CHAPTER 32

EXCEPTIONS AND GENERAL PROVISIONS
Section A – Exceptions

Article 32.1:    General Exceptions

  1. For the purposes of Chapter 2 (National Treatment and Market Access for Goods), Chapter 3  (Agriculture),  Chapter  4  (Rules  of  Origin),  Chapter  5  (Origin  Procedures), Chapter 6 (Textile and Apparel Goods), Chapter 7 (Customs Administration and Trade Facilitation), Chapter 9 (Sanitary and Phytosanitary Measures), Chapter 11 (Technical Barriers to Trade), Chapter 22 (State-Owned Enterprises and Designated Monopolies), and, Section  B  of  Chapter  29  (Energy  Regulatory  Measures  and  Regulatory  Transparency), Article XX of the GATT 1994 and its interpretative notes  are incorporated into and made part of this Agreement, mutatis mutandis. 1
  1. For the  purposes  of  Chapter  15  (Cross-Border  Trade  in  Services),  Chapter  16 (Temporary Entry), Chapter 18 (Telecommunications),   Chapter 19 (Digital Trade)2, and Chapter 22 (State-Owned Enterprises and Designated Monopolies), paragraphs (a), (b) and (c) of Article XIV of GATS are incorporated into and made part of this Agreement, mutatis mutandis.3
  1. The Parties understand that the measures referred to in Article XX(b) of the GATT

1994  and  GATS  Article  XIV  (b)  include  environmental  measures  necessary  to  protect human, animal, or plant life or health, and that Article XX(g)  of the GATT 1994 applies to measures relating to the conservation of living and non-living exhaustible natural resources.

1  For the purposes of Chapter 22 (State-Owned Enterprises and Designated Monopolies), Article XX of the GATT  1994  and  its  interpretative  notes  are  incorporated  into  and  made  part  of  this  Agreement, mutatis mutandis, only with respect to measures of a Party (including the implementation of measures through the activities of a state-owned enterprise or a designated monopoly) affecting the purchase, production or sale of goods, or affecting activities the end result of which is the production of goods.

2 This paragraph is without prejudice to whether a digital product should be classified as a good or service.

3  For the purposes of Chapter 22 (State-Owned Enterprises and Designated Monopolies), Article XIV of the GATS 1994 (including its footnotes) is incorporated into and made part of this Agreement, mutatis mutandis, only with respect to measures of a Party (including the implementation of measures through the activities of a state-owned enterprise or a designated monopoly) affecting the purchase or supply of services, or affecting activities the end result of which is the supply of services.

  1. Nothing in this Agreement shall be construed to prevent a Party from taking action, including maintaining or increasing a customs duty, that is authorized by the Dispute Settlement Body of the WTO or is taken as a result of a decision by a dispute settlement panel under a free trade agreement to which the Party taking action and the Party against which the action is taken are party.

Article 32.2:  Essential Security

  1. Nothing in this Agreement shall be construed to:

(a)        require a Party to furnish or allow access to information the disclosure of which it determines to be contrary to its essential security interests; or

(b)        preclude a Party from applying measures that it considers necessary for the fulfilment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.

Article 32.3:  Taxation Measures

  1. For the purposes of this Article:

designated authorities means:

(a)       for Canada, the Assistant Deputy Minister for Tax Policy, Department of

Finance;

(b)       for Mexico, the Deputy Minister of Revenue of the Ministry of Finance and

Public Credit (Subsecretario de Ingresos); and

(c)       for the United States, the Assistant Secretary of the Treasury (Tax Policy), or any successor of these designated authorities as notified in writing to the other Parties;

tax  convention  means  a  convention  for  the  avoidance  of  double  taxation  or  other international taxation agreement or arrangement; and

taxes and taxation measures include excise duties, but do not include:

(a)       a “customs duty” as defined in Article 1.3 (General Definitions); or

(b)       the measures listed in subparagraphs (b), (c); and (d) of that definition.

