Indo- Sri Lanka Economic & Technology Cooperation Agreement (ETCA)

Transcription

1 Negotiations on Indo- Sri Lanka Economic & Technology Cooperation Agreement (ETCA) Between India and Sri Lanka Sri Lanka reserves the right to propose amendments and deletions to this text, Annexes referred therein and to propose additional provisions for consideration by the Parties at any time before the conclusion of negotiations of India-Sri Lanka ETCA 0

2 Contents CHAPTER SUBJECT Preamble 1 Establishment, Objectives and General Definitions 2 Trade in Goods 3 Trade in Services 4 Movement of Natural Persons (Dropped from CEPA text) 5 Investment (Updated Chapter was Not Available) 6 Air Services 7 Customs 8 Standards and Technical Regulations, Sanitary and Phyto-sanitary Measures 9 Economic Cooperation 10 Consultations and Dispute Settlement 11 Final Provisions 1

3 PREAMBLE: The Government of the Republic of India and the Government of the Democratic Socialist Republic of Sri Lanka (hereinafter referred to as Parties ), Recognising the desire for closer economic integration to achieve the shared goalsof alleviating poverty, creating wealth and bringing about progress and prosperity for the people of the two countries, underlined in the Joint Declaration by the president of Sri Lanka and the Prime Minister of India in June 2010 Recognising the considerable benefits from greater economic cooperation betweenthe two countries Recalling the historic India-Sri Lanka Free Trade Agreement (herein after referredto as ISLFTA ) signed between the two Parties on 28 th December, 1998 and came into operation in the year 2000; Acknowledging; the progress achieved under the India-Sri Lanka Free Tradeagreement. Acknowledging further that the ISLFTA has laid a robust foundation of economicintegration between the Parties; Recognising that further economic and trade liberalization allow for the optimaluse of natural resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment; Desiring to further minimize and, wherever possible, eliminate barriers and deepeneconomic linkages between the Parties; lower costs; increase bilateral trade and investment; increase economic efficiency; create a larger market with greater opportunities and larger economies of scale for the business activities of the Parties; and enhance the attractiveness of the Parties to capital and talent; Reaffirming that regional trade arrangements can contribute towards acceleratingregional and global liberalisation and as building blocks in the framework of the multilateral trading system; and also believing that their cooperative framework could serve as a template for future integration with other SAARC countries; Reaffirming the rights, obligations and undertakings of the Parties as DevelopingCountry Members of the World Trade Organisation (WTO), and other multilateral, regional and bilateral agreements and arrangements; Desiring to promote mutually beneficial economic relations, taking into account theasymmetry of their respective economies; 2

4 Reaffirming their right to pursue economic philosophies suited to theirdevelopment goals and their right to regulate activities to realise their national policy objectives; Recognising that it would be timely to build on this achievement through a morecomprehensive Economic & Technology Cooperation Agreement, best suited to the two countries. Have agreed as follows: 3

5 Article I: Establishment Chapter 1 Establishment, Objectives and General Definitions The Parties hereby establish a Economic & Technology Cooperation Agreement (ETCA) in conformity with relevant provisions of the Marrakesh Agreement Establishing the World Trade Organisation, 1994 (WTO Agreement), especially the Enabling Clause. Article II: Objectives The objectives of this ETCA are to: a) Further strengthen and enhance economic, trade and investment co-operation between the Parties by developing a policy framework encompassing trade in goods and services, investment and other areas of economic cooperation with a view to maximizing the benefits of geographical proximity and integrating the economies of the Parties; b) Further develop and enhance the scope of the ISLFTA building upon the past experience, improve the operation, clarify specific areas and disciplines of the ISLFTA; c) Liberalise and promote trade in services on a progressive and sequential basis, in accordance with the provisions of the General Agreement on Trade in Services (GATS), while respecting the national objectives of the Parties and recognizing the rights of Parties to regulate on the supply of services based on their level of development; d) Establish a transparent, predictable and facilitative investment regime; e) Explore new areas of opportunities for economic cooperation, and develop appropriate measures for closer economic cooperation between the Parties. Article III: General Definitions (a) Agreement or ETCA means the Economic & Technology Cooperation Agreement between India and Sri Lanka ; b) Authorities means central, state, regional or local governments or any entity / body within the territory of a Party, which exercises powers delegated to them by central, state, regional or local governments; 4

6 c) Committee means the Joint Committee referred to in Article I of Chapter 11 (Final Provisions) d) Measure includes any law, regulation, rule, governmental procedure or requirement, decision or administrative action; e) Measure by a Party means any measure taken by the authorities of a Party; f) Standing Committee means the Standing Committee referred to in Article I of Chapter 11 (Final Provisions) g) Territory means the territory of a Party including internal waters, the territorial sea and airspace above it, as well as the exclusive economic zone and the continental shelf over which a Party has / exercises sovereign rights or jurisdiction in accordance with its domestic law and international law; and h) WTO means the World Trade Organization. 5

