How do chapter 3 or chapter 4 codes apply in Form 1042?
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Withholding agents must enter both a Chapter 3 and a Chapter 4 withholding agent status code regardless of the type of payment being made. Withholding agents should use the applicable code that is most specific to your status.

• Chapter 3 - About the Type of Income
  Chapter 3 withholding, covered by sections 1441-1443, usually involves applying a 30% withholding rate to payments of FDAP income or gains from U.S. sources. This happens only if the income or gains are not effectively connected with the U.S.
• Chapter 4 (FATCA) - Rules for Reporting by FFIs
  Chapter 4 withholding means a withholding agent has to withhold 30% of payments considered withholdable when paying an entity that's an FFI unless the withholding agent can consider the FFI as a participating FFI, deemed-compliant FFI, or exempt beneficial owner.