Title:Energy and Basic Petrochemicals -- Chapter Six
Author: White House
Document-Date: 29 Sept 1993
Content-Type: text/plain; CHARSET=US-ASCII
Content-Length:25625                                      Chapter Six 
 
                            Energy and Basic Petrochemicals 
 
 
 
            Article 601:   Principles 
 
            1.   The Parties confirm their full respect for their 
            Constitutions. 
 
            2.   The Parties recognize that it is desirable to strengthen 
            the important role that trade in energy and basic petrochemical 
            goods plays in the free trade area and to enhance this role 
            through sustained and gradual liberalization. 
 
            3.   The Parties recognize the importance of having viable and 
            internationally competitive energy and petrochemical sectors to 
            further their individual national interests. 
 
 
            Article 602:   Scope and Coverage 
 
            1.   This Chapter applies to measures relating to energy and 
            basic petrochemical goods originating in the territories of the 
            Parties and to measures relating to investment and to the 
            cross-border trade in services associated with such goods, as 
            set forth in this Chapter. 
 
            2.   For purposes of this Chapter, energy and basic 
            petrochemical goods refer to those goods classified under the 
            Harmonized System as: 
 
                 (a)  subheading 2612.10; 
 
                 (b)  headings 27.01 through 27.06; 
 
                 (c)  subheading 2707.50; 
 
                 (d)  subheading 2707.99 (only with respect to solvent 
                      naphtha, rubber extender oils and carbon black 
                      feedstocks); 
 
                 (e)  headings 27.08 and 27.09; 
 
                 (f)  heading 27.10 (except for normal paraffin mixtures in 
                      the range of C9 to C15); 
 
                 (g)  heading 27.11 (except for ethylene, propylene, 
                      butylene and butadiene in purities over 50 percent); 
 
 
 
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                 (h)  headings 27.12 through 27.16; 
 
                 (i)  subheadings 2844.10 through 2844.50 (only with 
                      respect to uranium compounds classified under those 
                      subheadings); 
 
                 (j)  subheading 2845.10; and 
 
                 (k)  subheading 2901.10 (only with respect to ethane, 
                      butanes, pentanes, hexanes, and heptanes). 
 
            3.   Except as specified in Annex 602.3, energy and 
            petrochemical goods and activities shall be governed by the 
            provisions of this Agreement.  
 
 
            Article 603:   Import and Export Restrictions 
 
            1.   Subject to the further rights and obligations of this 
            Agreement, the Parties incorporate the provisions of the 
            General Agreement on Tariffs and Trade (GATT), with respect to 
            prohibitions or restrictions on trade in energy and basic 
            petrochemical goods.  The Parties agree that this language does 
            not incorporate their respective protocols of provisional 
            application to the GATT.  
 
            2.   The Parties understand that the provisions of the GATT 
            incorporated in paragraph 1 prohibit, in any circumstances in 
            which any other form of quantitative restriction is prohibited, 
            minimum or maximum export-price requirements and, except as 
            permitted in enforcement of countervailing and antidumping 
            orders and undertakings, minimum or maximum import-price 
            requirements. 
 
            3.   In circumstances where a Party adopts or maintains a 
            restriction on importation from or exportation to a non-Party 
            of an energy or basic petrochemical good, nothing in this 
            Agreement shall be construed to prevent the Party from: 
 
                 (a)  limiting or prohibiting the importation from the 
                      territory of any Party of such energy or basic 
                      petrochemical good of the non-Party; or 
 
                 (b)  requiring as a condition of export of such energy or 
                      basic petrochemical good of the Party to the 
                      territory of any other Party that the good be 
                      consumed within the territory of the other Party. 
 
            4.   In the event that a Party adopts or maintains a 
            restriction on imports of an energy or basic petrochemical good 
            from non-Party countries, the Parties, on request of any Party, 
 
 
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            shall consult with a view to avoiding undue interference with 
            or distortion of pricing, marketing and distribution 
            arrangements in another Party. 
 
            5.   Each Party may administer a system of import and export 
            licensing for energy or  basic petrochemical goods provided 
            that such system is operated in a manner consistent with the 
            provisions of this Agreement, including paragraph 1 and Article 
            1502 (Monopolies and State Enterprises). 
 
