthe
designation; and
(b) endeavour tointroduce atthetimeofthedesignation suchconditions ontheoperation
ofthemonopoly aswillminimize oreliminate anynullification orimpairment of
benefits.
3. EachPartyshallensure,throughregulatorycontrol,administrativesupervisionortheapplication
ofother measures, thatanyprivately-owned monopoly thatitdesignates andanygovernment monopoly
thatitmaintains ordesignates:WT/REG31/2
Page51
(a) actsinamanner thatisnotinconsistent withtheParty'sobligations under this
Agreement wherever suchamonopoly exercises anyregulatory, administrative orother
governmentalauthoritythatthePartyhasdelegatedtoitinconnectionwiththemonopoly
good, suchasthepower togrant import orexport licenses, approve commercial
transactions orimpose quotas, feesorother charges;
(b) except tocomply withanyterms ofitsdesignation thatarenotinconsistent with
subparagraph(c)actssolelyinaccordancewithcommercialconsiderationsinitspurchase
orsaleofthemonopoly good intherelevant market, including withregard toprice,
quality, availability, marketability, transportation andother terms andconditions of
purchase orsale; and
(c) doesnotuseitsmonopoly position toengage, either directly orindirectly, including
through itsdealings withitsparent, itssubsidiary orother enterprise withcommon
ownership, inanticompetitive practices inanon-monopolized market initsterritory
thatadversely affects theother Party, including through thediscriminatory provision
ofthemonopoly good, cross-subsidization orpredatory conduct.
4. Paragraph 3doesnotapply toprocurement bygovernmental agencies ofgoods forgovernmental
purposes andnotwithaviewtocommercial resale orwithaviewtouseintheproduction ofgoods
forcommercial sale.
5. Forpurposes ofthisArticle, "maintain" means designate prior tothedateofentry intoforce
ofthisAgreement andexisting onJanuary 1,1997.
Article 7.3
State Enterprises
1. Nothing inthisAgreement shallbeconstrued toprevent aParty frommaintaining orestablishing
astateenterprise.
2. EachPartyshallensure,throughregulatorycontrol,administrativesupervisionortheapplication
ofother measures, thatanystateenterprise thatitmaintains orestablishes actsinamanner thatisnot
inconsistentwiththeParty'sobligationswhereversuchenterpriseexercisesanyregulatory,administrative
orother governmental authority thattheParty hasdelegated toit,suchasthepower toexpropriate,
grant licenses, approve commercial transactions orimpose quotas, feesorother charges.
3. Each Party shallensure thatanystateenterprise thatitmaintains orestablishes accords non-
discriminatory treatment inthesaleofitsgoods.
Article 7.4
Definitions
Forpurposes ofthisChapter:
designate means toestablish, designate orauthorize, ortoexpand thescope ofamonopoly tocover
anadditional good orservice, afterthedateofentry intoforce ofthisAgreement;WT/REG31/2
Page52
monopoly means anentity, including aconsortium orgovernment agency, thatinanyrelevant market
intheterritory ofaParty isdesignated asthesoleprovider orpurchaser ofagoodorservice, butdoes
notinclude anentity thathasbeengranted anexclusive intellectual property right solely byreason
ofsuchgrant, and
state enterprise means anenterprise owned, orcontrolled through ownership interests, byaParty
andwith respect toCanada, means aCrown corporation within themeaning oftheFinancial
AdministrationAct(Canada),asamendedfromtimetotime,andaCrowncorporationwithinthemeaning
ofanycomparable provincial laworequivalent entity thatisincorporated under other applicable
provincial law.
PART FIVE
ADMINISTRATIVE AND INSTITUTIONAL PROVISIONS
Chapter Eight
Article 8.1
Application
1. ThisChapter applies withrespect totheavoidance orsettlement ofalldisputes regarding the
interpretation orapplication ofthisAgreement orwherever aParty considers thatanactual orproposed
measure oftheother Party isorwould beinconsistent withtheobligations ofthisAgreement orcause
nullification orimpairment inthesense ofAnnex 8.1unless theParties agree touseanother procedure
inanyparticular case.
