2-16CHAPTER 3 RULES OF ORIGIN SECTION A RULES OF ORIGIN Article 3.1: Definitions For the purposes of this Chapter: (a) aquaculture means the farming of aquatic organisms including fish, molluscs, crustaceans, other aquatic invertebrates, and aquatic plants from seed stock such as eggs, fry, fingerlings, and larvae, by intervention in the rearing or growth processes to enhance production such as regular stocking, feeding, or protection from predators; (b) CIF value means the value of the imported good, inclusive of the cost of insurance and freight up to the port or place of entry into the country of importation; (c) competent authority means the government authority or authorities designated by a Party and notified to the other Parties; (d) customs authority means a customs authority as defined in subparagraph (a) of Article 4.1 (Definitions); (e) FOB value means the value of the good free on board, inclusive of the cost of transport (regardless of the mode of transport) to the port or site of final shipment abroad; (f) fungible goods or materials means goods or materials that are interchangeable for commercial purposes, whose properties are essentially identical; (g) Generally Accepted Accounting Principles means those principles recognised by consensus or with substantial authoritative support in a Party, with respect to the recording of revenues, expenses, costs, assets, and liabilities; the disclosure of information; and the preparation of financial statements. These principles may encompass 3-1broad guidelines of general application as well as detailed standards, practices, and procedures; (h) good means any merchandise, product, article, or material; (i) issuing body means an entity designated or authorised by a Party to issue a Certificate of Origin and notified to the other Parties in accordance with this Chapter; (j) material means a good that is used in the production of another good; (k) non-originating good or non-originating material means a good or material which does not qualify as originating in accordance with this Chapter; (l) originating good or originating material means a good or material which qualifies as originating in accordance with this Chapter; (m) producer means a person who engages in the production of goods; and (n) production means methods of obtaining goods including growing, mining, harvesting, farming, raising, breeding, extracting, gathering, collecting, capturing, fishing, aquaculture, trapping, hunting, manufacturing, producing, processing, or assembling. Article 3.2: Originating Goods For the purposes of this Agreement, a good shall be treated as an originating good if it is: (a) wholly obtained or produced in a Party as provided in Article 3.3 (Goods Wholly Obtained or Produced); (b) produced in a Party exclusively from originating materials from one or more of the Parties; or (c) produced in a Party using non-originating materials, provided the good satisfies the applicable requirements set out in Annex 3A (Product-Specific Rules), 3-2and meets all other applicable requirements of this Chapter. Article 3.3: Goods Wholly Obtained or Produced For the purposes of Article 3.2 (Originating Goods), the following goods shall be considered as wholly obtained or produced in a Party: (a) plants and plant goods, including fruit, flowers, vegetables, trees, seaweed, fungi, and live plants, grown and harvested, picked, or gathered there; (b) live animals born and raised there; (c) goods obtained from live animals raised there; (d) goods obtained by hunting, trapping, fishing, farming, aquaculture, gathering, or capturing conducted there; (e) minerals and other naturally occurring substances, not included in subparagraphs (a) through (d), extracted or taken from its soil, waters, seabed, or subsoil beneath the seabed; (f) goods of sea-fishing and other marine life taken by vessels of that Party 1 , and other goods taken by that Party or a person of that Party, from the waters, seabed, or subsoil beneath the seabed outside the territorial sea of the Parties and non-Parties, in accordance with international law, provided that, in case of goods of sea-fishing and other marine life taken from the exclusive economic zone of any Party or non-Party, that Party or person of that Party has 1 For the purposes of this Article, “factory ships of that Party” or “vessels of that Party” respectively, means factory ships or vessels: (a) which are registered in that Party; and (b) which are entitled to fly the flag of that Party. Notwithstanding the preceding sentence, any factory ship or vessel operating within the exclusive economic zone of Australia that meets the definition of “Australian boat” under the Fisheries Management Act 1991 (Commonwealth), as amended from time to time, or any successor legislation, shall be considered to be a factory ship or vessel of Australia respectively. For greater certainty, when such a factory ship or vessel is operating outside of the exclusive economic zone of Australia, the requirements of subparagraphs (a) and (b) of this footnote shall apply. 3-3the rights to exploit 2 such exclusive economic zone, and in case of other goods, that Party or person of that Party has rights to exploit such seabed and subsoil beneath the seabed, in accordance with international law; (g) goods of sea-fishing and other marine life taken by vessels of that Party from the high seas in accordance with international law; (h) goods processed or made on board any factory ships of that Party, exclusively from the goods referred to in subparagraph (f) or (g); (i) goods which are: (j) (i) waste and scrap derived from production or consumption there, provided that such goods are fit only for disposal, for the recovery of raw materials, or for recycling purposes; or (ii) used goods collected there, provided that such goods are fit only for disposal, for the recovery of raw materials, or for recycling purposes; and goods obtained or produced there solely from goods referred to in subparagraphs (a) through (i), or from their derivatives. Article 3.4: Cumulation