            6.   This Article is subject to the reservations set out in 
            Annex 603.6. 
 
 
            Article 604:   Export Taxes 
 
                 No Party may adopt or maintain any duty, tax or other 
            charge on the export of any energy or basic petrochemical good 
            to the territory of another Party, unless such duty, tax or 
            charge is adopted or maintained on: 
 
                 (a)  exports of any such good to the territory of all 
                      other Parties; and 
 
                 (b)  any such good when destined for domestic consumption. 
 
 
            Article 605:   Other Export Measures 
 
                 Subject to Annex 605, a Party may adopt or maintain a 
            restriction otherwise justified under Articles XI:2(a) or 
            XX(g), (i) or (j) of the GATT with respect to the export of an 
            energy or basic petrochemical good to the territory of another 
            Party, only if: 
 
                 (a)  the restriction does not reduce the proportion of the 
                      total export shipments of the specific energy or 
                      basic petrochemical good made available to that other 
                      Party relative to the total supply of that good of 
                      the Party maintaining the restriction as compared to 
                      the proportion prevailing in the most recent 36-month 
                      period for which data are available prior to the 
                      imposition of the measure, or in such other 
                      representative period on which the Parties may agree; 
 
                 (b)  the Party does not impose a higher price for exports 
                      of an energy or basic petrochemical good to that 
                      other Party than the price charged for such good when 
                      consumed domestically, by means of any measure such 
                      as licenses, fees, taxation and minimum price 
                      requirements.  The foregoing provision does not apply 
 
 
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                      to a higher price that may result from a measure 
                      taken pursuant to subparagraph (a) that only 
                      restricts the volume of exports; and  
 
                 (c)  the restriction does not require the disruption of 
                      normal channels of supply to that other Party or 
                      normal proportions among specific energy or basic 
                      petrochemical goods supplied to that other Party, 
                      such as, for example, between crude oil and refined 
                      products and among different categories of crude oil 
                      and of refined products. 
 
 
            Article 606:   Energy Regulatory Measures 
 
            1.   The Parties recognize that energy regulatory measures are 
            subject to the disciplines of: 
 
                 (a)  national treatment, as provided in Article 301; 
 
                 (b)  import and export restrictions, as provided in 
                      Article 603; and 
 
                 (c)  export taxes, as provided in Article 604. 
 
            2.   Each Party shall seek to ensure that in the application of 
            any energy regulatory measure, energy regulatory bodies within 
            its territory avoid disruption of contractual relationships to 
            the maximum extent practicable, and provide for orderly and 
            equitable implementation appropriate to such measures. 
 
 
            Article 607:   National Security Measures 
 
                 Subject to Annex 607, no Party may adopt or maintain a 
            measure restricting imports of an energy or basic petrochemical 
            good from, or exports of an energy or basic petrochemical good 
            to, another Party under Article XXI of the GATT or under 
            Article 2102 (National Security), except to the extent 
            necessary to: 
 
                 (a)  supply a military establishment of a Party or enable 
                      fulfillment of a critical defense contract of a 
                      Party; 
 
                 (b)  respond to a situation of armed conflict involving 
                      the Party taking the measure; 
 
                 (c)  implement national policies or international 
                      agreements relating to the non-proliferation of 
 
 
 
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                      nuclear weapons or other nuclear explosive devices; 
                      or 
 
                 (d)  respond to direct threats of disruption in the supply 
                      of nuclear materials for defense purposes. 
 
 
            Article 608:   Miscellaneous Provisions 
 
            1.   The Parties agree to allow existing or future incentives 
            for oil and gas exploration, development and related activities 
            in order to maintain the reserve base for these energy 
            resources. 
 
            2.   Annex 608.2 applies only to the Parties specified in that 
            Annex with respect to other agreements relating to trade in 
            energy goods. 
 
 
            Article 609:   Definitions 
 
            For purposes of this Chapter: 
 
            consumed means transformed so as to qualify under the rules of 
            origin set out in Chapter Four (Rules of Origin), or actually 
            consumed; 
 
            cross-border trade in services means "cross-border trade in 
            services" as defined in Article 1213 (Cross-Border Trade in 
            Services - Definitions); 
 
            energy regulatory measure means any measure by federal or sub- 
            federal entities that directly affects the transportation, 
            transmission or distribution, purchase or sale, of an energy or 
            basic petrochemical good; 
 
            enterprise means "enterprise" as defined in Article 1139 
            (Investment - Definitions); 
 
            enterprise of a Party means "enterprise of a Party" as defined 
            in Article 1139; 
 
            facility for independent power production means a facility that 
            is used for the generation of electric energy exclusively for 
            sale to an electric utility for further resale; 
 
            first hand sale refers to the first commercial transaction 
            affecting the good in question; 
 
            investment means investment as defined in Article 1139; 
 
