EUROPEAN COMMISSION

Brussels, 3.9.2025

COM(2025) 339 final

2025/0184(NLE)

Proposal for a

COUNCIL DECISION

on the conclusion, on behalf of the European Union, of the Interim Agreement on Trade between the European Union, of the one part, and the Common Market of the South, the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay, of the other part

EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

Mercosur 1 is the world’s fifth largest economy outside of the EU in terms of GDP (EUR 2.9 trillion in 2023), and the EU's eleventh largest trading partner. It is an important market, with a population of over 270 million inhabitants and large untapped potential for trade and investment. The EU is the first major economy to reach a comprehensive trade agreement with Mercosur, which will give EU exporters, service providers and investors an important first mover advantage in this region. The ITA will strengthen ties between like-minded, reliable partners, and reflects both sides’ commitment to open, sustainable and rules-based trade, countering protectionism. It will create an ambitious and comprehensive framework for the trade relationship that will contribute to economic security and help facing current global challenges.

The negotiated outcome consists of two legal instruments:

1.the EMPA that will include a) the Political and Cooperation pillar and b) the Trade pillar; and

2.the ITA covering trade and investment liberalisation.

The ITA was signed on …., at the same time as the EMPA. Pursuant to Article 23.2(1), the ITA will enter into force on the first day of the month following the date on which the Parties have notified each other in writing of the completion of their respective internal procedures required for this purpose. The ITA will expire and be replaced by the EMPA upon the latter’s entry into force, following its ratification.

•Consistency with existing policy provisions in the policy area

The ITA will replace Title II of the Interregional Framework Cooperation Agreement between the European Community and its Member States, and the Southern Common Market and its Party States, signed in Madrid on 15 December 1995.

The ITA is fully in line with the overall EU vision for its partnership with Latin America and the Caribbean, as outlined in the Joint Communication to the European Parliament and the Council on a New Agenda for Relations between the EU and Latin America and the Caribbean, adopted on 7 June 2023.

In addition, the ITA is in line with the “Trade Policy Review - An Open, Sustainable and Assertive Trade Policy” of February 2021 which anchors trade and investment policy to European and universal standards and values, alongside core economic interests, putting a greater emphasis on sustainable development, human rights, tax evasion, consumer protection, and responsible and fair trade.

•Consistency with other Union policies

The EU-Mercosur ITA also includes a chapter on Trade and Sustainable Development, which links the Agreement to overall objectives of sustainable development and specific objectives in the areas of labour, environment, and climate change.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

Article 218(7) TFEU enables the Council to authorise the Commission to approve on the Union's behalf, modifications to the agreement, subject, as the case may be, to specific conditions the Council may attach to such authorisation.

•Subsidiarity (for non-exclusive competence)

•Proportionality

Trade agreements are the appropriate means to govern market access and the related areas of comprehensive economic relations with a third country outside the EU. No alternative means exist to render such commitments and liberalisation efforts legally binding.

•Choice of the instrument

3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

•Stakeholder consultations

•Collection and use of expertise

•Impact assessment

•Regulatory fitness and simplification

•Fundamental rights

4.BUDGETARY IMPLICATIONS

5.OTHER ELEMENTS

•Implementation plans and monitoring, evaluation and reporting arrangements

•Detailed explanation of the specific provisions of the proposal

(1)The full removal, over time, of duties on 91% of goods that EU companies export to Mercosur. This will save over EUR 4 billion annually in duties. For example, Mercosur countries will remove high duties on industrial products, such as cars (35%), car parts (14 to 18%), machinery (14 to 20%), chemicals (up to 18%), clothing (up to 35%), pharmaceuticals (up to 14%), leather shoes (up to 35%) or textiles (up to 35%). The agreement will also progressively eliminate duties on EU food and drink exports, such as wine (27%), chocolate (20%), spirits (20 to 35%), biscuits (16 to 18%), canned peaches (55%) or soft drinks (20-35%). The agreement will also provide duty-free access subject to quotas for EU dairy products (currently 28% tariff), notably for cheeses.

(2)A balanced market opening by the EU, as the agreement will eliminate import duties on 92% of Mercosur goods exported to the EU. Sensitive agricultural products such as beef, sugar or poultry are only given preferential treatment in limited quantities via carefully calibrated tariff-rate quotas.

(3)For Argentina, Uruguay and Paraguay, the agreement fully dismantles, or binds at zero, export taxes on raw materials and on industrial goods. It also reduces export taxes on agricultural goods (Argentina), or eliminates them (Uruguay, Paraguay and Brazil). For industrial goods, Brazil has bound at zero important raw materials needed for the EU’s economic diversification (nickel, copper, aluminium, steel raw materials, steel, titanium). Brazil has maintained policy space to impose export duties on certain raw materials, in such cases the EU has obtained preferences of at least 50% on any export tax introduced by Brazil in the future and a ceiling of 25%.

(4)A robust bilateral safeguard mechanism that allows the EU and Mercosur to impose temporary measures to regulate imports in the event of an unexpected and significant increase in imports, which causes, or threatens to cause, serious injury to their domestic industry. These safeguards also apply to agricultural goods under the tariff-rate quota regime or can be limited to the territory of EU outermost regions, where relevant.

(5)The highest standards for food safety, animal and plant health continue to apply to all products, irrespectively of whether they are produced domestically or imported into the EU. The precautionary principle applies. The agreement provides for reinforced cooperation with the authorities of the partner countries and faster flow of information about any potential risks through a more direct and efficient information and notification system.

(6)A comprehensive chapter on trade and sustainable development, which aims at ensuring that trade supports environmental protection and social development. The chapter covers issues such as sustainable management and conservation of forests, respect for labour rights and promotion of responsible business conduct. . It also includes specific dispute settlement provisions and a dedicated review mechanism. The chapter also includes an explicit commitment to effectively implement the Paris Agreement on Climate Change, which was also agreed to constitute an essential element of the EMPA, therefore allowing a suspension of the ITA if a Party leaves the Paris Agreement or stops being a party “in good faith”. An Annex to the TSD Chapter contains commitments by the Parties to take measures to stop further deforestation as of 2030. This is the first time that Parties to a trade agreement subject to dispute settlement take an individual legal commitment to stop deforestation. The Agreement also offers civil society organisations an active role to monitor the implementation of the agreement, including any environmental concerns.

(7)New tendering opportunities for EU bidders with Mercosur countries, which are not members of the WTO Agreement on Government Procurement. This is the first time that Mercosur countries will open up their government procurement markets. EU companies will be able to tender for contracts with public authorities, such as central government ministries and other governmental and federal agencies, on an equal footing with companies from Mercosur countries.

(8)The removal of technical and regulatory trade barriers to trade in goods, in particular by promoting the use of first-party certification and convergence through the use of international standards adopted by ISO, IEC, ITU and Codex Alimentarius, as well as by other international standard setting organisations, in accordance with the common definition agreed by the EU and Mercosur. There is an agreement to reduce duplicative testing in the electronics sector in low-risk areas. There will also be a specific Motor Vehicles Annex promoting UNECE Regulations and reducing duplicative testing in the sector.

(9)A comprehensive Annex with detailed provisions to facilitate trade in wine and spirits, covering recognition of winemaking practices, certification and labelling, in line with the most modern EU FTAs.

(10)The opening of services sectors and facilitation of trade in services between the EU and Mercosur, both through local establishment and on a cross-border basis. The agreement covers a wide range of services sectors, including business services, financial services, telecommunications, maritime transport (for the first time Mercosur is opening maritime transport within the region), postal and courier services. It also includes commitments on establishment of enterprises, both in services and non-services sectors. It will ensure a level-playing field between EU service providers and their competitors in Mercosur. The ‘right to regulate’ in public interest is fully preserved, at all levels of government. The agreement also contains advanced provisions on the movement of professionals for business purposes, such as managers or specialists that EU companies post to their subsidiaries in Mercosur countries. There is also a substantive e-commerce chapter – a novelty for the Mercosur partners.

(11)A high level of protection and enforcement of intellectual property rights including detailed provisions on copyright, trade secrets and enforcement providing for improved protection.

(12)A high level of protection and enforcement for EU Geographical Indications (GIs), comparable to that of the EU, for 344 EU names of quality food, wine and spirits products.

(13)A chapter dedicated to SMEs to ensure that they fully benefit from the opportunities offered by the FTA.

(14)Efficient dispute resolution mechanisms, either through panel arbitration or with the help of a mediator. The dispute settlement chapter includes new provisions modelled on the WTO non-violation complaint - if a party considers that a measure of the other party nullifies or substantially impairs its benefits under the agreement, it can ask a panel to rule on this question.

2025/0184 (NLE)

Proposal for a

COUNCIL DECISION

on the conclusion, on behalf of the European Union, of the Interim Agreement on Trade between the European Union, of the one part, and the Common Market of the South, the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay, of the other part

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 91(1), Article 100(2), and Article 207(4), first subparagraph, in conjunction with Article 218(5), Article 218(6), second subparagraph, point (a), and Article 218(7) thereof,

Having regard to the proposal from the European Commission,

Having regard to the consent of the European Parliament 2 ,

Whereas:

(1)In accordance with Council Decision No [XX] 3 , the Interim Agreement on Trade between the European Union, of the one part, and the Common Market of the South and the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay, of the other part (hereinafter ‘the Agreement’) was signed on [XX XXX 2025], subject to its conclusion at a later date.

(2)The Agreement should be applied on a provisional basis between, on the one part, the Union and, on the other part, one or more of the Signatory MERCOSUR States, in accordance with Article 23.3 of the Agreement, pending the completion of the procedures necessary for its entry into force. The Union’s agreement to provisionally apply the Agreement between the Union and one or more of the Signatory MERCOSUR States in accordance with Article 23.3(2) of the Agreement should be expressed together with the Union’s consent to be bound by the Agreement.

(3)The Agreement should be approved.

(4)Pursuant to Article 218(7) of the Treaty on the Functioning of the European Union, it is appropriate to authorise the Commission to approve on the Union’s behalf certain modifications to the Agreement by a body set up by the Agreement pursuant to Article 12.26 and subparagraph (f)(ii)(iv)(xvi) of Article 22.1(6) of the Agreement.

(5)The Agreement does not, in accordance with Article 23.7(1) thereof, within the Union, confer rights or impose obligations on persons, other than those created between the Parties under public international law,

HAS ADOPTED THIS DECISION:

Article 1

The Interim Agreement on Trade between the European Union, of the one part, and the Common Market of the South and the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay, of the other part (hereinafter ‘the Agreement’), is hereby approved.  4

Article 2

Pending its entry into force, the Agreement shall be applied provisionally, between, on the one part, the Union and, on the other part, one or more of the Signatory MERCOSUR States, in accordance with Article 23.3 of the Agreement, as from the first day of the second month following the date on which one or more Signatory MERCOSUR State or States, as the case may be, have notified the Union of the completion of its or their respective internal procedures necessary for the provisional application of the Agreement and confirm their agreement to provisionally apply the Agreement. 5

Article 3

For the purposes of Article 12.26 of the Agreement, any modification or rectification of Annexes 12-A to 12-E to the Agreement shall be approved by the Commission on behalf of the Union, following consultation of the Trade Policy Committee

Article 4

1.For the purposes of paragraph 6 of Article 2 of Annex 2-D and subparagraph (f)(ii) of Article 22.1(6) of the Agreement, any amendment to Appendix 2-D-1 of Annex 2-D to the Agreement shall be approved by the Commission on behalf of the Union, following consultation of the Trade Policy Committee.

2.For the purposes of paragraph 4 of Article 5 of Annex 2-D and subparagraph (f)(iv) of Article 22.1(6) of the Agreement, any amendment to Appendix 2-D-3 of Annex 2-D to the Agreement shall be approved by the Commission on behalf of the Union, following consultation of the Trade Policy Committee.

Article 5

For the purposes of Article 13.39 and subparagraph (f)(xii) of Article 22.1(6) of the Agreement, any amendment to Annex 13-C to the Agreement shall be approved by the Commission on behalf of the Union, following consultation of the Trade Policy Committee.

Article 6

This Decision shall enter into force on the day of its adoption 6 .

Done at Brussels,

LEGISLATIVE FINANCIAL STATEMENT ‘REVENUE’- FOR PROPOSALS HAVING BUDGETARY IMPACT ON THE REVENUE SIDE OF THE BUDGET

1.NAME OF THE PROPOSAL:

Proposal for a Council Decision on the conclusion, on behalf of the European Union, of the Interim Agreement on Trade between the European Union, of the one part, and the Common Market of the South and the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay, of the other part

2.BUDGET LINES:

Revenue line (Chapter/Article/Item): Chapter 12, Article 120 

Amount budgeted for the year concerned (2025): EUR 21 082 004 566

(only in case of assigned revenues):

The revenues will be assigned to the following expenditure line (Chapter/Article/Item):

3.FINANCIAL IMPACT

◻    Proposal has no financial implications

X    Proposal has no financial impact on expenditure but has a financial impact on revenue

◻    Proposal has a financial impact on assigned revenue

The effect is as follows: 

(EUR million to one decimal place)

(Only in case of assigned revenues, under the condition that the budget line is already known):

4.ANTI-FRAUD MEASURES

5.OTHER REMARKS

The proposed Decision does not incur additional costs (expenditure) in the EU budget.

The ITA will have a financial impact on the EU budget on the side of the revenues. The ITA will lead to an estimated loss of duties of EUR 247.5 million at the entry into force of the Agreement. 8 After the ITA is fully implemented on the EU side (after 15 years from its entry into force) the yearly loss of duties is estimated to reach EUR 1 billion. This estimation is based on a projection of the evolution of trade for the next 15 years without any agreement.

Indirect positive impacts are expected in terms of increases in resources linked to value added tax and gross national income.

(1)    The Common Market of the South (MERCOSUR for its Spanish initials) is a regional integration process, initially established by Argentina, Brazil, Paraguay and Uruguay, and subsequently joined by Venezuela (currently suspended) and Bolivia (in accession process). Only Argentina, Brazil, Paraguay and Uruguay are parties to the EU-Mercosur Partnership Agreement.

(2)    OJ C , , p. .

(3)    [Reference to be inserted]

(4)    The text of the Agreement is published in OJ L, XXXXX…

(5)    The date from which the Agreement is to be provisionally applied between, on the one part, the Union and, on the other part, one or more of the Signatory MERCOSUR States, shall be published in the Official Journal of the European Union by the General Secretariat of the Council.

(6)    The date of entry into force of the Agreement will be published in the Official Journal of the European Union by the General Secretariat of the Council.

(7)    To be used only if necessary.

(8)    The estimated amount of revenue losses at EUR 247.5 mn is net of collection costs (a 25% has been deducted from the estimated revenue loss of EUR 330 mn).

EUROPEAN COMMISSION

Brussels, 3.9.2025

COM(2025) 339 final

ANNEX

to the

Proposal for a Council Decision

on the conclusion, on behalf of the European Union, of the Interim Agreement on Trade between the European Union, of the one part, and the Common Market of the South, the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay, of the other part

INTERIM AGREEMENT ON TRADE BETWEEN THE EUROPEAN UNION, OF THE ONE PART, AND THE COMMON MARKET OF THE SOUTH, THE ARGENTINE REPUBLIC, THE FEDERATIVE REPUBLIC OF BRAZIL, THE REPUBLIC OF PARAGUAY AND THE ORIENTAL REPUBLIC OF URUGUAY, OF THE OTHER PART

THE EUROPEAN UNION, hereinafter referred to as "the Union" or the "EU",

   of the one part, and

THE ARGENTINE REPUBLIC,

THE FEDERATIVE REPUBLIC OF BRAZIL,

THE REPUBLIC OF PARAGUAY,

THE ORIENTAL REPUBLIC OF URUGUAY,

State Parties to the Common Market of the South signatories of this Agreement, hereinafter referred to as "Signatory MERCOSUR States", and

THE COMMON MARKET OF THE SOUTH, hereinafter referred to as "MERCOSUR",

   of the other part,

hereinafter jointly referred to as "the Parties",

for the purposes of this Agreement MERCOSUR refers to the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay,

CONSIDERING the important and longstanding trade and investment relations between the Parties;

REAFFIRMING their commitment to further strengthen, liberalise and diversify their trade and investment relations;

RECOGNISING that the provisions of this Agreement maintain the right of the Parties to regulate within their territories in conformity with their internal legislation to achieve legitimate policy objectives, such as public health, safety, environment, education, public morals, and the promotion and protection of cultural diversity, among others;

BUILDING UPON the rights and obligations of the Parties in the World Trade Organisation;

REAFFIRMING their commitment to strengthen and develop the multilateral trading system through the application of transparent, equitable and non-discriminatory rules, with a view to the promotion of increasingly dynamic and open international trade which ensures a larger participation of developing countries in international trade, investment and technology flows;

REAFFIRMING their commitment to promote international trade in such a way as to contribute to sustainable development in its economic, social and environment dimensions, involving all relevant stakeholders, including civil society and the private sector, and to implement this agreement in a manner consistent with their respective laws and international commitments on labour and environmental matters;

RECOGNISING the interim character of this Agreement, which will strengthen bilateral economic and trade relations between the Parties, which will be subsumed under the EU–MERCOSUR Partnership Agreement and which will hence cease to apply upon the entry into force of the
EU–MERCOSUR Partnership Agreement;

REAFFIRMING the Parties' right to exploit their natural resources in accordance with their own environmental policies, and sustainable development goals;

DESIRING to improve the competitiveness of their enterprises, by providing them with a predictable legal framework for their trade and investment relations, with special attention to micro, small and medium enterprises;

REAFFIRMING the need to promote the respect of internationally recognised guidelines and principles of corporate social responsibility and responsible business conduct, including the Organisation of Economic Cooperation and Development (hereinafter referred to as "OECD") Guidelines for Multinational Enterprises, amongst enterprises operating in their territories;

REAFFIRMING their commitment to promote comprehensive economic and social development with the objective of raising living standards, eradicating poverty, and enhancing the levels of labour and environmental protection in their respective territories;

CONSIDERING the importance of their respective regional integration processes for the promotion of economic and social development at the regional and global levels, for the strengthening of ties between their peoples and for international stability;

RECOGNISING the differences in economic and social development between and within the Parties;

RECOGNISING the specific challenges and difficulties faced by Paraguay as a landlocked developing country;

HAVE AGREED AS FOLLOWS:

CHAPTER 1

INITIAL PROVISIONS

ARTICLE 1.1

Establishment of a free trade area and relation to the WTO Agreement

1.    The Parties to this Agreement hereby establish a free trade area, in conformity with Article XXIV of the GATT 1994 and Article V of the GATS.

2.    The Parties affirm their rights and obligations with respect to each other under the WTO Agreement.

3.    Nothing in this Agreement shall be construed as requiring a Party to act in a manner inconsistent with its obligations under the WTO Agreement.

ARTICLE 1.2

Objectives

The provisions of this Agreement aim at:

(a)    a modern and mutually advantageous trade agreement which creates a predictable framework to boost trade and economic activity, while promoting and protecting our shared values and perspectives on the role of government in society, and retaining the right of the Parties to regulate at all levels of government to achieve public policy objectives;

(b)    the development of international trade and of trade between the Parties in a way as to contribute to sustainable development in its economic, social and environmental dimensions, consistent with, and supportive of, their respective international obligations, in these fields;

(c)    the promotion of a more sustainable, equitable and inclusive economy so as to raise standards of living, reduce poverty and create new employment opportunities;

(d)    the consolidation, increase and diversification of trade in agricultural and non-agricultural goods between the Parties, through the reduction or the elimination of tariff and non-tariff barriers to trade and the further integration in the global value chains;

(e)    the facilitation of trade in goods through, in particular, the application of the agreed provisions regarding customs and trade facilitation, standards, technical regulations and conformity assessment procedures as well as sanitary and phytosanitary measures;

(f)    the liberalisation and facilitation of trade in services, and the development of an environment conducive to an increase in investment flows, competitiveness, and economic growth and, in particular, to the improvement of conditions of establishment of businesses between the Parties;

(g)    the free movement of capital relating to direct investment and of current payments in accordance with Chapter 10;

(h)    the effective, transparent and competitive opening of government procurement markets of the Parties;

(i)    the promotion of innovation and creativity by ensuring an adequate and effective level of protection and of enforcement of intellectual property rights, in accordance with international rules in force between the Parties, so as to ensure the balance between the rights of the right‑holders and the public interest;

(j)    the conduct of economic activities, in particular those regarding the relations between the Parties, in conformity with the principle of free and undistorted competition;

(k)    the establishment of a framework for the participation of civil society, including employers, unions, labour and business organisations and environmental groups to support the effective implementation of this Agreement;

(l)    the establishment of an expeditious and effective dispute settlement mechanism; and

(m)    a transparent and predictable regulatory environment and efficient procedures for economic operators, especially small and medium-sized enterprises (hereinafter referred to as "SMEs"), while preserving the ability of the Parties to adopt and apply their own laws and regulations that regulate economic activity in the public interest, and to achieve legitimate public policy objectives such as the protection and promotion of public health, social services, public education, safety, the environment, public morals, social or consumer protection, privacy and data protection and the promotion and protection of cultural diversity.

