# Section G - Textiles and Apparel

**Article 3.19: Bilateral Emergency Actions**

1\. If, as a result of the elimination of a duty provided for in this
Agreement, a textile or apparel good benefiting from preferential tariff
treatment under this Agreement is being imported into the territory of a
Party in such increased quantities, in absolute terms or relative to the
domestic market for that good, and under such conditions as to cause
serious damage, or actual threat thereof, to a domestic industry
producing a like or directly competitive good, the importing Party may,
to the extent and for such time as may be necessary to prevent or remedy
such damage and to facilitate adjustment, take emergency action,
consisting of an increase in the rate of duty on the good to a level not
to exceed the lesser of:

\(a\) the most-favored-nation (MFN) applied rate of duty in effect at
the time the action is taken; and

\(b\) the MFN applied rate of duty in effect on the date of entry into
force of this

Agreement.

2\. In determining serious damage, or actual threat thereof, the
importing Party:

\(a\) shall examine the effect of increased imports from the other Party
on the particular industry, as reflected in changes in such relevant
economic variables as output, productivity, utilization of capacity,
inventories, market share, exports, wages, employment, domestic prices,
profits and investment, none of which is necessarily decisive; and

\(b\) shall not consider changes in technology or consumer preference as
factors supporting a determination of serious damage or actual threat
thereof.

3\. The importing Party may take an emergency action under this Article
only following an investigation by its competent authorities.

4\. The importing Party shall deliver to the other Party, without delay,
written notice of its intent to take emergency action, and, on request
of the other Party, shall enter into consultations with that Party.

5\. The following conditions and limitations shall apply to any
emergency action taken under this Article:

\(a\) no emergency action may be maintained for a period exceeding three
years;

\(b\) no emergency action may be taken or maintained beyond the period
ending eight years after duties on a good have been eliminated pursuant
to this Agreement;

\(c\) no emergency action may be taken by an importing Party against any
particular good of the other Party more than once; and

\(d\) on termination of the action, the good will return to duty-free
status.

6\. The Party taking an emergency action under this Article shall
provide to the Party against whose good the action is taken mutually
agreed trade liberalizing compensation in the form of concessions having
substantially equivalent trade effects or equivalent to the value of the
additional duties expected to result from the emergency action. Such
concessions shall be limited to textile and apparel goods, unless the
Parties otherwise agree. If the Parties are unable to agree on
compensation, the Party against whose good the emergency action is taken
may take tariff action having trade effects substantially equivalent to
the trade effects of the emergency action taken under this Article. Such
tariff action may be taken against any goods of the Party taking the
emergency action. The Party taking the tariff action shall apply such
action only for the minimum period necessary to achieve the
substantially equivalent trade effects. The importing Party\'s
obligation to provide trade compensation and the exporting Party\'s
right to take tariff action shall terminate when the emergency action
terminates.

7\. Nothing in this Agreement shall be construed to limit a Party\'s
right to restrain imports of textile and apparel goods in a manner
consistent with the Agreement on Textiles and Clothing or the Safeguards
Agreement. However, a Party may not take or maintain an emergency action
under this Article against a textile or apparel good that is subject, or
becomes subject, to a safeguard measure that a Party takes pursuant to
either such WTO agreement.

**Article 3.20: Rules of Origin and Related Matters**

*Application of Chapter Four*

1\. Except as provided in this Section, Chapter Four (Rules of Origin
and Origin Procedures) applies to textile and apparel goods.

2\. The rules of origin set forth in this Agreement shall not apply in
determining the country of origin of a textile or apparel good for
non-preferential purposes.

*Consultations*

3\. On the request of either Party, the Parties shall consult to
consider whether the rules

of origin applicable to particular textile and apparel goods should be
revised to address issues of availability of supply of fibers, yarns or
fabrics in the territories of the Parties.

4\. In the consultations referred to in paragraph 3, each Party shall
consider all data presented by the other Party showing substantial
production in its territory of the particular good. The Parties shall
consider that substantial production has been shown if a Party
demonstrates that its domestic producers are capable of supplying
commercial quantities of the good in a timely manner.

5\. The Parties shall endeavor to conclude consultations within 60 days
of a request. An agreement between the Parties resulting from the
consultations shall supersede any prior rule of origin for such good
when approved by the Parties in accordance with Article 24.2

(Amendments).