 
 
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            restriction means any limitation, whether made effective 
            through quotas, licenses, permits, minimum or maximum price 
            requirements or any other means;  
 
            total export shipments means the total shipments from total 
            supply to users located in the territory of the other Party; 
            and 
 
            total supply means shipments to domestic users and foreign 
            users from: 
 
                 (a)  domestic production; 
 
                 (b)  domestic inventory; and 
 
                 (c)  other imports, as appropriate. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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                                                                Annex 602.3                                              
                  ___________ 
 
 
                                      Annex 602.3 
 
                          Reservations and Special Provisions 
 
 
            Reservations 
 
            1.   The Mexican State reserves to itself the following 
            strategic activities, including investment in such activities 
            and the provision of services in such activities: 
 
                 (a)  exploration and exploitation of crude oil and natural 
                      gas; refining or processing of crude oil and natural 
                      gas; and production of artificial gas, basic 
                      petrochemicals and their feedstocks and pipelines;  
 
                 (b)  foreign trade; transportation, storage and 
                      distribution, up to and including the first hand 
                      sales of the following goods:  
 
                      (i)  crude oil,  
 
                      (ii) natural and artificial gas,  
 
                      (iii)     goods covered by this Chapter obtained from 
                                the refining or processing of crude oil and 
                                natural gas, and  
 
                      (iv) basic petrochemicals; 
 
                 (c)  the supply of electricity as a public service in 
                      Mexico, including, except as provided in paragraph 5, 
                      the generation, transmission, transformation, 
                      distribution and sale of electricity; and 
 
                 (d)  exploration, exploitation and processing of 
                      radioactive minerals, the nuclear fuel cycle, the 
                      generation of nuclear energy, the transportation and 
                      storage of nuclear waste, the use and reprocessing of 
                      nuclear fuel and the regulation of their applications 
                      for other purposes and the production of heavy water. 
               
            In the event of an inconsistency between this paragraph and 
            another provision of this Agreement, this paragraph shall 
            prevail to the extent of that inconsistency. 
 
            2.   Pursuant to Article 1101(2), private investment is not 
            permitted in the activities listed in paragraph 1.  Chapter 
 
 
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                                                                Annex 602.3                                              
                  ___________ 
 
 
            Twelve (Cross-Border Trade in Services) shall only apply to 
            activities involving the provision of services covered in 
            paragraph 1 when Mexico permits a contract to be granted in 
            respect of such activities and only to the extent of that 
            contract. 
 
            Trade in Natural Gas and Basic Petrochemicals 
 
            3.   Where end-users and suppliers of natural gas or basic 
            petrochemical goods consider that cross-border trade in such 
            goods may be in their interests, each Party shall permit such 
            end-users and suppliers, and any state enterprise of that Party 
            as may be required under its domestic law, to negotiate supply 
            contracts. 
 
                 Each Party shall leave the modalities of the 
            implementation of any such contract to the end-users, 
            suppliers, and any state enterprise of the Party as may be 
            required under its domestic law, which may take the form of 
            individual contracts between the state enterprise and each of 
            the other entities.  Such contracts may be subject to 
            regulatory approval. 
 
            Performance Clauses  
 
            4.   Each Party shall allow its state enterprises to negotiate 
            performance clauses in their service contracts. 
 
            Activities and Investment in Electricity Generation Facilities 
 
            5.   (a)  Production for Own Use 
 
                      An enterprise of another Party may acquire, 
                      establish, and/or operate an electrical generating 
                      facility in Mexico to meet the enterprise's own 
                      supply needs.  Electricity generated in excess of 
                      such needs must be sold to the Federal Electricity 
                      Commission (Comisi n Federal de Electricidad) (CFE) 
                      and CFE shall purchase such electricity under terms 
                      and conditions agreed to by CFE and the enterprise. 
 
                 (b)  Co-generation 
 
                      An enterprise of another Party may acquire, 
                      establish, and/or operate a co-generation facility in 
                      Mexico that generates electricity using heat, steam 
                      or other energy sources associated with an industrial 
                      process.  Owners of the industrial facility need not 
 
 
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                                                                Annex 602.3                                              
                  ___________ 
 
 
                      be the owners of the co-generating facility.  
                      Electricity generated in excess of the industrial 
                      facility's supply requirements must be sold to CFE 
                      and CFE shall purchase such electricity under terms 
                      and conditions agreed to by CFE and the enterprise. 
 
