Details of CBP's Proposed Rule on Uniform Rules for Country of Origin and "Product of" Determinations, Etc.

the use of another test for determining origin for the purposes of applying a preferential trade agreement is specified,

the purpose is to determine whether goods are entitled to preferential treatment under the U.S. - Israel or U.S.-Jordan free trade agreements (FTAs), or

otherwise specified,² or otherwise provided for by statute.

(The term "product of" encompasses any requirement that a good be "wholly the growth, product or manufacture" of a country; substantially transformed in a country; a new and different product or a new or different article of commerce as a result of processing performed in a country; or the growth, product, or manufacture of a country.)

Corrections, Other Amendments Also Proposed

CBP's proposed rule would also amend or correct the Part 102 rules for certain:

In addition, CBP's proposed rule would amend the country of origin marking regulations in 19 CFR Part 134 and the government procurement country of origin determination regulations in 19 CFR Part 177 for the uniform application of the Part 102 rules.

Written Comments Due by September 23rd

Written comments on this proposed rule are due by September 23, 2008, and may be submitted by mail or via the Federal eRulemaking Portal: http://www.regulations.gov . (See proposed rule for full instructions.)

GSP, 9802.00.80 and Certain Other Preference Programs Would be Affected

CBP's proposed rule would amend 19 CFR to require the Part 102 rules to be used to determine whether a good meets the "product of" criterion for receiving duty preferences under the following programs:

The following programs would also require the Part 102 rules to be used to determine whether a good meets the "product of" criterion for receiving duty preferences:

(Any applicable value content requirements and any other rules under these 11 programs, however, must still be met in order for a good to qualify for duty preference.)

NAFTA Origin Marking Already Subject to Part 102 Rules

The rules in 19 CFR 102 are currently used, and will continue to be used, to determine the country of origin for marking purposes for North American Free Trade Agreement imports from Canada and/or Mexico.

The Part 102 rules are not used for the application of NAFTA's tariff benefits, which will continue to be determined by the origin rules set out in NAFTA Chapter 4. (See also HTS General Note 12.)

Bahrain and Morocco FTAs Already Subject to Part 102 Rules

CBP states that the trade negotiators for the BFTA and MFTA had reached an understanding that the codified rules under Part 102 should guide the use of the substantial transformation standard as part of the test to determine whether products qualify for reduced tariffs under these two agreements.

CBP is proposing to remove specific mention of the BFTA in Part 102.0 in light of the changes that this rulemaking will bring. The recent final rule on the MFTA already contains an amendment that states that the Part 102 rules apply. (See ITT's Online Archives or 08/06/08 news, 08080615, for BP summary of MFTA final rule.)

AGOA Textiles and Apparel Already Subject to Part 102 Rules

The regulations for AGOA textiles and apparel already state that origin is determined by 19 CFR 102.21 (which is specific to textiles and apparel).

CBTPA and ATPDEA Textiles and Apparel Would Not be Affected

Caribbean Basin Trade Partnership Act (CBTPA) textiles and apparel and ATPDEA textiles and apparel do not have an origin requirement.

DR-CAFTA, Singapore, Chile, and Australia FTAs Would Not be Affected

The U.S.-Dominican Republic-Central America FTA, and the SFTA and UCFTA each have specific Agreement rules of origin that must be followed, which are cited in the 19 CFR Part 10 regulations for each FTA.

According to CBP sources, HTS General Note 28 for the UAFTA also indicates that specific Agreement rules of origin must be followed.

Special Situation for Israel and Jordan FTAs

CBP states that the Part 102 rules would not be used for making preference determinations for goods other than textiles and apparel under the U.S.-Israel and U.S.-Jordan FTAs, because it has been the understanding of the U.S. and those countries that the case-by-case method would be used for making origin determinations for preference purposes under those FTAs.

However, CBP would use the appropriate sections of Part 102 to make all other origin determinations (non-preference or preference) regarding goods from Israel and Jordan.

CBP Believes Extension of Part 102 Rules Would Facilitate Reasonable Care

Under CBP's current regulations, there are two primary methods that CBP uses to determine the country of origin of imported goods that are processed in, or contain materials from, more than one country. One method employs case-by case adjudication to determine whether goods have been ''substantially transformed'' in a particular country, and the other method employs codified rules, also used to determine whether a

good has been ''substantially transformed,'' primarily expressed through changes in tariff classification.

Under the codified tariff shift method, the substantial transformation that an imported good must undergo in order to be deemed a good of the country where the change occurred is usually expressed in terms of a specified tariff shift as a result of further processing.

Case-by case adjudications are based on subjective judgments as to what constitutes a new and different article and whether processing has resulted in a new name, character, and use. It has evolved over many years through numerous court decisions and CBP administrative rulings. CBP also states that the case-by-case approach has been difficult for the court and CBP to apply consistently and has often resulted in a lack of predictability and certainty for both CBP and the trade community.