*De Minimis*

6\. A textile or apparel good provided for in Chapters 50 through 63 of
the Harmonized

System that is not an originating good, because certain fibers or yarns
used in the production of the component of the good that determines the
tariff classification of the good do not undergo an applicable change in
tariff classification set out in Annex 4.1 (Specific Rules of Origin),
shall nonetheless be considered to be an originating good if the total
weight of all such fibers or yarns in that component is not more than
seven percent of the total weight of that component. Notwithstanding the
preceding sentence, a good containing elastomeric yarns in the component
of the good that determines the tariff classification of the good shall
be considered to be an originating good only if such yarns are wholly
formed in the territory of a Party.

*Treatment of Sets*

7\. Notwithstanding the good specific rules in Annex 4.1 (Specific Rules
of Origin), textile and apparel goods classifiable as goods put up in
sets for retail sale as provided for in General Rule of Interpretation 3
of the Harmonized System shall not be regarded as originating goods
unless each of the goods in the set is an originating good or the total
value of the non-originating goods in the set does not exceed 10 percent
of the customs value of the set.

*Preferential Tariff Treatment for Non-Originating Cotton and Man-made
Fiber Fabric*

*Goods (Tariff Preference Levels)*

8\. Subject to paragraph 9, the following goods, if they meet the
applicable conditions for preferential tariff treatment under this
Agreement other than the condition that they be originating goods, shall
be accorded preferential tariff treatment as if they were originating
goods:

(a) cotton or man-made fiber fabric goods provided for in Chapters 52,
    54, 55, 58, and 60 of the Harmonized System that are wholly formed
    in the territory of a Party from yarn produced or obtained outside
    the territory of a Party; and

(b) cotton or man-made fiber fabric goods provided for in Annex 4.1
    (Specific Rules of Origin) that are wholly formed in the territory
    of a Party from yarn spun in the territory of a Party from fiber
    produced or obtained outside the territory of a Party.

9\. The treatment described in paragraph 8 shall be limited to goods
imported into the territory of a Party up to an annual total quantity of
1,000,000 SME.

*Preferential Tariff Treatment for Non-Originating Cotton and Man-made
Fiber Apparel*

*Goods (Tariff Preference Levels)*

10\. Subject to paragraph 11, cotton or man-made fiber apparel goods
provided for in Chapters 61 and 62 of the Harmonized System that are
both cut (or knit to shape) and sewn or otherwise assembled in the
territory of a Party from fabric or yarn produced or obtained outside
the territory of a Party, and that meet the applicable conditions for
preferential tariff treatment under this Agreement other than the
condition that they be originating goods, shall be accorded preferential
tariff treatment as if they were originating goods.

11\. The treatment described in paragraph 10 shall be limited as
follows:

(a) in each of the first 10 years after the date of entry into force of
    this Agreement, the treatment shall apply to goods described in that
    paragraph imported into the territory of a Party up to a quantity of
    2,000,000 SME; and

(b) in the eleventh year, and for each year thereafter, the treatment
    shall apply to goods described in that paragraph imported into the
    territory of a Party up to a quantity of 1,000,000 SME.

*Certification for Tariff Preference Level*

12\. A Party, through its competent authorities, may require that an
importer claiming preferential tariff treatment for a textile or apparel
good under paragraph 8 or 10 present to such competent authorities at
the time of importation a certification of eligibility for preferential
tariff treatment under such paragraph. A certification of eligibility
shall be prepared by the importer and shall consist of information
demonstrating that the good satisfies the requirements for preferential
tariff treatment under paragraph 8 or 10.

**Article 3.21: Customs Cooperation**

1\. The Parties shall cooperate for purposes of:

(a) enforcing or assisting in the enforcement of their laws,
    regulations, and procedures implementing this Agreement affecting
    trade in textile and apparel goods;

(b) ensuring the accuracy of claims of origin; and

(c) preventing circumvention of laws, regulations, and procedures of
    either Party or international agreements affecting trade in textile
    and apparel goods.

2\. On the request of the importing Party, the exporting Party shall
conduct a verification for purposes of enabling the importing Party to
determine that a claim of origin for a textile or apparel good is
accurate. The exporting Party shall conduct such a verification,
regardless of whether an importer claims preferential tariff treatment
for the good. The exporting Party also may conduct such a verification
on its own initiative.