7 Chapter 2 Article I: Definitions Trade in Goods For the purposes of this Chapter, the following definitions shall apply: Tariffs means basic customs duties included in the national schedules of thecontracting Parties; Anti-Dumping Agreement means the Agreement on Implementation of Article VI of the GATT 1994; Customs Administration/Authority means the competent authority that is responsible under the laws of a Party for the administration of customs laws, regulations and policies; Customs Duties 1 means duties imposed in connection with the importation of a good provided that such customs duties shall not include: i) Other Duties and Charges (ODCs) imposed consistent with Article II:1(b) of the GATT 1994; ii) charges equivalent to internal taxes, including excise duties and value added taxes imposed consistent with Article III (2) of GATT 1994; iii) any anti-dumping, countervailing duty or other duties applied consistent with the provisions of GATT 1994, the WTO Anti-dumping Agreement, the WTO Agreement on Subsidies and Countervailing Measures and the WTO Agreement on Safeguards; and iv) fees or other charges that are limited in amount to the approximate cost of services rendered, and do not represent a direct or indirect protection for domestic goods or a taxation of imports for fiscal purposes; Customs Value means value as determined by the customs authorities of each Party in conformity with the provisions of Article VII of the GATT 1994 and the WTO Agreement on Implementation of Article VII of the GATT Customs duties for India refer to basic customs duties as included in the National Customs Schedules of India and for Sri Lanka Customs duties refer to General customs duties as described in the Schedule A to the Customs Ordinance. 6

8 GATT 1994 means the General Agreement on Tariffs and Trade 1994, which is part of the WTO Agreement, including Annex I (Notes and Supplementary Provisions); Harmonized System means the Harmonized Commodity Description and CodingSystem (HS), as may be amended from time to time by the World CustomsOrganisation (WCO) and implemented by the parties to the HS Convention, including its General Rules for Interpretation, Section Notes and Chapter Notes, as adopted by the Parties in their respective tariff laws; MFN means most favoured nation treatment in accordance with Article I of GATT 1994; Originating Goods has the same meaning as defined in Rule 4 of Rules of Origin as at Annex 2C. Preferential Treatment means any concession or privilege granted under thischapter by a Party, including the elimination of tariffs on the movement of goods. Products means all products including manufactures and commodities in theirraw, semi-processed and processed forms. Preferential Safeguard Measures means the measures referred to in Article XVI of this Chapter; SPS Agreement means the WTO Agreement on the Application of Sanitary and Phyto-sanitary Measures; and TBT Agreement means the WTO Agreement on Technical Barriers to Trade. Article II: Tariff Liberalisation 1. Trade in goods between the Parties shall be governed by this Chapter. The Free Trade Agreement between the Republic of India and the Democratic Socialist Republic of Sri Lanka (ISLFTA) signed on 28 th of December 1998 together with all the related Notifications, Protocols, Side Letters, Understandings etc., governing ISLFTA s implementation, is deemed to be incorporated into this Chapter. 2. The Parties shall continue to fulfil their respective obligations under the tariff liberalisation programme (TLP) of the ISLFTA. The Parties, however, with a view to adopting more trade liberalisation measures under the TLP, shall revise their 7

9 respective negative lists together with TLP within [sixty (60)] days of signing of this Agreement Goods which are covered under the Negative List (NL) of each Party shall not be subject to tariff concessions referred to above, except for items that are subject to preferential tariffs and tariff rate quotas. 4. Goods listed in the Negative Lists, including the items that are subject to Tariff Rate Quotas (TRQs) / Margin of Preferences (MOPs) shall be subject to review every four years, or earlier as mutually agreed, with the objective of promoting free trade between both the Parties. The first such review shall take place within one (1) year after signing of this Agreement 5. In the event of any inconsistency between the provisions of the ISLFTA and this Chapter, the latter shall prevail to the extent of inconsistency. Article III: General Exceptions Nothing in this Chapter shall prevent either Party from taking action and adopting measures, which it considers necessary for the protection of its national security, the protection of public morals, the protection of human, animal or plant life and health, and the protection of articles of artistic, historic and archaeological value, as provided for in Articles XX and XXI of the GATT Article IV: National Treatment The Parties affirm their commitments under Article III of GATT Article V: State Trading Enterprises 1. Nothing in this Chapter shall be construed to prevent a Party from maintaining or establishing a State Trading Enterprise as understood in Article XVII of GATT Each Party shall ensure that any State enterprise that it maintains or establishes, acts in a manner that is consistent with the obligations of the Parties under this Chapter and accords non-discriminatory treatment in the import from and export to the other Party. 2 India s revised Negative List and the TLP are contained in the Annex 2A. Sri Lanka s revised Negative List and the TLP are contained in the Annex 2B 8