2. Disputes arising under boththisAgreement andtheWTO Agreement ,including theGeneral
Agreement onTariffs andTrade 1994(WTO) ,anditssuccessor agreements, towhich bothParties are
party, maybesettled ineither forum, according totherules ofthatforum, atthediscretion ofthe
complaining Party.
3. OncethedisputesettlementprovisionsofthisAgreementortheWTOhavebeeninitiatedpursuant
toArticle 8.7ortheWTO withrespect toanymatter, theprocedure initiated shallbeusedtothe
exclusion ofanyother.
Article 8.2
TheCommission
1. ThePartiesherebyestablishtheCanada-IsraelTradeCommission(TheCommission)tosupervise
theimplementation ofthisAgreement, toresolve disputes thatmayariseoveritsinterpretation and
application, tooversee itsfurther elaboration, andtoconsider anyother matter thatmayaffect its
operation.
2. TheCommission shallcomprise representatives ofbothParties. Theprincipal representative
ofeachParty shallbethecabinet-level officer orMinister primarily responsible forinternational trade,
oraperson designated bythecabinet-level officer orMinister.WT/REG31/2
Page53
3. TheCommission shallconvene atleastonceayearinregular session toreview thefunctioning
ofthisAgreement. Regular sessions oftheCommission shallbeheldalternately inthetwocountries.
4. TheCommission mayestablish, anddelegate responsibilities to,adhocorstanding committees
orworking groups andseektheadvice ofnon-governmental individuals orgroups.
5. TheCommission mayestablish itsrules andprocedures. Alldecisions oftheCommission
shallbetaken byconsensus.
Article 8.3
Administrative Support totheTrade Commission andDispute Resolution Panels
1. EachParty shallidentify anagency, division orbranch ofitsgovernment ("designated agency")
tofacilitate theoperation ofthisChapter andtoprovide administrative assistance topanels established
under thisChapter.
2. Where aParty hasrequested aCommission meeting under Article 8.7(1), thedesignated agency
oftheParty complained against shallberesponsible forproviding support toanymediator ortoany
panel established todealwiththedispute.
3. During apanel proceeding theParties shall exchange documents bysending them tothe
designated agency tobefiledandforwarded totheother Party. Thedesignated agency shalladminister
theCode ofConduct forpanelists established pursuant toArticle 8.8,andprovide administrative support
forpanels byarranging forhearing rooms, theproduction ofpanel reports andthepayment ofpanelists.
Thedesignated agency mayalsoprovide administrative support fortheCommission ifsodirected by
theCommission.
Article 8.4
Contact Points
EachParty shalldesignate acentral contact pointtofacilitate communication between theParties
onanymatter covered bythisAgreement. Ontherequest oftheother Party, thecontact point shall
identify theoffice orofficial responsible forthematter andassist, asnecessary, infacilitating
communication withtheother Party.
Article 8.5
Publication, Notification andProvision ofInformation
1. Each party shall, totheextent possible, publish promptly, alllaws, regulations, procedures
andadministrative rulings ofgeneral application respecting matters covered bythisAgreement.
2. Each Party shall, totheextent possible, publish, consistent withArticle XofGATT 1994,
anylaw,regulation, procedure oradministrative ruling ofgeneral application thatitproposes toadopt
respecting thematters covered bythisAgreement.WT/REG31/2
Page54
3. EachParty shall, totheextent possible, provide written notice, inanofficial language ofeither
Party, totheother Party ofanyproposed oractual measure thatmight materially affect theoperation
ofthisAgreement. Thenotice shallinclude, where appropriate, adescription ofthereasons forthe
proposed oractual measure.
4. Thewritten notice shallbegiven asfarinadvance aspossible oftheimplementation ofthe
measure. Ifprior notice isnotpossible, theParty implementing themeasure shallprovide written
notice totheother Party assoonaspossible afterimplementation.
5. Onrequest oftheother Party, aParty shall promptly provide information andrespond to
questions pertaining toanyactual orproposed measure, whether ornotpreviously notified.
6. Theprovision ofwritten notice shallbewithout prejudice astowhether themeasure isconsistent
withthisAgreement.
Article 8.6
Consultations
1. Either Party mayrequest consultations regarding anyactual orproposed measure oranyother
matter thatitconsiders affects theoperation ofthisAgreement, whether ornotthematter hasbeen
notified inaccordance withArticle 8.5.