CBP believes that the proposed extension of the 19 CFR Part 102 country of origin (tariff shift and other) rules will result in determinations that are more objective, transparent, and predictable and will therefore facilitate the exercise of reasonable care by importers with respect to their obligations regarding the identification of the proper country of origin of imported merchandise.

Part 102 Rules for Pipe Fittings, Greeting Cards, Etc. Would be Modified

CBP proposes to change the specific tariff shift and other rules set forth in 19 CFR 102.20 that apply to printed greeting cards classified in HTS heading 4909, fittings and flanges classified in HTS heading 7307, glass optical fiber classified in HTS subheading 9001.10, and rice preparations classified in HTS subheading 1904.90.

Part 102 Rules for Textile and Apparel Would be Corrected

CBP also proposes to correct two aspects of the rules of origin for textile and apparel products in 19 CFR 102.21: (1) for fabrics of HTS Chapter 59 and (2) brassieres and similar articles and parts of HTS heading 6212.

Part 134 Country of Origin Marking Regulations Would be Amended

The proposed rule would amend the country of origin marking regulations in 19 CFR Part 134.1, as follows:

Definition of country of origin. Country of origin would mean the country of manufacture, production, or growth of any article of foreign origin entering the U.S. as determined under 19 CFR Part 102.1 through 102.21.

Definition of ultimate purchaser. The definition of ultimate purchaser would be revised to state that:

If an imported article will be further processed in the U.S., the processor will be the ultimate purchaser if the country of origin of the processed good is determined to be the U.S. under 19 CFR 102.1 through 102.21.

If the country of origin of the processed good is not determined to be the U.S. under 19 CFR 102.1 through 102.21, the consumer or user of the article, who obtains the article after the processing, will be regarded as the ''ultimate purchaser.''

Ultimate purchaser if further processing in the U.S. 19 CFR 134.35 would be revised to state:

If an imported article will be used in further processing in the U.S., the processor will be considered the ultimate purchaser if the processed good is determined to be a good of the U.S. under 19 CFR 102.1 through 102.21. In such a case, the imported article is excepted from individual marking pursuant to 19 U.S.C. 1304(a)(3)(D) and 19 CFR 134.32(d), provided the outermost container in which it is imported will reasonably indicate the country of origin of the article to the ultimate purchaser.

Part 177 Government Procurement Regulations Would be Amended

CBP is also proposing to amend the government procurement country of origin regulations in 19 CFR Part 177.22, as follows:

Definition of country of origin. For purposes of Subpart B of Part 177 (Government Procurement; Country of Origin Determinations), an article is a product of a country or instrumentality only if:

It is wholly the growth, product, or manufacture of that country or instrumentality; or

In the case of an article which consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce.

The term ''instrumentality'' will not be construed to include any agency or division of the government of a country, but may be construed to include such arrangements as the European Economic Community.

For purposes of this section, the expression ''wholly the growth, product, or manufacture'' refers to articles wholly obtained or produced within the meaning of 19 CFR 102.1(g), and a substantial transformation into a ''new and different article of commerce'' occurs when the country of origin of an article which is produced in a country or instrumentality from foreign materials is determined to be that country or instrumentality under 19 CFR 102.1 through 102.21.

¹When the proposed rule references Part 102 uniform rules of origin, it usually means 19 CFR 102.1 through 102.21.

The rules set forth in 102.1 through 102.20 apply for all such purposes where a requirement exists to determine the ''country of origin'' of a good or whether a good is: wholly the growth, product or manufacture of a country; substantially transformed in a country; a new and different product or a new or different article of commerce as a result of processing performed in a country; or the growth, product or manufacture of a

country.

The rules in 102.1 through 102.20 also apply for determining the country of origin of imported goods for the [origin marking] purposes specified under NAFTA Annex 311.

The rules for determining the country of origin of textile and apparel products set forth in

1. .21 and 102.22 (Israel) also apply for the other purposes stated in those sections.

Sections 102.23 through 102.25 set forth certain procedural requirements relating

to the importation of apparel products.

²Origin-related determinations for antidumping and countervailing purposes and Section 201 or 421 safeguard remedies, etc. may differ from the origin determinations made by CBP for customs purposes. However, these origin determinations are for trade remedy purposes only, and do not alter CBP's origin determination for customs purposes that are unrelated to trade remedies.

(See ITT's Online Archives, or 07/25/08 news, 08072505, for initial BP summary announcing the proposed rule.)

CBP proposed rule (D/N USCBP-2007-0100, FR Pub 07/25/08) available at http://edocket.access.gpo.gov/2008/pdf/E8-17025.pdf