Details of the Proclamation Implementing the DR-CAFTA for El Salvador (Part III)

According to the Proclamation, the DR-CAFTA for El Salvador is generally in effect for goods entered, or withdrawn from warehouse, for consumption on or after March 1, 2006.

This is Part III of a multi-part series of BP summaries of Proclamation 7987, and highlights some of the March 1, 2006 provisions in Annex I. See future issues of ITT for BP summaries highlighting the remaining provisions in Annexes I and II. (See ITT's Online Archives or 03/02/06 and 03/10/06 news, 06030200 and 06031005, for Parts I and II.)

Highlights of March 1, 2006 Changes Made by Annex I

According to Annex I, the following changes are effective with respect to goods entered, or withdrawn from warehouse, for consumption on or after March 1, 2006 (partial list):

New HTS General Note 29 (CAFTA-DR). A new General Note 29 is added to the HTS that contains the specific rules of origin, definitions, and other provisions necessary to determine whether a good is an originating good, etc.^*, eligible for DR-CAFTA tariff treatment, some of which are subject to quantitative limitations. These goods are entered under HTS Chapter 1 - 97 followed by the symbol P or P, or are entered in HTS Chapters 98 or 99 where the rate of duty or other treatment is specified.

^*(Certain goods are eligible for a specified DR-CAFTA duty rate or other treatment, that otherwise qualify as originating but as to which any operations performed in, or any material obtained from, the U.S. shall be considered as if the operations were performed in, and the material was obtained from, a country that is not a party to the DR-CAFTA.)

Definitions. Included in new General Note 29 are definitions or descriptions for the following terms (partial list):

Good wholly obtained or produced

Recovered goods

Remanufactured goods

Material

Material that is self-produced

Nonoriginating good or nonoriginating material

Production

Adjusted value

Net cost

Goods that have undergone production necessary to qualify as an originating good

Accumulation

Goods classifiable as goods put up in sets

Textile and apparel goods. New General Note 29 also includes certain textile and apparel provisions, which are highlighted below:

De minimis, certain yarns. A textile or apparel good that is not an originating good under the terms of new General Note 29, because certain fibers or yarns used in the production of the component of the good that determines the tariff classification of the good¹ do not undergo an applicable change in tariff classification as set forth in Note 29(n), shall be considered an originating good if:

The total weight of all such fibers or yarns in that component is not more than 10% of the total weight of that component; or

Such yarns are nylon filament yarns (other than elastomeric yarn) provided for in HTS 5402.10.30, 5402.10.60, 5402.31.30, 5402.31.60, 5402.32.30, 5402.32.60, 5402.41.10, 5402.41.90, 5402.51.00, or 5402.61.00 from a country that is a party to an agreement with the U.S. establishing a free trade area that entered into force before January 1, 1995 (i.e., Israel, Mexico, or Canada).

(Notwithstanding the above information, a textile or apparel good containing elastomeric² yarn in the component of the good that determines the tariff classification of the good¹ shall be considered to be an originating good only if such yarns are wholly formed in the territory of a CAFTA-DR party.)

U.S. fabric cut in a CAFTA-DR beneficiary country. For a textile or apparel good provide for in HTS Chapters 61-63 that is not an originating good and for which the duty treatment set forth in HTS 9822.05.10 is claimed, the rate of duty set forth in the general subcolumn of rate of duty column 1 shall apply only to the value of the assembled good minus the value of fabrics formed in the U.S., components knit-to-shape in the U.S., and any other materials of U.S. origin used in the production of the good, provided that the good is sewn or otherwise assembled in the territory of a CAFTA-DR party (other than the U.S.) with thread wholly formed in the U.S. from fabrics wholly formed in the U.S. and cut in one or more CAFTA-DR parties or from components knit-to-shape in the U.S., or both.

New General Note 29 also discusses when a fabric and a thread is wholly formed in the U.S.