2. TheParties shallmake every attempt toarrive atamutually satisfactory resolution ofanymatter
through consultations under thisArticle orother consultative provisions ofthisAgreement.
3. Each Party shalltreatanyconfidential orproprietary information exchanged inthecourse of
consultations onthesame basis astheParty providing theinformation.
Article 8.7
Initiation ofProcedures
1. IftheParties failtoresolve amatter through consultations within 30daysofdelivery ofarequest
forconsultations under Article 8.6,either Party mayrequest inwriting ameeting oftheCommission.
Therequest shallstatethematter complained of,andshallindicate whatprovisions ofthisAgreement
areconsidered relevant. Unless otherwise agreed, theCommission shallconvene within 20daysafter
delivery ofarequest andshallendeavour toresolve thedispute promptly.
2. TheCommission maycallonsuchtechnical advisers asitdeems necessary, orontheassistance
ofamediator acceptable tobothParties, inaneffort toreach amutually satisfactory resolution ofthe
dispute.
Article 8.8
Code ofConduct
TheParties shall, bythedateoftheentry intoforce ofthisAgreement, exchange letters
establishing aCode ofConduct forpanelists appointed pursuant toArticle 8.9.WT/REG31/2
Page55
Article 8.9
Panel Procedures
1. Panels shallbeestablished inaccordance withtheprovisions ofAnnex 8.9.
2. Ifadispute hasbeenreferred totheCommission under Article 8.7andhasnotbeenresolved
within aperiod of30daysaftertheCommission hasconvened orwithin suchother period asthe
Commissionhasagreed,theCommission,ontherequestofeitherParty,shallestablishapanelofexperts
toconsider thematter andtomake findings, determinations and,ifrequested byeither Party,
recommendations concerning theremoval ofameasure found nottoconform withtheAgreement.
Apanel shallbedeemed tobeestablished from thedateofdelivery totheother Party oftherequest
ofaParty.
3. Thepanel proceedings commenced attherequest ofoneParty shalltakeplace intheterritory
oftheother Party orinajointly agreed location.
4. Unless theParties otherwise agree within 20daysfromthedateofthedelivery oftherequest
fortheestablishment ofthepanel, theterms ofreference shallbe:
"Toexamine, inthelightoftherelevant provisions oftheAgreement, thematter referred to
theCommission (assetoutintherequest foraCommission meeting) andtomake suchfindings,
determinations andrecommendations ifrequested asareprovided inthisArticle."
Ifthecomplaining Party, having raised itduring theCommission meeting, wishes toargue thatamatter
hasnullified orimpaired benefits, theterms ofreference shallsoindicate.
5. TheCommission shall, atitsfirstmeeting orshortly thereafter, establish Model Rules of
Procedure. TheModel Rules ofProcedure shall:
(a) assure arighttoatleastonehearing before thepanel andtheopportunity toprovide
written submissions andrebuttal arguments;
(b) permit counsel chosen byaParty toadvise thatParty during panel proceedings including
hearings;
(c) require thataParty'spositions bepresented byofficial spokespersons ofthatParty;
and
(d) setoutprovisions concerning confidentiality ofthepanel'shearings, deliberations and
initial report, andwritten submissions toandcommunications withthepanel.
Unless otherwise agreed bytheParties, thepanel shallconduct itsproceedings inaccordance withthe
Model Rules ofProcedure andshallbaseitsdecision onthearguments andsubmissions oftheParties.WT/REG31/2
Page56
6. Unless theParties otherwise agree, thepanel shall, within 3months afteritsChairperson is
appointed, present totheParties aninitial report containing findings offact,itsdetermination asto
whether themeasure atissue isorwould beinconsistent withtheobligations ofthisAgreement or
cause nullification andimpairment inthesense ofAnnex 8.1,anditsrecommendations, ifany,for
resolution ofthedispute. Where feasible, thepanel shallafford theParties opportunity tocomment
onitspreliminary findings offactpriortocompletion ofitsreport. Ifrequested intheterms ofreference
forthepanel, thepanel shallalsopresent findings astothedegree ofadverse trade effect ontheother
Party ofanymeasure found nottoconform withtheobligations oftheAgreement.