1. Unless otherwise provided in this Agreement, goods and materials which comply with the origin requirements provided in Article 3.2 (Originating Goods), and which are used in another Party as materials in the production of another good or material, shall be considered as originating in the Party where working or processing of the finished good or material has taken place.
2. The Parties shall commence a review of this Article on the date of entry into force of this Agreement for all signatory States. This review will consider the extension of the application of cumulation 2 For the purposes of determining the origin of goods of sea-fishing and other marine life, “rights to exploit” in this subparagraph include those rights of access to the fisheries resources of a coastal State, as accruing from any agreements or arrangements between a Party and the coastal State. 3-4in paragraph 1 to all production undertaken and value added to a good within the Parties. The Parties shall conclude the review within five years of the date of its commencement, unless the Parties agree otherwise. Article 3.5: Calculation of Regional Value Content

The regional value content of a good, specified in Annex 3A (Product-Specific Rules), shall be calculated by using either of the following formulas: (a) Indirect/Build-Down Formula RVC = FOB – VNM

x 100 FOB or (b) Direct/Build-Up Formula Direct Direct Labour Overhead Other RVC = VOM + Cost + Cost + Profit + Cost ____________________________________ x 100 FOB

where:

RVC is the regional value content of a good, expressed as a percentage; FOB is the FOB value as defined in subparagraph (e) of Article

3.1 (Definitions);

VOM is the value of originating materials, parts, or produce acquired or self-produced, and used in the production of the good; VNM is the value of non-originating materials used in the production of the good; 3-5Direct Labour Cost includes wages, remuneration, and other employee benefits; and Direct Overhead Cost is the total overhead expense. 2. The value of goods under this Chapter shall be calculated, mutatis mutandis, in accordance with Article VII of GATT 1994 and the Customs Valuation Agreement. All costs shall be recorded and maintained in accordance with the Generally Accepted Accounting Principles applicable in the Party where the goods are produced. 3. The value of non-originating materials shall be: (a) for imported materials, the CIF value of the materials at the time of importation; and (b) for materials obtained within a Party, the earliest ascertainable price paid or payable. 4. A material of undetermined origin shall be treated as a non- originating material. 5. The following expenses may be deducted from the value of non- originating materials or materials of undetermined origin: (a) the costs of freight, insurance, packing, and other transport-related costs incurred in transporting the goods to the producer; (b) duties, taxes, and customs brokerage fees, other than duties that are waived, refunded, or otherwise recovered; and (c) costs of waste and spillage, less the value of any renewable scrap or by-products. Where the expenses listed in subparagraphs (a) through (c) are unknown or evidence is not available, then no deduction is allowed for those expenses. 3-6Article 3.6: Minimal Operations and Processes Notwithstanding any provisions of this Chapter, the following operations when undertaken on non-originating materials to produce a good shall be considered as insufficient working or processing to confer on that good the status of an originating good: (a) preserving operations to ensure that the good remains in good condition for the purposes of transport or storage; (b) packaging or presenting goods for transportation or sale; (c) simple 3 processes, consisting of sifting, screening, sorting, classifying, sharpening, cutting, slitting, grinding, bending, coiling, or uncoiling; (d) affixing or printing of marks, labels, logos, or other like distinguishing signs on goods or their packaging; (e) mere dilution with water or another substance that does not materially alter the characteristics of the good; (f) disassembly of products into parts; (g) slaughtering 4 of animals; (h) simple painting and polishing operations; (i) simple peeling, stoning, or shelling; (j) simple mixing of goods, whether or not of different kinds; or (k) any combination of two or more operations referred to in subparagraphs (a) through (j). 3 For the purposes of this Article, “simple” describes an activity which does not need special skills, or machines, apparatus, or equipment especially produced or installed for carrying out the activity. 4 For the purposes of this Article, “slaughtering” means the mere killing of animals. 3-7Article 3.7: De Minimis 1. 2. A good that does not satisfy a change in tariff classification pursuant to Annex 3A (Product-Specific Rules) is nonetheless an originating good if the good meets all of the other applicable requirements in this Chapter and: (a) for a good classified in Chapters 01 through 97 of the HS Code, the value of non-originating materials that have been used in the production of the good and did not undergo the applicable change in tariff classification does not exceed 10 per cent of the FOB value of that good. The value of those non-originating materials shall be determined pursuant to paragraph 3 of Article 3.5 (Calculation of Regional Value Content); or (b) for a good classified in Chapters 50 through 63 of the HS Code, the weight of all non-originating materials used in its production that did not undergo the required change in tariff classification does not exceed 10 per cent of the total weight of the good. The value of non-originating materials referred to in paragraph 1 shall, however, be included in the value of non-originating materials for any applicable regional value content requirement. Article 3.8: Treatment of Packing and Packaging Materials and Containers