  1. Except as provided in this Article, nothing in this Agreement shall apply to taxation measures.
  1. Nothing in this Agreement shall affect the rights and obligations of any Party under any tax convention. In the event of any inconsistency between this Agreement and any such tax convention, that convention shall prevail to the extent of the inconsistency.
  1. In the case of a tax convention between two or more Parties, if an issue arises as to whether any inconsistency exists between this Agreement and the tax convention, the issue shall be referred to the designated authorities of the Parties in question. The designated authorities of those Parties shall have six months from the date of referral of the issue to make a determination as to the existence and extent of any inconsistency.  If those designated authorities agree, the period may be extended up to 12 months from the date of referral of the issue.  No procedures concerning the measure giving rise to the issue may be initiated under Chapter 31 (Dispute Settlement) or Article 3 of Annex 14-D (Investment – Submission of a Claim to Arbitration) until the expiry of the six month period, or any other period as may have been agreed by the designated authorities.  A panel or tribunal established to consider a dispute  related  to  a  taxation  measure  shall  accept  as  binding  a  determination  of  the designated authorities of the Parties made under this paragraph.
  1. Notwithstanding paragraph 3:

(a)        Article 2.3 (Market Access – National Treatment) and such other provisions of this Agreement as are necessary to give effect to that Article shall apply to taxation measures to the same extent as does Article III of the GATT 1994; and

(b)       Article 2.13 (Market Access – Export Duties, Taxes, or other Charges) shall apply to taxation measures.

  1. Subject to paragraph 3:

(a)        Article  15.3  (CBTS  –  National  Treatment)  and  Article  17.3  (Financial Services – National Treatment) shall apply to taxation measures on income, on capital gains, or on the taxable capital of corporations that relate to the purchase or consumption of particular services, except that nothing in this subparagraph shall prevent a Party from conditioning the receipt or continued receipt  of  an  advantage  that  relates  to  the  purchase  or  consumption  of particular services on requirements to provide the service in its territory;

(b)        Article 14.4 (Investment – National Treatment), Article 14.5 (Investment – Most-Favored-Nation Treatment), Article 15.3 (CBTS – National Treatment), Article 15.4 (CBTS – Most-Favoured-Nation Treatment), Article 17.3 (Financial Services – National Treatment), Article 17.4 (Financial Services – Most-Favoured-Nation Treatment), and Article 19.4 (Digital Trade – Non-

Discriminatory Treatment of Digital Products) shall apply to all taxation measures, other than those on income, on capital gains, on the taxable capital of corporations or taxes on estates, inheritances, gifts and generation-skipping transfers; and

(c)        Article  19.4  (Digital  Trade  –  Non-Discriminatory  Treatment  of  Digital Products) shall apply to taxation measures on income, on capital gains, or on the taxable income of corporations that relate to the purchase or consumption of particular digital products, except that nothing in this subparagraph shall prevent a Party from conditioning the receipt or continued receipt of an advantage  relating  to  the  purchase  or  consumption  of  particular  digital products on requirements to provide the digital product in its territory,

but nothing in the Articles referred to in subparagraphs (a), (b) and (c) shall apply to:

(d)       any most-favored-nation obligation with respect to an advantage accorded by a Party pursuant to a tax convention;

(e)        a non-conforming provision of a taxation measure in existence as of the date of entry into force of NAFTA 1994;

(f)        the  continuation  or  prompt  renewal  of  a  non-conforming  provision  of  a taxation measure in existence as of the date of entry into force of NAFTA

1994;

(g)        an  amendment  to  a  non-conforming  provision  of  a  taxation  measure  in existence as of the date of entry into force of NAFTA 1994 to the extent that the  amendment  does  not  decrease  its  conformity,  at  the  time  of  the amendment, with any of those Articles;

(h)        the adoption or enforcement of any new taxation measure aimed at ensuring the equitable or effective imposition or collection of taxes, including any taxation measure that differentiates between persons based on their place of residence for tax purposes, provided that the taxation measure does not arbitrarily discriminate between persons, goods or services of the Parties;4 or

(i)        a provision that conditions the receipt or continued receipt of an advantage relating to the contributions to, or income of, a pension trust, pension plan, or other arrangement to provide pension, or similar benefits, on a requirement that the Party maintain continuous jurisdiction, regulation, or supervision over that trust, plan, fund, or other arrangement.

4    The Parties understand that this subparagraph must be interpreted by reference to the footnote to Article

XIV(d) of GATS as if the Article was not restricted to services or direct taxes.

(j)        any excise duty on insurance premiums to the extent that such tax would, if levied by the other Parties, be covered by subparagraphs (e), (f) or (g).

  1. Subject to paragraph 3, and without prejudice to the rights and obligations of the

Parties under paragraph 5, Article 14.10.2 (Investment – Performance Requirements), Article

14.10.3 and Article 14.10.4 shall apply to taxation measures.