ARTICLE 1.3

General definitions

Unless otherwise specified, for the purposes of this Agreement:

(a)    "agricultural good" means a product listed in Annex 1 to the Agreement on Agriculture;

(b)    "customs duty" means any duty or charge of any kind imposed on or in connection with the importation of a good, including any form of surtax or surcharge imposed on or in connection with such importation 1 , but does not include any:

(i)    internal taxes or other internal charges imposed consistently with Article III of GATT 1994;

(ii)    antidumping or countervailing duties applied in accordance with Articles VI and XVI of GATT 1994 and the WTO Agreement on the Implementation of Article VI of GATT 1994 and the SCM Agreement in conformity with Chapter 8;

(iii)    measures applied in accordance with Article XIX of GATT 1994 and with the Safeguards Agreement, or other safeguard measures applied pursuant to Chapter 8;

(iv)    measures authorised by the WTO Dispute Settlement Body or under Chapter 21;

(v)    fee or other charge, imposed consistently with Article VIII of GATT 1994; or

(vi)    measures adopted to safeguard a Party's external financial position and its balance of payments, in conformity with Article XII of GATT 1994 and the Understanding on Balance of Payments Provisions of GATT 1994.

(c)    "CPC" means the Provisional Central Product Classification (Statistical Papers Series M No. 77, Department of International Economic and Social Affairs, Statistical Office of the United Nations, New York, 1991);

(d)    "days" means calendar days, including weekends and holidays;

(e)    "EU–MERCOSUR Partnership Agreement" means the Partnership Agreement between the European Union and its Member States, of the one part, and the Common Market of the South, the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the oriental Republic of Uruguay, of the other part, to be concluded;

(f)    "existing" means in effect on the date of entry into force of this Agreement;

(g)    "good of a Party" means a domestic good as that is understood in the GATT 1994, and includes originating goods of that Party;

(h)    "Harmonized System" or "HS" means the Harmonized Commodity Description and Coding System, including its General Rules of Interpretation, Section Notes, and Chapter Notes, done at Brussels on 14 June 1983;

(i)    "heading" means the first four digits in the tariff classification number under the Harmonized System;

(j)    "juridical person" means any legal entity duly constituted or otherwise organised 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;

(k)    "measure" includes any measure by a Party, whether in the form of a law, regulation, rule, procedure, decision, administrative action, requirement or practice 2 ;

(l)    "natural person of a Party" means, for the European Union, a national of a Member State of the European Union, and for MERCOSUR, a national of a Signatory MERCOSUR State, in accordance with their respective applicable legislation;

(m)    "person" means a natural person or a juridical person;

(n)    "sanitary or phytosanitary measure" means any measure as defined in Annex A to the SPS Agreement;

(o)    "third country" means a country or territory outside the territorial scope of application of this Agreement;

(p)    "UNCLOS" means the United Nations Convention on the Law of the Sea, done at Montego Bay on 10 December 1982; and

(r)    "WTO" means the World Trade Organization.

ARTICLE 1.4

WTO Agreements

(a)    "ADA" means the Agreement on Implementation of Article VI of GATT 1994;

(b)    "Agreement on Agriculture" means the Agreement on Agriculture, contained in Annex 1A to the WTO Agreement;

(c)    "DSU" means the Understanding on Rules and Procedures Governing the Settlement of Disputes, contained in Annex 2 of the WTO Agreement;

(d)    "GATS" means the General Agreement on Trade in Services, contained in Annex 1B to the WTO Agreement;

(e)    "GATT 1994" means the General Agreement on Tariffs and Trade 1994, contained in Annex 1A to the WTO Agreement;

(f)    "Safeguards Agreement" means the Agreement on Safeguards, contained in Annex 1A to the WTO Agreement;

(g)    "SCM Agreement" means the Agreement on Subsidies and Countervailing Measures, contained in Annex 1A to the WTO Agreement;

(h)    "SPS Agreement" means the Agreement on the Application of Sanitary and Phytosanitary Measures, contained in Annex 1A to the WTO Agreement;

(i)    "TBT Agreement" means the Agreement on Technical Barriers to Trade, contained in Annex 1 to the WTO Agreement;

(j)    "TRIPS Agreement" means the Agreement on Trade-Related Aspects of Intellectual Property Rights, contained in Annex 1C to the WTO Agreement; and

(k)    "WTO Agreement" means the Marrakesh Agreement Establishing the World Trade Organization, done on 15 April 1994.

ARTICLE 1.5

Parties

1.    The European Union shall be responsible for the fulfilment of the commitments in this Agreement.

2.    Save where otherwise provided, each of the Signatory MERCOSUR States of this Agreement shall be responsible for the fulfilment of the commitments in this Agreement.

ARTICLE 1.6

Regional integration

1.    While recognising the differences in their respective regional integration processes, and without prejudice to the commitments undertaken under this Agreement, the Parties shall foster conditions which facilitate the movement of goods and services between and within the two regions.

2.    With respect to movement of goods, pursuant to paragraph 1:

(a)    goods originating in a Signatory MERCOSUR State that are released for free circulation in the European Union shall benefit from free movement of goods within the territory of the European Union under the conditions established by the Treaty on the Functioning of the European Union;

(b)    the Signatory MERCOSUR States shall apply to goods originating in the European Union that are imported in its territory from another Signatory MERCOSUR State, customs procedures that are no less favourable than those applicable to goods originating in that Signatory MERCOSUR State.

The treatment referred to under points (a) and (b) of this paragraph does not include tariff treatment for goods, which is governed by Chapter 2;

(c)    the Signatory MERCOSUR States shall periodically review their customs procedures with a view to facilitating the movement of goods of the European Union between their territories and to avoiding duplication of procedures and controls when practicable and in accordance with the evolution of their integration process; and

(d)    the benefits of MERCOSUR's harmonisation of technical regulations and conformity assessment procedures, SPS requirements and approval procedures, including import certificates and controls, shall be extended under non-discriminatory conditions to goods originating in the European Union if they have been imported in compliance with the laws and regulations of the importing Signatory MERCOSUR State.

3.    With respect to movement of services, pursuant to paragraph 1:

(a)    Member States of the European Union shall endeavour to facilitate, as appropriate, the freedom to provide services within the territory of the European Union to enterprises owned or controlled by natural or juridical persons of a Signatory MERCOSUR State and established in a Member State of the European Union; and

(b)    the Signatory MERCOSUR States shall endeavour to facilitate, as appropriate, the freedom to provide services between their territories to enterprises owned or controlled by natural or juridical persons of a Member State of the European Union and established in a Signatory MERCOSUR State.

ARTICLE 1.7

References to laws and other agreements

1.    Unless otherwise specified, where reference is made to laws and regulations of a Party, those laws and regulations shall be understood to include amendments thereto.

2.    Unless otherwise specified, any reference, or incorporation by means of a reference in this Agreement to other agreements or legal instruments in whole or in part shall be construed as including related annexes, protocols, footnotes, interpretative notes and explanatory notes.

3.    Unless otherwise specified, where international agreements are referred to or incorporated into this Agreement, in whole or in part, they shall be understood to include amendments thereto or their successor agreements entering into force for both Parties on or after the date of signature of this Agreement. If any matter arises regarding the implementation or application of the provisions of this Agreement as a result of such amendments or successor agreements, the Parties may, on request of either Party, consult with each other via the Trade Council with a view to finding a mutually satisfactory solution to this matter as necessary. As a result of such consultation, the Parties may, by decision in the Trade Council, amend this Agreement accordingly.

4.    Paragraph 3 applies mutatis mutandis, if the amendment or successor agreement of an international agreement referred to or incorporated into this Agreement in whole or in part, has entered into force for the European Union and one or more Signatory MERCOSUR States.

CHAPTER 2

TRADE IN GOODS

ARTICLE 2.1

Objective and scope

1.    The Parties shall establish a free trade area for goods over a transitional period starting on the date of entry into force of this Agreement.

2.    Except as otherwise provided in this Agreement, the provisions of this Chapter apply to trade in goods of a Party.

SECTION A

CUSTOM DUTIES

ARTICLE 2.2

National treatment

Each Party shall accord national treatment to the goods of the other Party in accordance with Article III of GATT 1994, including its Notes and Supplementary Provisions. To that end, Article III of GATT 1994 and its Notes and Supplementary Provisions are incorporated into and made part of this Agreement, mutatis mutandis.

ARTICLE 2.3

Definitions

For the purposes of this Chapter, "originating good" means a good qualifying as originating in a Party under the rules of origin set out in Chapter 3.

ARTICLE 2.4

Reduction and elimination of customs duties

1.    Except as otherwise provided for in this Agreement, each Party shall reduce or eliminate its customs duties on originating goods in accordance with Annex 2-A.

2.    The classification of goods in trade between the Parties shall be in accordance with each Party's respective tariff nomenclature in conformity with the Harmonized System. Each Party shall specify in its respective Appendix to Annex 2-A the version of the Harmonized System used to this end.

3.    A Party may create a new tariff line. In that event and in so far as trade between the Parties is concerned, the customs duty applicable to the corresponding goods under the new tariff line shall be equal to or lower than the customs duty applicable to the corresponding goods under the original tariff line specified in Annex 2-A and the agreed tariff concession shall remain unchanged.

4.    For each good originating in the other Party, the base rate of customs duties on imports to which the successive reductions apply under paragraph 1 is specified in Annex 2-A.

5.    Without prejudice to paragraphs 1 and 3, for a period of 2 (two) years from the date of entry into force of this Agreement, the European Union shall not increase the customs duties applied on 31 December 2017 on goods originating in Paraguay that are classified under the following tariff lines set out in Appendix 2-A-1 as "PY" goods: 20019030, 21012098, 21069098 and, 33021029. For the purposes of this paragraph, "goods originating in Paraguay" means goods that conform to the origin requirements under Subsections 2 and 3 of Section 2 of Chapter 1 of Title II of Commission Delegated Regulation (EU) 2015/2446 of 28 July of 2015 supplementing Regulation (EU) No 952/2013 of the European Parliament and of the Council as regards detailed rules concerning certain provisions of the Union Customs Code 3 and Subsections 3 to 9 of Section 2 of Chapter 2 of Title II of Commission Implementing Regulation (EU) 2015/2447 of 24 November 2015 laying down detailed rules for implementing certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code 4 .

6.    Except as otherwise provided for in this Agreement, a Party shall not introduce new customs duties or increase customs duties which are already applied in accordance with the base rates set out in Annex 2-A on trade in originating goods between the Parties as from the date of entry into force of this Agreement. For greater certainty, a Party may increase a customs duty applicable to trade between the Parties as set out in Annex 2-A that has been unilaterally reduced to the level set out in that Annex for the respective year following that unilateral reduction.

7.    If a Party reduces its most-favoured-nation applied rate of customs duty to a level below the base rate for a particular tariff line specified in Annex 2-A, that duty rate shall be deemed to replace the base rate in Annex 2-A, if, and for as long as it is lower than the base rate, for the purposes of the calculation of the preferential rate for that tariff line. In this regard, the Party shall apply the tariff reduction to the most-favoured-nation applied rate to calculate the applicable rate of customs duty, maintaining at all times the relative margin of preference for any tariff line. Such relative margin of preference for a tariff line shall correspond to the difference between the base rate set out in Annex 2-A and the applied duty rate for that tariff line in accordance with Annex 2-A divided by that base rate and shall be expressed as a percentage.

8.    Each Party may accelerate the elimination of customs duties on originating goods of the other Party, or otherwise improve the conditions of market access for originating goods of the other Party, if its general economic situation and the situation of the economic sector concerned so permit.

9.    As from 3 (three) years after the date of entry into force of this Agreement, on request of either Party, the Subcommittee on trade in goods, referred to in Article 2.14, shall consider measures providing for improved market access. The Trade Council shall have the power to adopt decisions to amend Annex 2-A. Such decisions shall supersede any duty rate or staging category determined in Annex 2-A for such originating goods.

ARTICLE 2.5

Goods re-entered after repair

1.    For the purposes of this Article, "repair" means any processing operation undertaken on a good to remedy operating defects or material damage and entailing the re-establishment of the good to its original function or to ensure its compliance with technical requirements for its use, without which the good could no longer be used in the normal way for the purposes for which it was intended. Repair of a good includes restoration and maintenance but does not include an operation or process that:

(a)    destroys the essential characteristics of a good or creates a new or commercially different good;

(b)    transforms an unfinished good into a finished good; or

(c)    is used to improve the technical performance of a good.

2.    A Party shall not apply customs duties to a good, regardless of its origin, that re-enters that Party's customs territory after hat good has been temporarily exported from its customs territory to the customs territory of the other Party for repair, regardless of whether such repair could have been performed in the customs territory of the Party from which the goods were exported for repair as defined in paragraph 1.

3.    Paragraph 2 does not apply to a good imported in bond into free-trade zones or zones of similar status, that is exported for repair and is not re-imported in bond into free-trade zones or zones of similar status.

4.    A Party shall not apply customs duties to a good, regardless of its origin, imported temporarily from the customs territory of the other Party for repair.

SECTION B

NON-TARIFF MEASURES

ARTICLE 2.6

Fees and other charges on imports and exports

1.    Each Party shall ensure, in accordance with Article VIII of GATT 1994, including its Notes and Supplementary Provisions, that all fees and other charges of whatever character 5 , other than import and export duties imposed on or in connection with importation or exportation, are limited in amount to the approximate cost of services rendered, shall not be calculated on an ad valorem basis and shall not represent an indirect protection for domestic goods or a taxation of imports or exports for fiscal purposes.

2.    Each Party may impose charges or recover costs only if specific services are rendered, in particular for the following:

(a)    attendance, if requested, by customs staff outside official office hours or at premises other than customs premises;

(b)    analyses or expert reports on goods and postal fees for the return of goods to an applicant, particularly in respect of decisions relating to binding information or the provision of information concerning the application of customs laws and regulations;

(c)    the examination or sampling of goods for verification purposes, or the destruction of goods, if costs other than the cost of using customs staff are involved; or

(d)    exceptional control measures, where these are necessary due to the nature of the goods or to a potential risk.

3.    A Party shall not require consular transactions, including related fees and charges, in connection with the importation of goods from the other Party. The Parties shall have a transitional period of 3 (three) years from the date of entry into force of this Agreement to fulfil the requirements of this paragraph 6 .

4.    Each Party shall publish a list of the fees and charges it imposes in connection with the importation or exportation of goods.

ARTICLE 2.7

Import and export licensing procedures

1.    The Parties shall ensure that all import and export licensing procedures applicable to trade in goods between the Parties are neutral in application and administered in a fair, equitable, non‑discriminatory and transparent manner.

2.    Each Party shall only adopt or maintain licensing procedures as a condition for importation into its territory from that of the other Party or exportation from its territory to that of the other Party if other appropriate procedures to achieve an administrative purpose are not reasonably available.

3.    The Parties shall not adopt or maintain non-automatic import or export licensing procedures 7 unless it is necessary to implement a measure that is consistent with this Agreement. A Party adopting non-automatic import or export licensing procedures shall indicate clearly the measure being implemented through such licensing procedure.

4.    The Parties shall introduce and administer any licensing procedures in accordance with Articles 1 to 3 of the WTO Import Licensing Agreement (hereinafter referred to as "Import Licensing Agreement"). To that end, Articles 1 to 3 of the Import Licensing Agreement are incorporated into and made part of this Agreement, mutatis mutandis, and shall apply to any export licensing procedures.

5.    Any Party introducing or modifying any import and export licensing procedures shall make the relevant information available on an official website. This information shall be made available, whenever practicable, 21 (twenty-one) days prior to the date of the application of the introduction of, or modification to, licensing procedures but in any event no later than such date. The information available on the Internet shall contain the data required under Article 5 of the Import Licensing Agreement. Each Party shall notify the other Party of any introduction or modification of export licensing procedures and such notification shall contain the same information as referred to in Article 5 of the Import Licensing Agreement.

6.    On request of a Party, the other Party shall promptly provide any relevant information regarding any import and or export licensing procedures that the Party to which the request is addressed intends to adopt or has adopted or maintained, including the information referred to in Articles 1 to 3 of the Import Licensing Agreement, mutatis mutandis.

ARTICLE 2.8

Export competition

1.    The Parties affirm their commitments expressed in the Export Competition Ministerial Decision of 19 December 2015 (WT/MIN(15)/45, WT/L/980) of the WTO (hereinafter referred to as the "Export Competition Ministerial Decision").

2.    For the purposes of this Article, "export subsidies" means subsidies within the meaning of Articles 1 and 3 of the SCM Agreement that are contingent upon export performance, including the subsidies listed in Annex I to the SCM Agreement and the subsidies listed in Article 9 of the Agreement on Agriculture.

3.    A Party shall not maintain, introduce or reintroduce export subsidies on an agricultural good that is exported or incorporated in a product that is exported.

4.    A Party shall not maintain, introduce or reintroduce export credits, export credit guarantees, insurance programmes, state trading enterprises or international food aid, or other measures that have an effect equivalent to an export subsidy, on an agricultural good that is exported or incorporated in a good that is exported to the territory of the other Party, unless those measures comply with the obligations of the exporting Party under the WTO Agreements and Decisions of the Ministerial Conference and the General Council of the WTO, including in particular the Export Competition Ministerial Decision.

5.    The Parties affirm their commitment in the Bali Ministerial Declaration adopted on 7 December 2013 (WT/MIN(13)/DEC) of the WTO, strengthened by the Export Competition Ministerial Decision, to enhance transparency and to improve monitoring in relation to all forms of export subsidies and export credits, export credit guarantees, insurance programmes, state trading enterprises and international food aid, as well as other measures that have an effect equivalent to an export subsidy.

6.    The Parties affirm the commitments taken under the Export Competition Ministerial Decision with regard to international food aid and shall work together to encourage the best practice in the delivery of food aid in the relevant international fora by seeking to limit the monetisation of food aid and the delivery of in-kind food aid only to emergency situations.

ARTICLE 2.9

Duties, taxes and other fees and charges on exports

A Party shall not introduce or maintain any duties or charges of any kind on or in connection with the exportation of a good to the other Party, other than in accordance with Annex 2-B, 3 (three) years from the date of entry into force of this Agreement.

ARTICLE 2.10

State trading enterprises

1.    Nothing in this Agreement shall prevent a Party from maintaining or establishing a state trading enterprise in accordance with Article XVII of GATT 1994, including its Notes and Supplementary Provisions and the WTO Understanding on the Interpretation of Article XVII of GATT 1994, which are incorporated into and made part of this Agreement, mutatis mutandis.

2.    If a Party requests information from the other Party on individual cases of state trading enterprises, their operation or the effect of their operations on bilateral trade, the requested Party shall ensure full transparency in accordance with Article XVII of GATT 1994.

3.    Notwithstanding paragraph 1, a Party shall not designate or maintain a designated import or export monopoly, except for those already established by a Party or prescribed by in its Constitution as listed in Annex 2-C. For the purposes of this paragraph, an import or export monopoly means the exclusive right or grant of authority by a Party to an entity to import a good from, or to export a good to, the other Party.