7. Within 30daysofissuance oftheinitial report ofthepanel, aParty disagreeing inwhole or
inpartmaypresent awritten statement ofitsobjections andthereasons forthose objections tothe
Commission andthepanel. Insuchanevent, thepanel onitsownmotion orattherequest ofthe
Commission oreither Party mayrequest theviews ofbothParties, reconsider itsreport, make any
furtherexaminationthatitdeemsappropriateandissueafinalreport,togetherwithanyseparateopinions,
within 60daysofissuance oftheinitial report.
8. Unless theCommission agrees otherwise, thefinalreport ofthepanel shallbepublished along
withanyseparate opinions, andanywritten views thateither Party desires tobepublished, within 15
daysafteritispresented totheCommission.
9. Onreceipt ofthefinalreport ofthepanel, theCommission shallagree ontheresolution of
thedispute,whichnormallyshallconformwiththereportofthepanel.Wheneverpossible,theresolution
shallbenon-implementation orremoval ofameasure notconforming withthisAgreement orcausing
nullification orimpairment inthesense ofAnnex 8.1or,failing sucharesolution, agreed compensation.
10. Ifinitsfinalreport apanel hasdetermined thatameasure isinconsistent withtheobligations
ofthisAgreement orcauses nullification orimpairment inthesense ofAnnex 8.1andtheParty
complained against hasnotreached agreement withthecomplaining Party onamutually satisfactory
resolution pursuant toparagraph 9within 30daysofreceiving thefinalreport ifthemeasure wasfound
tobeinconsistent withthisAgreement orwithin 180daysifthemeasure wasfound tocause nullification
orimpairment, thecomplaining Party maysuspend theapplication totheParty complained against
ofbenefits ofequivalent effect untilsuchtimeastheyhavereached agreement onaresolution ofthe
dispute.
11. Inconsidering whatbenefits tosuspend pursuant toparagraph 9:
(a) acomplaining Party should firstseektosuspend benefits inthesame sector orsectors
asthataffected bythemeasure orothermatter thatthepanel hasfound tobeinconsistent
withtheobligations ofthisAgreement ortohavecaused nullification orimpairment
inthesense ofAnnex 8.1; and
(b) acomplaining Party thatconsiders itisnotpracticable oreffective tosuspend benefits
inthesame sector orsectors maysuspend benefits inother sectors.
12. Onthewritten request oftheParty complained against delivered tothecomplaining Party and
toitsdesignated agency, thepanel which made thedetermination shalldetermine whether thelevel
orextent ofbenefits suspended bythecomplaining Party pursuant toparagraph 10ismanifestly
excessive.WT/REG31/2
Page57
13. Thepanel proceedings pursuant toparagraph 12shallbeconducted inaccordance withthe
Model Rules ofProcedure. Thepanel shallpresent itsdetermination within 60daysofthedatethe
Party complained against made therequest orsuchother period asthedisputing Parties mayagree.
Article 8.10
Private Rights
Neither Party mayprovide forarightofaction under itsdomestic lawagainst theother Party
ontheground thatameasure oftheother Party isinconsistent withthisAgreement.
Annex 8.1
Nullification andImpairment
1. IfaParty considers thattheapplication ofanymeasure, thatisnotinconsistent withthe
provisions ofthisAgreement, causes nullification orimpairment ofanybenefit reasonably expected
toaccrue tothatParty, directly orindirectly under theprovisions ofthisAgreement, thatParty may,
withaviewtothesatisfactory resolution ofthematter, invoke theconsultation provisions ofArticle
8.6and,ifitconsiders itappropriate, proceed todispute settlement pursuant toArticle 8.7.
2. Paragraph 1shallnotapply toArticle 10.5.
Annex 8.9
1. TheCommission shalldevelop andmaintain aroster ofindividuals whoarewilling andable
toserve aspanelists. Wherever possible, panelists shallbechosen fromthisroster. Inallcases, panelists
shallbechosen strictly onthebasisofobjectivity, reliability andsound judgment and,where appropriate,
haveexpertise intheparticular matter under consideration. Panelists shallnotbeaffiliated withor
takeinstructions from either Party.