  1. Article 14.8 (Investment – Expropriation and Compensation) shall apply to taxation measures. However, no investor may invoke Article 14.8 (Investment – Expropriation and Compensation) as the basis for a claim if it has been determined pursuant to this paragraph that the measure is not an expropriation.   An investor that seeks to invoke Article 14.8 (Investment – Expropriation and Compensation) with respect to a taxation measure must first refer to the designated authorities of the Party of the investor and the respondent Party, at the time  that  it  gives  its  notice  of  intent  under  Article  3  of  Annex  14-D  (Investment  – Submission of a Claim to Arbitration), the issue of whether that taxation measure is not an expropriation.   If the designated authorities do not agree to consider the issue or, having agreed to consider it, fail to agree that the measure is not an expropriation within a period of six months of the referral, the investor may submit its claim to arbitration under Article 3 of Annex 14-D (Investment – Submission of a Claim to Arbitration).

Article 32.4. Temporary Safeguards Measures

  1. For the purposes of this Article:

foreign direct investment means a type of investment by an investor of a Party in the territory of another Party, through which the investor exercises ownership or control over, or a significant degree of influence on the management of, an enterprise or other direct investment, and tends to be undertaken in order to establish a lasting relationship; for example, ownership of at least 10 per cent of the voting power of an enterprise over a period of at least 12 months generally would be considered a foreign direct investment.

  1. Nothing in this Agreement shall be construed to prevent a Party from adopting or maintaining restrictive measures with regard to payments or transfers for current account transactions in the event of serious balance of payments and external financial difficulties or threats thereof.
  1. Nothing in this Agreement shall be construed to prevent a Party from adopting or maintaining restrictive measures with regard to payments or transfers relating to the movements of capital:

(a)        in the event of serious balance of payments and external financial difficulties or threats thereof; or

(b)       if,  in  exceptional  circumstances,  payments  or  transfers  relating  to  capital

movements cause or threaten to cause serious difficulties for macroeconomic management.

  1. Any measure adopted or maintained under paragraph 1 or 2 shall:

(a)         not be inconsistent with Article 14.4 (Investment –  National Treatment), Article 14.5 (Investment – Most-Favoured-Nation Treatment), Article 15.3 (CBTS – National Treatment), Article 15.4 (CBTS – Most-Favoured-Nation Treatment),  Article  17.3  (Financial  Services  –  National  Treatment)  and Article 17.4 (Financial Services – Most-Favoured-Nation Treatment);5

(b)       be consistent with the Articles of Agreement of the International Monetary

Fund;

(c)        avoid  unnecessary  damage  to  the  commercial,  economic  and  financial interests of  another Party;

(d)       not  exceed  those  necessary  to  deal  with  the  circumstances  described  in paragraph 1 or 2;

(e)        be temporary and be  phased out progressively as the situations specified in paragraph 1 or 2 improve, and shall not exceed   12 months in duration; however, in exceptional circumstances, a Party may extend such measure for one additional period of one year, by notifying the other Parties in writing within 30 days of the extension;

(f)        not  be  inconsistent  with  Article  14.8  (Investment  –  Expropriation  and

Compensation);6

(g)        in the case of restrictions on capital outflows, not interfere with investors’ ability to earn a market rate of return in the territory of the restricting Party on assets invested in the territory of the restricting Party by an investor of a Party that are restricted from being transferred out of the territory of the restricting Party; and

(h)       not be used to avoid necessary macroeconomic adjustment.

  1. As soon as practicable after a Party imposes a measure under paragraph 1, the Party shall:

5    Without prejudice to the general interpretation of the Articles listed in this sub-paragraph], the fact that a measure it adopts or maintains pursuant to paragraph 1 or 2 differentiates between investors on the basis of residency does not necessarily mean that the measure is inconsistent with  those Articles.

6 For greater certainty, measures referred to in paragraph 1 or 2 may be non-discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives as referred to in Annex 14-B(3)(b) (Expropriation).

(a)        submit   any   current   account   exchange   restrictions   to  the   International Monetary Fund (IMF) for review and approval under Article VIII of the Articles of Agreement of the IMF;

(b)       consistent with its obligations under the Articles of Agreement, enter into good faith consultations with the IMF on economic adjustment measures necessary to remove the restrictions in 3(a); and

(c)       adopt or maintain economic policies consistent with such consultations.