Textile or apparel good defined, exceptions listed. For purposes of General Note 29, the term "textile or apparel good" means a good listed in the Annex to the Agreement on Textiles and Clothing referred to in section 101(d)(4) of the Uruguay Round Agreement Act (19 USC 3511(d)(4)); but such term does notencompass the following goods that are listed in Annex 3.29 of the DR-CAFTA:

wadding, gauze, bandages and the like (subheading 3005.90);

woven, knitted or nonwoven fabrics coated, covered, or laminated with plastics (subheading 3921.12, 3921.13, or 3921.90);

footwear with soles and uppers of wool felt (subheading 6405.20);

footwear uppers of which 50% or more of the external surface is textile material (subheading 6406.10);

leg warmers and gaiters of textile material (subheading 6406.99);

hat forms, hat bodies and hoods of felt and plateaux and manchons of felt (heading 6501);

hat shapes, plaited or made by assembling strips of any material (heading 6502);

felt hats and other felt headgear (heading 6503);

hats and other headgear, plaited or made by assembling strips of any material (heading 6504);

hats and other headgear, knitted or made up from lace or other textile material (subheading 6505.90);

safety seat belts for motor vehicles (subheading 8708.21);

parachutes, parts thereof and accessories thereof (heading 8804);

watch straps, bands and bracelets of textile materials (subheading 9113.90);

garments for dolls (subheading 9502.91); and

woven ribbons of manmade fibers, other than those measuring less than 30 mm in width and permanently put up in cartridges (subheading 9612.10).

De minimis, regional content value, etc. Also described in new General Note 29 are the following:

De minimis amounts of nonoriginating material

Regional value content

Accessories, spare parts or tools

Fungible goods and materials

Packaging or packing materials and containers

Indirect materials

Generally accepted accounting principles

Special subcolumn indicators P and P. General Note 3(c)(i) indicates that the HTS "Special" subcolumn indicators for the CAFTA-DR are P or P.

GSP. General Note 4 (Generalized System of Preferences (GSP)) is modified by removing El Salvador from the list of GSP beneficiary countries.

In addition, General Note 4(d) is amended by removing the following three entries listed for El Salvador HTS 0713.33.20, 1102.90.30, and 2106.90.52. The "Special" duty subcolumn for each of these three HTS numbers is also modified by replacing "A*" with "A."

CBERA. General Note 7 (Caribbean Basin Economic Recovery Act (CBERA)) is modified by removing El Salvador from the list of CBERA beneficiary countries.

General Note 7 is also amended in order to allow the cost or value of materials produced in the territory of the U.S. Virgin Islands, Puerto Rico, and "former beneficiary countries" to be counted towards meeting the 35% value added requirement.

In addition, General Note 7 is amended by listing El Salvador as a former CBERA beneficiary country.

CBTPA. General Note 17 (U.S.-Caribbean Basin Trade Partnership Act (CBTPA)) is modified by removing El Salvador from the list of CBTPA beneficiary countries.

New CBTPA notice 17(e).In addition, a new General Note 17(e) is added for articles that undergo production in a CBTPA beneficiary country and a former CBTPA beneficiary country. New 17(e) states that:

For purposes of determining eligibility of an article for preferential treatment under General Note 17, references to (1) a CBTPA beneficiary country shall be considered to include any former CBTPA beneficiary country, and (2) CBTPA beneficiary countries shall be considered to include former CBTPA beneficiary countries, if the article or good used in the production of the article undergoes production in a CBTPA beneficiary country.

An article that is eligible for CBTPA preferential treatment under new 17(e)(i), shall not be ineligible for such treatment because the article is imported directly from a former CBTPA beneficiary country.

The term "former CBTPA beneficiary country" means a country that ceases to be designed as a CBTPA beneficiary country under Note 17 because the country has become a party to a free trade agreement with the U.S. El Salvador is currently the only country designated as a former CBTPA beneficiary country.

¹In the case of a good that is a yarn, fabric or fiber, the term "component of the good that determines the tariff classification of the good" means all of the fibers in the good.

²See new General Note 29 for details on the term "elastomeric".

Presidential Proclamation 7987 (FR Pub 03/02/06) available at http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/06-2084.pdf.

Annexes for CAFTA-DR Proclamation 7987 (USITC Publication 3829 (dated 02/06) available at http://www.usitc.gov/tata/hts/other/rel_doc/annex/index.htm