2. Theremuneration ofpanelists, theirtravel andlodging expenses, andallgeneral expenses of
thepanel shallbeborne equally bytheParties. Each panelist shallkeeparecord andrender afinal
account ofhistimeandexpenses, andthepanel shallkeeparecord andrender afinalaccount ofall
general expenses. TheCommission shallestablish amounts ofremuneration andexpenses thatwill
bepaidtothepanelists.
3. Thepanel shallbecomposed ofthree members, whomaybecitizens ofCanada orIsrael.
Within 45daysofestablishment ofthepanel, eachParty, inconsultation withtheother Party, shall
choose onemember ofthepanel, andtheCommission shallendeavour toagree onthethirdmember
whoshallchair thepanel. IfaParty failstoappoint itspanelists within 45days, suchpanelists shall
beselected bylotfromamong itscitizens ontheroster described inparagraph 1.IftheCommission
isunable toagree ontheChairperson ofthepanel theneachParty shall nominate acandidate for
Chairperson andtheChairperson shallbeselected bylotfromthenominees agreed uponbytheParties.
4. Panelists mayfurnish separate opinions onmatters notunanimously agreed.
5. Nopanel may,either initsinitial report oritsfinalreport, disclose which panelists areassociated
withmajority orminority opinions.WT/REG31/2
Page58
6. Panelists shallbesubject totheCode ofConduct established pursuant toArticle 8.8.IfaParty
believes thatapanelist isinviolation oftheCode ofConduct, theParties shallconsult andiftheParties
agree, thepanelist shall beremoved andanewpanelist shall beselected inaccordance withthe
procedures ofthisAnnex.
7. Ifapanelist becomes unable tofulfil panel duties orisdisqualified, proceedings ofthepanel
shallbesuspended pending theselection ofasubstitute panelist inaccordance withtheprocedures of
thisAnnex.
PART SIX
OTHER PROVISIONS
Chapter Nine
Further Elaboration
Article 9.1
Intellectual Property Rights
Therights andobligations oftheParties relating tointellectual property rights shallbegoverned
bytheAgreement onTrade-Related Aspects ofIntellectual Property Rights ,Annex 1CoftheWTO
Agreement, andanysubsequent amendments tothatAgreement.
Article 9.2
Subsidies andCountervailing Measures
1. Therights andobligations oftheParties relating tosubsidies andcountervailing measures shall
begoverned bytheAgreement onSubsidies andCountervailing Measures ,partofAnnex 1Aofthe
WTO Agreement .
2. Therights andobligations oftheParties relating totheapplication ofantidumping measures
shallbegoverned bytheAgreement onImplementation ofArticle VIoftheGeneral Agreement onTariffs
andTrade 1994, partofAnnex 1AoftheWTO Agreement .
3. EachParty reserves therighttoapply itsantidumping lawandcountervailing dutylawtogoods
importedfromtheterritoryoftheotherPartyinconformitywiththeprinciplesoftheagreementsreferred
toinparagraphs 1and2.Antidumping lawandcountervailing dutylawinclude, asappropriate for
eachParty, relevant statutes, legislative history, regulations, administrative practice andjudicial
precedents.WT/REG31/2
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Chapter Ten
Exceptions
Article 10.1
General Exceptions
Article XXofGATT 1994anditsinterpretative notes, oranyequivalent provision ofasuccessor
agreement towhich bothParties areparty, areincorporated intoandmade partofthisAgreement.
TheParties understand thatthemeasures referred toinArticle XX(b) ofGATT 1994 alsoinclude
environmentalmeasuresnecessarytoprotecthuman,animalorplantlifeorhealth,andthatArticleXX(g)
ofGATT 1994 applies tomeasures relating totheconservation ofliving andnon-living exhaustible
natural resources.
Article 10.2
National Security
1. Nothing inthisAgreement shallbeconstrued:
(a) torequire either party tofurnish orallow access toanyinformation thedisclosure of
which would becontrary toitsessential security interests;
(b) toprevent either Party from taking anyactions necessary fortheprotection ofits
essential security interests:
(i) relating tothetraffic inarms, ammunition andimplements ofwarandtosuch
traffic andtransactions inother goods, materials, services andtechnology
undertaken directly orindirectly forthepurpose ofsupplying amilitary or
other security establishment,
(ii) taken intimeofwarorother emergency ininternational relations, or
(iii) relating totheimplementation ofnational policies orinternational agreements
respecting thenon-proliferation ofbiological, chemical, nuclear weapons or
other nuclear explosive devices; or
(c) toprevent either Party from taking action inpursuance ofitsobligations under the
United Nations Charter forthemaintenance ofinternational peace andsecurity.