ARTICLE 2.11

Prohibition of quantitative restrictions

1.    A Party may not adopt or maintain any prohibition or restriction on the importation of any good from the other Party or on the exportation or sale for export of any good destined for the other Party, whether applied by quotas, licences or other measures, except in accordance with Article XI of GATT 1994, including its Notes and Supplementary Provisions. To that end, Article XI of GATT 1994 and its Notes and Supplementary Provisions are incorporated into and made part of this Agreement, mutatis mutandis.

2.    A Party may not adopt or maintain export or import price requirements, except as permitted in the enforcement of antidumping and countervailing duty orders or price undertakings.

ARTICLE 2.12

Preference utilisation

1.    For the purpose of monitoring the functioning of this Agreement and calculating preference utilisation rates, the Parties shall annually exchange import statistics for a period starting 1 (one) year after the date of entry into force of this Agreement and ending 10 (ten) years after the tariff elimination is completed for all goods in accordance with Annex 2-A. Unless the Trade Committee decides otherwise, this period shall be automatically extended for 5 (five) years, and the Trade Committee may decide to further extend it.

2.    The exchange of import statistics referred to in paragraph 1 shall cover data pertaining to the most recent year available, including value and, if applicable, volume, at the tariff line level for imports of goods of the other Party benefitting from preferential duty treatment under this Agreement and those that received non-preferential treatment.

3.    Without prejudice to paragraph 2 and subject to confidentiality requirements under each Party's laws and regulations a Party shall not be obliged to exchange import statistics.

ARTICLE 2.13

Specific measures concerning the management of preferential treatment

1.    The Parties shall cooperate in preventing, detecting and combating breaches of their laws and regulations, irregularities and fraud related to the preferential treatment granted under this Chapter, in accordance with Chapter 3 and Annex 4-A.

2.    A Party may, in accordance with the procedure laid down in paragraph 4, decide to temporarily suspend the relevant preferential treatment of the products concerned, if that Party makes a finding, based on objective, compelling and verifiable information, that:

(a)    large-scale systematic breaches in the relevant laws and regulations, irregularities or fraud have been committed in order to obtain preferential tariff treatment granted under this Chapter; and

(b)    the other Party systematically refuses or otherwise fails to comply with its obligations referred to in paragraph 1, in accordance with Chapter 3 and Annex 4-A.

3.    For the purposes of this Article, a failure to comply with the obligations referred to in paragraph 1 means, among others, a clearly demonstrated and systematic:

(a)    failure to fulfil the obligation to verify the originating status of the products concerned, in accordance with the procedures established in Articles 3.24 and 3.25 and;

(b)    refusal or unjustifiable delay in communicating the result of a verification of origin carried out in accordance with Articles 3.25 and 3.26; or

(c)    lack of administrative cooperation pursuant to Annex 4-A.

4.    The Party which has made a finding referred to in paragraph 2 shall, without undue delay, notify the Trade Committee thereof and provide it with the information that constitutes the basis for its finding.

5.    When the requirements of paragraph 4 are fulfilled, the Party which has made a finding shall enter into consultations with the other Party, in the Trade Committee, with a view to reaching a solution that is acceptable to both Parties. If the Parties fail to agree on a mutually acceptable solution within 3 (three) months after the date of notification, the Party which has made the finding may decide to suspend temporarily the relevant preferential treatment of the products concerned. In such cases, the Party which has made the finding shall notify the temporary suspension to the Trade Committee without undue delay.

6.    A decision to suspend temporarily the relevant preferential treatment of the product concerned pursuant to paragraph 4 shall apply only for a period commensurate with the impact on the financial interests of the Party concerned and not for longer than 3 (three) months. If it can be objectively and verifiably ascertained that the conditions that gave rise to that decision to suspend persist at the expiry of the suspension period, the Party concerned may decide to renew that decision to suspend for an equal period of time. Any suspension shall be subject to periodic consultations in the Trade Committee. In case of renewal, consultations shall take place in the Trade Committee at least 15 (fifteen) days prior to the expiry of the suspension period.

7.    Each Party shall publish, in accordance with its internal procedures, notices to importers about any notification of a finding pursuant to paragraph 4 and decision to suspend temporarily referred to in paragraphs 5 and 6.

SECTION C

INSTITUTIONAL PROVISIONS

ARTICLE 2.14

Subcommittee on trade in goods

1.    The Subcommittee on trade in goods, established pursuant to Article 22.3(4), shall have the following functions, in addition to those listed in Article 22.3 and Article 5.14:

(a)    promote trade in goods between the Parties;

(b)    evaluate annually the use and the administration of quotas and of preferences granted by this Agreement; and

(c)    discuss, clarify and address any technical issues that may arise between the Parties on matters related to the application of each Party's tariff nomenclature as defined in paragraphs 3 and 4 of Annex 2-A.

ARTICLE 2.15

Subcommittee on trade in wine products and spirits

1.    The Subcommittee on trade in wine products and spirits, established pursuant to Article 22.3(4), shall have the following functions, in addition to those listed in Article 22.3:

(a)    ensure the timely notification of amendments to laws and regulations on matters covered by Annex 2-D that have an impact on wine products and spirits traded between the Parties; and

(b)    adopt decisions to determine the details of the rules set out in paragraph 2 of Appendix 2-D-3, in particular the forms to be used and the details of the information to be provided in the analysis report.

ARTICLE 2.16

Cooperation on trade in wine products and spirits and focal points

1.    The Parties shall cooperate on and address issues related to trade in wine products and spirits, in particular:

(a)    product definitions, certification and labelling of wine products;

(b)    the use of vine varieties in winemaking and the labelling thereof; and

(c)    product definitions, certification and labelling of spirits.

2.    The Parties shall closely cooperate and seek ways to improve assistance to each other in the application of Annex 2-D, in particular in order to combat fraudulent practices.

3.    To facilitate mutual assistance between the enforcement bodies and authorities of the Parties as regards matters covered by this Annex, each Party shall designate the bodies and authorities responsible for the application and enforcement of Annex 2-D. If a Party designates more than one competent body or authority, it shall ensure that the work of those bodies and authorities is coordinated. In such cases, a Party shall also designate a single liaison body or authority that serves as the single focal point for the body or authority of the other Party.

4    The Parties shall, via the Subcommittee on trade in wine products and spirits, inform each other of the contact details of the bodies, authorities and focal points referred to in in paragraph 3 no later than 6 (six) months after the date of entry into force of this Agreement. The Parties shall inform each other of any changes of the contact details to such bodies, authorities and focal points.

CHAPTER 3

RULES OF ORIGIN AND ORIGIN PROCEDURES

SECTION A

RULES OF ORIGIN

ARTICLE 3.1

Definitions

For the purposes of this Chapter:

(a)    "classified" refers to the classification of a product or material under a particular section, Chapter, heading or subheading of the Harmonized System;

(b)    "consignment" means products which are either sent simultaneously from one exporter to one consignee or covered by a single transport document covering their shipment from the exporter to the consignee or, in the absence of such a document, by a single invoice;

(c)    "customs authority or competent governmental authority" refers to:

(i)    in the European Union, the services of the European Commission responsible for customs matters, and the customs administrations and any other authorities of the Member States of the European Union responsible for the application and enforcement of customs legislation; and

(ii)    in MERCOSUR, the competent authorities of the Signatory MERCOSUR States or their successors, as listed below:

(A)    Argentina: Secretaría de Industria y Gestión Comercio of the Ministerio de Economía;

(B)    Brazil: Secretaria de Comércio Exterior do Ministério do Desenvolvimento, Indústria, Comércio e Serviços and Secretaria Especial da Receita Federal do Brasil of the Ministério da Fazenda;

(C)    Paraguay: Subsecretaría de Estado de Comercio y Servicios of the Ministerio de Industria y Comercio; and

(D)    Uruguay: Asesoría de Política Comercial of the Ministerio de Economía y Finanzas;

(d)    "exporter" means a person located in a Party who exports the originating product and makes out a statement on origin;

(e)    "fungible materials" means materials that are of the same kind and commercial quality, with the same technical and physical characteristics, and which cannot be distinguished from one another once they are incorporated into the product;

(f)    "goods" means both materials and products;

(g)    "importer" means a person who imports the originating product and claims preferential tariff treatment for it;

(h)    "manufacture" means any kind of working or processing, including assembly or specific operations;

(i)    "material" means any ingredient, raw material, component or part used in the manufacture of a product; and

(j)    "product" means the product being manufactured, even if it is intended for later use in another manufacturing operation.

ARTICLE 3.2

General requirements

1.    For the purposes of applying the preferential tariff treatment by a Party to the originating goods of the other Party in accordance with this Agreement, the following products shall be considered as originating in the European Union, provided that they satisfy all other applicable requirements in this Chapter:

(a)    products wholly obtained in the European Union pursuant to Article 3.4;

(b)    products obtained in the European Union exclusively from originating materials; or

(c)    products obtained in the European Union incorporating non-originating materials, provided that they have fulfilled the conditions set out in Annex 3-B.

2.    For the purposes of applying the preferential tariff treatment by a Party to the originating goods of the other Party in accordance with this Agreement, the following products shall be considered as originating in MERCOSUR, provided that they satisfy all other applicable requirements in this Chapter:

(a)    products wholly obtained in MERCOSUR pursuant to Article 3.4;

(b)    products obtained in MERCOSUR exclusively from originating materials; or

(c)    products obtained in MERCOSUR incorporating non-originating materials, provided that they have fulfilled the conditions set out in Annex 3-B.

3.    If a product has acquired originating status, the non-originating materials used in the manufacture of that product shall not be considered non-originating if that product is incorporated into another product as a material.

ARTICLE 3.3

Bilateral cumulation of origin

1.    Products originating in the European Union shall be considered as materials originating in MERCOSUR when incorporated into a product obtained there, provided that they have undergone working or processing going beyond the operations referred to in Article 3.6.

2.    Products originating in MERCOSUR shall be considered as materials originating in the European Union when incorporated into a product obtained there, provided that they have undergone working or processing going beyond the operations referred to in Article 3.6.

ARTICLE 3.4

Wholly obtained products

1.    The following shall be considered as wholly obtained products in the European Union or in MERCOSUR:

(a)    mineral products and other natural substances extracted from their soil or from their seabed;

(b)    plants and vegetable products grown or harvested there;

(c)    live animals born and raised there;

(d)    products from live animals raised there;

(e)    products from slaughtered animals born and raised there;

(f)    products obtained through hunting or fishing conducted there;

(g)    products of aquaculture where the fish, crustaceans, molluscs and other aquatic invertebrates are born and raised there;

(h)    products of fishing and other products taken from the sea by their vessels 8 ;

(i)    products made aboard their factory ships exclusively from products referred to in point (h);

(j)    mineral products and other non-living natural resources, taken or extracted from the seabed, subsoil or ocean floor of:

(i)    the exclusive economic zone of Signatory MERCOSUR States or of Member States of the European Union, as determined by their laws and regulations and in accordance with Part V of UNCLOS;

(ii)    the continental shelf of Signatory MERCOSUR States or of Member States of the European Union, as determined by their laws and regulations and in accordance with Part VI of UNCLOS; or

(iii)    the Area, as defined in Article 1(1) of UNCLOS, where a Party or a person of a Party has exclusive exploitation rights, in accordance with Part XI of UNCLOS and the Agreement relating to the implementation of Part XI of UNCLOS;

(k)    used articles collected there fit only for the recovery of raw materials;

(l)    waste and scrap resulting from manufacturing operations conducted there 9 ; or

(m)    goods produced there exclusively from the products specified in points (a) to (l).

2.    The terms "their vessels" and "their factory ships" in points (h) and (i) of paragraph 1 apply only to vessels and factory ships which:

(a)    are registered in a Member State of the European Union or in a Signatory MERCOSUR State and, where appropriate, have fishing licences issued by a Signatory MERCOSUR State or the European Union in the name of fishing companies duly registered to operate in that Member State of the European Union or that Signatory MERCOSUR State;

(b)    sail under the flag of the same registering Member State of the European Union or Signatory MERCOSUR State 10 ; and

(c)    meet one of the following conditions:

(i)    they are at least 50 % (fifty per cent) owned by one or more natural persons 11 of the Parties;

(ii)    they are owned by juridical persons 12 :

(A)    which have their head office and their main place of business in a Party; and

(B)    in which at least 50 % (fifty per cent) of the ownership belongs to natural persons or juridical persons of the Parties; or

(iii)    at least a minimum of two thirds of the crew are natural persons of the Parties.

ARTICLE 3.5

Tolerances

1.    If a non‑originating material used in the manufacture of a product does not satisfy the requirements set out in Annex 3-B, such product shall nonetheless be considered as originating in a Party if:

(a)    the total value of non-originating materials does not exceed 10 % (ten per cent) of the ex‑works price of the product; and

(b)    any of the percentages for the maximum value or weight of non‑originating materials set out in Annex 3-B are not exceeded through the application of this paragraph.

2.    Paragraph 1 does not apply to products falling within Chapters 50 to 63 of the Harmonized System, for which the tolerances set out in Notes 6 and 7 of Annex 3-A apply.

ARTICLE 3.6

Insufficient working or processing operations

1.    Notwithstanding point (c) of Article 3.2(1) and point (c) of Article 3.2(2), a product shall not be considered as originating in a Party if the manufacture of that product consists only of the following operations conducted on non-originating materials in that Party:

(a)    preserving operations to ensure that the products remain in good condition during transport and storage;

(b)    changes of packaging and breaking-up and assembly of packages;

(c)    washing, cleaning or removing dust, oxide, oil, paint or other coverings;

(d)    ironing or pressing of textiles;

(e)    simple painting and polishing operations;

(f)    husking, partial or total bleaching, polishing and glazing of cereals and rice;

(g)    operations to colour or flavour sugar or form sugar lumps, and partial or total milling of crystal sugar;

(h)    peeling, stoning and shelling of fruits, nuts and vegetables;

(i)    sharpening, simple grinding, separating or simple cutting;

(j)    sifting, screening, sorting, classifying, grading and matching, including the making-up of sets of articles;

(k)    simple placing in bottles, cans, flasks, bags, cases or boxes, fixing on cards or boards and all other simple packaging operations;

(l)    affixing or printing marks, labels, logos and other similar signs on products or their packaging;

(m)    simple mixing of products, whether or not of different kinds, and simple mixing of sugar with any material;

(n)    simple assembly of non-originating parts to constitute a complete product, or disassembly of products into parts;

(o)    simple addition of water, dilution, dehydration or denaturation of products;

(p)    a combination of two or more operations specified in points (a) to (o); or

(q)    slaughter of animals.

2.    For the purposes of paragraph 1, operations shall be considered simple if neither special skills nor machines, apparatus or tools specially produced or installed for those operations are required for their performance.

ARTICLE 3.7

Unit of qualification

1.    The unit of qualification for the application of this Chapter shall be the particular product as classified in accordance with the Harmonized System.

2.    For a product composed of a group or assembly of articles which is classified under a single heading of the Harmonized System, the whole constitutes the unit of qualification.

3.    For a consignment consisting of a number of identical products classified under the same heading of the Harmonized System, each product shall be taken individually when applying this Chapter.

ARTICLE 3.8

Packaging materials, packing materials and containers

1.    If, under General Rule 5 for the Interpretation of the Harmonized System, packaging is included with the product for classification purposes, it shall be included for the purposes of determining origin.

2.    Packing materials and containers for shipment that are used to protect products during transportation shall be disregarded in determining the origin of such products.

ARTICLE 3.9

Accessories, spare parts and tools

Accessories, spare parts and tools dispatched with a piece of equipment, machine, apparatus or vehicle which are customary for that product and included in the price thereof or which are not separately invoiced shall be regarded as one product with the piece of equipment, machine, apparatus or vehicle in question.

ARTICLE 3.10

Accounting segregation

1.    If originating and non-originating fungible materials are used in the manufacture of a product, those materials shall be physically segregated, according to their origin, during storage in order for the originating materials to maintain their originating status.

2.    Notwithstanding paragraph 1, physical segregation of originating and non-originating fungible materials is not needed in the manufacture of a product if the origin of such product is determined pursuant to the accounting segregation method for managing stocks.

3.    The accounting segregation shall be recorded and applied in accordance with the generally accepted accounting principles applicable in the Party in which the product is manufactured.

4.    The accounting segregation method may be used only if it can be ensured that, at any time, no more products receive originating status than would be the case if the materials had been physically segregated.

5.    A Party may require that the application of the accounting segregation method be subject to prior authorisation by the relevant competent authorities. The competent authorities may grant authorisation subject to any conditions deemed appropriate and, in such cases, they shall monitor the use of the authorisation. Those authorities may withdraw the authorisation at any time if the beneficiary of the authorisation makes improper use of the accounting segregation method in any manner or fails to fulfil any of the other conditions laid down in this Chapter.

ARTICLE 3.11

Sets

Sets, as defined in General Rule 3 for the Interpretation of the Harmonized System, shall be regarded as originating if all their component products are originating. Nevertheless, if a set is composed of originating and non‑originating products, the set as a whole shall be regarded as originating, provided that the value of the non‑originating products does not exceed 15 % (fifteen per cent) of the ex‑works price of the set.

ARTICLE 3.12

Neutral elements

In order to determine whether a product is originating, it is not necessary to determine the origin of the following elements used in its manufacture:

(a)    energy and fuel;

(b)    plant and equipment;

(c)    machines and tools; or

(d)    goods which do not enter and which are not intended to enter into the final composition of the product.

ARTICLE 3.13

Principle of territoriality

1.    The conditions set out in this Chapter relating to the acquisition of originating status shall be fulfilled without interruption in the European Union or MERCOSUR.

2.    If originating goods exported from the European Union or MERCOSUR to a third country are returned, they shall be considered to be non-originating unless it can be demonstrated to the satisfaction of the customs authorities that the goods returned:

(a)    are the same as those exported; and

(b)    have not undergone any operation beyond that necessary to preserve them in good condition while in that third country or while being exported.

ARTICLE 3.14

Transport conditions

1.    The products declared for importation into a Party shall be the same products as exported from the Party in which they are considered originating. They shall not have been altered, transformed in any way or subjected to operations other than those to preserve them in good condition or to add or affix marks, labels, seals or any other distinguishing signs, in order to ensure compliance with specific domestic requirements of the importing Party, prior to being declared for import.

2.    Storage of products or consignments and splitting of consignments may take place if carried out under the responsibility of the exporter or of a subsequent holder of the goods, and if the products remain under customs supervision in the country or countries of transit.

3.    In case of doubt as to whether the requirements provided for in paragraphs 1 and 2 are complied with, the customs authorities of the importing Party may request the importer to provide evidence of compliance, which may be given by any means, including contractual transport documents such as bills of lading, factual or concrete evidence based on marking or numbering of packages or any evidence related to the product itself.

ARTICLE 3.15

Exhibitions

1.    Originating products sent for exhibition in a third country and sold after the exhibition for importation into the European Union or MERCOSUR shall benefit on importation from the provisions of this Agreement if it is shown to the satisfaction of the customs authorities of the importing Party that:

(a)    an exporter has consigned the products from the European Union or MERCOSUR to the third country in which the exhibition is held and has exhibited them there;

(b)    the products have been sold or otherwise disposed of by that exporter to a person in the European Union or MERCOSUR;

(c)    the products have been consigned during the exhibition or immediately thereafter in the state in which they were sent for exhibition; and

(d)    the products have not, since they were consigned for exhibition, been used for any purpose other than demonstration at the exhibition.

2.    A statement on origin shall be made out pursuant to Section B and submitted to the customs authorities of the importing Party. The name and address of the exhibition shall be indicated thereon.

3.    Paragraph 1 applies to any trade, industrial, agricultural or crafts exhibition, fair or similar public show or display which is organised for purposes other than private purposes in shops or business premises with a view to the sale of foreign products, and during which the products remain under customs control.

