Chapter IV: Section C: United States Measures

Articles 301 and 309 shall not apply to:

(a) controls by the United States on the export of logs of
all species;

(b) taxes on imported perfume containing distilled spirits under existing provisions of Section 5001(a)(3) and 5007(b)(2) of the Internal Revenue Code of 1986 (26 U.S.C. 5001(a)(3), 5007(b)(2));

(c) measures under existing provisions of section 27 of the Merchant Marine Act (46 U.S.C. App. 883), the Passenger Vessel Act of 1920 (46 U.S.C. App. 289), the Merchant Ship Sales Act of 1946 (46 U.S.C. App. 292, 316, and 46 U.S.C. 12108); and

(d) import restrictions with respect to Canada imposed under existing provisions of section 22 of the Agricultural Adjustment Act of 1933 (7 U.S.C. 624). ============================================================================= ANNEX 302.2

Tariff Elimination

1. Except as otherwise provided in a Party's Schedule attached to this Annex, the following staging categories apply to the elimination of customs duties by each Party pursuant to Article 302(2):

(a) duties on goods provided for in the items in staging category A in a Party's Schedule shall be eliminated entirely and such goods shall be duty-free, effective January 1, 1994;

(b) duties on goods provided for in the items in staging category B in a Party's Schedule shall be removed in 5 equal annual stages commencing on January 1, 1994, and such goods shall be duty-free, effective January 1, 1998;

(c) duties on goods provided for in the items in staging category C in a Party's Schedule shall be removed in 10 equal annual stages commencing on January 1, 1994, and such goods shall be duty-free, effective January 1, 2003;

(d) duties on goods provided for in the items in staging category C+ in a Party's Schedule shall be removed in 15 equal annual stages commencing on January 1, 1994, and such goods shall be duty-free, effective January 1, 2008; and

(e) goods provided for in the items in staging category D in a Party's Schedule shall continue to receive duty- free treatment.

(other staging categories will be displayed in the tariff schedules of each Party and may be incorporated here.)

2. The base rate of duty and staging category for determining the interim rate of duty at each stage of reduction for an item are indicated for the item in each Party's Schedule attached to this Annex. These rates generally reflect the rate of duty in effect on July 1, 1991, including rates under the U.S. Generalized System of Preferences and the General Preferential Tariff of Canada.

3. For the purpose of the elimination of customs duties in accordance with Article 302, interim staged rates shall be rounded down, except as set out in each Party's Schedule attached to this Annex, at least to the nearest tenth of a percentage point or, if the rate of duty is expressed in monetary units, at least to the nearest .001 of the official monetary unit of the Party.

4. Canada shall apply the rate applicable under the staging category set out for an item in Annex 401.2, as amended, of the Canada - United States Free Trade Agreement which Annex is hereby incorporated into and made part of this Agreement, to an originating good provided that:

(a) notwithstanding any provision in Chapter Four of this Agreement, in determining whether such good is an originating good, operations performed in or materials obtained from Mexico are considered as if they were performed in or obtained from a non-Party; and

(b) any processing that occurs in Mexico after the good would qualify as an originating good in accordance with subparagraph (a) does not increase the transaction value of the good by greater than seven percent.

5. Canada shall apply the rate applicable under the staging category set out for an item contained in column I of section A of this Annex to an originating good provided that:

(a) notwithstanding any provision to the contrary in Chapter Four, in determining whether such good is an originating good, operations performed in or materials obtained from the United States are considered as if they were performed in or obtained from a non-Party; and

(b) any processing that occurs in the United States after the good would qualify as an originating good in accordance with subparagraph (a) does not increase the transaction value of the good by greater than seven percent.

6. Canada shall apply to an originating good to which neither paragraph 4 nor paragraph 5 applies, the applicable rate indicated for an item contained in column II, reduced in accordance with the staging category of column I of section A of this Annex except as otherwise indicated, or where there is a letter "X" (to be replaced with descriptive language) in column II, the applicable rate of duty for the item shall be the higher of:

(a) the General Preferential Tariff rate of duty for that item applied on July 1, 1991, reduced in accordance with the applicable staging category set out for that item in column I of its Schedule; or

(b) the applicable rate under the staging category for that
item set out in Annex 401.2, as amended, of the Canada -
United States Free Trade Agreement.

7. Paragraphs 4, 5 and 6 shall not apply to goods provided for under Chapters 50 through 63 of the Harmonized System and to other goods identified in Appendix 1.1 of Annex 300-B (Textiles and Apparel Goods).

8. Mexico shall apply the rate applicable under the staging category set out for an item in column II of section B of this Annex to an originating good when the good qualifies to be marked as a good of Canada, pursuant to Annex 312, without regard to whether the good is marked.

9. Mexico shall apply the rate applicable under the staging category set out for an item in column I of section B of this Annex to an originating good when the good qualifies to be marked as a good of the United States, pursuant to Annex 312, without regard to whether the good is marked.

10. The United States shall apply the rate applicable under the staging category set out for an item in Annex 401.2, as amended, of the Canada - United States Free Trade Agreement to an originating good when the good qualifies to be marked as a good of Canada pursuant to Annex 312, without regard to whether the good is marked.

11. The United States shall apply the rate applicable under the staging category set out for an item in section C of this Annex to an originating good when the good qualifies to be marked as a good of Mexico pursuant to Annex 312, whether or not the good is marked. ============================================================================= SECTION A - SCHEDULE OF CANADA

(TARIFF SCHEDULE TO BE ATTACHED)

SECTION B - SCHEDULE OF MEXICO

(TARIFF SCHEDULE TO BE ATTACHED)