10 Article VI: Rules of Origin 1. Products covered by the provisions of this Chapter shall be eligible for preferential treatment provided they satisfy the Rules of Origin set out in Annex 2C to this Agreement. 2. For the development of specific sectors of the industry of either Party, specific derogations in respect of products manufactured or produced by those sectors may be considered through mutual negotiations. 3. The Parties shall apply Product Specific Rules (PSRs) in respect of the products listed in Annex 2D to this Agreement. 4. The PSRs in Annexes 2D to this Agreement shall be reviewed and may be amended at the request of either Party. Any new proposals on PSRs may be mutually considered for inclusion in the Annexes as and when the need arises. 5. Operational Certification Procedures for implementing the rules of origin are at Annex 2E to this Agreement. Article VII: Non-Tariff Measures Neither Party shall adopt or maintain any non-tariff measures which are inconsistent with the provisions of the WTO Agreements except as otherwise provided in this Chapter and in conformity with Articles XI, XIII and XVIII of GATT Article VIII: Balance of Payment Measures 1. Notwithstanding the provisions of this Chapter, any Party facing balance of payments difficulties may suspend provisionally the preferential treatment as to the quantity and value of merchandise permitted to be imported under the Chapter. When such action is taken, the Party, which initiated such action, shall immediately notify the other Party. 2. Any Party, which takes action under paragraph 1 of this Article, shall afford, upon request from the other Party, adequate opportunities for consultations with a view to preserving the stability of the preferential treatment provided under this Agreement. 9

11 Article IX: Anti Dumping Measures Each Party retains its rights and obligations under Article VI of GATT 1994 and the Anti-dumping Agreement and any amendment thereto. To this end, the provisions of the WTO Agreement on Anti-Dumping shall apply, mutatis mutandis, to the extent not specifically provided for in this Agreement. Article X: Notification of petition for investigation, exchange of information and consultations 1. The investigating authority of a Party shall, before proceeding to initiate an antidumping investigation, notify the other Party at least seven (7) working days in advance of the date of initiation of such investigation. 2. The purpose of notification requirement referred to in paragraph 1 is to accord an opportunity for consultations between the Parties prior to the initiation of any anti-dumping investigation against the products originating from the territory of the other Party. 3. In addition to the usual practice regarding notification in anti-dumping investigations, each Party shall, for the purposes of paragraph 1, designate a contact point to which such notification shall be conveyed through electronic means. Having recognized that it may not always be practicable for such notification to include attachments and enclosures referred to therein, both Parties agree, to the extent possible, to provide the following information: a) the name of the petitioner; b) the complete description of the imported product under investigation, which is sufficient for customs purposes and its classification in accordance with the Harmonized System; c) the name, address and telephone number of the authority where request or other documents related to the investigation can be examined and further information can be obtained; and d) a summary of the facts upon which the initiation of the investigation is to be based, including data on imports that have supposedly increased in absolute or relative terms to total production. 4. A Party, whose product is subject to an anti-dumping investigation by the other Party, may by the due date for the submission of the response to the questionnaire 3, inform, where applicable, the investigating Party in the importing country that there are no significant exports of that product to the investigating Party. Such information, together with all relevant information on record, shall be taken into 3 This relates to the questionnaire referred to in Article 6 of the WTO Anti-Dumping Agreement. 10

12 account by the investigating authority of the other Party in its findings. The purpose of this provision, among others, is to determine whether that the volume of dumped imports is negligible or not. Article XI: Incomplete information Where the information provided by the exporter or producer under antidumping investigation is not ideal in all respects, but the producer or exporter concerned has acted to the best of his ability, the investigating authority of a Party shall, before rejecting the information, use its best endeavours to obtain more complete information for the purposes of the investigation including, where requested, granting a reasonable extension of time to the producer or exporter concerned to make a more detailed and proper response in accordance with Article of the Anti-Dumping Agreement. Article XII: Use of Information 1. Where originating goods are subject to an anti-dumping investigation, the export price of such goods before adjustment for fair comparison in accordance with Article 2.4 of the Anti-Dumping Agreement shall, subject to paragraph 2, where appropriate, be based on the value, which appears in relevant documents, including the Certificate of Origin for the goods. 2. Where the investigating authority of a Party determines that the value referred to in paragraph 1 is unreliable because of association or a compensatory arrangement between the exporter and the importer or a third party, the export price may be constructed in accordance with Article 2.3 of the Anti-Dumping Agreement. In such instances, the investigating authority may rely on other sources of information 4, in accordance with its practice 5, to arrive at the export price. Article XIII: Recommendations of the WTO Committee on Anti-Dumping Practices Each Party may, in all anti-dumping investigations take into account the recommendations of the WTO Committee on Anti-Dumping Practices. 4 Other source of information means the sources identified in Article 2.3 of the Anti-Dumping Agreement. 5 In accordance with practice means any determination by the Competent Authority on reasonable basis as stated in Article 2.3 of the Anti-Dumping Agreement. 11