SECTION B

ORIGIN PROCEDURES

ARTICLE 3.16

General requirements

Products originating in the European Union on importation into MERCOSUR, and products originating in MERCOSUR on importation into the European Union, shall benefit from preferential tariff treatment under this Agreement upon submission of a statement on origin in accordance with Article 3.17 and each Party's laws and regulations 13 .

ARTICLE 3.17

Conditions for making out a statement on origin

1.    A statement on origin as referred to in Article 3.16 may be made out by:

(a)    an exporter in accordance with the relevant laws and regulations of the Party of export; or

(b)    any exporter for any small consignment consisting of one or more packages containing originating products whose total value does not exceed the threshold stipulated in the relevant laws and regulations of the Party of export.

2.    The Parties shall exchange information on the relevant laws and regulations as referred to in paragraph 1:

(a)    on the date of entry into force of this Agreement;

(b)    if there are any modifications to such laws and regulations, prior to the entry into force of such modifications; and

(c)    on request of either Party, at any time after the entry into force of this Agreement.

3.    A statement on origin may be made out if the products concerned are products originating in the European Union or MERCOSUR and fulfil the other requirements of this Chapter.

4.    The exporter making out a statement on origin shall be prepared to submit at any time, at the request of the customs authorities or competent governmental authorities of the Party of export, all appropriate documents proving the originating status of the products concerned and the fulfilment of the other requirements of this Chapter.

5.    The exporter shall make out a statement on origin on the invoice, the delivery note, or any other commercial document that describes the originating product in sufficient detail to enable its identification using one of the language versions set out in Annex 3-C and in accordance with the laws and regulations of the Party of export.

6.    A statement on origin shall bear the original, handwritten signature of the exporter unless otherwise provided in the relevant laws and regulations of the Party of export.

7.    A statement on origin may be made out by the exporter when the products to which it relates are exported, or after exportation provided that it is presented in the Party of import no later than 2 (two) years after the importation of the products to which it relates.

ARTICLE 3.18

Validity of a statement on origin

1.    A statement on origin shall be valid for 12 (twelve) months from the date on which it was made out by the exporter, and shall be submitted within that time period to the customs authorities of the Party of import.

2.    Statements on origin submitted after the time period specified in paragraph 1 may be accepted for the purposes of applying preferential treatment only if the failure to submit them within that time period was due to exceptional circumstances.

3.    In other cases of belated submission, the customs authorities of the Party of import may accept the statement on origin if the products have been submitted before the final date.

ARTICLE 3.19

Importation by instalments

If, at the request of the importer and subject to the conditions set by the customs authorities of the Party of import, dismantled or non‑assembled products within the meaning of General Rule 2(a) for the Interpretation of the Harmonized System that are classified within Sections XV to XXI of the Harmonized System are imported by instalments, a single statement on origin for such products shall be submitted to the customs authorities upon importation of the first instalment.

ARTICLE 3.20

Exemptions from a statement on origin

1.    Products sent as small packages from private persons to private persons or forming part of travellers' personal luggage shall be admitted as originating products without requiring the submission of a statement on origin if such products are not imported by way of trade and have been declared as meeting the requirements of this Chapter, and if there is no doubt as to the veracity of the declaration. In the case of products sent by post, the declaration can be made on the customs declaration CN22/CN23 or on a sheet of paper annexed to that document.

2.    Imports which are occasional and consist solely of products for the personal use of the recipients or travellers or their families shall not be considered to be imports by way of trade if it is evident from the nature and quantity of the products that no commercial purpose is intended.

3.    The total value of the products referred to in paragraph 1 shall not exceed the values stipulated in the laws and regulations of the Party of import. The Parties shall exchange information on those values.

ARTICLE 3.21

Supporting documents

The documents referred to in Article 3.17(4) may include:

(a)    direct evidence of the processes carried out by the exporter or supplier to obtain the goods concerned, contained, for example, in their accounts or internal book-keeping;

(b)    documents proving the originating status of materials used, issued or made out in the European Union or MERCOSUR, if those documents are used, issued or made out in accordance with that Party's laws and regulations;

(c)    documents proving the working or processing of materials in the European Union or MERCOSUR, issued or made out in the European Union or MERCOSUR, if those documents are used, issued or made out in accordance with that Party's laws and regulations; and

(d)    a statement on origin proving the originating status of materials used made out in the European Union or MERCOSUR in accordance with this Chapter.

ARTICLE 3.22

Record-keeping requirements

The exporter making out a statement on origin shall keep, for at least 3 (three) years as of the date of making out the statement on origin, a copy of that statement on origin and of the documents referred to in Article 3.17(4). The importer shall keep that statement of origin, or a copy thereof if the original is held by the customs authority or competent governmental authority, for at least 3 (three) years as of the date of importation of the products to which that statement on origin refers.

ARTICLE 3.23

Discrepancies and formal errors

1.    Slight discrepancies between the statements on origin and the documents submitted to the customs office for the purposes of carrying out the formalities for importing the products shall not render the statement on origin null and void if it is duly established that the statement on origin corresponds to the products submitted.

2.    Obvious formal errors on a statement on origin shall not cause the statement on origin to be rejected if such errors do not create doubts concerning the correctness of the information contained in the statement on origin.

ARTICLE 3.24

Cooperation between customs authorities and competent governmental authorities

1.    The customs authorities or competent governmental authorities of the Member States of the European Union and of the Signatory MERCOSUR State shall provide each other, by means of communication between the European Commission and the Secretariat of MERCOSUR, with the addresses of the customs authorities or competent governmental authorities responsible for verifying statements on origin.

2.    In order to ensure the proper application of this Chapter, the European Union and MERCOSUR shall assist each other, through their customs authorities or competent governmental authorities, in checking the authenticity of statements on origin and the correctness of the information given in these statements.

3.    To prevent, investigate and combat breaches of customs legislation, Annex 4-A provides for cooperation between customs authorities or competent governmental authorities, including the presence of duly authorised officials of one Party in the territory of the other, subject to the agreement of and the conditions set by the Party in whose territory the assistance is being given.

ARTICLE 3.25

Verification of statements on origin

1.    Verifications of statements on origin shall be carried out at random or whenever the customs authorities or competent governmental authorities of the Party of import have reasonable doubts as to the authenticity of such statements, the originating status of the products concerned or the fulfilment of the other requirements of this Chapter.

2.    For the purposes of implementing paragraph 1, the customs authorities or competent governmental authorities of the Party of import shall return the statement on origin, or a copy thereof, to the customs authorities or competent governmental authorities of the Party of export, providing the reasons for the request of verification. Any documents or information obtained suggesting that the information provided on the statement on origin is incorrect shall be included in support of the request for verification.

3.    The request for verification and the subsequent reply shall be submitted in an official language of the customs authority or competent governmental authority of the Party of import requesting the verification, in a language acceptable to that Party or in accordance with Article 5(3) of Annex 4-A.

4.    The verification shall be carried out by the customs authorities or competent governmental authorities of the Party of export. For this purpose, they have the authority to call for any evidence and to carry out any inspections of the exporter's accounts or any other check that they consider appropriate.

5.    If the customs authorities or competent governmental authorities of the Party of import decide to suspend the granting of preferential treatment to the products concerned while awaiting the results of the verification, they shall offer to release the products to the importer subject to any precautionary measures that the customs authorities or competent governmental authorities deem necessary. Any suspension of preferential treatment shall be terminated as soon as possible after the Party of import has determined the origin of the products.

6.    The customs authorities or competent governmental authorities of the Party of export shall inform the authorities of the Party of import requesting the verification of the results thereof as soon as possible. The Party of export shall provide to the customs authorities or competent governmental authorities of the Party of import the following information:

(a)    the results of the verification;

(b)    a description of the product subject to verification and the tariff classification relevant for the application of the rules of origin;

(c)    a description and explanation of the manufacture sufficient to support the rationale concerning the originating status of the product;

(d)    information on the manner in which the verification was conducted; and

(e)    if appropriate, supporting documentation.

7.    If there is no reply within 10 (ten) months of the date of the verification request or if the reply does not contain sufficient information to determine the authenticity of the statement in question or the origin of the products, the requesting customs authorities or competent governmental authorities shall, except in exceptional circumstances, refuse preferential tariff treatment to the products covered by the statement on origin. The period of 10 (ten) months may be extended by mutual agreement between the Parties, taking into account the number of verification requests and the complexity of the verifications.

8.    The customs authorities or competent governmental authorities of the Party of import requesting the verification shall, at the request of the customs authorities or competent governmental authorities of the Party of export, notify those authorities of their decision on the verification process.

ARTICLE 3.26

Consultations

1.    If, in relation to the verification procedures set out in Article 3.25, the customs authorities or competent governmental authorities of the Party of import intend to make a determination of origin that is not consistent with the reply provided by the customs authorities or competent governmental authorities of the Party of export in accordance with Article 3.25(6), the Party of import shall notify this intention to the Party of export within 60 (sixty) days of receiving the reply in accordance with Article 3.25(6).

2.    At the request of either Party, the Parties shall hold consultations within 90 (ninety) days of the date of the notification referred to in paragraph 1 or within an agreed period of time, with a view to resolving differences in relation to the verification procedures. The period for consultation may be extended on a case-by-case basis by mutual written agreement between the Parties.

3.    If there are differences in relation to the verification procedures which cannot be settled between the customs authorities or competent governmental authorities of the Party of import requesting a verification and the customs authorities or competent governmental authorities of the Party of export responsible for carrying out this verification, or if such differences raise questions as to the interpretation of this Chapter, such differences or questions shall be submitted to the Subcommittee on customs, trade facilitation and rules of origin, referred to in Article 3.32.

4.    The customs authorities or competent governmental authorities of the Party of import requesting a verification may make the determination on origin after consultations in the Subcommittee on customs, trade facilitation and rules of origin and only on the basis of sufficient justification, after having granted the importer the right to be heard. The determination shall be notified to the Party of export.

5.    Nothing in this Article shall affect the procedures or the rights of the Parties under Chapter 21.

6.    In all cases, disputes between the importer and the customs authorities or competent governmental authorities of the Party of import shall be settled under the law of that Party.

ARTICLE 3.27

Confidentiality

1.    Each Party shall maintain, in conformity with its law, the confidentiality of the information collected pursuant to this Chapter and shall protect that information from disclosure.

2.    Information obtained by the authorities of the importing Party may only be used by those authorities for the purposes of this Chapter. Each Party shall ensure that the confidential information collected pursuant to this Chapter is not used for purposes other than the administration and enforcement of determination of origin and of customs matters, except with the permission of the person or Party that provided such confidential information.

3.    Notwithstanding paragraph 2, the importing Party may allow information collected pursuant to this Chapter to be used or disclosed in any administrative, judicial or jurisdictional proceedings instituted for failure to comply with customs related laws implementing this Chapter. In such a case the importing Party shall notify the exporting Party of the use or disclosure of the information.

ARTICLE 3.28

Administrative measures and sanctions

A Party shall impose, in accordance with its laws and regulations, administrative measures and sanctions on any person who draws up, or causes to be drawn up, a document which contains incorrect information for the purposes of obtaining a preferential treatment for products.

SECTION C

FINAL PROVISIONS

ARTICLE 3.29

Ceuta and Melilla

1.    For the purposes of this Chapter, in the case of the European Union, the term "Party" does not include Ceuta and Melilla.

2.    Products originating in MERCOSUR, when imported into Ceuta and Melilla, shall in all respects be subject to the same customs treatment under this Agreement as that which is applied to products originating in the customs territory of the European Union under Protocol 2 of the Act of Accession of the Kingdom of Spain and the Portuguese Republic to the European Union. MERCOSUR shall grant to imports of products covered by this Agreement and originating in Ceuta and Melilla the same customs treatment as that which is granted to products imported from and originating in the European Union.

3.    The rules of origin and origin procedures referred to in this Chapter shall apply, mutatis mutandis, to products exported from MERCOSUR to Ceuta and Melilla and to products exported from Ceuta and Melilla to MERCOSUR.

4.    Ceuta and Melilla shall be considered to be a single territory.

5.    The exporter shall indicate "MERCOSUR" or "Ceuta and Melilla" in field 2 of the text of the statement on origin, depending on the origin of the product.

6.    The customs authorities of the Kingdom of Spain shall be responsible for the application and implementation of this Chapter in Ceuta and Melilla.

ARTICLE 3.30

Tariff rate quotas

Products exported under tariff rate quotas granted by the European Union shall be accompanied by an official document issued by the Signatory MERCOSUR States, the model of which should be communicated to the European Union by MERCOSUR no later than the date of entry into force of this Agreement 14 .

ARTICLE 3.31

Goods in transit or storage

This Agreement may be applied to goods which comply with this Chapter and which, on the date of entry into force of this Agreement, are either in transit or in temporary storage in bonded warehouses or in free zones in the European Union or in MERCOSUR, subject to the submission to the customs authorities of the importing Party, within 6 (six) months of said date, of a statement on origin and, if appropriate, the documents showing that the goods comply with Article 3.14.

ARTICLE 3.32

Subcommittee on customs, trade facilitation and rules of origin

1.    The Subcommittee on customs, trade facilitation and rules of origin established pursuant to Article 22.3(4) shall have the following functions, in addition to those listed in Article 22.3 and Articles 4.6(10) and 4.21:

(a)    conduct the preparatory internal work necessary for the Trade Committee on:

(i)    the implementation and operation of this Chapter; and

(ii)    any amendments to this Chapter proposed by a Party;

(b)    adopt explanatory notes to facilitate the implementation of this Chapter; and

(c)    conduct, where necessary, the consultations provided for in Article 3.26.

ARTICLE 3.33

Explanatory notes

The Subcommittee on customs, trade facilitation and rules of origin shall adopt, as appropriate, explanatory notes regarding the interpretation, application and administration of this Chapter.

ARTICLE 3.34

Amendments to this Chapter

The Trade Council may amend this Chapter pursuant to point (f) of Article 22.1(6).

CHAPTER 4

CUSTOMS AND TRADE FACILITATION

ARTICLE 4.1

Objectives and scope

1.    The Parties recognise the importance of customs and trade-facilitation matters in the evolving global trading environment.

2.    The Parties recognise that international trade and customs instruments and standards are the basis for import, export and transit requirements and procedures.

3.    The Parties recognise that their legislation should be non-discriminatory and that customs and other trade-related procedures should be based upon the use of modern methods and effective controls to combat fraud, protect consumer health and safety and promote legitimate trade. Each Party should periodically review its legislation and customs procedures. The Parties also recognise that their customs and other trade-related procedures should not be more administratively burdensome or trade-restrictive than necessary to achieve legitimate objectives and that they should be applied in a predictable, consistent and transparent manner.

4.    The Parties shall reinforce their cooperation with a view to ensuring that the relevant laws and regulations, as well as the administrative capacity of the relevant administrations, fulfil the objectives of promoting trade-facilitation while ensuring effective control of import, export and transit of goods at the border.

5.    The Parties shall cooperate with a view to support the development of regional integration within both the European Union and MERCOSUR.

ARTICLE 4.2

Customs cooperation

1.    The Parties, through their respective authorities, shall cooperate on customs and other trade‑related matters in order to ensure that the objectives set out in Article 4.1 are attained.

2.    Cooperation may include:

(a)    exchanging information concerning customs and other trade-related legislation, the implementation of such legislation and customs procedures, particularly in the following areas:

(i)    simplification and modernisation of customs procedures;

(ii)    enforcement of intellectual property rights by the customs authorities;

(iii)    free circulation of goods and regional integration;

(iv)    facilitation of transit movements and transhipment;

(v)    interagency coordination at the border;

(vi)     relations with the business community;

(vii)     supply chain security and risk management; and

(viii)    use of information technology, data and documentation requirements and single window systems, including work towards their future interoperability;

(b)    exchanging information concerning international trade and customs instruments and standards;

(c)    collaborating on the customs-related aspects of securing and facilitating the international trade supply chain in accordance with the Framework of Standards to Secure and Facilitate Global Trade (hereinafter referred to as the "SAFE Framework" of the World Customs Organization (hereinafter referred to as the "WCO");

(d)    developing joint initiatives related to import and export procedures, including technical assistance, capacity building and measures aimed at providing an effective service to the business community;

(e)    strengthening cooperation between the Parties in the fields of customs and trade-facilitation in international organisations such as the WTO, the WCO and the United Nations Conference on Trade and Development (hereinafter referred to as "UNCTAD");

(f)    establishing, if relevant and appropriate, mutual recognition of trade partnership programmes and customs controls, including equivalent trade-facilitation measures;

(g)    fostering cooperation between customs and other government authorities or agencies in relation to authorized economic operator programmes for example by aligning requirements, facilitating access to benefits and minimising unnecessary duplication;

(h)    working together with a view to reaching a common approach to issues relating to customs valuation; and

(i)    working together to further reduce release times and to release goods without undue delay, in particular perishable goods.

3.    The Parties shall provide each other with mutual administrative assistance in customs matters in accordance with the provisions of Annex 4-A.

ARTICLE 4.3

Customs and other trade-related laws and regulations

1.    Each Party's customs and trade-related laws and regulations 15 shall be based upon:

(a)    international instruments and standards applicable in the area of customs and trade, including: the WTO Trade Facilitation Agreement done at Bali on 7 December 2013 (hereinafter referred to as "WTO Trade Facilitation Agreement"); the International Convention on the Harmonized Commodity Description and Coding System, done at Brussels on 14 June 1983; the Safe Framework and the WCO data model, adopted in June 2005, and, to the extent possible, the substantive elements of the Revised Kyoto Convention on the Simplification and Harmonisation of Customs Procedures, done at Kyoto on the 18 May 1973;

(b)    the common objective of facilitating legitimate trade through effective enforcement of and compliance with legislative requirements; and

(c)    legislation that is proportionate and non-discriminatory, avoids unnecessary burdens on economic operators, provides for further facilitation for operators with high levels of compliance, including favourable treatment with respect to customs controls prior to the release of goods, and ensures safeguards against fraud and illicit or damaging activities.

2.    In order to improve working methods, as well as to ensure non-discrimination, transparency, efficiency, integrity and accountability of operations, each Party shall:

(a)    simplify and review requirements and formalities wherever possible with a view to the rapid release and clearance of goods;

(b)    work towards the further simplification and standardisation of data and documentation required by customs authorities and other agencies; and

(c)    ensure that the highest standards of integrity be maintained, through the application of measures reflecting the principles of the relevant international conventions and instruments in this field.

ARTICLE 4.4

Release of goods

1.    Each Party shall adopt or maintain requirements and procedures that:

(a)    provide for the prompt release of goods within a period no greater than that required to ensure compliance with its customs and other trade-related laws and formalities;

(b)    provide for advance electronic submission and processing of documentation and any other required information prior to the arrival of the goods, to enable the release of goods on arrival 16 ; and

(c)    allow for the release of goods prior to the final determination of customs duties, taxes, fees and charges, if such a determination is not done prior to, upon, or as rapidly as possible after arrival, and if all other regulatory requirements have been met.

2.    For the purposes of point (c) of paragraph 1, as a condition for such release, each Party may require a guarantee for any amount not yet determined in the form of a surety, a deposit or another appropriate instrument provided for in its laws and regulations. Such guarantee shall not be greater than the amount the Party requires to ensure payment of customs duties, taxes, fees and charges ultimately due for the goods covered by the guarantee. The guarantee shall be discharged when it is no longer required 17 .

3.    Each Party shall strive to further reduce release-times and release the goods without undue delay.

ARTICLE 4.5

Perishable goods

1.    For the purposes of this provision, perishable goods are goods that rapidly decay due to their natural characteristics, in particular in the absence of appropriate storage conditions.

2.    Each Party shall give appropriate priority to perishable goods when scheduling and performing any examinations that may be required.

3.    On request of an economic operator, each Party shall, if practicable and consistent with its laws and regulations:

(a)    provide for the clearance of a consignment of perishable goods outside the business hours of customs and other relevant authorities; and

(b)    allow consignments of perishable goods to be cleared at the premises of the economic operator.