1. Packing materials and containers for the transportation and shipment of a good shall not be taken into account in determining the originating status of any good.
2. Packaging materials and containers in which a good is packaged for retail sale, which are classified together with the good, shall not be taken into account in determining the originating status of the good, provided that: (a) the good is wholly obtained or produced in a Party in accordance with subparagraph (a) of Article 3.2 (Originating Goods); (b) the good is produced in a Party exclusively from originating materials from one or more of the Parties, in accordance with subparagraph (b) of Article 3.2 (Originating Goods); or 3-8(c)

the good is subject to a change in tariff classification or a specific manufacturing or processing operation requirement provided in Annex 3A (Product-Specific Rules). If a good is subject to a regional value content requirement, the value of the packaging materials and containers in which the good is packaged for retail sale shall be taken into account as originating materials or non-originating materials of the good, as the case may be, in calculating the regional value content of the good. Article 3.9: Accessories, Spare Parts, and Tools 1. 2. For the purposes of determining the originating status of a good, accessories, spare parts, tools, and instructional or other information materials presented with the good shall be considered as part of the good and shall be disregarded in determining whether all the non-originating materials used in the production of the good have undergone the applicable change in tariff classification or a specific manufacturing or processing operation set out in Annex 3A (Product-Specific Rules), provided that: (a) the accessories, spare parts, tools, and instructional or other information materials presented with the good are not invoiced separately from the good; and (b) the quantities and value of the accessories, spare parts, tools, and instructional or other information materials presented with the good are customary for the good. Notwithstanding paragraph 1, if a good is subject to a regional value content requirement, the value of the accessories, spare parts, tools, and instructional or other information materials presented with the good shall be taken into account as originating materials or non-originating materials, as the case may be, in calculating the regional value content of the good, provided that: (a) the accessories, spare parts, tools, and instructional or other information materials presented with the good are not invoiced separately from the good; and 3-9(b) the quantities and value of the accessories, spare parts, tools, and instructional or other information materials presented with the good are customary for the good. Article 3.10: Indirect Materials

1. An indirect material shall be treated as an originating material without regard to where it is produced and its value shall be the cost registered in accordance with the Generally Accepted Accounting Principles in the records of the producer of the good.
2. For the purposes of this Article, “indirect material” means a good used in the production, testing, or inspection of another good but not physically incorporated into that other good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including: (a) fuel and energy; (b) tools, dies, and moulds; (c) spare parts and goods used in the maintenance of equipment and buildings; (d) lubricants, greases, compounding materials, and other materials used in production or used to operate equipment and buildings; (e) gloves, glasses, footwear, clothing, and safety equipment and supplies; (f) equipment, devices, and supplies used for testing or inspecting goods; (g) catalysts and solvents; and (h) any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production. Article 3.11: Fungible Goods or Materials The determination of whether fungible goods or materials are originating shall be made either by physical segregation of each of the fungible 3-10goods or materials or, where commingled, by the use of an inventory management method which is recognised in the Generally Accepted Accounting Principles of the exporting Party, and should be used throughout the fiscal year. Article 3.12: Materials Used in Production If a non-originating material undergoes further production such that it satisfies the requirements of this Chapter, the material shall be treated as originating when determining the originating status of the subsequently produced good, regardless of whether that material was produced by the producer of the good. Article 3.13: Unit of Qualification
3. The unit of qualification for the application of this Chapter shall be the particular good which is considered as the basic unit when determining classification under the Harmonized System.
4. When a consignment consists of a number of identical goods classified under a single tariff line, each good shall be individually taken into account in determining whether it qualifies as an originating good. Article 3.14: Treatment for Certain Goods The Parties and signatory States shall enter into discussions on the treatment for certain goods under this Chapter upon the request of a Party and conclude such discussions within three years from the start of the discussions. The treatment for certain goods under this Chapter shall be subject to agreement of all the Parties and signatory States by consensus.

Article 3.15: Direct Consignment

1. An originating good shall retain its originating status as determined under Article 3.2 (Originating Goods) if the following conditions have been met:

(a) the good has been transported directly from an exporting Party to an importing Party; or

(b) the good has been transported through one or more Parties other than the exporting Party and the importing Party (hereinafter referred to as “intermediate Parties” in this Article), or non-Parties, provided that the good: (i) has not undergone any further processing in the intermediate Parties or the non-Parties, except for logistics activities such as unloading, reloading, storing, or any other operations necessary to preserve it in good condition or to transport it to the importing Party; and (ii) remains under the control of the customs authorities in the intermediate Parties or the non-Parties. 2. Compliance with subparagraph 1(b) shall be evidenced by presenting the customs authorities of the importing Party either with customs documents of the intermediate Parties or the non- Parties, or with any other appropriate documentation on request of the customs authorities of the importing Party. 3. Appropriate documentation referred to in paragraph 2 may include commercial shipping or freight documents such as airway bills, bills of lading, multimodal or combined transport documents, a copy of the original commercial invoice in respect of the good, financial records, a non-manipulation certificate, or other relevant supporting documents, as may be requested by the customs authorities of the importing Party.