13 Article XIV: Subsidies and Countervailing Measures Each Party retains its rights and obligations under the Part V of the WTO Agreement on Agriculture as well as under Articles VI and XVI of GATT 1994 and the WTO Agreement on Subsidies and Countervailing Measures, or any amendments thereto. Article XV: Global Safeguard Measures Each Party retains its rights and obligations under Article XIX of GATT 1994 and the WTO Agreement on Safeguards. Article XVI: Preferential Safeguard Measures Clause 1: Scope 1. These provisions shall be known as Preferential Safeguards Measures. The Parties can apply preferential safeguard measures under this Chapter subject to the provisions hereunder. 2. Preferential safeguard measures shall not be applied to a product after three (3) years from the date on which tariff on that product has reached zero. Clause 2: Definitions For the purposes of this Article: (a) domestic industry shall be understood to mean the producers as a whole of the like or directly competitive products operating within the territory of a Party or those producers whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of such products; (b) serious injury shall be understood to mean a significant overall impairment in the position of a domestic industry; (c) threat of serious injury shall be understood to mean the serious injury that is clearly imminent, based on facts and not merely on allegation, conjecture or remote possibility; 12

14 (d) critical circumstances means the emergence of an exceptional situation where massive preferential imports are causing or threatening to cause serious injury difficult to repair and which calls for immediate action. Clause 3: Conditions for Application of Preferential Safeguard Measures 1. The Parties may apply preferential safeguard measures subject to the conditions specified in this Article, when a product under preferential terms is being imported into a territory of a Party in such increased quantities, absolute and relative to, domestic production of the importing Party, and under such conditions as to cause or threaten to cause serious injury to the domestic industry in the importing country that produces like or directly competitive products. 2. A Party may apply or extend a preferential safeguard measure only following an investigation by that Party s competent authorities pursuant to procedures as established in this Article. Clause 4: Application of Preferential Safeguard Measures 1. The importing country may apply preferential safeguard measures only if the increase in the imports of the products from the exporting Party alone constitutes a substantial cause of serious injury, or threat thereof, to the domestic industry of the importing country that produces like or directly competitive products. 2. Preferential safeguard measures shall not be applied against a product originating in either Party as long as its share of imports (import share calculated on the basis of both preferential and non-preferential imports) of the product concerned in the importing country does not exceed six (6) percent. 3. A Party may not apply or continue to apply a preferential or provisional safeguard measure on a product that has been subjected to a measure under Article XIX of GATT 1994 and the WTO Agreement on Safeguards. 4. The preferential safeguard measure applied in accordance with this Article shall not affect the imports, which have been cleared by the Customs Authority of the importing Party prior to the date of entry into force of the measure. Clause 5: Types of Preferential Safeguard Measures 1. The importing country may, subject to the conditions provided in Clauses 3 and 4, to the extent necessary to prevent or remedy serious injury and facilitate adjustment, apply a preferential safeguard measure, consisting of: 13

15 (a) Temporary suspension of the further reduction of any rate of customs duty provided for under this Chapter for the product from the date on which the action to apply the preferential safeguard measure is taken; or (b) Temporary partial suspension of the tariff preferences already granted in accordance with this Chapter for the product subject to the measure; or (c) An increase of the rate of customs duty of the product to a level not to exceed a level, which is lesser of: (i) the most-favoured-nation (MFN) applied rate of customs duty in effect on the date on which the action to apply the Preferential Safeguard measure is taken; or (ii) the MFN applied rate of customs duty in effect on the day immediately preceding the date of entry into force of this Agreement; (d) Imposition of quantitative restriction which shall not reduce the quantity of imports below the level of a recent period which shall be the average of imports in the last three (3) years for which statistics are available, unless clear justification is given that a different level is necessary to prevent or remedy serious injury. 2. The Parties shall choose, in consultation with each other, one or a combination of the above measures most suitable for the achievement of the objectives of Clauses 3 and 4 of this Article. Clause 6: Investigation 1. Each Party shall ensure the consistent, impartial and reasonable administration of its laws, regulations, decisions and rulings governing all safeguard investigation proceedings. To this end, each Party shall establish or maintain transparent, effective and equitable procedures for the impartial and reasonable investigation proceedings and application of preferential safeguard measures, in compliance with the provisions established in this Article. 2. Each Party shall entrust determinations of serious injury or threat thereof in safeguard investigation proceedings to a competent investigating authority, subject to review by judicial or administrative tribunals, to the extent provided by domestic law. 3. A Party may initiate a safeguard investigation at the request of the domestic producers of the importing Party of the like or directly competitive products. 4. The purpose of the investigation shall be: (a) to assess the quantities and conditions under which the product is being 14