ARTICLE 4.6

Advance rulings

1.    For the purposes of this Article, "advance ruling" means a written decision provided to an applicant prior to the importation of a good covered by the application that sets forth the treatment that the Party shall provide to the good at the time of importation with regard to:

(a)    the good's tariff classification; and

(b)    the origin of the good.

2.    Each Party shall issue, through its customs authorities, an advance ruling that sets forth the treatment to be provided to the goods concerned. If an applicant submits a written request, including in electronic format, containing all necessary information in accordance with the laws and regulations of the issuing Party, that ruling shall be issued in a reasonable, time-bound manner.

3.    The advance ruling shall be valid for a period of at least 3 (three) years after its issuance unless the law, facts or circumstances supporting the original advance ruling change.

4.    A Party may decline to issue an advance ruling if the question raised is the subject of administrative or judicial review or if the application does not relate to any intended use of the advance ruling. If a Party declines to issue an advance ruling, it shall promptly notify the applicant in writing, setting out the relevant facts and the basis for its decision.

5.    Each Party shall publish, at least:

(a)    the requirements for the application for an advance ruling, including the information to be provided and the format;

(b)    the time period by which it will issue an advance ruling; and

(c)    the length of time for which the advance ruling is valid.

6.    If a Party revokes, modifies or invalidates an advance ruling, it shall provide written notice to the applicant setting out the relevant facts and the basis for its decision. A Party may revoke, modify or invalidate an advance ruling with retroactive effect, only if the ruling was based on incomplete, incorrect, false or misleading information.

7.    An advance ruling issued by a Party shall be binding on that Party in respect of the applicant that sought it. The Party may provide that the advance ruling be binding on the applicant.

8.    Each Party shall provide, upon written request of an applicant, a review of the advance ruling or of the decision to revoke, modify or invalidate it 18 .

9.    Subject to any confidentiality requirements, substantive elements of these rulings shall be published, online or in other appropriate formats.

10.    To facilitate trade, the Subcommittee on customs, trade facilitation and rules of origin, referred to in Article 4.21, shall regularly discuss updates on changes in the respective laws and regulations of the Parties on the matters listed in this Article.

11.    The Parties may agree upon advance rulings on any other matter.

ARTICLE 4.7

Transit and transhipment

1.    Each Party shall ensure freedom of transit through its territory via the route most convenient for transit.

2.    Without prejudice to legitimate control, each Party shall accord to traffic in transit to or from the territory of the other Party, treatment no less favourable than that accorded to its own like goods and their movement, including imports and exports, when such goods are transported on the same route under like conditions.

3.    Each Party shall, to the extent possible, apply to transhipped goods customs procedures that are less burdensome than those applied to traffic in transit.

4.    Each Party shall operate bonded transport regimes that allow the transit of goods without payment of customs duties or other charges subject to the provision of an appropriate guarantee.

5.    Each Party shall promote and implement regional transit arrangements with a view to facilitating traffic in transit and reducing trade barriers.

6.    Each Party shall draw upon and use international standards and instruments relevant to transit.

7.    Customs transit procedures may be used also if the transit of goods begins or ends in the territory of a Party (inland transit).

8.    The Parties shall ensure that all concerned authorities and agencies in their respective territories cooperate and coordinate on customs matters with a view to facilitating traffic in transit.

ARTICLE 4.8

Authorized economic operator

1.    Each Party shall establish or maintain a trade-facilitation partnership programme for operators who meet specified criteria, hereinafter referred to as authorized economic operators (hereinafter referred to as "AEO").

2.    The specified criteria that operators need to meet in order to qualify as authorized economic operators, hereinafter referred to as "the specified criteria", shall be related to compliance, or the risk of non-compliance, with requirements specified in each Party's laws and regulations. The specified criteria, which shall be published, may include:

(a)    the absence of any serious infringement or repeated infringements of customs and taxation laws and regulations, including no record of serious criminal offences relating to the economic activity of the applicant;

(b)    the demonstration by the applicant of a high level of control of his or her operations and of the flow of goods, by means of a system of managing commercial and, where appropriate, transport records which allows appropriate customs controls;

(c)    financial solvency, which shall be deemed to be proven if the applicant has good financial standing, which enables him or her to fulfil his or her commitments, with due regard to the characteristics of the type of business activity concerned;

(d)    proven competences or professional qualifications directly related to the activity carried out; and

(e)    appropriate security and safety standards.

3.    The specified criteria shall not be designed or applied so as to afford or create arbitrary or unjustifiable discrimination between operators where the same conditions prevail and shall allow the participation of SMEs.

4.    The trade-facilitation partnership programme shall include at least four of the following benefits:

(a)    fewer documentary and data requirements, as appropriate;

(b)    low rate of physical inspections and examinations, as appropriate;

(c)    rapid release time, as appropriate;

(d)    deferred payment of duties, taxes, fees and charges;

(e)    use of comprehensive guarantees or reduced guarantees;

(f)    a single customs declaration for all imports or exports in a given period; and

(g)    clearance of goods at the premises of the authorized economic operator or another place authorised by the customs authorities.

5.    The Parties should ensure coordination between customs authorities and other border agencies in the development of their respective authorized economic operator programmes through means such as the alignment of requirements, the minimisation of unnecessary duplication and the access to benefits related to controls and requirements administered by agencies other than customs authorities.

ARTICLE 4.9

Single window

Each Party shall endeavour to establish single window systems, enabling traders to submit through a single entry point documentation and data requirements for importation, exportation or transit of goods to the participating authorities or agencies.

ARTICLE 4.10

Transparency

1.    The Parties recognise the importance of timely consultations with trade representatives on a Party's proposed laws and procedures related to customs and trade facilitation matters.

2.    Each Party shall ensure that its respective customs and other trade-related requirements and procedures continue to meet the needs of the trading community, follow best practices and remain as less trade-restrictive as possible.

3.    Each Party shall, as appropriate, provide for regular consultations between its border agencies and traders or other stakeholders located within its territory.

4.    Each Party shall promptly publish, in a non-discriminatory and easily accessible manner, and as far as possible through electronic means, new laws, regulations and general procedures related to customs and trade-facilitation matters prior to the application of any such laws, regulations or general procedures, as well as changes to and interpretations of such laws, regulations and general procedures. This shall include:

(a)    importation, exportation and transit procedures, including port, airport, and other entry-point procedures and hours of operation, and required forms and documents;

(b)    applied rates of duties and taxes of any kind imposed on or in connection with importation or exportation;

(c)    fees and charges imposed by or for governmental agencies on or in connection with importation, exportation or transit;

(d)    rules for the classification or valuation of products for customs purposes;

(e)    laws, regulations and administrative rulings of general application relating to rules of origin;

(f)    import, export or transit restrictions or prohibitions;

(g)    penalty provisions against breaches of import, export or transit formalities;

(h)    appeal procedures;

(i)    agreements or parts thereof with any country or countries relating to importation, exportation or transit;

(j)    procedures relating to the administration of tariff quotas;

(k)    points of contact for information enquiries; and

(l)    other relevant notices of an administrative nature in relation to the above.

5.    Each Party shall ensure there is a reasonable time period between the publication of new or amended laws, regulations and general procedures and fees or charges and their entry into force.

6.    Each Party shall make available online and update, as appropriate, the following:

(a)    a description of its importation, exportation and transit procedures, including appeal procedures, informing of the practical steps needed to import and export and for transit;

(b)    the forms and documents required for importation into, exportation from, or transit through the territory of that Party; and

(c)    contact information on enquiry points.

7.    Each Party shall establish or maintain one or more enquiry points to answer within a reasonable time enquiries from governments, traders and other interested parties on customs and other trade-related matters. The Parties shall not require the payment of a fee for answering enquiries or providing required forms and documents. The enquiry points shall answer enquiries and provide the forms and documents within a reasonable time period set by each Party, which may vary depending on the nature or complexity of the enquiry.

ARTICLE 4.11

Customs valuation

The Agreement on the Implementation of Article VII of GATT (1994) shall govern customs valuation rules applied to reciprocal trade between the Parties. Its provisions are hereby incorporated into and made an integral part of this Agreement.

ARTICLE 4.12

Risk management

1.    Each Party shall adopt or maintain a risk management system for customs control.

2.    Each Party shall design and apply risk management in such a manner as to avoid arbitrary or unjustifiable discrimination, or disguised restrictions on international trade.

3.    Each Party shall concentrate customs control and other relevant border controls on high-risk consignments and expedite the release of low-risk consignments. Each Party may also select, on a random basis, consignments for such controls as part of its risk management.

4.    Each Party shall base risk management on assessment of risk through appropriate selectivity criteria.

5.    The provisions of this Article are, whenever possible, applicable to procedures administered by other border agencies.

ARTICLE 4.13

Post-clearance audit

1.    With a view to expediting the release of goods, each Party shall adopt or maintain post‑clearance audit to ensure compliance with customs and other related laws and regulations.

2.    Each Party shall conduct post-clearance audits in a risk-based manner.

3.    Each Party shall conduct post-clearance audits in a transparent manner. If an audit is performed and conclusive results have been achieved, the Party shall, without delay, notify the person whose record is audited of the results, the person's rights and obligations and the reasons for the results.

4.    The Parties acknowledge that the information obtained in a post-clearance audit may be used in further administrative or judicial proceedings.

5.    The Parties shall, wherever practicable, use the results of a post-clearance audit in applying risk management.

ARTICLE 4.14

Customs brokers

Each Party shall publish its measures on the use of customs brokers. Each Party shall apply transparent, non-discriminatory and proportionate rules if and when licensing customs brokers. A Party shall not adopt new measures introducing the mandatory use of customs brokers.

ARTICLE 4.15

Pre-shipment Inspections

A Party shall not require the mandatory use of pre-shipment inspections as defined in the WTO Agreement on Pre-shipment Inspection or any other inspection activity performed at destination, before customs clearance, by private companies.

ARTICLE 4.16

Appeals

1.    Each Party shall provide effective, prompt, non-discriminatory and easily accessible procedures to guarantee the right of appeal against the administrative actions, rulings and decisions of customs or other competent authorities affecting import or export of goods or goods in transit.

2.    Appeal procedures may include administrative review by the supervising authority and judicial review of decisions taken at the administrative level according to each Party's laws and regulations.

3.    Any person who has applied to the customs authorities for a decision and has not obtained a decision on that application within the applicable time-limits shall also be entitled to exercise the right of appeal.

4.    Each Party shall provide a person to whom it issues an administrative decision with the reasons for that decision, so as to enable that person to have recourse to appeal procedures if necessary.

ARTICLE 4.17

Import, export and transit formalities and data and documentation requirements

1.    Each Party shall ensure that import, export and transit formalities and data and documentation requirements are:

a)    adopted or applied with a view to a rapid release of goods, in particular perishable goods, provided the conditions for the release are fulfilled;

b)    adopted or applied in a manner that aims to reduce the time and cost of compliance for traders and operators;

c)    the least trade-restrictive measure chosen, if two or more alternative measures are reasonably available for fulfilling the policy objective or objectives in question; and

d)    not maintained, including parts thereof, if they, or parts of them are no longer required.

2.    MERCOSUR shall work towards applying common customs procedures and uniform customs data requirements for the release of goods.

ARTICLE 4.18

Use of information technology

1.    Each Party shall use information technologies that expedite procedures for the release of goods in order to facilitate trade between the Parties.

2.    Each Party shall:

(a)    make available by electronic means customs declarations and, whenever possible, other documents required for the import, transit or export of goods;

(b)    allow a customs declaration and, whenever possible, any other data requirements for the import and export of goods to be submitted in electronic format;

(c)    establish means of providing for the electronic exchange of customs information with its trading community;

(d)    promote the electronic exchange of data between its respective traders, customs administrations and other trade-related agencies; and

(e)    use electronic risk management systems for assessment and targeting that enable its customs authorities and, whenever possible, other border agencies to focus their inspections on high-risk goods and that facilitate the release and movement of low-risk goods.

3.    Each Party shall adopt or maintain procedures allowing the option of electronic payment for duties, taxes, fees and charges incurred upon importation and exportation collected by customs authorities and, whenever possible and applicable, by other border agencies.

ARTICLE 4.19

Penalties

1.    Each Party shall ensure that its customs laws and regulations provide that any penalties imposed for breaches of customs regulations or procedural requirements be proportionate and non-discriminatory.

2.    Penalties for a breach of a Party's customs law, regulation or procedural requirement are imposed only on the person responsible under that Party's law for such breach.

3.    Penalties imposed shall depend on the facts and circumstances of the case and shall be commensurate with the degree and severity of the breach. Each Party shall avoid incentives for the assessment or collection of a penalty or conflicts of interest in the assessment and collection of penalties.

4.    In the event of voluntary prior disclosure to a customs administration of the circumstances of a breach of a customs law, regulation or procedural requirement, each Party is encouraged to consider this as a potential mitigating factor when establishing a penalty.

5.    When a penalty is imposed for a breach of a customs law, regulation or procedural requirement, an explanation in writing is provided to the person upon whom the penalty is imposed specifying the nature of the breach and the applicable law, regulation or procedure under which the amount or range of penalty for the breach has been prescribed.

ARTICLE 4.20

Temporary admission

1.    For the purposes of this Article, the term "temporary admission" means the customs procedure under which certain goods, including their means of transport, that are brought into a customs territory for a specific purpose are conditionally relieved from payment of import duties and taxes, without application of import prohibitions or restrictions of economic character. Such goods must be intended for re-exportation within a specified period and without having undergone any change except normal depreciation due to the use made of them.

2.    Nothing in this Article should be construed as to relieve imported goods from meeting trade-related requirements of non-economic character, in particular sanitary and phytosanitary measures.

3.    Each Party shall, in accordance with its law, grant temporary admission, with total conditional relief from import duties and taxes and without application of import restrictions or prohibitions of economic character to the following goods:

(a)    goods for display or use at exhibitions, fairs, meetings or similar events;

(b)    professional equipment for the press or for sound or television broadcasting; cinematographic equipment; any other equipment necessary for the exercise of the calling, trade or profession of a person visiting the territory of another country to perform a specified task;

(c)    goods imported in connection with a commercial operation but whose importation does not in itself constitute a commercial operation;

(d)    goods imported in connection with a manufacturing operation (such as plates, drawings, moulds, plans and models, for use during a manufacturing process); replacement means of production;

(e)    goods imported exclusively for educational, scientific or cultural purposes;

(f)    personal effects of passengers and goods imported for sports purposes;

(g)    tourist publicity material;

(h)    goods imported for humanitarian purposes; and

(i)    animals imported for specific purposes.

3.    Each Party shall, for the temporary admission of the goods referred to in paragraph 2 and regardless of their origin, accept A.T.A. carnets issued and endorsed by the other Party in accordance with the Customs Convention on the A.T.A. Carnet for the temporary admission of goods done at Brussels on 6 December 1961, and guaranteed by an association forming part of the international guarantee chain, certified by the competent authorities and valid in the territory of the importing Party 19 .

ARTICLE 4.21

Subcommittee on customs, trade facilitation and rules of origin

The Subcommittee on customs, trade facilitation and rules of origin, established pursuant to Article 22.3(4) shall, in addition to the functions listed in Articles 3.32, 4.6(10) and 22.3, have the function to enhance cooperation on the development, application and enforcement of customs and trade-related procedures, mutual administrative assistance in customs matters, rules of origin and administrative cooperation.

ARTICLE 4.22

Trade Council

With a view to implementing the relevant provisions in this Chapter, the Trade Council shall have the power to adopt decisions relating to AEO programmes and their mutual recognition as well as to joint initiatives relating to customs procedures and trade-facilitation.

CHAPTER 5

TECHNICAL BARRIERS TO TRADE

ARTICLE 5.1

Objective

The objective of this Chapter is to facilitate trade in goods between the Parties by identifying, preventing and eliminating unnecessary technical barriers to trade (hereinafter referred to as "TBT") and to enhance cooperation between the Parties in matters covered by this Chapter.

ARTICLE 5.2

Relation to the TBT Agreement

1.    The Parties reaffirm their rights and obligations under the TBT Agreement, which is hereby incorporated into and made part of this Agreement.

2.    References to "this Agreement" in the TBT Agreement are to be read, as appropriate, as references to the Interim Agreement on Trade between the European Union, of the one part, and the Common Market of the South, the Argentine Republic, the Federative Republic of Brazil, the Republic of Paraguay and the Oriental Republic of Uruguay, of the other part.

3.    The term "Members" in the TBT Agreement means the Parties to this Agreement.

ARTICLE 5.3

Scope

1.    This Chapter applies to the preparation, adoption and application of standards, technical regulations and conformity assessment procedures that may affect trade in goods between the Parties.

2.    This Chapter does not apply to:

(a)    purchasing specifications prepared by governmental bodies for production or consumption requirements of governmental bodies; and

(b)    sanitary and phytosanitary measures as defined in Annex A to the SPS Agreement.

ARTICLE 5.4

Definitions

For the purposes of this Chapter, the following definitions apply:

(a)    the definitions set out in Annex 1 to the TBT Agreement;

(b)    "supplier's declaration of conformity" means a first-party attestation issued by the manufacturer on his sole responsibility based on the results of an appropriate type of conformity assessment activity and excluding mandatory third-party assessment;

(c)    "ISO" means the International Organization for Standardization;

(d)    "IEC” means the International Electrotechnical Commission;

(e)    "ITU" means the International Telecommunication Union;

(f)    "Codex Alimentarius" means the Codex Alimentarius Commission (hereinafter referred to as "Codex Alimentarius");

(g)    "ILAC" means the International Laboratory Accreditation Cooperation;

(h)    "IAF" means the International Accreditation Forum; and

(i)    "IECEE CB Scheme" means the Scheme of the IEC System of Conformity Assessment Schemes for Electrotechnical Equipment and Components for Mutual Recognition of Test Certificates for Electrical Equipment.

ARTICLE 5.5

Joint cooperation on trade-facilitating initiatives

1.    The Parties recognise the importance of intensifying their cooperation with a view to increasing mutual understanding of their respective systems and helping to eliminate or avoid the creation of TBT. In this regard, the Parties shall work towards the identification, promotion, development and implementation, as appropriate, of trade-facilitating initiatives, on a case‑by‑case basis.

2.    A Party may propose to the other Party sector-specific initiatives in matters covered by this Chapter. Those proposals shall be transmitted to the TBT Chapter coordinator, nominated pursuant to Article 5.13, and may include:

(a)    information exchange on regulatory approaches and practices;

(b)    joint analysis of a sector or group of products;

(c)    initiatives to further align technical regulations and conformity assessment procedures with relevant international standards;

(d)    the promotion of the use of accreditation to assess the competence of conformity assessment bodies; and

(e)    the consideration of mutual or unilateral recognition of conformity assessment results.

3.    Whenever one of the Parties proposes a specific trade-facilitating initiative, the other Party shall duly consider such proposal and reply within a reasonable period of time. If the other Party rejects the proposed initiative, it shall explain the reasons for its decision to the proposing Party.

4.    The terms of the work envisaged in this Article shall be defined by, of the one hand, the European Union and, of the other hand, MERCOSUR or the Signatory MERCOSUR States engaged in each trade-facilitating activity, if needed, and may include establishing ad hoc working groups. In order to benefit from non-governmental perspectives on matters related to this Article, each Party may, as appropriate and in accordance with its rules and procedures, consult with stakeholders and other interested parties.

5.    The Subcommittee on trade in goods, established pursuant to Article 22.3(4), shall discuss the results of the work carried out pursuant to this Article and may consider appropriate actions.

6.    Nothing in this Article shall be construed as obliging a Party to:

(a)    deviate from domestic procedures for preparing and adopting regulatory measures;

(b)     take actions that would undermine or impede the timely adoption of regulatory measures to achieve its public policy objectives; or

(c)    adopt any particular regulatory outcome.

7.    If initiatives referred to in this Article are agreed and if that is necessary for their implementation, each Party shall facilitate the interaction of technical teams to demonstrate their conformity assessment schemes and systems in order to increase mutual understanding.

