Annex 1 referred to in Chapter 3 Schedules in relation to Article 5 Section 1 General Notes 1. For the purposes of Article 5, the following categories indicated in Column 4 and applicable terms and conditions set out in the notes indicated in Column 5 in each Party’s Schedule shall be applied: (a) Customs Duties on originating goods classified under the tariff items indicated with “A” shall be eliminated as from the date of entry into force of this Agreement; (b) Customs Duties on originating goods classified under the tariff items indicated with “B1” shall be the most-favored-nation applied rate as of April 1, 2003 as from the date of entry into force of this Agreement and such Customs Duties shall be eliminated as from April 1, 2006; (c) Customs Duties on originating goods classified under the tariff items indicated with “B2” shall be 0.5 yen per kilogram for Japan and 2.6 percent for Mexico as from the date of entry into force of this Agreement and such Customs Duties shall be eliminated as from April 1, 2010; (d) Customs Duties on originating goods classified under the tariff items indicated with “B4” shall be eliminated in 4 equal annual installments from the Base Rate to free, as from the date of entry into force of this Agreement; (e) Customs Duties on originating goods classified under the tariff items indicated with “B5” shall be eliminated in 5 equal annual installments from the Base Rate to free, as from the date of entry into force of this Agreement; (f) Customs Duties on originating goods classified under the tariff items indicated with “B6” shall be eliminated in 6 equal annual installments from the Base Rate to free, as from the date of entry into force of this Agreement; (g) Customs Duties on originating goods classified under the tariff items indicated with “B7” shall be eliminated in 7 equal annual installments from the Base Rate to free, as from the date of entry into force of this Agreement; 136 (h) Customs Duties on originating goods classified under the tariff items indicated with “B8” shall be eliminated in 8 equal annual installments from the Base Rate to free, as from the date of entry into force of this Agreement; (i) Customs Duties on originating goods classified under the tariff items indicated with “C” shall be eliminated in 10 equal annual installments from the Base Rate to free, as from the date of entry into force of this Agreement; (j) Customs Duties on originating goods classified under the tariff items indicated with “Ca” shall be eliminated in 11 equal annual installments from the Base Rate to free, as from the date of entry into force of this Agreement; (k) Customs Duties on originating goods classified under the tariff items indicated with “D” shall be the most-favored-nation applied rate as of January 1, 2004 as from the date of entry into force of this Agreement and such Customs Duties shall be eliminated in 6 equal annual installments from the Base Rate to free, as from the first day of the sixth year; (l) Customs Duties on originating goods classified under the tariff items indicated with “E” shall be eliminated as from the first day of the eleventh year; (m) Customs Duties on originating goods classified under the tariff items indicated with “P” shall be reduced to the rate specified in the note indicated in Column 5 in each Party’s Schedule as from the date of entry into force of this Agreement; (n) Customs Duties on originating goods classified under the tariff items indicated with “Q” shall be as provided for in the terms and conditions set out in the note indicated in Column 5 in each Party’s Schedule; and (o) The originating goods classified under the tariff items indicated with “X” shall be excluded from any reduction or elimination of Customs Duties. 137 2. For the purposes of the elimination or reduction of Customs Duties in accordance with this Annex, any fraction less than 0.1 of a percentage point shall be rounded down in the cases of ad valorem duties, and any fraction less than 0.01 of the official monetary unit of the Party shall be rounded down in the cases of specific duties. This shall not be applied to the case of Customs Duties on originating goods classified in HS 0203.12, 0203.19, 0203.22, 0203.29, 0206.49, 0210.11, 0210.12, 0210.19, 0703.10, 1602.41, 1602.42, 1602.49, 7901.11 and 7901.12, derived from the difference between the value for Customs Duty and the value specified in Note 2 (b) or Column 3 of the Schedule of Japan in Section 2. 3. This Annex is made based on the Harmonized System, as amended on January 1, 2002. 4. For the purposes of subparagraphs 1(d) through (k) of this Section, Base Rate, as specified in Column 3 of each Party’s Schedule, means starting point of equal annual installments of elimination of Customs Duties. 