CBP Issues its KORUS Instructions, Including Origin Rule Get-Around
U.S. Customs and Border Protection has issued its instructions for the U.S.-Korea Free Trade Agreement (KORUS), which takes effect for qualifying goods entered or withdrawn from warehouse for consumption on or after March 15, 2012. The notice gives an overview of the KFTA rules of origin, as well as instructions for handling "WCO tariff number" discrepancies. CBP also provides information on its process for verifying importer claims, the SPI "KR", post-importation claims and protests, etc.
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Highlights of these instructions include the following (see notice for full details):
Origination. A KFTA originating good eligible for KORUS duty rates must meet the general and/or product specific rules of origin set out in General Note (GN) 33 and all other requirements of KORUS.
Making a preference claim. A claim for KFTA preference may be made at time of entry summary by prefacing the HTS number of the applicable good on CBP Form 7501 with the Special Program Indicator (SPI "KR"). Post importation claims may also be made within one year of importation.
Until ACS programming is completed, importers may make a KFTA entry summary claim by either (1) transmitting the CBP Form 3461 (entry) data via ABI and filing a non-ABI paper CBP Form 7501 (entry summary) making the preference claim, or (2) file a non-ABI paper CBP Form 3461 (entry) and a non-ABI paper CBP Form 7501 (entry summary) making the preference claim.
(However, CBP sources also state that (1) importers can file the CBP 3461 release information in ACS via ABI and then the CBP 7501 entry summary information (with the KORUS claim) in the Automated Commercial Environment (ACE), or (2) filers can use ACE to "file for release via entry summary" by filing a combined 3461/7501, and the system will send the 3461 information to ACS for the release and keep the entry summary information in ACE.)
(See ITT's Online Archives 12031407 for summary containing additional details of the portion of CBP's instructions on post importation KFTA claims.)
Transit and transshipment. Goods that undergo further production outside the territory of Korea or the U.S., other than unloading, reloading or other processes to preserve the condition of the good or to transport the good to the territory of Korea or the U.S., or goods that do not stay under customs control in the territory of a non-Party, will not be considered originating.
RVC calculation methods. Unlike other FTAs, the KFTA build-up method disregards an indirect material. See instructions for details.
De minimis (non-textile). The KFTA has a 10 percent (by value) de minimis provision for most goods, with the exception for textiles in GN 33(d)(iv) and other goods listed in GN 33(e)(ii).
Fiber or yarn forward for yarn, fabric, apparel. For KFTA yarn, the fiber must originate in either the U.S. or Korea. For KFTA fabric, the yarn must originate in either the U.S. or Korea. For apparel, generally yarn must originate in Korea or the U.S. for apparel to qualify for KFTA tariff benefits.
De minimis (textiles). The KFTA has a 7 percent (by weight) de minimis provision for textile or apparel goods that are not originating (when certain fibers or yarns used in the production of the component that determines the classification do not undergo an applicable tariff change as set out in Annex I or GN 33(d)(iv)). Elastomeric yarn is required to be originating regardless of this rule.
Visible linings. Fabric used for visible linings in certain apparel, such as suits, coats and skirts, must be wholly formed and finished in a KFTA beneficiary country.
Short supply. Fibers, yarns and fabrics determined to be unavailable in commercial quantities in a timely manner among the Parties, will be listed in Subchapter XX of Chapter 99 and good made from such inputs will be subject to quantitative restraints. (No products are currently on this list.)
Ag quotas. For KFTA agricultural products subject to quantitative limits, the applicable tariff numbers are 9822.07.10 through 9922.07.25. The application of tariff rate quotas (TRQs) are addressed in separate CBP instructions.
Treatment of sets. Goods put up in sets for retail sale shall not be regarded as originating unless each good is originating or the total value of non-originating goods does not exceed 10 percent (textile) or 15% (non-textile) of the adjusted value.
MPF exemption. Originating goods are exempt from the Merchandise Processing Fee.
Correcting/unsupported claims. An importer making a false or unsupported preference claim must submit a correction within 30 days of discovery and pay all duties and fees due.
Certification. The importer may make a claim for preferential tariff treatment based on a written or electronic certification issued by the exporter or producer, or based on the importer's knowledge, including a reasonable reliance on information in his possession. Certification is usually not required if the import is valued at $2500 or less. This information must be provided to CBP upon request. Certifications must be maintained for five years from the date of importation.
TCRs based on 2002 HTS. Until revised tariff change rules (TCRs) are published (that take into account the World Customs Organization's 2007 and 2012 recommended HTS changes), manufacturers of affected goods should classify both the good and its materials in accordance with the 2002 HTS when performing TCR analysis. In addition, the certification should indicate both the current and 2002 HTS numbers used to perform the TCR analysis. ITC's online 2002 HTS available here.
Verification by CBP. Under the KFTA, the importer is responsible for substantiating the validity of a preference claim, which may be based on a certification, other documentation, or the importer's knowledge. CBP will initiate a verification via a CBP Form 28, Request for information, to the importer. (See notice for list of information CBP requires in such a verification check, including, flow charts on manufacturing process, bill of materials, purchase orders, etc.). CBP notes that the producer may elect to provide this information directly to CBP to protect its confidentiality, and that verification visits to the producer may occur. CBP's verification determinations (either positive or negative) will be issued on the CBP Form 29, Notice of Determination. Negative determinations are protestable.
(See ITT's Online Archives See ITT's Online Archives [Ref:12031222">120313420 for summary of CBP creating a KORUS Web Page for FTA instructions, laws, agreement text. See ITT's Online Archives [Ref:12031222
See ITT's Online Archives 12022807 for summary of CBP's ABI requirements for filing KORUS entry summary claims, which states that CBP will advise the trade when it has made the system requirements to allow such claims to be filed using ABI.)
*Paragraphs 2 and 3 on "making a preference claim" added on 03/14/12.