  1. Measures referred to in paragraphs 1 and 2 shall not apply to payments or transfers relating to foreign direct investment.
  1. A Party  shall  endeavor  to  provide  that  a  measure  it  adopts  or  maintains  under paragraph 1 or 2 be price-based, and if that measure is not price-based, the Parties shall explain the rationale for using quantitative restrictions when it notifies the other Parties of the measure.
  1. In the case of trade in goods, Article XII of GATT 1994 and the Understanding on the Balance of Payments Provisions of the GATT 1994 are incorporated into and made part of this Agreement, mutatis mutandis. Any measures it adopts adopted or maintains under this paragraph shall not impair the relative benefits accorded to the other Parties under this Agreement as compared to the treatment of a non-Party.
  1. A Party adopting or maintaining measures under paragraph 1, 2 or 6 shall:

(a)        notify, in writing, the other Parties of the measures, including any changes therein, along with the rationale for their imposition, within 30 days of their adoption;

(b)        present, as soon as possible, either a time schedule or the conditions necessary for their removal;

(c)       promptly publish the measures; and

(d)       promptly commence consultations with the other Parties in order to review the measures.

(i)         In the case of capital movements, promptly respond to any other Party that requests consultations in relation to the measures, provided that such consultations are not otherwise taking place outside of this Agreement.

(ii)        In the case of current account restrictions, if consultations in relation to the measures are not taking place under the framework of the WTO Agreement, a Party, if requested, shall promptly commence consultations with any interested Party.

Article 32.5:  Indigenous Peoples Rights

Provided that such measures are not used as a means of arbitrary or unjustified discrimination against persons of the other Parties or as a disguised restriction on trade in goods, services, and investment, nothing in this Agreement shall preclude a Party from adopting or maintaining a measure it deems necessary to fulfill its legal obligations to indigenous peoples.7

Article 32.6:  Cultural Industries

  1. For the purposes of this Article, “cultural industry” means a person engaged in the following activities:

(a)       the publication, distribution, or sale of books, magazines, periodicals or newspapers in print or machine readable form but not including the sole activity of printing or typesetting any of the foregoing;

(b)       the production, distribution, sale or exhibition of film or video recordings; (c)       the production, distribution, sale or exhibition of audio or video music

recordings;

(d)       the publication, distribution or sale of music in print or machine readable form; or

(e)       radiocommunications in which the transmissions are intended for direct reception by the general public, and all radio, television and cable broadcasting undertakings and all satellite programming and broadcast network services

  1. This Agreement does not apply to a measure adopted or maintained by Canada with respect to a cultural industry, except as specifically provided in Article 2.3 (National

7 For greater certainty, for Canada the legal obligations include those recognized and affirmed by section 35 of the Constitution Act 1982 or those set out in self-government agreements between a central or regional level of government and indigenous peoples.

Treatment and Market Access for Goods – Tariff Elimination) or Annex 15-D (Simultaneous

Substitution).

  1. With respect to Canadian goods, services, and content, the United States and Mexico may adopt or maintain a measure that, were it adopted or maintained by Canada, would have been inconsistent with the Agreement but for paragraph 2.
  1. Notwithstanding any other provision of this Agreement, a Party may take a measure of equivalent commercial effect in response to an action by another Party that would have been inconsistent with this Agreement but for paragraph 2 or 3.
  1. Notwithstanding Article 31.3 (Dispute Settlement -Choice of Forum), a dispute regarding a measure taken under paragraph 4 shall be settled exclusively under this Agreement unless a Party seeking to establish a panel under Article 31.6 (Dispute Settlement

– Establishment of a Panel) has been unable to do so within 90 days of the date of delivery of the request for consultations under Article 31.4 (Dispute Settlement-Consultations).  A panel established under Article 31.6 (Establishment of a Panel) with respect to such a challenge shall have jurisdiction and may make findings only with respect to: (i) whether an action to which another Party responds is a measure adopted or maintained with respect to a cultural industry for purposes of this Article, and (ii) whether the responsive action of a Party is of “equivalent commercial effect” to the relevant action of the other Party.

Section B – General  Provisions

Article 32.7:  Disclosure of Information

This Agreement does not require a Party to furnish or allow access to information, the disclosure of which would be contrary to its law or would impede law enforcement, or otherwise be contrary to the public interest, or which would prejudice the legitimate commercial interests of particular enterprises, public or private.

Article 32.8:  Personal Information Protection8

  1. Each Party shall adopt or maintain a legal framework that provides for the protection of personal information.9  In the development of its legal framework for the protection of

8 This Article does not apply to information held or processed by or on behalf of a Party, or measures related to that information, including measures related to its collection.

