YES

2 decompositions
 #1 -----------
   3: hd(:(x3,x4)) -> x3

 #2 -----------
   1: nats() -> :(0(),inc(nats()))
   2: inc(:(x1,x2)) -> :(s(x1),inc(x2))
   4: tl(:(x5,x6)) -> x6
   5: inc(tl(nats())) -> tl(inc(nats()))

@Knuth and Bendix' criterion
--- R
   3: hd(:(x3,x4)) -> x3

--- S
   3: hd(:(x3,x4)) -> x3


@Rule Labeling
--- R
   1: nats() -> :(0(),inc(nats()))
   2: inc(:(x1,x2)) -> :(s(x1),inc(x2))
   4: tl(:(x5,x6)) -> x6
   5: inc(tl(nats())) -> tl(inc(nats()))

--- S
   1: nats() -> :(0(),inc(nats()))
   2: inc(:(x1,x2)) -> :(s(x1),inc(x2))
   4: tl(:(x5,x6)) -> x6
   5: inc(tl(nats())) -> tl(inc(nats()))