NAFTA: Annexes | Page 6

cottage industry goods made of such hand- loomed fabrics; or
(c) traditional folklore handicraft goods
that have been identified and agreed by the Parties concerned for duty-free treatment.
Section 3: Import and Export Restrictions and Consultation Levels
1. Appendix 3.1 sets out certain circumstances and conditions under which prohibitions, restrictions, or consultation levels in effect upon the date of entry into force of this Agreement may be maintained, notwithstanding Article 309.
2. Each Party shall eliminate a restriction or consultation level on a textile or apparel good that otherwise would be permitted under this Annex if the elimination of that restriction is required as a result of integration of that good into the GATT pursuant to commitments undertaken by that Party under any successor agreement to the Multifiber Arrangement.
Section 4: Bilateral Emergency Actions (Tariff Actions)
1. During the transition period only, if, as a result of the reduction or elimination of a duty provided for in this Agreement, an originating textile or apparel good, or a good that has been integrated into the GATT pursuant to a commitment undertaken by a Party under any successor agreement to the Multifiber Arrangement and entered under a tariff preference level set out in Appendix 6.0, is being imported into the territory of another Party in such increased quantities, in absolute terms or relative to the domestic market for that good, and under such conditions as to cause serious damage, or actual threat thereof, to a domestic industry producing a like or directly competitive good, the importing Party may, to the extent necessary to remedy the damage or actual threat thereof: (a) suspend the further reduction of any rate of duty provided for under this Agreement on such good; or
(b) increase the rate of duty on such good to a level not to exceed the lesser of:
(i) the most-favored-nation (MFN) applied rate of duty in effect at the time the action is taken, or
(ii) the MFN applied rate of duty in effect on the day immediately preceding the date of entry into force of this Agreement.
2. In determining serious damage, or actual threat thereof, the Party shall:
(a) examine the effect of increased imports on the particular industry, as reflected in the following factors, none of which is necessarily decisive: changes in such relevant economic variables as output, productivity, utilization of capacity, inventories, market share, exports, wages, employment, domestic prices, profits and investment; and
(b) not consider changes in technology or consumer preference as factors supporting a determination of serious damage or actual threat thereof.
3. The following conditions and limitations shall apply to any emergency action taken pursuant to this Section:
(a) a Party shall deliver without delay to any Party that may be affected written notice of intent to take such action, and shall enter into consultations with that Party upon request;
(b) no action may be maintained for a period exceeding three years or, except with the consent of the Party against whose good the action is taken, have effect beyond the expiration of the transition period;
(c) no action may be taken by a Party against any particular originating good more than once during the transition period; and
(d) upon the termination of the action, the rate of duty shall be the rate that, according to the Schedule for that staged elimination of the tariff, would have been in effect a year after the commencement of the action, and commencing January 1 of the year following the termination of the action, at the option of the Party that has taken the action:
(i) the rate of duty shall conform to the schedule in that Party's Schedule in Annex 302.2, or
(ii) the tariff shall be eliminated in equal annual stages ending on the date set forth in that Party's Schedule in Annex 302.2 for the elimination of the tariff.
4. A Party taking an action under this Section shall provide, to the Party against whose good the action is taken, mutually agreed trade liberalizing compensation in the form of concessions having substantially equivalent trade effects on the other Party, or equivalent to the value of the additional duties expected to result from the action. Such concessions shall be limited to the textile and apparel goods listed in Appendix 1.1, unless the Parties otherwise agree. If the concerned Parties are unable to agree on compensation, the exporting Party may take tariff action having trade effects substantially equivalent to the action taken under this Section against any goods imported from the Party that initiated the action pursuant to this Section. The Party taking such tariff action shall only apply it for the minimum period necessary to achieve such substantially equivalent effects.
Section 5: Bilateral Emergency Actions (Quantitative Restrictions)
1. Notwithstanding any other provision of this Agreement except Appendix 5.2, a Party may take bilateral emergency action against non-originating goods of another Party in accordance with this Section and the provisions