9  For greater certainty, a Party may comply with the obligation in this paragraph by adopting or maintaining measures such as a comprehensive privacy, personal information, or personal data protection law, sector- specific  laws  covering  privacy,  or  laws  that  provide  for  the  enforcement  of  voluntary  undertakings  by enterprises relating to privacy.

personal  information,  each  Party  should  take  into  account  principles  and  guidelines  of relevant international bodies, such as the APEC Privacy Framework and the OECD Recommendation of the Council concerning Guidelines governing the Protection of Privacy and Transborder Flows of Personal Data (2013).

  1. The Parties  recognize that  these  key  principles  include:  limitation  on collection; choice; data quality; purpose specification; use limitation; security safeguards; transparency; individual participation; and accountability.
  1. Each Party shall endeavor to adopt non-discriminatory practices in protecting natural persons from personal information protection violations occurring within its jurisdiction.
  1. Each Party  shall  publish  information  on  the  personal  information  protections  it provides, including how:

(a)       individuals can pursue remedies; and

(b)       business can comply with any legal requirements.

  1. Recognizing that  the  Parties  may  take  different  legal  approaches  to  protecting personal information, each Party should encourage the development of mechanisms to promote compatibility between these different regimes.   The Parties shall endeavor to Exchange information on the mechanisms applied in their jurisdictions and explore ways to extend these or other suitable arrangements to promote compatibility between them. The Parties recognize that the APEC Cross-Border Privacy Rules system is a valid mechanism to facilitate cross-border information transfers while protecting personal information.
  1. The Parties shall endeavor to foster cooperation between appropriate government agencies regarding investigations on matters involving personal information protection and encourage the development of mechanisms to assist users to submit cross-border complaints regarding protection of personal information.
  1. For purposes of this article, “personal information” means any information, including data, about an identified or identifiable natural person.

Article 32.9:  Access to Information

Each  Party shall  maintain  a  legal  framework  that  allows  a  natural  person  in its territory to obtain access to records held by the central level of government subject to reasonable terms and limitations specified in the Party’s law, provided that the terms and limitations applying to natural persons of another Party in the Party’s territory are no less favorable than those applying to natural persons of the Party, or of another country, in the

Party’s territory.10

Article 32.10:  Non-Market Country FTA

  1. At least 3 months prior to commencing negotiations, a Party shall inform the other Parties of its intention to commence free trade agreement negotiations with a non-market country. For purposes of this Article, a non-market country is a country that on the date of signature of this agreement at least one Party has determined to be a non-market economy for purposes of its trade remedy laws and is a country with which no Party has a free trade agreement.
  1. Upon request, the Party shall provide as much information as possible regarding the objectives for those negotiations.
  1. As early as possible, and no later than 30 days before the date of signature, that Party shall provide the other Parties with an opportunity to review the full text of the agreement, including any annexes and side instruments, in order for the Parties to be able to review the agreement and assess its potential impact on this Agreement. If the Party involved requests that the text be treated as confidential, the other Parties shall maintain the confidentiality of the text.
  1. Entry by any Party into a free trade agreement with a non-market country, shall allow the other Parties to terminate this Agreement on six-month notice and replace this Agreement with an agreement as between them (bilateral agreement).
  1. The bilateral agreement shall be comprised of all the provisions of this Agreement, except those provisions the relevant Parties decide are not applicable as between them.
  1. The relevant Parties shall utilize the six-month notice period to review the Agreement and determine whether any amendments should be made in order to ensure the proper operation of the bilateral agreement.
  1. The bilateral agreement enter into force 60 days after the date on which the parties to the bilateral agreement have notified each other that they have completed their respective applicable legal procedures.

Article 32.11:  Specific Provision on Cross-Border Trade in Services, Investment, and

State-Owned Enterprises and Designated Monopolies for Mexico

With respect to the obligations in the Cross-Border Trade in Services, Investment, and  State-Owned  Enterprises  and  Designated  Monopolies  Chapters  of  this  Agreement,

10   For the United States, this provision applies to “agencies,” as defined at 5 U.S.C. 551(1).

Mexico reserves the right to adopt or maintain measures with respect to any sector and sub- sector for which Mexico has not taken a specific reservation in its Schedules to Annexes I, II, and IV of this Agreement, only to the extent consistent with the least restrictive measures that Mexico may adopt or maintain under the terms of applicable reservations and exceptions to parallel obligations in other trade and investment agreements that Mexico has ratified prior to entry into force of this Agreement, including the WTO Agreement, without regard to whether those other agreements have entered into force.

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