5. For the purposes of implementing equal annual installments for this Section and Section 2 of this Annex, the following shall apply: (a) The reduction for the first year shall take place on the date of entry into force of this Agreement; and (b) The subsequent annual reductions shall take place on April 1 of each following year. 6. Except otherwise provided for in subparagraph 1(k) above, for the purposes of implementing equal annual installments for this Section and Section 3 of this Annex, the reductions shall take place on an annual basis, beginning the date of entry into force of this Agreement. 7. For the purposes of this Section and Section 2 of this Annex, the term “year” means, with respect to the first year, the period from the date of entry into force of this Agreement until the coming March 31 and, with respect to each subsequent year, the twelve-month period which starts on April 1 of that year. 8. For the purposes of this Section and Section 3 of this Annex, the term “year” means each twelve-month period starting on the date of entry into force of this Agreement. 138 Section 2 Schedule of Japan Notes for Schedule of Japan The terms and conditions in the following notes indicated with a serial number from 1 through 32 shall apply to originating goods imported from Mexico specified with that number in the Column 5 of the Schedule. The originating goods imported from Mexico specified with the letter “R” indicated in the Column 5 of the Schedule mean the goods with regard to which after the third year, the Parties shall enter into consultation in accordance with subparagraph 3(a)(i) of Article 5. On the request of either Party, the Parties shall consult on the facilitation of trade in fish and fishery products classified under Chapter 3 or 16 of the Harmonized System. The Parties may invite, by mutual consent, representatives from the private sector to the consultations. 1. Japan shall apply a tariff rate quota, in accordance with the following: (a) For the first year and the second year, the aggregate quota quantity shall be 10 metric tons for each year and the in-quota rate of Customs Duties shall be free. (b) From the third year to the fifth year, the aggregate quota quantity shall be as follows, respectively: (i) 3,000 metric tons for the third year; (ii) 4,000 metric tons for the fourth year; and (iii) 6,000 metric tons for the fifth year. The in-quota rate of Customs Duties applied during the period from the third year to the fifth year shall be negotiated by the Parties in the second year, in accordance with subparagraph 3(a)(i) of Article 5. The in-quota rate of Customs Duties for that period shall be lower than the most-favored-nation applied rate of Customs Duty in effect at the beginning of the Japanese fiscal year 2003 by at least 10 percent of that most-favored-nation applied rate. 139 (c) For the purposes of subparagraphs (a) and (b) above, the tariff rate quota shall be implemented through a certificate of tariff rate quota issued by the importing Party on the basis of the certificate issued by the exporting Party for each export. In the case of subparagraph (a) above, the certificates shall be issued for marketing and sales promotion. Both Parties shall avoid undue delay in the issuance of these certificates. On the request of either Party, the Parties shall consult as soon as possible to resolve any matter arising related to the issuance of the certificates or other administrative issues. (d) In accordance with subparagraph 3(a)(i) of Article 5, the Parties shall consult in the fifth year to consider the aggregate quota quantity of the tariff rate quota and in-quota rate after the fifth year, taking into consideration among others, the quota quantity during the fifth year and records of trade between the Parties. In the absence of agreement between the Parties and until such an agreement is reached as a result of the consultation, the aggregate quota quantity and in-quota rate for the fifth year shall be applied. (e) The tariff emergency measures on beef, stipulated in Article 7-5 of Temporary Tariff Measures Law of Japan (Law No. 36 of 1960), as may be amended, shall not be applied to the originating goods imported under this tariff rate quota. 2. Japan shall apply a tariff rate quota, in accordance with the following: (a) From the first year to the fifth year, the aggregate quota quantity shall be as follows, respectively: (i) 38,000 metric tons for the first year; (ii) 53,000 metric tons for the second year; (iii) 65,000 metric tons for the third year; (iv) 74,000 metric tons for the fourth year; and (v) 80,000 metric tons for the fifth year.