8.    For the purposes of this Article, the European Union shall act through the European Commission.

ARTICLE 5.6

Technical regulations

1.    Each Party shall make best use of good regulatory practices with regard to the preparation, adoption and application of technical regulations, as provided for in the TBT Agreement, including, for example, preference for performance-based technical regulations, use of impact assessments or stakeholder consultation.

2.    In particular, the Parties shall:

(a)    use relevant international standards as a basis for their technical regulations, including any conformity assessment elements therein, except if such international standards would be an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued; if international standards are not used as a basis for a technical regulation which may have a significant effect on trade, a Party shall, upon request of the other Party, explain the reasons why such standards are considered inappropriate or ineffective for the fulfilment of the legitimate objective pursued;

(b)    when reviewing their respective technical regulations, in addition to Article 2.3 of the TBT Agreement and without prejudice to Articles 2.4 and 12.4 of the TBT Agreement, increase the alignment of those regulations with relevant international standards; a Party shall consider among others any new development in the relevant international standards and whether the circumstances that have given rise to any divergence from any relevant international standards continue to exist;

(c)    promote the development of regional technical regulations and encourage that these are adopted at national level and replace existing ones, in order to facilitate trade between the Parties;

(d)    allow a reasonable interval between the publication of technical regulations and their entry into force for economic operators of the other Party to adapt 20 ;

(e)    carry out the impact analysis of planned technical regulations in accordance with their respective rules and procedures; and

(f)    when preparing technical regulations, take due account of the characteristics and special needs of micro, small and medium-sized enterprises.

ARTICLE 5.7

Standards

1.    The Parties reaffirm their obligations under Article 4.1 of the TBT Agreement, particularly in respect of taking all reasonable measures to ensure that all standardising bodies within their territories accept and comply with the Code of Good Practice for the Preparation Adoption and Application of Standards in Annex 3 to the TBT Agreement.

2.    International standards developed by ISO, IEC, ITU or the Codex Alimentarius shall be considered as the relevant international standards within the meaning of Articles 2 and 5 and Annex 3 to the TBT Agreement.

3.    A standard developed by other international organisations may also be considered a relevant international standard within the meaning of Articles 2 and 5 and Annex 3 to the TBT Agreement, if:

(a)    it has been developed by a standardising body which seeks to establish consensus either:

(i)    among national delegations of the participating WTO Members representing all the national standardising bodies in their territory that have adopted, or expect to adopt, standards for the subject matter to which the international standardisation activity relates; or

(ii)    among governmental bodies of participating WTO Members; and

(b)    it has been developed in accordance with the WTO TBT Committee Decision on Principles for the Development of International Standards, Guides and Recommendations with relation to Articles 2 and 5 and Annex 3 to the TBT Agreement.

4.    With a view to harmonising standards on a basis as wide as possible each Party shall encourage, within the limits of its competence and resources, the standardising bodies within its territory, as well as the regional standardising bodies of which that Party or the standardising bodies within its territory are members, to:

(a)    participate, within the limits of their resources, in the preparation of international standards by relevant international standardising bodies;

(b)    cooperate with the relevant national and regional standardising bodies of the other Party in international standardisation activities;

(c)    use relevant international standards as a basis for the standards they develop, except where such international standards would be ineffective or inappropriate, for instance because of an insufficient level of protection or fundamental climatic or geographical factors or fundamental technological problems;

(d)    avoid duplication of, or overlap with, the work of international standardising bodies;

(e)    promote the development of standards at regional level and the adoption of such standards by national standardising bodies, thereby replacing existing national standards;

(f)    review national and regional standards not based on relevant international standards at regular intervals, with a view to increasing their alignment with relevant international standards; and

(g)    foster bilateral cooperation with the standardising bodies of the other Party.

5.    The Parties should exchange information through the TBT Chapter coordinators, nominated pursuant to Article 5.13, on:

(a)    their use of standards as a basis for, or in support of, technical regulations;

(b)    cooperation agreements implemented by either Party on standardisation, for example on standardisation issues in free trade agreements with third countries; and

(c)    their respective standardisation processes, and the use of international, regional or sub-regional standards as a basis for their national standards.

ARTICLE 5.8

Conformity assessment procedures and accreditation

1.    The provisions set out in Article 5.6 with respect to the preparation, adoption and application of technical regulations also apply to conformity assessment procedures.

2.    If a Party requires conformity assessment as a positive assurance that a product conforms with a technical regulation, it shall:

(a)    select conformity assessment procedures proportionate to the risks involved;

(b)    consider, in the regulatory process, the use of the supplier's declaration of conformity as assurance of conformity, among other options, for showing compliance with technical regulations; and

(c)    if requested, provide information to the other Party on the reasons for selecting a particular conformity assessment procedure for specific products.

3.    If a Party requires third-party conformity assessment as a positive assurance that a product conforms with a technical regulation, and it has not reserved this task to a governmental body as specified in paragraph 4, it shall:

(a)    preferentially use accreditation to qualify conformity assessment bodies;

(b)    make best use of international standards for accreditation and conformity assessment, as well as international agreements involving the Parties' accreditation bodies, for example, through the mechanisms of ILAC and IAF;

(c)    consider to join or, as applicable, encourage its testing, inspection and certification bodies to join any functioning international agreements or arrangements for harmonisation or facilitation of acceptance of conformity assessment results;

(d)    within its territory, promote competition between conformity assessment bodies designated by the authorities for a particular product or set of products with a view to enabling economic operators to choose amongst them;

(e)    ensure that conformity assessment bodies are independent of manufacturers, importers and distributors, in the sense that they carry out their activities with objectivity and independence of judgment;

(f)    ensure that there are no conflicts of interest between accreditation bodies and conformity assessment bodies, or between activities of market surveillance authorities and activities of conformity assessment bodies;

(g)    allow, to the extent possible, conformity assessment bodies to use subcontractors to perform testing or inspections in relation to the conformity assessment, including subcontractors located in the territory of the other Party; and

(h)    publish online a list of the bodies that it has designated to perform such conformity assessment and relevant information on the scope of each such body's designation.

4.    Nothing in point (g) of paragraph 3 shall be construed as prohibiting a Party from requiring subcontractors to meet the requirements that the conformity assessment body to which it is contracted would be required to meet in order to perform the contracted tests or inspection itself.

5.    Nothing in this Article shall preclude a Party from requesting that conformity assessment in relation to specific products is performed by specified government authorities of that Party. In such cases, that Party shall:

(a)    establish the conformity assessment fees in accordance with the approximate cost of the services rendered and, upon request of an applicant for conformity assessment, provide the different elements included in those fees; and

(b)    in principle, make the conformity assessment fees publicly available or, publicly available or, when such information is not publicly available, provide it upon request.

6.    Notwithstanding paragraphs 3 to 5 of this Article, in the fields which are listed in Annex 5-A, in which the European Union accepts supplier's declaration of conformity as assurance that a product conforms to a technical regulation, and in which a Signatory MERCOSUR State requires mandatory third-party testing or certification for these fields, the Signatory MERCOSUR State shall, as an assurance that a product conforms with the requirements of a Signatory MERCOSUR State's technical regulations, accept certificates or, in cases where such acceptance is not provided for under its relevant laws and regulations, accept test reports issued by conformity assessment bodies that are located in the territory of the European Union and which have been accredited for the relevant scopes by an accreditation body member of the international arrangements for mutual recognition of the ILAC and the IAF; or accept certificates that have been issued under the IECEE CB Scheme. In order to accept such certificates or test reports, a Signatory MERCOSUR State may require in its relevant laws and regulations that bilateral arrangements, including memoranda of understanding, exist between the conformity assessment body located in the territory of the European Union and the conformity assessment body located in the territory of the Signatory MERCOSUR State.

7.    If supplier's declarations of conformity are considered a valid conformity assessment procedure in the European Union, test reports issued by conformity assessment bodies that are located in the territory of the Signatory MERCOSUR State, shall be accepted as a valid document in the process of demonstrating that a product conforms with the European Union's technical regulation requirements. The manufacturer shall remain responsible in all cases for the conformity of the product.

8.    Paragraph 6 also applies where a Signatory MERCOSUR State introduces new mandatory third-party testing or certification requirements for the fields specified in Annex 5-A, in accordance with paragraph 10 of this Article. If the European Union introduces mandatory third-party testing or certification requirements for the fields specified in Annex 5-A, in accordance with paragraph 10 of this Article, the Parties shall discuss in the Subcommittee on trade in goods, referred to in Article 5.14, whether any steps need to be taken to ensure reciprocity as regards the acceptance of tests reports or certificates issued by conformity assessment bodies that are located in the territory of the Signatory MERCOSUR State.

9.    The Trade Council may adopt a decision to amend Section A of Annex 5-A.

10.    Notwithstanding paragraph 6 of this Article, either Party may introduce requirements for mandatory third-party testing or certification for the fields specified in Annex 5-A, for products falling within the scope of that Annex under the following conditions:

(a)    the introduction of such requirements or procedures are justified under the legitimate objectives referred to in Article 2.2 of the TBT Agreement;

(b)    the reasons for the introduction of any such requirements or procedures are supported by substantiated technical or scientific information regarding the performance of the products in question;

(c)    any such requirements or procedures are not more trade-restrictive than necessary to fulfil the Party's legitimate objective, taking account of the risks that non-fulfilment would create; and

(d)    the Party could not have reasonably foreseen the need for introducing any such requirements or procedures at the date of entry into force of this Agreement.

11.    Paragraph 6 is without prejudice to the exercise, on a non-discriminatory basis, of market surveillance competences by the authorities of a Party, including additional testing on samples at the point of entry.

ARTICLE 5.9

Transparency

1.    With regard to the preparation, adoption and application of standards, technical regulations and conformity assessment procedures, each Party shall:

(a)    take the other Party's views into account if the process of developing a technical regulation is open to public consultation, wholly or partially;

(b)    when developing major technical regulations and conformity assessment procedures which may have a significant effect on trade ensure in accordance with its respective laws and regulations that transparency procedures are in place that allow persons of the Parties to provide input through a formal public consultation process, except when urgent problems of safety, health, environmental protection or national security arise or threaten to arise;

(c)    allow persons of the other Party to participate in the consultation process referred to in point (b) on terms no less favourable than those accorded to its own persons and, whenever possible, make the results of that consultation process public;

(d)    allow, in principle, a period of at least 60 (sixty) days for the other Party to provide written comments on the proposed technical regulations and conformity assessment procedures, and consider a reasonable request to extend the comment period;

(e)    provide, in cases where the notified text is not in one of the official WTO languages, a clear and comprehensive description of the content of the measure in the WTO notification format;

(f)    if it receives written comments on its proposed technical regulation or conformity assessment procedure from the other Party:

(i)    discuss, upon request by the other Party, the written comments, whenever possible with the participation of its competent regulatory authority and at a time when they can be taken into account; and

(ii)    reply in writing to the comments, whenever possible no later than the date of publication of the technical regulation or conformity assessment procedure;

(g)    provide, if requested by the other Party, information regarding the objectives of, legal basis and rationale for, a technical regulation or conformity assessment procedure that the Party has adopted or is proposing to adopt;

(h)    provide information on the adoption and the entry into force of the technical regulation or conformity assessment procedure and the adopted final text through an addendum to the original notification to the WTO;

(i)    consider a reasonable request from the other Party, received prior to the end of the comment time period following the transmission of a proposed technical regulation, to extend the time period between the adoption of the technical regulation and its entry into force, except when the delay would be ineffective in fulfilling the legitimate objectives pursued; and

(j)    provide free of charge access to the electronic version of the notified text with the notification.

2.    For the purposes of point (d) of paragraph 1, where urgent problems of safety, health, environmental protection or national security arise or threaten to arise, Articles 2.10 and 5.7 of the TBT Agreement shall apply.

3.    If standards are made mandatory through incorporation or referencing in a draft technical regulation or conformity assessment procedure, the transparency obligations related to TBT notification set out in this Article and in Article 2 or 5 of the TBT Agreement shall be fulfilled.

4.    Each Party shall ensure that all technical regulations and mandatory conformity assessment procedures adopted and in force are publicly available on an official website free of charge. Each Party shall always provide unrestricted access to all information relevant to the achievement of conformity with a technical regulation. If standards provide a presumption of conformity with technical regulations and these standards are not referred to in those technical regulations, each Party shall ensure access to the information on corresponding standards.

5.    Each Party shall, upon a reasonable request of the other Party or its economic operators, provide information on technical regulations in force and, as appropriate and available, written guidance on compliance with the technical regulations, without undue delay.

ARTICLE 5.10

Marking and labelling

1.    The Parties' technical regulations including or dealing exclusively with mandatory marking or labelling shall observe the principles of Article 2 of the TBT Agreement.

2.    In particular, if a Party requires mandatory marking or labelling of products:

(a)    it shall only require information which is relevant for consumers or users of the product or authorities to indicate the product's conformity with the mandatory technical requirements;

(b)    and if a Party requires any prior approval, registration or certification of the labels or markings of the products, as a precondition for placing on the market products that otherwise comply with its mandatory technical requirements, it shall ensure that the requests submitted by the economic operators of the other Party are decided without undue delay and on a non-discriminatory basis;

(c)    and if a Party requires the use of a unique identification number, the Party shall issue such number to the economic operators of the other Party without undue delay and on a non-discriminatory basis;

(d)    and provided that it is not misleading, contradictory or confusing in relation to the importing Party's regulatory requirements and the legitimate objectives under the TBT Agreement are not compromised thereby, the Party shall permit:

(i)    information in other languages in addition to the language required in the importing Party of the products; and

(ii)    nomenclatures, pictograms, symbols or graphics adopted in international standards;

(e)    it shall accept, whenever possible, that supplementary labelling and corrections to labelling take place in customs warehouses or other designated areas at the point of import as an alternative to labelling in the country of origin;

(f)    if it considers that the protection of public health and the environment, the protection against deceptive practices and any other legitimate objectives under the TBT Agreement are not compromised thereby, it shall endeavour to accept non-permanent or detachable labels, rather than labels physically attached to the product, or inclusion of relevant information in the accompanying documentation.

3.    Paragraph 2 shall not apply to marking or labelling of medicinal products.

4.    If a Party considers that marking or labelling requirements for a product or a sector in the other Party could be improved, it may propose a trade-facilitating initiative to address its concerns in conformity with Article 5.5.

ARTICLE 5.11

Cooperation and technical assistance

1.    To contribute to the fulfilment of the objectives of this Chapter, each Party shall, inter alia:

(a)    promote cooperation and joint activities and projects between their respective organisations, public or private, national or regional, in the fields of technical regulations, standardisation, conformity assessment, metrology and accreditation;

(b)    promote good regulatory practices through the exchange of information, experiences and best practices about, inter alia, regulatory impact assessment, regulatory stock management and risk assessment and public consultation;

(c)    exchange views on market surveillance;

(d)    strengthen the technical and institutional capacity of the national regulatory, metrology, standardisation, conformity assessment and accreditation bodies, supporting the development of their technical infrastructure, including laboratories and testing equipment, and sustaining the continuous training of human resources;

(e)    promote, facilitate and, whenever possible, coordinate their participation in international organisations and other fora related to technical regulations, conformity assessment, standards, accreditation and metrology;

(f)    support technical assistance activities by national, regional and international organisations in the areas of technical regulations, standardisation, conformity assessment, metrology and accreditation; and

(g)    endeavour to share available scientific evidence and technical information among regulatory authorities of the Parties, to the extent necessary to cooperate or pursue technical discussions under this Chapter, with the exception of confidential or other sensitive information.

2.    A Party shall give appropriate consideration to proposals of the other Party for cooperation under this Chapter.

ARTICLE 5.12

Technical discussions

1.    Each Party may request to discuss any concern that arises under this Chapter, including any draft or proposed technical regulation or conformity assessment procedure of the other Party that the Party considers might significantly adversely affect trade between the Parties. The requesting Party shall deliver its request to the TBT Chapter coordinator of the other Party nominated pursuant to Article 5.13 and shall identify:

(a)    the issue;

(b)    the provisions of this Chapter to which the concerns relate; and

(c)    the reasons for the request, including a description of the requesting Party's concerns.

2.    Any information or explanation requested in accordance with paragraph 1 shall be provided no later than 60 (sixty) days after the date of the request of a Party in accordance with paragraph 1. The deadline may be extended with prior justification by the requested Party.

3.    If an issue has been previously addressed between the Parties in any forum, a Party may request directly a discussion, in person or via video or teleconference, no later than 60 (sixty) days after the date of such request. In such cases, the requested Party shall make every effort to be available for such discussion.

4.    If the Parties have not had a discussion under this Article in the previous 12-month period, the request may not be refused by the other Party. If the requesting Party believes that the matter is urgent, it may request that a meeting take place within a shorter timeframe. In such cases, the responding Party shall give positive consideration to such a request. The Parties shall make every attempt to arrive at a mutually satisfactory resolution of the matter.

5.    For greater certainty, a Party may request technical discussions with the other Party pursuant to paragraph 2 also with regard to technical regulations or conformity assessment procedures of national, regional or local governments, as the case may be, on the level directly below that of the central government that may have a significant effect on trade.

6.    Following the technical discussion, the Parties may conclude that the issue could be better addressed through a trade-facilitating initiative, in accordance with Article 5.5.

7.    This Article is without prejudice to a Party's rights and obligations under Chapter 21.

ARTICLE 5.13

TBT Chapter coordinator

1.    Each Party shall nominate a TBT Chapter coordinator and notify the other Party in the event of any changes. The TBT Chapter coordinators shall work jointly to facilitate the implementation of this Chapter and cooperation between the Parties in all TBT matters.

2.    The functions of the TBT Chapter coordinators include:

(a)    supporting the Subcommittee on trade in goods, referred to in Article 5.14, in the exercise of the functions;

(b)    supporting trade-facilitating initiatives and technical discussions, as appropriate, in accordance with Articles 5.5 and 5.12 respectively;

(c)    exchanging information on work undertaken in non-governmental, regional and multilateral fora related to standards, technical regulations and conformity assessment procedures; and

(d)    reporting any relevant development related to the implementation of this Chapter to the Subcommittee on trade in goods, referred to in Article 5.14, whenever appropriate.

3.    The TBT Chapter coordinators shall communicate with one another by any agreed method that is appropriate to carry out their functions, which may include email, teleconferences, video conferences and meetings.

ARTICLE 5.14

Subcommittee on trade in goods

The Subcommittee on trade in goods, established pursuant to Article 22.3(4), shall have the following functions, in addition to those listed in Article 22.3, and Article 2.14:

(a)    discuss the results of the work carried out pursuant to Article 5.5 and consider appropriate actions;

(b)    provide a forum for the Parties to discuss the need to take steps to ensure reciprocity in accordance with Article 5.8(8);

(c)    foster cooperation in accordance with Article 5.11 and support technical discussions, as appropriate, in accordance with Article 5.12;

(d)    endeavour to discuss at least annually the issues covered under paragraph 2 of Section C of Annex 5-B; and

(e)    provide a forum for the Parties to cooperate and exchange information on any issues relevant for the implementation of Annex 5-B.

CHAPTER 6

SANITARY AND PHYTOSANITARY MEASURES

ARTICLE 6.1

Objectives

The objectives of this Chapter are to:

(a)    protect human, animal or plant life or health in the territory of the Parties while facilitating trade between the Parties in so far as sanitary and phytosanitary (hereinafter referred to as "SPS") measures are concerned;

(b)    establish cooperation on the implementation of SPS Agreement;

(c)    ensure that SPS measures do not create unjustified barriers to trade between the Parties;

(d)    enhance cooperation on technical and scientific issues related to the adoption and application of SPS measures;

(e)    improve the exchange of information and consultations between the Parties on SPS matters; and

(f)    establish cooperation concerning multilateral fora dealing with SPS matters.