3\. Where the importing Party has a reasonable suspicion that an
exporter or producer of the exporting Party is engaging in unlawful
activity relating to trade in textile and apparel goods, the importing
Party may request the exporting Party to conduct a verification for
purposes of enabling the importing Party to determine that the exporter
or producer is complying with applicable customs laws, regulations, and
procedures regarding trade in textile and apparel goods, including laws,
regulations, and procedures that the exporting

Party adopts and maintains pursuant to this Agreement and laws,
regulations, and procedures of either Party implementing other
international agreements regarding trade in textile and apparel goods,
and to determine that claims of origin regarding textile or apparel
goods exported or produced by that person are accurate. For purposes of
this paragraph, a reasonable suspicion of unlawful activity shall be
based on factors including relevant factual information of the type set
forth in Article 5.5 (Cooperation) or that, with respect to a particular
shipment, indicates circumvention by the exporter or producer of
applicable customs laws, regulations, or procedures regarding trade in
textile and apparel goods, including laws, regulations, or procedures
adopted to implement this Agreement, or international agreements
affecting trade in textile and apparel goods.

4\. The importing Party, through its competent authorities, may
undertake or assist in a verification conducted pursuant to paragraph 2
or 3, including by conducting, along with the competent authorities of
the exporting Party, visits in the territory of the exporting Party to
the premises of an exporter, producer, or any other enterprise involved
in the movement of textile or apparel goods from the territory of the
exporting Party to the territory of the importing Party.

5\. Each Party shall provide to the other Party, consistent with its
laws, regulations, and procedures, production, trade, and transit
documents and other information necessary to conduct verifications under
paragraphs 2 and 3. Any documents or information exchanged between the
Parties in the course of such a verification shall be considered
confidential, as provided for in Article 5.6 (Confidentiality).

6\. While a verification is being conducted, the importing Party may
take appropriate action, which may include suspending the application of
preferential tariff treatment to:

\(a\) the textile or apparel good for which a claim of origin has been
made, in the case of a verification under paragraph 2; or

\(b\) the textile and apparel goods exported or produced by the person
subject to a verification under paragraph 3, where the reasonable
suspicion of unlawful activity relates to those goods.

7\. The Party conducting a verification under paragraph 2 or 3 shall
provide the other Party with a written report on the results of the
verification, which shall include all documents and facts supporting any
conclusion that the Party reaches.

8\. (a) If the importing Party is unable to make the determination
described in paragraph 2 within 12 months after its request for a
verification, it may take action as permitted under its law with respect
to the textile and apparel good subject to the verification, and with
respect to similar goods exported or produced by the person that
exported or produced the good.

\(b\) If the importing Party is unable to make the determinations
described in paragraph 3 within 12 months after its request for a
verification, it may take action as permitted under its law with respect
to any textile or apparel goods exported or produced by the person
subject to the verification.

9\. Prior to commencing appropriate action under paragraph 8, the
importing Party shall notify the other Party. The importing Party may
continue to take appropriate action under paragraph 8 until it receives
information sufficient to enable it to make the determination described
in paragraph 2 or 3, as the case may be.

10\. Chile shall implement its obligations under paragraphs 2, 3, 6, 7,
8, and 9 no later than two years after the date of entry into force of
this Agreement. Before Chile fully implements those provisions, if the
importing Party requests a verification, the verification shall be
conducted principally by that Party, including through means described
in paragraph 4. Nothing in this paragraph shall be construed to waive or
limit the importing Party\'s rights under paragraphs 6 and 8.

11\. On the request of either Party, the Parties shall enter into
consultations to resolve any technical or interpretive difficulties that
may arise under this Article or to discuss ways to improve the
effectiveness of their cooperative efforts. In addition, either Party
may request technical or other assistance from the other Party in
implementing this Article. The Party receiving such a request shall make
every effort to respond favorably and promptly to it.

**Article 3.22: Definitions**

For purposes of this Section:

**claim of origin** means a claim that a textile or apparel good is an
originating good or a good of a Party;

**exporting Party** means the Party from whose territory a textile or
apparel good is exported;

**importing Party** means the Party into whose territory a textile or
apparel good is imported;

**SME** means square meter equivalents, as calculated in accordance with
the conversion

factors set out in the *Correlation: Textile and Apparel Categories with
the Harmonized*

*Tariff Schedule of the United States, 2002* (or successor publication),
published by the

United States Department of Commerce, International Trade
Administration, Office of

Textiles and Apparel, Trade and Data Division, Washington, D.C.; and

**textile or apparel good** means a good listed in the Annex to the
Agreement on Textiles and

Clothing.