16 imported; (b) to determine the existence of serious injury or threat of serious injury to the domestic industry; and (c) to determine the causal link between the increased preferential imports of the product concerned and the serious injury or threat thereof to the domestic industry, in compliance with the provisions of this Article. 5. Pursuant to the provisions of Clause 9 of this Article, the investigation shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other party and to submit their views, inter alia, as to whether or not the application of a preferential safeguard measure would be in the public interest. 6. The period between the date of publication of the decision to initiate the investigation and the publication of the final decision shall not exceed one (1) year. 7. In the investigation to determine whether increased imports of an originating product of the other Party have caused or are threatening to cause serious injury to a domestic industry under the terms of this Article, the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular: a) the rate and amount of the increase in preferential imports concerned in absolute and relative terms; b) the share of the domestic market taken by such increased preferential imports; c) the consequent impact on the domestic industry of the like or directly competitive products, based on factors, including: production, productivity, capacity utilisation, the level of stocks, sales, market share, prices, profits, losses and employment; d) the relationship between the preferential and non-preferential imports; as well as between the increase of one and the other. 8. The determination referred to in paragraph 6 of this Article shall not be made unless the investigation demonstrates, on the basis of objective evidence, the existence of a causal link between the increased preferential imports of the product concerned and the serious injury or threat thereof. 15

17 9. When factors other than increased preferential imports of the other Party resulting from the reduction or elimination of a customs duty pursuant to this Chapter are at same time causing serious injury, such injury shall not be attributed to such increased imports. 10. Any information which is by nature confidential or which is provided on a confidential basis shall, upon cause being shown, be treated as such by the competent authorities. Such information shall not be disclosed without permission of the party submitting it. Parties providing confidential information may be requested to furnish non-confidential summaries thereof or, if such Party indicates that such information cannot be summarised, the reasons why a summary cannot be provided. However, if the competent authorities find that a request for confidentiality is not warranted and if the Party concerned is either unwilling to make the information public or to authorise its disclosure in generalised or summary form, the authorities may disregard such information unless it can be demonstrated to their satisfaction from appropriate sources that the information is correct. Clause 7: Duration of Preferential Safeguard Measures 1. A Party shall apply a preferential safeguard measure only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment. The total period of the application of a preferential safeguard measure including the period of application of any provisional measure shall not exceed one (1) year. 2. The period of a Preferential safeguard measure, referred to in paragraph 1 above, may be extended by up to one (1) more year, provided that the conditions of this Article are met and that the preferential safeguard measure continues to be applied to the extent necessary to prevent or remedy serious injury and that there is evidence that the industry is adjusting and the pertinent provisions of Clauses 9 (Notification & Consultations) and 11 (Compensation) are observed. A measure extended under this paragraph shall not be more restrictive than it was at the end of the initial period, and should continue to be liberalized. 3. The total period of a preferential safeguard measure, including the period of application of any provisional measures, shall not exceed two (2) years. 4. In order to facilitate adjustment in a situation where the proposed duration of a preferential safeguard measure is over one (1) year, the Party applying the measure shall progressively liberalise it at regular intervals during the application of the measure, including the time of any extension. 5. A Party shall not apply a preferential safeguard or provisional measure again to the import of a product, which has been subjected to a measure until two (2) years 16