ARTICLE 6.2

Scope

1.    This Chapter applies to all SPS measures 21 that may, directly or indirectly, affect trade between the Parties.

2.    This Chapter applies to cooperation concerning multilateral fora dealing with SPS matters.

ARTICLE 6.3

Definitions

1.    For the purposes of this Chapter, the following definitions apply:

(a)    the definitions set out in Annex A of the SPS Agreement;

(b)    the definitions adopted by the Codex Alimentarius;

(c)    the definitions adopted by the World Organisation for Animal Health (hereinafter referred to as the "OIE");

(d)    the definitions adopted by the International Plant Protection Convention (hereinafter referred to as the "IPPC"); and

(e)    "protected zone" means an officially defined geographical part of the territory of the European Union in which a specific regulated pest is known not to be established in spite of favourable conditions and its presence in other parts of the territory of the European Union.

Protected zones are pest-free areas under European Union control in the European Union territory. They are recognised by Regulation (EU) No 2016/2031 of the European Parliament of the Council of 26 October 2016 on protective measures against pests of plants, amending Regulations (EU) No 228/2013, (EU) No 652/2014 and (EU) No 1143/2014 of the European Parliament and of the Council and repealing Council Directives 69/464/EEC, 74/647/EEC, 93/85/EEC, 98/57/EC, 2000/29/EC, 2006/91/EC and 2007/33/EC 22 . This concept is not applied outside the European Union territory. For trade purposes, the European Union shall not require the other Party to establish protected zones in its territory. In such cases, the conditions of pest-free areas shall apply. For the purposes of Chapter 6 and for the recognition of protected zones, the same conditions as for pest‑free areas shall apply.

2.    In the event of any inconsistency between the definitions in Annex A to the SPS Agreement and the definitions agreed by the Parties or the definitions adopted by the Codex Alimentarius, OIE and IPPC, the definitions set out in Annex A of the SPS Agreement shall prevail.

ARTICLE 6.4

Rights and obligations

The Parties affirm their rights and obligations under the SPS Agreement. Nothing in this Chapter shall affect the rights and obligations of each Party under the SPS Agreement.

ARTICLE 6.5

Competent authorities

1.    For the purposes of this Chapter, the official competent authority of a Party is the authority that, in accordance with a Party's law, is empowered to enforce its laws and regulations falling within the scope of this Chapter to ensure compliance with its requirements, or any other authority to which those authorities have delegated that power (hereinafter referred to as "competent authorities").

2.    Upon the date of entry into force of this Agreement, each Party shall provide in writing to the other Party the name of the competent authorities referred to in paragraph 1, specifying where this information is made publicly available and a description of the distribution of competences between the respective competent authorities.

3.    The Parties shall, in accordance with paragraph 4 of Article 6.11, inform each other of any change to these competent authorities.

ARTICLE 6.6

General obligations

1.    Products exported from a Party shall meet the applicable SPS requirements of the importing Party.

2.    The SPS requirements of the importing Party shall be the same for the entire territory of the exporting Party, as long as the same sanitary and phytosanitary conditions prevail throughout that territory, without prejudice to decisions and measures adopted in accordance with Article 6.10. Each Party shall ensure that their SPS measures are applied in a proportionate manner and do not arbitrarily or unjustifiably discriminate between Member States of the European Union or Signatory MERCOSUR States where identical or similar conditions prevail, including between its own territory and that of the other Party. SPS measures shall not be applied in a manner which would constitute a disguised restriction on trade between the Parties.

3.    The procedures referred to in this Chapter shall be applied without undue delay and in a transparent manner, and information requested shall be limited to what is necessary for appropriate approval, control, inspection and verification purposes.

4.    Each Party shall ensure that any fees imposed for import procedures to check and ensure the fulfilment of SPS requirements are equitable in relation to any fees charged on like domestic products or products originating in any other WTO Member and shall not be higher than the actual cost of the service.

5.    Except as provided for in Article 6.14, when modifying SPS import requirements, each Party, and where appropriate MERCOSUR, shall allow for a transitional period, taking into account the nature of the modification, in order to avoid the unnecessary interruption or disruption of trade flows of products and to allow the exporting Party to adjust its export procedures accordingly to such modification.

6.    The implementation of this Chapter shall not jeopardise the SPS requirements for trade between the Parties existing at the date of entry into force of this Agreement.

7.    Without prejudice to similar provisions in other Chapters of this Agreement, nothing in this Chapter shall affect the rights and obligations of each Party to protect confidential information, in accordance with each Party's relevant laws and regulations. Each Party shall ensure that procedures are in place to prevent the disclosure of confidential information that is acquired during procedures referred to in this Chapter.

8.    Each Party shall ensure that the necessary resources are available for the effective implementation of this Chapter.

ARTICLE 6.7

Trade-facilitation measures

Approval of establishments for the import of animals, animal products, products of animal origin and animal by-products

1.    The importing Party may require the approval of establishments situated in the territory of the exporting Party for the import of animals, animal products, products of animal origin and animal by-products from such establishments.

2.    Such approval shall be granted without prior inspection of individual establishments by the importing Party if:

(a)    the importing Party has recognised the official control system of the competent authority of the exporting Party;

(b)    the importing Party has authorised the import of the concerned products; and

(c)    the competent authority of the exporting Party has provided sufficient guarantees that such establishments comply with the sanitary requirements of the importing Party.

3.    The exporting Party shall only authorise exports from approved establishments as referred to in paragraph 1. The exporting Party shall suspend or withdraw its approval of establishments that do not comply with the sanitary requirements of the importing Party and shall notify such suspension or withdrawal to the importing Party.

4.    The exporting Party shall propose to the importing Party a list of establishments to be approved. This list shall be accompanied by guarantees of the competent authority of the exporting Party that the establishments comply with the guarantees referred in to point (c) of paragraph 2.

5.    The importing Party shall authorise imports from approved establishments no later than 40 (forty) working days after the receipt of the list and guarantees referred to in in paragraph 4 of the exporting Party. If additional information is requested and as a result an authorisation cannot be granted within the deadline of 40 (forty) working days, the importing Party shall inform the exporting Party and establish a new deadline for such authorisation. That deadline shall not exceed 40 (forty) working days after the receipt of the additional information.

6.    The importing Party shall draw up lists of approved establishments and shall make those lists publicly available.

7.    The importing Party may refuse the approval of establishments that are not compliant with its sanitary requirements. In such cases, the importing Party shall inform the exporting Party about such refusal, including the justification therefor.

8.    The importing Party may carry out verifications of the official control system in accordance with Article 6.15. Based on the results of these verifications, the importing Party may amend the lists of approved establishments.

SPS import checks

9.    Each Party shall adopt or maintain procedures relating to SPS import checks allowing for the expedited release of products for import without undue delay.

10.    Each Party shall, where appropriate, simplify controls and verifications and reduce the frequency of the SPS import checks made by the importing Party on products of the exporting Party. Each Party shall base its decision on the following:

(a)    the risks involved;

(b)    the controls carried out by the producers or importers which are validated by the competent authorities of the Parties;

(c)    the guarantees given by the competent authority of the exporting Party that the establishments comply with the sanitary requirements of the importing Party; and

(d)    the international guidelines, standards and recommendations of the Codex Alimentarius, OIE or IPPC, as applicable.

11.    Each Party may apply other criteria to simplify the controls and verifications pursuant to paragraph 10 if they do not undermine the commonly agreed criteria that are listed therein.

12.    If import checks reveal non-compliance with SPS import requirements and products or consignments are rejected, the importing Party shall notify the exporting Party thereof in accordance with the procedure referred to in Article 6.12, as soon as possible and no later than 5 (five) working days after the date of the rejection.

13.    If import checks reveal non-compliance with the relevant SPS import requirements, the action taken by the importing Party shall be justified, based on the identified non-compliance, and not more trade-restrictive than required to achieve the Party's appropriate level of sanitary or phytosanitary protection.

Simplification of the import and approval procedures of MERCOSUR

14.    The Parties recognise the different levels reached by regional integration processes within the European Union, on the one hand, and MERCOSUR on the other. With a view to facilitating trade between their respective territories, MERCOSUR shall make its best efforts to gradually adopt for import and approval procedures for products and establishments of the European Union, if applicable:

(a)    one single questionnaire;

(b)    one single certificate; and

(c)    one list of approved establishments.

15.    MERCOSUR will make its best efforts to harmonise the SPS import requirements, certificates and import checks of the individual Signatory MERCOSUR States.

ARTICLE 6.8

Alternative measures

1.    Upon request of the exporting Party, the importing Party shall examine whether exceptionally an alternative SPS measure to the SPS measure of the importing Party ensures the appropriate level of protection of the importing Party. The alternative measure may be based on international guidelines, standards and recommendations of the Codex Alimentarius, OIE or IPPC or on SPS measures of the exporting Party.

2.    Article 6.9 shall not apply to alternative SPS measures.

ARTICLE 6.9

Equivalence

1.    An exporting Party may request a determination of equivalence from the importing Party that a specific SPS measure or specific SPS measures related to a product or group of products or on a system-wide basis is equivalent to its own SPS measures.

2.    In order to implement this Article, the Subcommittee, referred to in Article 6.18, shall make recommendations to establish a procedure for the recognition of equivalence based on the Decision on the implementation of Article 4 of the Agreement on Sanitary and Phytosanitary Measures of the WTO Committee on Sanitary and Phytosanitary Measures 23 and any subsequent updates thereof, and international guidelines, standards and recommendations adopted in the framework of the Codex Alimentarius, OIE and IPPC. This procedure should include a process whereby the Parties hold consultations in order to determine the equivalence of SPS measures, the information to be required from the Parties, the responsibilities of the Parties and the deadlines for the recognition of equivalence.

3.    Upon receipt of a specific request, the Parties shall enter into consultations based on the procedure to be established pursuant to paragraph 2, with the aim of achieving an agreement on recognition of equivalence.

4.    Upon request of the exporting Party, the importing Party shall inform the exporting Party of the stage of the procedure for the assessment of equivalence.

ARTICLE 6.10

Recognition of animal health and plant pest status and regional conditions

1.    The Parties recognise the concept of zoning and compartmentalisation, including pest free areas or disease free areas and areas of low pest or low disease prevalence and shall apply it in the trade between the Parties, in accordance with the SPS Agreement, including the Guidelines to further the practical implementation of Article 6 of the Agreement on the Application of Sanitary and Phytosanitary measures adopted by the WTO Committee on Sanitary and Phytosanitary Measures 24 and the relevant guidelines, recommendations and standards of the OIE or IPPC.

2.    At the request of the exporting Party, the importing Party shall decide whether to recognise pest and disease free areas, areas of low pest and low disease prevalence and compartments of the exporting Party, whether for the first time or after an outbreak of an animal disease or a plant pest. The importing Party shall base this decision on the information provided by the exporting Party in accordance with the SPS Agreement and OIE and IPPC standards, and take into account the establishment of pest and disease free areas, areas of low pest and low disease prevalence and compartments by the exporting Party. The Parties shall follow the procedures set out in Annex 6-A.

3.    The decision of the importing Party pursuant to paragraph 2 shall be taken without undue delay. If, without prejudice to Article 6.14, the importing Party decides to recognise pest and disease free areas, areas of low pest and low disease prevalence and compartments of the exporting Party, it shall allow trade from those areas or compartments without undue delay.

4.    The Subcommittee, referred to in Article 6.18, may define further details for the procedure for the recognition of pest and disease free areas, areas of low pest and low disease prevalence and compartments set out in paragraph 2, taking into account the SPS Agreement and the guidelines, standards and recommendations of the IPPC and OIE.

Animals, animal products, products of animal origin and animal by-products

5.    The procedure for the recognition of the disease free zones or compartments for animals, animal products, products of animal origin and animal by-products is set out in paragraphs 7 to 9 and in Annex 6-A.

6.    When establishing or maintaining the zones or compartments referred to in paragraph 2 for animals, animal products, products of animal origin and animal by-products, the Parties shall consider factors such as geographical location, ecosystems, epidemiological surveillance and the effectiveness of sanitary controls.

7.    No later than 60 (sixty) working days after the receipt of the information referred to in paragraph 2 from the exporting Party, the importing Party may:

(a)    explicitly object to the request for recognition of disease-free zones or compartments for animals, animal products, products of animal origin and animal by-products;

(b)    request additional information from the exporting Party; or

(c)    request verifications pursuant to Article 6.15.

The importing Party shall assess any additional information no later than 30 (thirty) working days after its receipt. If verifications are required by the importing Party, the deadline for assessing the additional information shall be interrupted.

8.    The importing Party shall expedite the procedure established in paragraph 7 if the zones or compartments for which recognition is sought by the exporting Party are officially recognised by the OIE as having disease free status or if disease-free status has been recovered after an outbreak.

9.    If after following the procedure in paragraph 7, the importing Party decides not to recognise the zones or compartments for which recognition was sought by the exporting Party, it shall notify its decision to the exporting Party and explain the reasons for not recognising the zones or compartments concerned and, upon request, hold consultations in accordance with Article 6.13.

Plants and plant products

10.    Each Party shall establish a list of regulated pests and regulated plants and plant products for which phytosanitary requirements exist. The importing Party shall make available to the other Party its list of regulated pests, and regulated plants and plant products and the phytosanitary import requirements that apply thereto. The phytosanitary import requirements for regulated plants and plant products shall be limited to what is necessary to protect plant health or safeguard the intended use of the plants and plant products. The importing Party shall inform the other Party about any required additional declaration.

11.    The phytosanitary requirements of the importing Party shall be established taking into account the phytosanitary status in the exporting Party and, if required by the importing Party, the result of a pest risk analysis (hereinafter referred to as "PRA"). The PRA shall be carried out in accordance with the relevant International Standards for Phytosanitary Measures (hereinafter referred to as "ISPM") of the IPPC. Such risk analysis shall take into account available scientific and technical information as well as the intended use of the plants and plant products under consideration.

12.    The importing Party shall update the lists referred to in paragraph 10 when the exporting Party makes a request to export new products to the other Party. When the importing Party requires a PRA to authorise the import of a certain product, in order to expedite the process, a PRA already carried out for the same or similar products may be used as a basis, together with any additional information that the importing Party considers necessary to be analysed.

13.    The importing Party, when conducting the process for the determination of the pest status of the exporting Party, shall take into account paragraphs 10 to 17 of this Article, Annex 6-A and the recommendations of the ISPM of the IPPC.

14.    The Parties recognise the concepts of pest free areas, pest free places of production and pest free production sites, as well as areas of low pest prevalence as specified in the ISPM of the IPPC, and of protected zones which they shall apply in trade between them.

15.    When establishing or maintaining phytosanitary measures, the importing Party shall take into account pest free areas, pest free places of production, pest free production sites and areas of low pest prevalence, as well as protected zones if they are established by the exporting Party.

16.    The exporting Party shall communicate pest free areas, pest free places of production, pest free production sites or areas of low pest prevalence to the other Party and provide, upon request, an explanation and supporting information as provided for in the relevant ISPM or as otherwise deemed appropriate. Unless the importing Party:

(a)    explicitly objects to the request for approval of pest free areas, pest free places of production, pest free production sites or areas of low pest prevalence to the other Party or protected zones if they are established by the exporting Party;

(b)    requests additional information from the exporting Party;

(c)    requests verifications pursuant to Article 6.15; or

(d)    initiates consultations pursuant to Article 6.13 no later than 150 (one hundred and fifty) working days after receiving such information, the status of the exporting Party shall be recognised by the importing Party.

17.    The importing Party shall assess any additional information requested pursuant to paragraph 16 no later than 90 (ninety) days after its receipt. Any verifications requested by the importing Party pursuant to paragraph 16 shall be carried out in accordance with Article 6.15 taking into account the biology of the pest and the plant concerned. If the importing Party requests such verifications, the deadline for assessing additional information shall be interrupted.

18.    If, after following the procedure in paragraph 16, the importing Party decides not to approve pest free areas, pest free places of production, pest free production sites or areas of low pest prevalence or protected zones if they are established by the exporting Party for which recognition was sought by the exporting Party, it shall notify its decision to the exporting Party and explain the reasons for not approving them and, upon request, hold consultations in accordance with Article 6.13.

ARTICLE 6.11

Transparency and exchange of information

1.    Upon request of a Party and no later than 15 (fifteen) working days after the date of such request, the Parties shall exchange information on:

(a)    procedures for the authorisation to import a product, including, if possible, the expected timeframe;

(b)    requirements for the import of specific products, including the model for a certificate, as appropriate;

(c)    their pest status, including surveillance, eradication and containment programmes and the results thereof in order to support such pest status and import phytosanitary measures;

(d)    the stage of progress of the procedure for import approval of specific products; and

(e)    the relationship between a SPS measure and the international guidelines, standards and recommendations and, if an SPS measure is not based on international guidelines, standards and recommendations, the scientific information as to how the SPS measure is not in conformity with international guidelines, standards and recommendations and an explanation of the reasons for such measure.

2.    In cases where the relevant scientific evidence is insufficient, a Party adopting a provisional SPS measure shall provide the available pertinent information on which the measure is based and, if available, additional information for a more objective assessment of the risk, and shall review the SPS measure within a reasonable period of time.

3.    The Parties shall make publicly available, by any means, updated information about their:

(a)    SPS import requirements and approval procedures; and

(b)    a list of regulated pests.

4.    The Parties shall inform each other of:

(a)    any change in the sanitary and phytosanitary status that may affect trade between the Parties;

(b)    matters related to the development and application of SPS measures that may affect trade between the Parties; and

(c)    any other information relevant for the effective implementation of this Chapter.

5.    Without prejudice to paragraph 1, if the information referred to in this Article has been made available by the Parties through a notification to the WTO or to the relevant international standard‑setting body in accordance with its relevant rules, or on publicly accessible and free of charge websites of the Parties, the exchange of information pursuant to paragraph 1 shall not be required.

6.    Each Party shall designate a contact point for communication on all matters covered by this Chapter and inform the other Party thereof no later than 1 (one) month after the date of entry into force of this Agreement. Each Party shall promptly notify the other Party of any change to its contact point.

ARTICLE 6.12

Notifications

1.    Any serious or significant risk to human, animal or plant life or health, including any food or feed control emergencies, shall be notified to the contact points of the other Party designated in Article 6.11, within 2 (two) working days from the identification of that risk.

2.    Risks to human, animal or plant life or health which are not serious shall also be notified to the contact points of the other Party within a reasonable period of time that is sufficient to avoid threatening human, animal or plant life or health or jeopardising existing trade between the Parties.

3.    Notifications referred to in paragraphs 1 and 2 shall be done through an established system of notifications or through specific ad hoc notifications, in accordance with the legislation of the notifying Party. In both cases, the notification shall be sent to the competent authorities of the concerned Parties.

4.    If the notifying Party adopts or maintains any SPS measure in relation to the notification (including the rejection of a product or consignment), that notification shall be accompanied by an explanation of the reasons justifying such measure.

5.    The notifying Party shall withdraw any notification based upon information which is subsequently found to be unsubstantiated or which was transmitted erroneously. Such withdrawal shall take place as soon as possible, and be notified to the exporting Party, in order to avoid a negative impact on trade between the Parties.

6.    The Parties shall identify contact points for the notifications under this Article and inform the other Party thereof, if they are not the same as the contact points identified pursuant to paragraph 6 of Article 6.11.

ARTICLE 6.13

Consultations

1.    Without prejudice to Chapter 21, if the SPS measures or draft measures of the importing Party, or the implementation thereof, are considered to be inconsistent with this Chapter, the Parties shall enter into consultations no later than 60 (sixty) days after the exporting Party has introduced a reasoned request for such consultations.

2.    Notwithstanding paragraph 1, if a notification has been made by a Party pursuant to Article 6.12 or if a Party has serious concerns regarding a risk to public, animal or plant health, affecting products traded between the Parties consultations shall, upon request of a Party, be held as soon as possible. Each Party shall endeavour, in such conditions, to provide the information necessary to avoid a disruption in trade, including a limitation thereof.

3.    At the request of the exporting Party, the importing Party shall provide the information necessary to avoid a disruption in trade, including a limitation thereof. Such information includes the information referred to in Article 6.11(1).

4.    Consultations may be held for a reasonable period of time that allows the Parties to reach a mutually satisfactory solution.

5.    Consultations may be held by e-mail, video, audio conference or any other means of communication which are available to both Parties. The Party which requested consultations shall be responsible for preparing the minutes. The minutes shall be formally approved by the parties to the consultations.