Article 10.3
Taxation
1. Except asprovided inthisArticle, nothing inthisAgreement shallapply totaxation measures.WT/REG31/2
Page60
2. Nothing inthisAgreement shallaffect therights andobligations ofaParty under anytax
convention. Intheevent ofanyinconsistency between thisAgreement andanysuchconvention, that
convention shallprevail totheextent oftheinconsistency.
3. Notwithstanding paragraph 2:
(a) Article 4.1andsuchother provisions ofthisAgreement asarenecessary togiveeffect
tothatArticle shallapply totaxation measures tothesame extent asdoesArticle III
oftheGATT 1994; and
(b) Article 4.7shallapply totaxation measures.
Article 10.4
Balance ofPayments
Therights andobligations oftheParties relating tobalance ofpayments shallbegoverned
bytheUnderstanding ontheBalance-of-Payments Provisions oftheGeneral Agreement onTariffs and
Trade 1994,partofAnnex 1AoftheWTO Agreement .
Article 10.5
Cultural Industries
Measures affecting cultural industries areexempt fromtheprovisions ofthisAgreement, except
asspecifically provided inArticle 2.1.
Article 10.6
Definitions
Forpurposes ofthisChapter:
cultural industries means persons engaged inanyofthefollowing activities:
(a) thepublication, distribution, orsaleofbooks, magazines, periodicals ornewspapers
inprint ormachine readable form butnotincluding thesoleactivity ofprinting or
typesetting anyoftheforegoing;
(b) theproduction, distribution, saleorexhibition offilmorvideo recordings;
(c) theproduction, distribution, saleorexhibition ofaudio orvideo music recordings;
(d) thepublication, distribution orsaleofmusic inprintormachine readable form; or
(e) radiocommunications inwhich thetransmissions areintended fordirect reception by
thegeneral public, andallradio, television andcable broadcasting undertakings and
allsatellite programming andbroadcast network services;WT/REG31/2
Page61
taxconvention means aconvention fortheavoidance ofdouble taxation orother international taxation
agreement orarrangement;
taxation measures donotinclude:
(a) a"customs duty" asdefined inArticle 2.3; or
(b) themeasures listed inexceptions (b)and(c)ofthatdefinition; and
transfers means international transactions andrelated international transfers andpayments.
Chapter Eleven
General andFinal Provisions
Article 11.1
Annexes
TheAnnexes tothisAgreement constitute anintegral partofthisAgreement.
Article 11.2
Amendments
1. TheParties mayagree onanymodification oforaddition tothisAgreement.
2. When soagreed, andapproved inaccordance withtheapplicable legal procedures ofeach
Party, amodification oraddition shallconstitute anintegral partofthisAgreement.
3. NotwithstandingArticle11.1,theannexestothisAgreementmaybeamendedbytheCommission
through anexchange ofletters confirming theamendment.
Article 11.3
Entry intoForce
1. ThisAgreement shallenter intoforce onJanuary 1,1997, subject tothecompletion ofthe
necessarylegalproceduresbyeachParty,throughanexchangeofwrittennotificationsthroughdiplomatic
channels certifying suchcompletion.
Article 11.4
Duration andTermination
ThisAgreement shallremain inforce unless terminated byeither Party on
sixmonth 'snotice totheother Party.WT/REG31/2
Page62
Article 11.5
Further Liberalization ofTrade
With aview toenhancing thefreetrade areaestablished under thisAgreement, theParties
agree that,within twoyears ofthedateofitsentry intoforce, theywillenter intofurther discussions
toseekadditional means ofexpanding thescope ofliberalized trade inthefreetrade areathrough the
further removal oftariffs andother barriers totrade between theParties.
Article 11.6
Authentic Texts
TheEnglish, French andHebrew textsofthisAgreement areequally authentic.
INWITNESS WHEREOF ,theundersigned, being dulyauthorized bytheir respective
Governments, havesigned thisAgreement.