18 have elapsed since the date of the termination of the earlier preferential safeguard or provisional measure. 6. Upon the termination of a preferential safeguard measure, the Party that applied the measure shall apply the rate of customs duty set out in its Tariff Schedule as specified in Annex 2A and 2B on the date of termination as if the preferential safeguard measure had never been applied. Clause 8: Provisional Measures 1. In critical circumstances where delay would cause damage which would be difficult to repair,, a Party may, after due notification, apply a provisional preferential safeguard measure pursuant to a preliminary determination that there is clear evidence that increased preferential imports of the other Party as a result of the reduction or elimination of a duty pursuant to this Agreement have caused or are threatening to cause serious injury to the domestic industry in the importing country that produces like or directly competitive products. 2. The duration of such a provisional measure shall not exceed 120 days, during which period the pertinent requirements of Clauses 3, 4, 5, 6, 7, 8 and 9 shall be met. The duration of any such provisional measure shall be counted as part of the total period referred to in Clause 7 (3). 3. Any additional customs duties collected as a result of such a provisional measure shall be promptly refunded if the subsequent investigation under Clause 6 determines that increased imports of an originating product of the other Party have not caused or threatened to cause serious injury to a domestic industry. In such a case, the Party that applied the measure shall apply the rate of customs duty set out in its Tariff Schedule as specified in Annex 2A and 2B as if the provisional measure had never been applied. Clause 9: Notification 1. A Party shall promptly notify the other Party, in writing, of its: a) decision to initiate the investigation under this Article; b) findings of serious injury or threat thereof caused by increased imports of an originating product of the other Party as a result of the reduction or elimination of a customs duty on the product pursuant to this Chapter; c) decision to apply a provisional preferential safeguard measure; d) decision to apply a definitive preferential safeguard measure or to extend an existing preferential safeguard measure; e) decision to suspend any provisional or definitive preferential safeguard measure; and 17

19 f) decision to progressively liberalise a preferential safeguard measure previously applied. 2. Any of the decisions referred to in paragraph 1 shall be notified by the Party within a period of seven (7) days from the date of publication. The Party shall provide an appropriate public version of the reports of its competent authorities required under paragraphs 4 and 5 of Clause The notification(s) under paragraphs 1 and 2 shall include the following information: a) the name of the petitioner; b) the complete description of the imported product under investigation, which is sufficient for customs purposes and its classification in accordance with the Harmonized System; c) the deadline for the request for hearings and the venue where hearings will be held; d) the deadline for the submission of information, statements and other documents; e) the name, address and telephone number(s) of the authority where the request or other documents related to the investigation can be examined and further information can be obtained; and f) a summary of the facts upon which the initiation of the investigation was based, including data on imports that have supposedly increased in absolute and relative terms to total production. 4. The Party proposing to apply or extend a provisional or definitive preferential safeguard measure shall also provide the following information in the notification(s) under paragraphs 1 and 2: a) the complete description of the imported product under investigation, which is sufficient for customs purposes and its classification in accordance with the Harmonized System; b) a summary of the facts upon which the initiation of the investigation was based, including data on imports that have supposedly increased in absolute and relative terms to total production and evidence of serious injury or threat thereof caused by increase in preferential imports of the other Party as a result of the reduction or elimination of a customs duty pursuant to this Chapter; c) information and evidence leading to the decision, such as, the increasing or increased preferential imports; the situation of the domestic industry; the fact that the increasing preferential imports are causing or threatening to cause serious injury to the domestic industry; 18

20 d) in the case of preliminary determination, the existence of critical circumstances; e) other reasoned findings and conclusions on all relevant issues of fact and law; f) In the case of an extension of a measure, evidence that the domestic industry concerned is adjusting shall also be provided; g) the details of the proposed measure including as appropriate the grounds for not selecting the measures described in Clause 5.1 (a) and (b); and h) the date of introduction, duration and timetable for progressive liberalisation of the measure in case of extension, if such timetable is applicable. 5. Upon request, the Party applying or extending a preferential safeguard measure shall provide additional information as the other Party may consider necessary. Clause 10: Consultation 1. A Party proposing to apply or extend a preferential safeguard measure shall provide adequate opportunity for prior consultations with the other Party, with a view to, inter alia, reviewing the information provided under paragraphs 3 and 4 of Clause 9, exchanging views on the measure and reaching an agreement on compensation as set forth in Clause 11 (1). 2. Where a Party applies a provisional safeguard measure referred to in Clause 8, on request of the other Party, consultations shall be initiated immediately after such application. 3. The Party shall notify the other Party of its decision or proposal by the competent authority to apply a definitive preferential safeguard measure. The notification shall be provided no less than thirty (30) days before the measure comes into force. 4. The notification referred to in paragraph 3 above shall include: a) evidence of the existence of serious injury or threat of serious injury to the domestic industry caused by the increased imports; b) the complete description of the product subjected to the measure, which is sufficient for customs purposes, including its tariff classification under the Harmonised System; c) description of the measure proposed; d) the date of entry into force of the measure and its duration; 19

21 e) the period for consultations; and f) the criteria employed or any objective information proving that the conditions established in this Article for the application of a measure have been met. 5. Notwithstanding the provisions of paragraphs 1, 2 and 3 of this Clause, at any stage of the investigation, the Parties may request consultations with each other to seek any additional information that they consider necessary. Clause 11: Compensation 1. A Party extending a safeguard measure for an overall period beyond one (1) year shall, in consultation with the other Party, provide to the other Party mutually agreed compensation in the form of substantially equivalent concessions during the period of extension of the measure beyond the aforementioned one (1) year. The consultations shall take place at least 30 days prior to the extension of the measure. 2. The Parties may agree on any adequate means of trade compensation for the adverse effects of the measure on their trade. 3. If the Parties are unable to reach agreement on compensation, the affected exporting Party shall give a written notice, at least 30 days before suspending concessions, to the other Party of its decision to suspend the application of substantially equivalent concessions to the trade of the Party applying the safeguard measure. 4. The written notice shall include relevant details of the proposed suspension of substantially equivalent concessions or any other adequate means of trade compensation for the adverse effects of the measure on the trade of the affected exporting Party. 5. The affected exporting Party shall be free to suspend the application of substantially equivalent concessions to the trade of the Party applying the safeguard measure upon the expiry of thirty (30) days from the day on which the written notice of suspension is received by the Party applying the preferential safeguard measure. 6. The obligation to provide compensation under paragraphs 1 and 2, and the right to suspend substantially equivalent concessions under paragraph 5 shall terminate on the date of the termination of the preferential safeguard measure. 7. Notwithstanding the provisions in paragraph 1 of this Clause, if the preferential safeguard measure has been taken as a result of an absolute increase in imports and such a measure is consistent with the provisions of this Article, the right of suspension referred to in paragraph 5 of this Clause shall not be exercised for the 20

22 period referred to in paragraph 1 of Clause 7 (one year), and for the first two (2) years that a preferential safeguard measure is in effect as per the provisions in paragraph 3 of Clause 7 (two years) of this Article. Clause 12: Review 1. Within 5 years after entry into force of this Agreement, the Parties shall meet to review this Article with a view to determining whether there is a need to maintain any preferential safeguard mechanism. 2. If the Parties do not agree to remove the preferential safeguard mechanism during the review pursuant to paragraph (1) above, they shall thereafter conduct reviews, as mutually agreed upon, to determine the necessity of a preferential safeguard mechanism. Clause 13: Competent Authority Each Party shall within a period of three months of the signing of this Agreement, notify the other Party of the competent investigating authorities referred to in this Article. 21

23 Chapter 3 Trade in Services Article I: Definitions For the purposes of this Chapter: (a) (b) a service supplied in the exercise of governmental authority meansany service which is supplied neither on a commercial basis nor in competition with one or more service suppliers; commercial presence means any type of business or professionalestablishment, including through: (i) (ii) the constitution, acquisition or maintenance of a juridical person, or the creation or maintenance of a branch or a representative office, within the territory of a Party for the purpose of supplying a service; (c) (d) (e) direct taxes comprise all taxes on total income, on total capital or onelements of income or of capital, including taxes on gains from the alienation of property, taxes on estates, inheritances and gifts, and taxes on the total amounts of wages or salaries paid by enterprises, as well as taxes on capital appreciation; juridical person means any legal entity duly constituted or otherwiseorganised under applicable law, whether for profit or otherwise, and whether privately-owned or governmentally-owned, including any corporation, trust, partnership, joint venture, sole proprietorship or association, cooperative or society; juridical person of the other Party means a juridical person which iseither: (i) (ii) constituted or otherwise organised under the law of the other Party or in the case of the supply of a service through commercial presence, owned or controlled by: (1) natural persons of the other Party; or (2) juridical persons of the other Party identified under paragraph (e)(i); 22

24 (f) measure means any measure by a Party, whether in the form of a law,regulation, rule, procedure, decision, administrative action, or any other form; (g) measures by Parties means measures taken by: (i) (ii) central, regional, or local governments and authorities; and non-governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities; (h) measures by Parties affecting trade in services include measures inrespect of: (i) (ii) (iii) the purchase, payment or use of a service; the access to and use of, in connection with the supply of a service, services which are required by the Parties to be offered to the public generally; the presence, including commercial presence, of persons of a Party for the supply of a service in the territory of the other Party; (i) (j) (k) monopoly supplier of a service means any person, public or private,which in the relevant market of the territory of a Party is authorised or established formally or in effect by that Party as the sole supplier of that service; natural person of a Party means a natural person who resides in theterritory of the Party or elsewhere and who under the law of that Party is a national of that Party; a juridical person is: (i) (ii) (iii) owned by persons of a Party if more than 50 per cent of the equityinterest in it is beneficially owned by persons of that Party; controlled by persons of a Party if such persons have the power toname a majority of its directors or otherwise to legally direct its actions; affiliated with another person when it controls, or is controlled by,that other person, or when it and the other person are both controlled by the same person; (l) (m) person means either a natural person or a juridical person; services means all services except services supplied in the exercise ofgovernmental authority; 23

25 (n) service consumer means any person that receives or uses a service; (o) service of the other Party means a service which is supplied: (i) (ii) from or in the territory of the other Party, or in the case of maritime transport, by a vessel registered under the laws of the other Party, or by a person of the other Party which supplies the service through the operation of a vessel and/or its use in whole or in part; or in the case of the supply of a service through commercial presence or through the presence of natural persons, by a service supplier of the other Party; (p) service supplier means any person that supplies a service; 7-1 (q) (r) supply of a service includes the production, distribution, marketing, saleand delivery of a service; and trade in services is defined as the supply of a service: (i) (ii) (iii) (iv) from the territory of a Party into the territory of the other Party (cross-border); in the territory of a Party to the service consumer of the other Party (consumption abroad); by a service supplier of a Party, through commercial presence in the territory of the other Party (commercial presence); by a service supplier of a Party, through presence of natural persons of that Party in the territory of the other Party (presence of naturalpersons). Article II: Scope and Coverage 1. This Chapter applies to measures by a Party affecting trade in services. 2. In accordance with the provisions of Article XV, this Chapter shall not apply to subsidies or grants provided by a Party or to any conditions attached to the receipt or continued receipt of such subsidies or grants, whether or not 7-1 Where the service is not supplied directly by a juridical person but through other forms of commercial presence such as a branch or a representative office, the service supplier (i.e. the juridical person) shall, nonetheless, through such presence be accorded the treatment provided for service suppliers under this Chapter. Such treatment shall be extended to the presence through which the service is supplied and need not be extended to any other parts of the supplier located outside the territory where the service is supplied. 24

26 such subsidies or grants are offered exclusively to domestic services, service consumers or service suppliers. 3. This Chapter shall not apply to: (a) (b) a service supplied in the exercise of governmental authority; and a shell company, which is any legal entity falling within the definition of juridical person in this Chapter which is established and located in the territory of either Party with negligible or nil business operations or with no real and continuous business activities carried out in the territory of either Party. 4. New services, including new financial services, may be considered for possible incorporation into this Chapter at future reviews held in accordance with Article IX, or at the request of either Party immediately. The supply of services which are not technically or technologically feasible when this Agreement comes into force shall, when they become feasible, also be considered for possible incorporation at future reviews or at the request of either Party immediately. 5. This Chapter shall not apply to measures affecting natural persons seeking access to the employment market of a Party, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis. 6. Nothing in this Chapter shall prevent a Party from applying measures to regulate the entry of natural persons of the other Party into, or their temporary stay in, its territory, including those measures necessary to protect the integrity of, and to ensure the orderly movement of natural persons across its borders, provided that such measures are not applied in such a manner as to nullify or impair the benefits accruing to the other Party under the terms of this Chapter as well as the terms of specific commitments undertaken. Article III: Market Access 1. With respect to market access through the modes of supply defined in paragraph (r) of Article I, each Party shall accord services and service suppliers of the other Party treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule of specific commitments If a Party undertakes a market-access commitment in relation to the supply of a service through the mode of supply referred to in Article I(r)(i) and if the cross-border movement of capital is an essential part of the service itself, that Party is thereby committed to allow such movement of capital. If a Party undertakes a market-access commitment in relation to the supply of a service through the mode of supply referred to in Article I(r)(iii), it is thereby committed to allow related transfers of capital into its territory. 25

27 2. In sectors where market access commitments are undertaken, the measures which a Party shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory, unless otherwise specified in its Schedule of specific commitments, are defined as: (a) (b) (c) (d) (e) (f) limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test; limitations on the total value of service transactions or assets in the form of numerical quotas or the requirement of an economic needs test; limitations on the total number of service operations or on the total quantity of service output expressed in terms of designated numerical units in the form of quotas or the requirement of an economic needs test 7-3 ; limitations on the total number of natural persons that may be employed in a particular service sector or that a service supplier may employ and who are necessary for, and directly related to, the supply of a specific service in the form of numerical quotas or the requirement of an economic needs test; measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service; and limitations on the participation of foreign capital in terms of maximum percentage limit on foreign shareholding or the total value of individual or aggregate foreign investment. Article IV: National Treatment 1. In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Party shall accord to services and service suppliers of the other Party, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers paragraph 2(c) of Article III does not cover measures of a Party which limit inputs for the supply of services. 7-4 Specific commitments assumed under this Article shall not be construed to require any Party to compensate for any inherent competitive disadvantages which result from the foreign character of the relevant services or service suppliers. 26