                 (c)  Independent Power Production 
 
                      An enterprise of another Party may acquire, 
                      establish, and/or operate an electricity generating 
                      facility for independent power production (IPP) in 
                      Mexico.  Electricity generated by such a facility for 
                      sale in Mexico shall be sold to CFE and CFE shall 
                      purchase such electricity under terms and conditions 
                      agreed to by CFE and the enterprise.  Where an IPP 
                      located in Mexico and an electric utility of another 
                      Party consider that cross-border trade in electricity 
                      may be in their interests, each relevant Party shall 
                      permit these entities and CFE to negotiate terms and 
                      conditions of power purchase and power sale 
                      contracts.  The modalities of implementing such 
                      supply contracts are left to the end users, suppliers 
                      and CFE and may take the form of individual contracts 
                      between CFE and each of the other entities.  Each 
                      relevant Party shall determine whether such contracts 
                      are subject to regulatory approval. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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                                                                Annex 603.6                                              
                  ___________ 
 
 
                                      Annex 603.6 
 
                                Exception to Article 603 
 
 
                 For only those goods listed below, Mexico may restrict the 
            granting of import and export licenses for the sole purpose of 
            reserving foreign trade in these goods to itself. 
 
            2707.50   Other aromatic hydrocarbon mixtures of which 65 
                      percent or more by volume (including losses) distills 
                      at 250  C by the ASTM D 86 method. 
 
            2707.99   Rubber extender oils, solvent naphtha and carbon 
                      black feedstocks only. 
 
            2709      Petroleum oils and oils obtained from bituminous 
                      minerals, crude. 
 
            2710      Aviation gasoline; gasoline and motor fuel blending 
                      stocks (except aviation gasoline) and reformates when 
                      used as motor fuel blending stocks; kerosene; gas oil 
                      and diesel oil; petroleum ether; fuel oil; paraffinic 
                      oils other than for lubricating purposes; pentanes; 
                      carbon black feedstocks; hexanes; heptanes and 
                      naphthas. 
 
            2711      Petroleum gases and other gaseous hydrocarbons other 
                      than: ethylene, propylene, butylene and butadiene, in 
                      purities over 50 percent. 
 
            2712.90   Only paraffin wax containing by weight more than 0.75 
                      percent of oil, in bulk (Mexico classifies these 
                      goods under HS 2712.90.02) and only when imported to 
                      be used for further refining. 
 
            2713.11   Petroleum coke not calcined. 
 
            2713.20   Petroleum bitumen (except when used for road 
                      surfacing purposes under HS 2713.20.01). 
 
            2713.90   Other residues of petroleum oils or of oils obtained 
                      from bituminous minerals. 
 
 
 
 
 
 
 
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                                                                Annex 603.6                                              
                  ___________ 
 
 
            2714      Bitumen and asphalt, natural; bituminous or oil shale 
                      and tar sands, asphaltites and asphaltic rocks 
                      (except when used for road surfacing purposes under 
                      HS 2714.90.01). 
 
            2901.10   Ethane, butanes, pentanes, hexanes, and heptanes 
                      only. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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                                                                  Annex 605                                               
                   _________ 
 
 
                                       Annex 605 
 
                                Exception to Article 605 
 
 
                 Notwithstanding any other provision of this Chapter, the 
            provisions of Article 605 shall not apply as between the other 
            Parties and Mexico. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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                                                                  Annex 607                                               
                   _________ 
 
 
                                       Annex 607 
 
                                   National Security 
 
 
            1.   Article 607 shall impose no obligations and confer no 
            rights on Mexico. 
 
            2.   Article 2102 (National Security) shall apply as between 
            Mexico and the other Parties.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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                                                                Annex 608.2                                              
                  ___________ 
 
 
                                      Annex 608.2 
 
                                    Other Agreements 
 
 
            1.   Canada and the United States shall act in accordance with 
            the terms of Annexes 902.5 and 905.2 of the Canada - United 
            States Free Trade Agreement, which are hereby incorporated into 
            and made a part of this Agreement for such purpose.  This 
            paragraph shall impose no obligations and confer no rights on 
            Mexico. 
 
            2.   Canada and the United States intend no inconsistency 
            between this Chapter and the Agreement on an International 
            Energy Program (IEP).  In the event of any inconsistency 
            between the IEP and this Chapter, the IEP shall prevail as 
            between Canada and the United States to the extent of that 
            inconsistency. 
              
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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