6.    If the parties to the consultations do not reach a mutually satisfactory solution, the matter may be submitted to the Subcommittee, referred to in Article 6.18.

ARTICLE 6.14

Emergency measures

1.    If a Party adopts any measure to control any serious risks to human, animal and plant life or health, such measure shall, without prejudice to paragraph 2, also aim to prevent the introduction of any sanitary and phytosanitary risk into the territory of the other Party.

2.    The importing Party may, in the event of serious risks to human, animal or plant life or health, adopt emergency measures against such risks.

3.    For products in transit between the Parties, the importing Party shall consider the most suitable and proportional solution in order to avoid unnecessary disruptions to trade.

4.    Measures referred to in paragraph 2 may be adopted without prior notification pursuant to Article 6.12. The Party adopting emergency measures shall notify the other Party as soon as possible of the adoption of these measures and, in any case, no later than 48 (forty-eight) hours thereafter.

5.    Each Party may request any information related to the sanitary and phytosanitary situation and the emergency measures adopted. Each Party shall answer such requests as soon as the requested information is available.

6.    Upon request of either Party and in accordance with Article 6.13, the Parties shall hold consultations regarding the emergency measure no later than 15 (fifteen) working days of the notification of the emergency measures. The Parties may consider options to facilitate the implementation, or the replacement, of the emergency measures.

ARTICLE 6.15

Verifications of the official control system

1.    Each Party, within the scope of this Chapter, has the right to:

(a)    carry out verifications, including audits, of the official control system of the other Party, including verification visits; and

(b)    receive information about the official control system of the other Party and the results of the controls carried out under that system.

2.    The nature and frequency of verifications, including audits, shall be determined by the importing Party, taking into account the import requirements, the inherent characteristics of the product concerned, the track record of past import checks and other available information, such as audits and inspections undertaken by the competent authority of the exporting Party.

3.    The objective of the verifications shall be to evaluate the capacity of the competent authorities of the exporting Party to ensure that the products exported or to be exported meet the SPS requirements of the importing Party.

4.    Verification visits shall be carried out without undue delay and be notified to the exporting Party at least 60 (sixty) working days before such verifications are carried out, except in cases of emergency or if the Parties decide otherwise. Any modification to the date of the visit shall be agreed by the Parties.

5.    Verifications shall be conducted in accordance with the audit plan agreed by the Parties concerned, based on the Guidelines for the Design, Operation, Assessment and Accreditation of Food Import and Export Inspection and Certification Systems 25 . The importing Party shall provide to the other Party the reasons for any modification to the audit plan of the visit.

6.    The expenses incurred by the Party carrying out the verification shall be borne by that Party.

7.    The Party carrying out the verification shall send a draft report on the verification to the Party subject to the verification no later than 60 (sixty) working days after the end of the verification visit. The Party subject to the verification may comment on the draft report no later than 60 (sixty) working days after its receipt. Comments and an action plan, if required, shall be attached to the final report. The Party carrying out the verification shall send the final report to the Party subject to the verification no later than 30 (thirty) working days after the receipt of the comments on the draft report.

8.    Any measure taken as a consequence of verifications shall be proportionate to shortcomings or risks identified. If requested, technical consultations regarding the matter shall be held in accordance with Article 6.13.

9.    If a significant public, animal or plant health risk has been identified during the verification, the Party subject to the verification shall be informed as quickly as possible and, in any case, no later than 10 (ten) working days after the end of the verification.

ARTICLE 6.16

Cooperation on multilateral fora

1.    The Parties shall promote cooperation between them on all the multilateral fora relevant for SPS issues, in particular in international standard-setting bodies recognised in the framework of the SPS Agreement and shall exchange information to that end.

2.    The Subcommittee on SPS matters, referred to in Article 6.18, shall be the forum for promoting cooperation as referred to in paragraph 1.

ARTICLE 6.17

Cooperation

1.    The Parties shall endeavour to cooperate in implementing this Chapter and to optimise the results thereof with a view to expanding opportunities and obtaining the greatest benefits for the Parties. Such cooperation shall be developed within the legal and institutional framework governing cooperation relations between the Parties.

2.    To achieve the objectives referred to in paragraph 1, the Parties shall give consideration to the cooperation needs identified by the Subcommittee on SPS matters, referred to in Article 6.18.

ARTICLE 6.18

Subcommittee on SPS matters

1.    The Subcommittee on SPS matters, established pursuant to Article 22.3(4), shall meet for the first time no later than 1 (one) year after the entry into force of this Agreement.

2.    The Subcommittee shall have the following functions, in addition to those listed in Article 22.3:

(a)    provide a forum to discuss problems arising from the application of the SPS measures with a view to reaching mutually acceptable solutions provided that the Parties have first attempted to address them through technical consultations pursuant to Article 6.13 and the matter has then been referred to the Subcommittee.

(b)    provide a forum to discuss the information exchanged in accordance with Article 6.11;

(c)    promote exchange of information and cooperation on multilateral fora pursuant to Article 6.16;

(d)    exchange the lists of contact points pursuant to Article 6.11(6) to share information related to this Chapter;

(e)    conduct the preparatory internal work necessary for the amendment of Annex 6-A by the Trade Council;

(f)    make recommendations to establish a procedure for the recognition of equivalence in accordance with Article 6.9(2);

(g)    may define further details for the procedure for the recognition of pest and disease free areas, areas of low pest and low disease prevalence and compartments in accordance with Article 6.10(4); and

(h)    identify cooperation needs in implementing this Chapter, pursuant to Article 6.17(2).

ARTICLE 6.19

Special and differential treatment

In accordance with Article 10 of the SPS Agreement, if Paraguay identifies difficulties with a proposed measure notified by the European Union, Paraguay may request, in its comments submitted to the European Union, pursuant to Annex B to the SPS Agreement, an opportunity to discuss the issue. The European Union and Paraguay shall, without prejudice to Article 6.13, enter into consultations in order to agree on:

(a)    alternative import conditions to be applied by the importing Party in accordance with Article 6.8 of this Chapter;

(b)    the provision of technical assistance in accordance with Article 6.17 of this Chapter; or

(c)    a transitional period of 6 (six) months for proposed measures to apply to products from Paraguay, which could be exceptionally extended for another period of no longer than 6 (six) months.

CHAPTER 7

DIALOGUES ON ISSUES RELATED TO THE AGRI-FOOD CHAIN

ARTICLE 7.1

Objectives

With a view to strengthen their mutual trust and respective understanding, the Parties shall establish dialogues and exchange information on the following subjects:

(a)    animal welfare;

(b)    application of agricultural biotechnology;

(c)    combating antimicrobial resistance (hereinafter referred to as "AMR"); and

(d)    scientific matters related to food safety, animal and plant health.

ARTICLE 7. 2

Subcommittee on dialogues on issues related to the agri-food chain

The Subcommittee on dialogues on issues related to the agri-food chain, established pursuant to Article 22.3(4), shall in addition to functions listed in Article 22.3 and Article 7.7, meet at expert level to conduct the dialogues referred to in Article 7.1.

ARTICLE 7.3

Animal welfare

Recognising that animals are sentient beings, the Subcommittee on dialogues on issues related to the agri-food chain shall conduct a dialogue covering, inter alia, the following matters:

(a)    specific topics on animal welfare that may affect mutual trade;

(b)    exchange of information, expertise and experiences in the field of animal welfare to improve, to the benefit of the Parties, their respective approaches on regulatory standards related to the breeding, holding, handling, transportation and slaughter of animals;

(c)    strengthening of their research collaboration; and

(d)    collaboration in international fora with a view to promoting the further development of international standards on animal welfare by the OIE and best animal welfare practices and their implementation.

ARTICLE 7.4

Agricultural biotechnology

The Subcommittee on dialogues on issues related to the agri-food chain shall conduct a dialogue on agricultural biotechnology that will cover, among others, the following matters:

(a)    exchange of information on policies, legislation, guidelines, good practices and projects on biotechnology products;

(b)    discussions on specific topics related to biotechnology that may affect mutual trade, including cooperation on genetically modified organisms (hereinafter referred to as "GMOs") testing;

(c)    exchange of information on topics related to asynchronous authorisations of GMOs in order to minimise the possible impact on trade;

(d)    exchange of information on the economic and trade outlook for authorisations of GMOs; and

(e)    exchange of information on cases of low-level presence of GMOs non-authorised by the importing Party but authorised by the exporting Party.

ARTICLE 7.5

Combating antimicrobial resistance

The Subcommittee on dialogues on issues related to the agri-food chain shall conduct a dialogue on combatting antimicrobial resistance that will cover, among others, the following matters:

(a)    collaboration to follow up on existing and future guidelines, standards, recommendations and actions developed in relevant international organisations, initiatives and national plans aiming to promote the prudent and responsible use of antibiotics and in relation to animal production and veterinary practices;

(b)    collaboration in the implementation of the recommendations of the OIE, World Health Organisation (hereinafter referred to as "WHO") and Codex Alimentarius, in particular the Code of Practice to Minimize and Contain Foodborne Antimicrobial Resistance (CAC/RCP 61-2005);

(c)    exchange of information on good farming practices;

(d)    the promotion of research, innovation and development; and

(e)    the promotion of multidisciplinary approaches to combat AMR, including the "One Health" approach of the WHO, OIE and Codex Alimentarius.

ARTICLE 7.6

Scientific matters related to food safety, animal and plant health

1.    The Parties should foster cooperation between their respective official scientific bodies responsible for food safety, animal and plant health science. Such cooperation shall aim to deepen the scientific information available to the Parties in order to support their respective approaches on regulatory standards that may affect mutual trade.

2.    The Subcommittee shall conduct a dialogue on scientific matters related to food safety, animal and plant health that will cover, among others, the following matters:

(a)    exchange of scientific and technical information on food and feed safety, animal and plant health areas, including risk assessment and the scientific information supporting the establishment of maximum residue levels;

(b)    collection of data; and

(c)    collaboration in the building of a common understanding regarding OIE, IPPC and the Codex Alimentarius standards.

ARTICLE 7.7

Additional provisions

1.    The Parties shall ensure that the activities of the Subcommittee, referred to in Article 7.2, do not endanger the independence of their respective national or regional agencies. The Subcommittee on dialogues on issues related to the agri-food chain shall establish the rules on conflicts of interest for the participants of its meetings.

2.    Nothing in this Chapter shall affect the rights and obligations of each Party to protect confidential information, in accordance with each Party's relevant legislation. Each Party shall ensure that procedures are in place to prevent the disclosure of confidential information that is acquired during the process established in this Chapter.

3.    Fully respecting the Parties' right to regulate, nothing in this Chapter shall be construed to oblige a Party to:

(a)    deviate from domestic procedures for preparing and adopting regulatory measures;

(b)    take action that would undermine or impede the timely adoption of regulatory measures to achieve its public policy objectives; or

(c)    adopt any particular regulatory outcome.

CHAPTER 8

TRADE DEFENCE AND GLOBAL SAFEGUARDS

SECTION A

GENERAL PRINCIPLES

ARTICLE 8.1

Relationship with the WTO Agreements

1.    This Chapter applies without prejudice to the rights and obligations of the Parties under the ADA, the SCM Agreement, the Safeguards Agreement and the DSU.

2.    The Parties shall exempt bilateral trade subject to preferential treatment from the application of the Special Agricultural Safeguard of the Agreement on Agriculture.

3.    The preferential rules of origin under this Agreement do not apply to trade defence and global safeguard investigations conducted in accordance with this Chapter.

ARTICLE 8.2

Transparency

1.    Trade defence and safeguard measures should be used in full compliance with the relevant WTO requirements and be based on a fair and transparent system.

2.    As soon as possible after the imposition of a provisional measure, a Party shall give to the interested parties full access to the facts that are the basis for the determinations, the injury assessment, calculations of the dumping and subsidies margins and causality. In addition, before the final determination, a Party shall fully and meaningfully disclose all essential facts and considerations which form the basis for the decision to apply a measure. This paragraph is without prejudice to Article 6.5 of the ADA, Article 12.4 of the SCM Agreement and Article 3.2 of the Safeguards Agreement.

3.    A Party shall send all of the information referred to in paragraph 2 in writing, preferably in electronic format, and the interested parties should be given enough time to make comments. For Parties whose investigating authorities keep electronic case files, all the information referred to in paragraph 2 may be made available online.

SECTION B

ANTI-DUMPING AND COUNTERVAILING MEASURES

ARTICLE 8.3

Considerations concerning anti-dumping and countervailing measures

Each Party shall:

(a)    analyse with special care proposals of price undertakings made by exporters of the other Party;

(b)    favour the imposition of a duty that is lower than the margin of dumping or subsidy, if that level is sufficient to remove the injury to the domestic industry;

(c)    analyse with special care requests for the extension of measures in force against exporters of the other Party; and

(d)    take into consideration the information provided by industrial users of the product under investigation, importers and, if applicable, representative consumer organisations in the context of Article 6.12 of the ADA and Article 12.10 of the SCM Agreement.

SECTION C

GLOBAL SAFEGUARDS

ARTICLE 8.4

Transparency on global safeguards

1.    Upon request of the exporting Party, and provided that it has a substantial interest in exporting the product concerned as defined in paragraph 3 of this Article, the Party initiating a safeguard investigation or intending to adopt provisional or definitive safeguard measures shall immediately provide:

(a)    the information referred to in Article 12.2 of the Safeguards Agreement, in the format prescribed by the WTO Committee on Safeguards;

(b)    the public version of the complaint filed by the domestic industry, if relevant; and

(c)    the public report setting forth the findings and reasoned conclusions on all pertinent issues of fact and law considered in the safeguard investigation.

The public report referred to in point (c) of this paragraph shall include an analysis that attributes injury to the factors causing it and shall set out the method used in defining the safeguard measures.

2.    If information is provided under this Article, the importing Party shall offer to hold informal consultations with the exporting Party in order to review the information provided.

3.    For the purposes of this Article, it is considered that a Party has a substantial interest if it is among the 5 (five) largest suppliers of the imported products concerned during the most recent period of 3 (three) years, measured in terms of either absolute volume or value.

ARTICLE 8.5

Application of definitive measures

1.    A Party adopting safeguard measures shall endeavour to apply them in the way that least affects bilateral trade.

2.    The importing Party shall offer to hold informal consultations with the exporting Party in order to review the matter referred to in paragraph 1. The importing Party shall not adopt measures within 30 (thirty) days of the date on which the offer to hold informal consultations was made.

SECTION D

DISPUTE SETTLEMENT

ARTICLE 8.6

Non-application of dispute settlement

No Party shall have recourse to dispute settlement under Chapter 21 for any matter arising under this Chapter.

CHAPTER 9

BILATERAL SAFEGUARD MEASURES

SECTION A

SCOPE

ARTICLE 9.1

Scope

1.    Sections B to I of this Chapter apply to any goods other than vehicles classified under HS headings 8703 and 8704.

2.    The provisions applicable to vehicles classified under HS headings 8703 and 8704 are detailed in Annex 9-A.

SECTION B

DEFINITIONS

ARTICLE 9.2

Definitions

For the purposes of this Chapter the following definitions apply:

(a)    "competent investigating authority" means:

(i)    for the European Union, the European Commission; and

(ii)    for MERCOSUR, the Ministerio de Economía or its successor in Argentina, the Secretaria de Comércio Exterior of the Ministério do Desenvolvimento, Indústria, Comércio e Serviços or its successor in Brazil, the Ministerio de Industria y Comercio or its successor in Paraguay, and the Asesoría de Política Comercial del Ministerio de Economía y Finanzas or its successor in Uruguay;

(b)    "domestic industry" means the producers as a whole of the like or directly competitive products operating in the territory of a Party or, failing that, those whose collective output of the like or directly competitive products normally constitutes more than 50 % (fifty percent) and in exceptional circumstances not less than 25 % (twenty-five percent) of the total production of such products;

(c)    "interested parties" includes:

(i)    exporters or foreign producers or importers of a product subject to investigation, or a trade or business association a majority of whose members are producers, exporters or importers of such product;

(ii)    the government of the exporting Party; and

(iii)    producers of the like or directly competitive product in the importing Party or a trade and business association a majority of whose members produces the like or directly competitive product in the territory of the importing Party;

this list does not preclude the Parties from allowing domestic or foreign parties other than those mentioned above to be included as interested parties;

(d)    "like or directly competitive product" means:

(i)    a product which is identical, meaning alike in all aspects, to the product under consideration;

(ii)    another product which, although not alike in all aspects, has characteristics closely resembling those of the product under consideration; or

(iii)    a product which directly competes within the internal market of the importing Party, given its degree of substitutability, basic physical characteristics and technical specifications, final uses and channels of distribution;

this list of factors is not exhaustive nor can one or several of these factors necessarily give decisive guidance;

(e)    "serious injury" means a significant overall impairment in the position of a domestic industry;

(f)    "threat of serious injury" means a serious injury that is clearly imminent, based on facts and not merely on allegation, conjecture or remote possibility; and

(g)    "transition period" means:

(i)    12 (twelve) years from the date of entry into force of this Agreement; or

(ii)    for goods other than vehicles classified under HS headings 8703 and 8704 for which the Tariff Elimination Schedule of the Party applying the measures provides for tariff elimination in 10 (ten) years or more, 18 (eighteen) years from the date of entry into force of this Agreement.

SECTION C

CONDITIONS FOR APPLICATION OF BILATERAL SAFEGUARD MEASURES

ARTICLE 9.3

Application of bilateral safeguard measures

1.    Without prejudice to the rights and obligations referred to in Chapter 8, a Party may, in exceptional circumstances, for goods other than vehicles classified under HS headings 8703 and 8704, apply bilateral safeguard measures under the conditions established in this Section if, after the date of entry into force of this Agreement, imports from the other Party of a product under preferential terms have increased in such quantities, absolute or relative to domestic production or consumption and under such conditions as to cause or threaten to cause serious injury to its domestic industry of the like or directly competitive products.

2.    For goods listed in paragraph 1, bilateral safeguard measures shall be applied only to the extent necessary to prevent or remedy serious injury or the threat of serious injury.

3.    Bilateral safeguard measures shall be applied following an investigation by the competent investigating authorities of the importing Party under the procedures established in this Chapter.

ARTICLE 9.4

Timeframe for the application of bilateral safeguard measures

A Party shall not apply, extend or maintain in force a bilateral safeguard measure beyond the expiration of the transition period.

ARTICLE 9.5

Conditions and limitations

1.    MERCOSUR may adopt bilateral safeguard measures to imports from the European Union:

(a)    as a sole entity, provided that all requirements to determine the existence of serious injury or the threat of serious injury being caused by the imports of a product under preferential terms have been fulfilled, on the basis of conditions applied to MERCOSUR; or

(b)    on behalf of one or more of the Signatory MERCOSUR States, in which case the requirements for the determination of the existence of serious injury or the threat of serious injury being caused by the imports of a product under preferential terms shall be based on the conditions prevailing in the relevant Signatory MERCOSUR State or Signatory MERCOSUR States of the customs union; and the measure shall be limited to that Signatory MERCOSUR State or those Signatory MERCOSUR States. The adoption of a bilateral safeguard measure by MERCOSUR on behalf of one or more Signatory MERCOSUR States shall not prevent another Signatory MERCOSUR State from adopting a measure regarding the same product afterwards.

2.    The European Union may apply bilateral safeguard measures to imports from MERCOSUR as a sole entity or from one or more Signatory MERCOSUR States if the serious injury or threat of serious injury is being caused by imports of products under preferential terms.

3.    In case the European Union determines that a measure shall apply to MERCOSUR as a sole entity, Paraguay shall be exempted from the application of the measure, unless the result of an investigation demonstrates that the existence of serious injury or the threat of serious injury is also being caused by imports of products from Paraguay under preferential terms.

SECTION D

FORM AND DURATION OF BILATERAL SAFEGUARD MEASURES

ARTICLE 9.6

Form of bilateral safeguard measures

For goods other than vehicles classified under HS headings 8703 and 8704, bilateral safeguard measures adopted pursuant to this Chapter shall consist of: