[Federal Register Volume 60, Number 87 (Friday, May 5, 1995)]
[Proposed Rules]
[Pages 22312-22332]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-10856]
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DEPARTMENT OF THE TREASURY
Customs Service
19 CFR Parts 10, 12, 102, 134 and 177
[RIN 1515-AB19; RIN 1515-AB34]
Rules for Determining the Country of Origin of a Good for
Purposes of Annex 311 of the North American Free Trade Agreement; Rules
of Origin Applicable to Imported Merchandise
AGENCY: U.S. Customs Service, Department of the Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes to amend the interim Customs
Regulations, published in the Federal Register on January 3, 1994, as
T.D. 94-4, which established the rules for determining when the country
of origin of a good is one of the parties to the North American Free
Trade Agreement for purposes of Annex 311 of that Agreement. This
document also republishes, with some modifications, proposed amendments
to the Customs Regulations to set forth uniform rules governing the
determination of the country of origin of imported merchandise, which
were also published in the Federal Register on January 3, 1994. The
purpose of the proposals set forth in this document is to clarify the
intent, or otherwise facilitate understanding of, the previously-
published interim and proposed regulatory amendments. In addition, this
document solicits public comments on the appropriate effective date for
a final rule action regarding the interim and proposed regulatory
amendments.
DATES: Comments must be received on or before June 19, 1995.
ADDRESSES: Written comments (preferably in triplicate) may be addressed
to the Regulations Branch, U.S. Customs Service, Franklin Court, 1301
Constitution Avenue, NW., Washington, DC 20229. Comments submitted may
be inspected at the Regulations Branch, Office of Regulations and
Rulings, Franklin Court, 1099 14th Street, N.W., Suite 4000,
Washington, D.C.
FOR FURTHER INFORMATION CONTACT: Sandra Gethers, Office of Regulations
and Rulings (202-482-6980).
SUPPLEMENTARY INFORMATION:
Background
On January 3, 1994, Customs published T.D. 94-4 in the Federal
Register (59 FR 110) setting forth interim regulations to establish
rules for determining the country of origin of a good for purposes of
Annex 311 of the North American Free Trade Agreement (NAFTA). The
United States, Canada and Mexico entered into the NAFTA on December 17,
1992, and the provisions of the NAFTA were adopted by the United States
with the enactment of the North American Free Trade Agreement
Implementation Act, Public Law 103-182, 107 Stat. 2057. T.D. 94-4
stated that the interim regulations were effective on January 1, 1994,
and also provided for a 90-day public comment period which was
subsequently extended to July 5, 1994, by a notice published in the
Federal Register on March 11, 1994 (59 FR 11547). On February 3, 1994,
a notice was published in the Federal Register (59 FR 5082) setting
forth corrections to the interim regulations contained in T.D. 94-4.
On January 3, 1994, Customs also published a document in the
Federal Register (59 FR 141) which proposed to amend the Customs
Regulations to set forth uniform rules governing the determination of
the country of origin of imported merchandise; this notice of proposed
rulemaking represented a refinement and replacement of an earlier
proposal published in the Federal Register on September 25, 1991 (56 FR
48448). This January 3, 1994, document proposed: (1) To amend
Sec. 102.0 of the interim regulations published as T.D. 94-4 so that
those interim regulations would apply not only for the purposes stated
in Annex 311 of the NAFTA but would also apply in the broader context
of country of origin determinations ``for purposes of the Customs and
related laws and the navigation laws of the United States''; and (2) to
amend various provisions within Parts 4, 10, 12, 134 and 177 of the
Customs Regulations (19 CFR Parts 4, 10, 12, 134 and 177) to ensure
that the rules contained in interim Part 102 would control wherever
language requiring a country of origin determination appears in those
other regulatory provisions. Thus, under this notice of proposed
rulemaking the interim rules set forth in T.D. 94-4 would apply
wherever a provision of the Customs and related laws or the
[[Page 22313]] navigation laws or a regulation thereunder uses language
such as ``new and different article of commerce'', ``wholly the growth,
product, or manufacture'', ``product of'', or ``substantial
transformation'' for purposes of establishing the criteria for country
of origin of a good. The notice of proposed rulemaking provided for a
90-day public comment period which was subsequently extended to July 5,
1994, by a notice published in the Federal Register on March 10, 1994
(59 FR 11225).
In view of the fact that the January 3, 1994, notice of proposed
rulemaking presented the same regulatory scheme as the rules contained
in T.D. 94-4, each document referred to the other and stated that
public comments submitted in response to either document would be
considered in connection with the review of both documents. The notice
of proposed rulemaking further indicated that the background section
and interim Part 102 regulatory texts set forth in T.D. 94-4 were
applicable to it. Thus, it was intended that the two documents be read
together so that, following public notice and comment procedures, one
final rule document could be derived from the interim and proposed rule
documents, consistent with the overall goal of promulgating uniform
rules of origin for Customs and related purposes.
The publication of the interim regulations set forth in T.D. 94-4
was specifically intended to fulfill the United States obligation under
paragraph 1 of NAFTA Annex 311 which provides that the parties to the
NAFTA shall establish, by January 1, 1994, rules (referred to as
``Marking Rules'') for determining whether a good is a good of a party
(that is, whether the country of origin of a good is either the United
States, Canada or Mexico) for purposes of the following NAFTA Annexes:
(1) Annex 311 (Country of Origin Marking); (2) Annex 300-B (Textile and
Apparel Goods); and (3) Annex 302.2 (Tariff Elimination). T.D. 94-4 set
forth these interim ``Marking Rules'' as a new Part 102 of the Customs
Regulations (19 CFR Part 102), entitled ``Rules of Origin'', and also
set forth consequential conforming interim amendments to existing
sections within Parts 12 and 134 of the Customs Regulations (19 CFR
Parts 12 and 134).
Interim Part 102 consists of Secs. 102.0-102.20 and, following
Sec. 102.0 (Scope), is divided into two subparts. Subpart A is entitled
``General'' and consists of Sec. 102.1 (Definitions), and Subpart B is
entitled ``Rules of Origin'' and consists of Secs. 102.11 through
102.20. Section 102.11 sets forth the general rules for determining the
country of origin of a good and consists of paragraphs (a) through (d)
which are applied in a hierarchical and sequential manner. Thus,
reference must be had first to paragraph (a) which provides that the
country of origin of a good is: under subparagraph (1), the country in
which the good is wholly obtained or produced; under subparagraph (2),
the country in which the good is produced exclusively from domestic
materials; or, under subparagraph (3), the country in which each
foreign material incorporated in the good undergoes an applicable
change in tariff classification set out in Sec. 102.20 and/or satisfies
any other applicable requirements contained in that section or
elsewhere in Part 102. If the country of origin cannot be determined
under paragraph (a) because the good does not meet the terms of
subparagraph (1), (2) or (3), then resort must be had to paragraph (b)
and, if that fails, then to paragraph (c) and, if that fails, finally
to paragraph (d). Sections 102.12-102.19 set forth additional rules
that serve to interpret, clarify, limit or otherwise control the
application of the general rules contained in Sec. 102.11 as well as
the specific rules contained in Sec. 102.20. Section 102.20 contains
the specific change in tariff classification rules and/or related
requirements referred to in the country of origin rule set forth in
Sec. 102.11(a)(3); the rules in Sec. 102.20 are set forth for each
Harmonized Tariff Schedule of the United States (HTSUS) chapter, and
the applicable rule is determined by the HTSUS tariff classification
that is applicable to the finished good at the time the country of
origin determination is being made.
Based on a review of the comments received in response to the
interim and proposed rule documents published in the Federal Register
on January 3, 1994, and as a result of independent review of the
interim and proposed texts within Customs, it has been determined (1)
that some clarification and further explanation of the intent behind
the proposed uniform rule concept should be provided and (2) that some
changes should be made to the interim and proposed texts and that those
changes should be the subject of public notice and comment procedures
before proceeding to the final rule stage in this matter; the interim
texts as published in T.D. 94-4 (and as subsequently corrected) remain
in effect pending completion of such final rule action. In addition,
Customs believes, for the reasons set forth below, that public comments
should be solicited at this time regarding the appropriate use of a
delayed effective date for any final rule that results from the interim
and proposed rules, including any changes thereto as proposed in this
document.
Accordingly, this document (1) provides supplemental background
information regarding the proposed uniform rule concept, (2) sets forth
proposals, as discussed in detail below, to amend the interim
regulatory texts contained in T.D. 94-4 published at 59 FR 110 and
corrected at 59 FR 5082, (3) republishes all of the proposed regulatory
amendments published at 59 FR 141 on January 3, 1994, with certain
changes thereto as discussed in detail below, and (4) invites public
comments on the appropriate effective date for a final rule on this
matter. It is the intention of Customs to address in this document only
those comments submitted in response to the January 3, 1994, notices
that involve substantive changes to the interim or proposed texts
requiring further public comment procedures; other such previously
submitted comments will be addressed in an appropriate final rule or
other document to be published at a later date. Comments will be
accepted and considered in response to this document only in regard to
the following: (1) The proposed changes to the interim regulatory texts
as discussed and set forth below; (2) all other proposed regulatory
amendments as discussed and set forth below which represent a
substantive change to the proposals published on January 3, 1994; and
(3) the final rule delayed effective date issue. Accordingly, comments
which concern other issues involved in the January 3, 1994, documents,
or which do not otherwise relate to the new proposals set forth in this
document, will not be accepted and considered by Customs. For purposes
of this document, the background sections of the January 3, 1994,
interim and proposed rule documents are applicable except where
otherwise required by a change set forth in this document.
Supplemental Background Information
Based on an apparent misunderstanding reflected in some of the
comments received in response to the January 3, 1994, notice of
proposed rulemaking, Customs believes that further clarification of the
purpose of the development of these rules for all non-preference
country of origin purposes is needed. This misunderstanding most
probably stemmed from the following statement made in the Background
portion of that document: ``The change in tariff classification
standard was specifically developed as an alternative to the
traditional substantial transformation [[Page 22314]] rule in order to
obviate the problems described above.'' This statement referred only to
the distinction in format between the proposed rulemaking, which
defines substantial transformation on the basis of published rules, and
the traditional application of the substantial transformation
principle. Customs was not proposing that the criteria for origin
determination be based on a new standard; quite to the contrary,
Customs intended that the same standard, substantial transformation, be
applicable. As stated in the Discussion of Proposals portion of the
January 3, 1994, notice of proposed rulemaking, the new Part 102 rules,
which are proposed to be used for all non-preference country of origin
determinations, are specifically intended to ``codify'', rather than
constitute an alternative to the substantial transformation rule, i.e.,
``the criteria for determining whether a good has become a `new and
different article of commerce' as a result of a manufacturing process
in a given country,'' and to ``provide the results that would be
reached under the case-by-case application of the substantial
transformation rule.''
The interim Part 102 rules, which Customs proposes to use for all
non-preference country of origin determinations, are in fact
specifically designed to implement the principles of the substantial
transformation standard. In this regard, it should be noted that
Customs views as relevant all court decisions involving substantial
transformation for purposes of country of origin determination,
regardless of the purpose for which the origin determination is being
made. As favorably noted by the Court of International Trade in Target
Sportswear, Inc. v. United States, Slip Op. 95-7 (January 23, 1995),
the purpose of these rules is ``to add more certainty and uniformity to
the substantial transformation test.'' A summary of court decisions
involving substantial transformation for country of origin purposes and
their relationship to the interim Part 102 rules is set forth below in
order to demonstrate the approach which Customs took in drafting the
interim and proposed rules at issue, including the further proposals
set forth in this document.
1. Country of Origin Marking Cases
With regard to country of origin marking, the area in which the
substantial transformation principle is employed most often, the Part
102 rules will implement this principle consistent with court decisions
in this area.
U.S. v. Gibson-Thomsen Co., Inc., 27 CCPA 267 (1970). The court
held that the manufacturer of hair and tooth brushes from imported wood
blocks and toothbrush handles was the ``ultimate purchaser'' by having
manufactured the imported articles into new articles having a new name,
character, and use. In this case, wooden toothbrush handles and brush
blocks were imported for use in the manufacture of tooth and hair
brushes. In the manufacture of the brushes, holes were bored into the
handles and blocks; bristles were inserted and imbedded; the bristles
were trimmed; and the handles were polished and stamped. In the opinion
of the court, the imported wood blocks and handles lost their
identities in a tariff sense as a result of the assembly process and
became an integral part of a new article. Therefore, the court held
that the imported articles were substantially transformed in the United
States so that country of origin marking of the hair and tooth brushes
was not required. The Part 102 rules are consistent with this case
since the Sec. 102.20 specific tariff shift rule for hairbrushes and
toothbrushes allows a change to heading 9603 from any other heading,
and the components which make up the finished toothbrushes and
hairbrushes (handles, brush blocks, bristles) are all classified
outside heading 9603.
National Juice Products Assn. v. U.S., 628 F.Supp. 978 (CIT 1986).
In this case the court upheld Customs' determination that production of
frozen concentrated and reconstituted orange juice from manufacturing
concentrate is not a substantial transformation. The court also upheld
Customs' determination that the manufacturing concentrate imparts the
essential character to the juice and makes it orange juice. The court
noted that the addition of water, orange essences, and oils to the
concentrate, while making it suitable for retail sale, does not change
the fundamental character of the product, which is still essentially
the product of juices. The court concluded that the orange juice
processors in the United States are not the ultimate purchasers of the
imported product because consumers are the last purchasers to receive
the product in essentially the form in which it is imported. Thus, in
accordance with 19 U.S.C. 1304, the court held that the retail
packaging must indicate the country of origin of the manufacturing
concentrate. The Part 102 rule which covers reconstituted orange juice
(and which specifies a change to subheading 2009.11 through 2009.30
from any other chapter) is consistent with National Juice. Thus, just
as the court in National Juice found that the process of mixing various
ingredients with foreign manufacturing concentrate to create
reconstituted orange juice did not result in a substantial
transformation, the applicable Part 102 rule likewise does not allow
origin to be conferred by a change from manufacturing concentrate to
reconstituted orange juice.
Uniroyal, Inc. v. U.S., 542 F.Supp. 1026 (CIT 1983). In Indonesia,
an upper was manufactured from sheets of leather into a substantially
complete shoe, that is, it was ``lasted'' or permanently molded so that
it was in its ultimate shape, form, and size when exported. The uppers
were shipped to the United States where pre-shaped, pre-sized outsoles
were attached to the uppers. The court held that despite the name
change (upper to shoe) there was no substantial transformation because
the attachment of the outsole to the upper was a minor manufacturing or
combining process which left the identity of the upper intact. The
upper when imported was readily recognizable as a distinct item apart
from the outsole to which it was attached. The court found that the
imported upper was the very ``essence'' of the finished shoe.
Therefore, the court held that the operations performed in the United
States did not constitute a substantial transformation and therefore
the uppers were required to be marked with the country of origin. The
Part 102 standard is consistent with the court's holding in Uniroyal
because the specific tariff shift rule for shoes (headings 6401-6405)
provides for a change to heading 6401 through 6405 from any tariff item
outside that group except from formed uppers.
Koru North America v. U.S., 701 F.Supp. 229 (CIT 1988). In this
case, Hoki fish caught off the coast of New Zealand were beheaded, de-
tailed, eviscerated, and frozen aboard the ships in New Zealand. The
fish were then sent to Korea for further processing which included
thawing, skinning, boning, trimming, glazing, refreezing, and packaging
the fish for shipment to the United States. The court held that the
processing in Korea constitutes a substantial transformation. The court
based this finding on a change in name and character, noting that there
was a name change from ``headed and gutted Hoki'' to ``individually
quick-frozen fillets'' as a result of the processing performed in
Korea. The court also noted that the two types of fish are classified
in separate tariff provisions. The court also found that the processing
in Korea resulted in a change in the fundamental nature and character
of the [[Page 22315]] fresh fish. The court noted that the fillets are
considered discrete commercial goods and are sold in separate areas and
markets different from the headed and gutted fish. Therefore, the court
held that the Hoki should be properly marked as products of Korea. The
Part 102 rules are consistent with this court decision since the rule
for frozen fish fillets (heading 0304) allows a change to frozen fish
fillets of heading 0304 from any other heading, and frozen, beheaded,
de-tailed, eviscerated fish are classified in heading 0303 rather than
in heading 0304.
MBI Merchandise Industries Inc. v. United States, 16 CIT 495
(1992). The court held that any Korean magnetic pages of a photo album
were substantially transformed in Taiwan and in the People's Republic
of China when they were incorporated into the finished photo album. The
court noted that the character of the pages was transformed from
refills into a fully salable photo album (classifiable in heading
4820). The court also stated that the use of the pages was also
transformed from loose refill pages to completed albums suitable for
display on a customer's bookshelf, the primary purpose of a photo
album. Finally, the court found that the combination of the various
parts (cover, pages, binder, and label) results in an item having a new
identity. Distinguishing the Uniroyal case discussed above, the court
found that the pages in this case were not the ``essence'' of the photo
albums. The court also considered the value added as a result of making
the photo albums as support for the conclusion that the photo album
pages were substantially transformed. The permitted changes under the
applicable Part 102 tariff shift rule include a change to heading 4820
from any other heading, and the loose filler paper is classified
outside of heading 4820. Thus, under the Part 102 rules the magnetic
pages will be transformed into products of the country in which the
albums were produced, consistent with the conclusion reached by the
court in M.B.I.
Carlson Furniture Industries v. United States, 65 Cust.Ct. 474
(1970). In the United States, wooden chair parts imported from Japan
were assembled and fitted together, glued, the joints steel-pinned, the
legs cut to length and leveled, and, in some instances, the chairs
upholstered and the legs fitted with glides and casters. The court held
that the work performed on the imported articles by the importer was
substantial in nature and more than the mere assembly of parts
together. The court further stated that the result of the assembly of
the chair parts was the transformation of the parts into a ``functional
whole''--which resulted in a new and different article of commerce. The
court concluded that the importer was the ``ultimate purchaser'' of the
imported articles, so that the marking of the country of origin on the
containers in which such articles were imported was deemed sufficient
to meet the statutory marking requirements. The Part 102 rules are
consistent with this court decision. In this case, the goods for which
country of origin had to be determined were ``chairs'', which are
classified under subheadings 9401.10 through 9401.80 for which the
following Sec. 102.20 tariff shift rule is prescribed: A change to
subheading 9401.10 through 9401.80 from any subheading outside that
group, except from subheading 9403.10 through 9403.80, and except a
change from subheading 9401.90 or 9403.90 when that change is pursuant
to GRI 2(a). The Court in Carlson Furniture also found that the
imported articles were ``not chairs in unassembled or knocked-down
condition'', but were ``at best the wooden parts which go into the
making of chairs''. Since the chair parts were assembled into finished
chairs by the U.S. importer, the change in classification from the
imported chair parts to finished chairs did not occur pursuant to GRI
(2)(a). Consequently, the assembly and other processing of the chair
parts, classifiable under 9401.90, would be treated as a substantial
transformation under the Part 102 rules.
Midwood Industries, Inc. v. United States, 313 F.Supp. 951
(Cust.Ct. 1970). In this case, steel forgings manufactured in West
Germany, England, or Italy were imported into the United States where
they were manufactured into flanges and fittings. The purpose of the
fittings was to connect pipes of matching sizes. To that end, the
forgings were faced, bored, threaded or bevelled, drilled, or spot-
faced, or they were heated and one end was reduced in size and diameter
by compression, excess steel was removed, and the ends were aligned,
trimmed, and bevelled for welding purposes. In finding that the steel
forgings were substantially transformed in the United States, the court
drew a distinction between consumer and producer goods, stating that
the imported articles are ``not in fact used by the consumer in such
state of manufacture and are not capable of use by the consumer in that
state.'' The Part 102 rules do not stipulate that all forgings
manufactured into flanges and fittings undergo a substantial
transformation. The Court of International Trade has not employed the
consumer-good-versus-producer-good analysis used by the Customs Court
in Midwood. Nor does Customs believe that the court is bound to follow
that reasoning. Cf. Algoma Steel Corp., Ltd. v. U.S., 865 F.2d 240, 243
(Fed.Cir. 1989). In Midwood, the Customs Court based its decision on an
analysis of the facts presented regarding the manufacturing processes
employed by a single pipe fittings company circa 1970 as well as the
legal arguments presented in that case. The court noted that it did not
need ``to determine whether or not the processes employed'' at the
plaintiff's plant were ``generally prevalent throughout any segment of
the industry in the United States.'' Midwood, 313 F.Supp. at 956.
Customs believes that the Midwood result would have been consistent
with the proposed rules set forth in this document had it been
presented as such. Consequently, Customs is confident that the Court of
International Trade will sustain the uniform rules of general
applicability contained herein, which are relevant to current industry
practices and are entirely consistent with the general principles
enunciated by the court.
National Hand Tool Corp. v. United States, 16 CIT 308 (1992). The
articles involved in this case were nine kinds of components of hand
tools which were further processed and assembled in the United States.
The components were either cold-formed or hot-forged in Taiwan into
their final shape before importation. Some of the tools underwent a
heat treatment, were reshaped by bending, or were further machined by
knurling in the United States, and other articles were electroplated in
the United States. The various components were then assembled in the
United States to produce the finished tools. The court found that there
was no name change and that the character of the imported articles
remained unchanged after heat treatment, electroplating, and assembly.
The court stated that although there may be changes in the
characteristics of the material, they did not change the character of
the articles. The court also found no change in use as a result of the
processing in United States. Finally, the court found that there was no
reason to find a substantial transformation on the basis of the value-
added in the United States. Accordingly, since the operations performed
in the United States did not result in a substantial transformation,
the court held that the imported articles must be marked to indicate
the country of origin pursuant to 19 U.S.C. 1304. The Part 102 rules
are [[Page 22316]] totally consistent with the application of the
substantial transformation principle in this case, not only in the case
of hand tools but also as applied to other products involving similar
processing operations.
2. Subheading 9802.00.80 and Products of the United States
This document sets forth, without change, the proposal contained in
the January 3, 1994, notice of proposed rulemaking to amend Sec. 10.14
of the Customs Regulations to provide for application of the Part 102
rules for purposes of determining when imported foreign materials are
substantially transformed in the United States so as to be considered
products of the United States and thus not subject to duty under
subheading 9802.00.80, HTSUS, when exported for assembly abroad and
then returned to the United States. The Part 102 rules are totally
consistent with the following court decision which involved substantial
transformation for purposes of determining country of origin in
connection with item 807.00, TSUS (the predecessor to subheading
9802.00.80, HTSUS).
Data General Corporation v. United States, 4 CIT 182 (1982). The
court considered the question of whether programming a programmable
read only memory (PROM) imported into the United States constitutes a
substantial transformation. The court analyzed the processing in terms
of the name, character, and use test. The court found that there was a
change in name in that a PROM when programmed is no longer a PROM and
is sometimes referred to as a read only memory (ROM). The court found
that there was also a change in character as a result of the
programming which changed the pattern of interconnections with the
PROM. According to the court, a distinct physical change was effected
in the PROM by the opening or closing of the fuses. Citing Uniroyal,
the court stated that the ``essence'' of the article, its pattern of
interconnections or stored memory, was established by the programming.
The court also noted that there was a change in use in that the PROM
had no function or use except for programming. The court analogized
programming a PROM to assembling the components on a printed circuit
board, which is cited in 19 CFR 10.14(b) as an example of substantial
transformation. Therefore, the court held that programming the PROM
resulted in a substantial transformation into a ``fabricated
component'' which was a product of the United States for purposes of
item 807.00, TSUS. The result reached in this case is reflected in the
Part 102 rules since the applicable tariff shift rule (subheadings
8541-8542) allows a change to any programmed chips from any
unprogrammed.
3. Application of Most-Favored-Nation Duty Rates
The Part 102 rules are consistent with the court's application of
the substantial transformation principle in the following case which
involved the question of whether the most favored-nation duty rate (as
opposed to the higher column 2 duty rate) should be applied to the
imported merchandise at issue.
Coastal States Marketing, Inc. v. United States, 646 F. Supp. 255
(CIT 1986). The court held that mixing gas oil from the Soviet Union
and fuel oil from Italy in Italy does not result in a new and different
article of commerce so that the mixture becomes a product of Italy. The
court concluded that there was no change in the appearance, character,
identity, or use of the Russian oil to warrant the conclusion that the
imported blend was solely a product of Italy. Furthermore, the court
stated that the essential character of the Russian component as a fuel
oil used primarily for heating remained unchanged. The court found that
``although a change in tariff classification is certainly not
controlling * * * the same classification treatment of the products * *
* is some indication that the imported blend was not a new and
different product.'' Accordingly, the Part 102 rules do not allow a
change of origin when fuel oil and gas oil, both of which are
classified in heading 2710, are simply blended together.
4. Voluntary Restraint Arrangement Cases
On balance, and as explained below, the Part 102 rules are
consistent with the following cases involving substantial
transformation for purposes of determining origin in the trade policy
area. These cases involved voluntary restraint arrangements that the
United States had with various countries regarding the exportation of
steel products to the United States.
Ferrostaal Metals Corporation v. U.S., 664 F.Supp. 535 (CIT 1987).
In New Zealand, full hard cold rolled steel sheet imported from Japan
was annealed and galvanized by a process known as ``continuous hot-dip
galvanizing'' to produce galvanized steel sheet. The court held that
the hot-dipped galvanized steel sheet was a new and different article
of commerce when compared to the full hard cold rolled steel sheet. In
making this determination, the court found that the processing of the
hard cold rolled steel sheet into hot-dipped galvanized steel sheet
results in a change in name, character, and use. The court noted the
change in name, that is, from full hard cold rolled steel sheet to
continuous hot-dip galvanized steel sheet. The court also stated that
the annealing and galvanizing process resulted in a change in character
by significantly altering the mechanical properties and chemical
composition of the steel. In addition, the court noted that cold-rolled
steel cannot be used for the same purposes as steel that has undergone
the hot-dip galvanizing process. The Ferrostaal opinion represents a
trial court's resolution of a single, particular dispute involving a
specific product and process. The case was not appealed. While the
Court of International Trade's substantial transformation analysis in
Ferrostaal remains relevant, Customs has not codified the specific
result of Ferrostaal and does not propose it as a uniform rule of
general applicability based on a comprehensive review of industry
practices. Again, Customs believes that the Ferrostaal court would have
reached the result contained in those rules had they been presented as
such to the court. Moreover, Customs is confident that the Court of
International Trade will sustain those rules based on an industry-wide
analysis, notwithstanding the result that was reached based on the
particular facts of a single case. Cf. Algoma Steel Corp., Ltd. v.
U.S., 865 F.2d 240, 243 (Fed.Cir. 1989).
Superior Wire v. United States, 867 F.2d 1409 (CAFC 1989). The
Court of Appeals for the Federal Circuit affirmed the Court of
International Trade decision that the process of drawing wire in Canada
from wire rod produced in Spain is not a substantial transformation.
The lower court had employed the traditional name, character, and use
test, finding that, although there is a name change from wire rod to
wire, there is no change in character or use when wire rod is drawn
into wire. Therefore, the court held that wire drawn in Canada from
Spanish wire rod was not substantially transformed for purposes of
determining the country of origin under the voluntary restraint
arrangement between the United States and Spain, thus resulting in
Spain remaining the country of origin of the imported steel. The Part
102 rules are consistent with the court's application of the
substantial transformation principle in this case: the specific
Sec. 102.20 tariff shift rule applicable to such goods provides for a
change to heading 7223 (wire) from any [[Page 22317]] other heading,
except from heading 7221 through 7222 (wire rod).
5. Generalized System of Preferences Cases
Although the Generalized System of Preferences (GSP) statute
currently requires that the imported article must be product of a
designated beneficiary developing country (BDC) in order to be eligible
for GSP duty-free treatment, all of the court decisions to date
involved Customs entries pre-dating that statutory provision and thus
focused only on the GSP statutory preference standard that 35 percent
of the value consist of materials the product of a BDC plus direct
costs of processing performed in the BDC. These cases remain relevant
as examples of substantial transformation analysis to the extent that
the question addressed by the court did not involve the origin of the
final product exported from the BDC but rather involved whether a
material imported into the BDC was substantially transformed into a new
and different intermediate article of commerce in the BDC before being
used to make the good exported from the BDC, so that its value could be
counted toward the 35 percent requirement. Although the court in each
of the cases discussed below did not specifically address the issue of
the origin of the final article exported to the United States, it
appears both that all of the involved goods as exported to the United
States were products of the BDC and that the same conclusion would be
reached under the Part 102 rules.
Texas Instruments v. U.S., 681 F.2d 778 (CCPA 1982). The court held
that silicon chips, wire and lead strips, which were imported into a
BDC where they were assembled into integrated circuits and photodiodes,
and where the chips had first to be severed from silicon slices prior
to the assembly process, were substantially transformed into
``materials produced in the BDC'' which were then used in the
production of electronic camera parts exported to the United States.
Azteca Milling Co. v. U.S., 703 F.Supp. 949 (CIT 1988), and F.F.
Zuniga Refractarios Monterrey, 996 F.2d 1203 (CAFC 1992). These GSP
cases involved the issue of whether there existed a new and different
article of commerce versus ``materials in process advancing toward the
finished product''. In Azteca Milling which involved corn flour
imported into the United States, the court found that the production of
corn flour nixtamal and masa from imported corn did not result in a
substantial transformation into new and different articles of commerce,
since the nixtamal and masa were ``clearly recognizable as processed
corn.'' Similarly, the court in Zuniga found that the production of a
casting slip for kiln furniture from imported dry materials did not
result in a substantial transformation into new and different articles
of commerce since the casting slip was only a ``transitional stage of a
material in process, advancing toward the finished product'', the kiln
furniture. The casting slip, like the nixtamal and masa in Azteca, was
not found by the court to be ``readily susceptible of trade''.
Torrington v. United States, 764 F.2d 1563 (CAFC 1985). The court
held that the production of swage needle blanks from imported wire and
the further production of sewing machine needles from swage blanks
represented a double substantial transformation of the imported wire.
The Part 102 rules support the trial court's first finding of a
substantial transformation--the transformation of wire into unfinished
sewing machine needles--but not the second finding regarding the
transformation from unfinished to finished needles. The appellate
court's decision upholding the second substantial transformation found
by the trial court was based on a rare citation of the producer good-
consumer good standard of Midwood, which the courts have not favored.
Moreover, the court's decision appears to have been influenced heavily
by its desire to effectuate what it believed to be the intent of
Congress. In sustaining the trial court's finding of double substantial
transformation, the court noted the Congressional intent behind the GSP
statute, which was to foster industrialization of BDCs, and focused on
the ``actual manufacturing process by which the intermediate article
becomes the final product''. In this regard, the court concluded that
in light of the significant manufacturing process, there was not a
``mere pass-through'' operation in the BDC.
6. Textile Cases
The court decisions involving substantial transformation of
textiles and textile products were superseded by the rules of origin
established under Sec. 12.130 of the Customs Regulations (19 CFR
12.130) for textiles and textile products subject to the U.S. textile
import program. The authority to promulgate these rules was upheld by
the court in Mast Industries v. Regan, 596 F.Supp. 1597 (CIT 1984). In
that case, the court found that the promulgation of Sec. 12.130, which
was at the direction of the President and which set forth rules for the
determination of country of origin for textiles and textile products
subject to import quotas, was fully in accordance with law. See also
Target Sportswear, Inc. v. United States, supra. This document
republishes the January 3, 1994, proposals to delete paragraphs (d) and
(e) from Sec. 12.130 and to amend paragraph (b) thereof to cross-refer
to the Part 102 rules as Customs in T.D. 90-17 made those Sec. 12.130
rules generally applicable for textiles and textile products. Thus, the
Part 102 rules track the principles of, as well as the origin results
that would be reached under, Sec. 12.130 in the case of textiles and
textile products.
Proposed Changes to the Interim and Proposed Texts and Proposed Delayed
Effective Date
A. Proposed Amendments to the Interim Rules
1. Part 102 General Origin Criteria
Section 102.11--General Rules
It is proposed to revise paragraph (d) of interim Sec. 102.11 in
part to simplify the text but principally in order to ensure that
paragraph (d) will provide for an origin determination in all cases in
which origin cannot be determined under paragraph (a), (b) or (c).
Customs notes that the interim paragraph (d) text in some cases will
not effectuate an origin determination when the good in question last
undergoes production in a country where only minor processing was
performed with respect to that good. For example, various furniture
parts classifiable under subheading 9403.90, HTSUS, enter Country A
from various countries; in Country A, the parts are collected and
packaged into unassembled boxes of desks and tables classifiable under
subheading 9403.30, HTSUS, pursuant to GRI 2(a) which are then shipped
to Country B. The interim Sec. 102.20 tariff shift rule for goods
classified in subheading 9403.30 provides for ``a change to subheading
9403.10 thorugh 9403.80 from any subheading outside that group, except
from subheading 9401.10 through 9401.80, and except a change from
subheading 9401.90 or 9403.90 when that change is pursuant to GRI
2(a).'' In the stated example this tariff shift rule will not be met
because the change in classification indeed does occur as a result of
classification of the collection of furniture parts as the unassembled
desks and tables pursuant to GRI 2(a); thus, origin cannot be
determined under interim Sec. 102.11(a)(3). If no single component can
be found to impart the essential character to the desks and tables,
then origin of the goods also cannot be determined under interim
Sec. 102.11 (b). Moreover, since the desks [[Page 22318]] and tables
are not classified as sets, mixtures or composite goods under the
HTSUS, origin cannot be determined under interim Sec. 102.11(c).
Finally, since the parts came into Country A from various countries and
only minor processing (packaging) was performed in Country A to make
the goods, the origin of the goods cannot be determined under interim
Sec. 102.11(d)(1) or (2). Thus, no determination of origin can be
achieved under the interim texts with regard to the good described in
this example.
In order to address the problem outlined above, the proposed
revision of paragraph (d) as set forth below incorporates the following
three subparagraphs: subparagraph (1) covers a good produced only as a
result of minor processing and provides in such a case that the country
of origin of the good is the country or countries of origin of each
single material that merits equal consideration for determining the
essential character of the good; subparagraph (2) covers a good
produced by simple assembly, where the assembled parts that merit equal
consideration for determining the essential character of the good are
from the same country, and provides in such a case that the country of
origin of the good is the country of origin of those parts; and
subparagraph (3) covers cases in which the country of origin of a good
cannot be determined under paragraph (d)(1) or (d)(2) and provides that
in such cases the country of origin of the good is the last country in
which the good underwent production.
Removal of Sec. 102.14--Goods Returned
Based on comments received and as a result of further internal
review, Customs has reconsidered the position stated in T.D. 94-4 that
U.S. Note 2(a), Subchapter II, Chapter 98, HTSUS, has application for
general country of origin purposes. In light of this change in
position, it is proposed to remove this section (see also the proposed
revision of interim Sec. 102.19 discussed below).
Removal of Sec. 102.16--Good and its Parts; Parts of Parts
It is proposed to remove interim Sec. 102.16 which sets forth
special origin rules where, for any of several specified reasons, a
part of a good or a part of a part does not undergo an applicable
change in tariff classification provided for in Sec. 102.20. The
experience of Customs in administering the interim NAFTA Marking Rules
has shown that the hierarchical application of Secs. 102.11 (b) through
(d), coupled with the proposed change to Sec. 102.11(d) discussed
above, yield an appropriate origin result that codifies the substantial
transformation principle. Accordingly, Customs no longer believes that
Sec. 102.16 is necessary.
Section 102.17--Non-qualifying Operations
It is proposed to revise the introductory text of interim
Sec. 102.17 to clarify the intent that the section applies whenever the
change in tariff classification or other condition specified in
Sec. 102.20 was met only as a result of one or more of the listed non-
qualifying operations having been performed with respect to the good.
In addition, it is proposed to revise paragraph (e) of interim
Sec. 102.17 which specifies, as a ``non-qualifying operation'' for
purposes of section 102.20, any process or work the sole object of
which is demonstrated by a preponderance of evidence to be the
circumvention of the Part 102 rules. Upon reconsideration of this
provision, it is Customs view that this provision is not administrable
since the text does not make clear how it is possible for a person to
``circumvent'' these rules. First, if the Sec. 102.20 rule or any other
Part 102 rule does not preclude a specific operation from being the
means by which a foreign material satisfies a Sec. 102.20 rule, any
operation is deemed allowable under Part 102. Second, if a Part 102
rule specifically precludes a type of operation (for example, ``simple
assembly'' or ``dismantling or disassembly'') and it was only as a
result of such an operation that the change in tariff classification
requirement or other conditions specified for the foreign material
under the Sec. 102.20 rule were met, the Sec. 102.20 rule is simply not
deemed to have been satisfied. In either case, there could not have
been a ``circumvention'' of the rules as a result of the operation,
since either the Part 102 rules permitted the operation or, as a result
of the operation, the Part 102 rules were not satisfied.
Nevertheless, to further protect against circumstances which may
appear to be a ``circumvention'' of the spirit or intent of the Part
102 rules, Customs proposes to redraft paragraph (e) of Sec. 102.17 to
specify, as an additional ``non-qualifying operation'', collecting
parts that, as such, are classifiable in the same tariff provision as
an assembled good pursuant to General Rule of Interpretation (GRI)
2(a), without any additional operation other than minor processing.
Thus, no specified change in tariff classification will be deemed to
have occurred if such change resulted solely from the act of collecting
parts which are then classified under the tariff provision applicable
to the assembled good. If, on the other hand, in addition to the
collecting of parts, processing constituting more than minor processing
also occurred in the country in question, this rule would be
inapplicable.
Section 102.18--Rules of Interpretation
It is proposed to revise paragraph (a) of interim Sec. 102.18 in
order to: (1) Simplify, and thus clarify the application of, the
introductory text; (2) remove subparagraph (a)(1)(i) which refers to
the collection of parts classified as an assembled good and thus would
become redundant because it would be encompassed within the broader
terms of proposed new Sec. 102.17(e) as discussed above (which would
apply to all tariff shift rules rather than to only those rules that
specifically cite classification under GRI 2(a) as a basis for not
allowing a specified change in tariff classification); (3) remove
paragraph (a)(2) which would no longer be needed in view of the
proposed removal of paragraph (a)(1)(i) from this section; and (4)
simplify the remaining portion of paragraph (a) (subparagraph
(a)(1)(ii) in the interim text) and remove therefrom the unnecessary
reference to ``a subassembly''.
In addition, it is proposed to revise paragraph (b) of interim
Sec. 102.18 in order to effect the following changes: (1) The removal
of the undefined parenthetical reference to ``self-produced materials''
in interim subparagraph (b)(2); (2) the reversal of the order of
interim subparagraphs (b)(1) and (b)(2); (3) in newly designated
subparagraph (b)(1), the addition of new subparagraphs (b)(1)(i) and
(b)(1)(ii) to clarify and illustrate, by way of a statement and an
example in each case, the intended operation of the subparagraph (b)(1)
rule; and (4) the simplification, and thus clarification, of the
paragraph (b) text.
Section 102.19--NAFTA Preference Override
It is proposed to make some editorial modifications to the text of
interim Sec. 102.19, to designate that text as paragraph (a), and to
add a new paragraph (b). New paragraph (b) is intended to facilitate
the application of the appropriate NAFTA preferential duty rate under
General Note 12(a), HTSUS, in the case of originating goods the origin
of which is determined to be the United States under the Part 102
provisions. It should be noted that the term ``Customs duty'' used in
this new paragraph (b) is intended to include merchandise processing
fees which are treated as Customs duties under
[[Page 22319]] Sec. 24.23(e) of the Customs Regulations (19 CFR
24.23(e)).
2. Section 102.20 Specific Rules
Customs proposes to make a number of amendments to the tariff shift
rules and other requirements set forth in interim Sec. 102.20. These
proposed amendments, and the reasons therefor, are summarized below
with reference to the HTSUS provisions and general types of goods
involved.
Elimination of the Specific Rules Referring to ``Substantial
Transformation''
Customs proposes to amend the tariff shift rules for headings/
subheadings 1901.90, 2103.90, 4823.20 through 4823.59, 4823.70 through
4823.90, 6811.90, 6812.90, 6814.90, 7010 through 7018, 7019.90, 7020,
8708.99, 9110, 9401.90, 9403.90, and 9606.21 through 9606.29, by
eliminating in each case the rule which permits a specified change ``if
that change results in a substantial transformation.'' In administering
the interim Part 102 rules Customs has determined that these specific
statements in the rules are redundant and do not need to be included in
Sec. 102.20 in order to codify the substantial transformation
principle. As a result of this proposal and the proposed removal of
Sec. 102.16 discussed above, the term ``substantial transformation''
would no longer appear in the Part 102 texts; accordingly, it is also
proposed to remove the definition of ``substantial transformation'' in
interim Sec. 102.1(p).
Section II Note
It is proposed to amend the Note under Section II by adding the
words ``or from whole plants,'' after the words ``slips or other live
parts of plants,''. This proposed change is intended to clarify,
consistent with the definition of ``a good wholly obtained or
produced'' in interim Sec. 102.1(g), that when an agricultural product
is grown and harvested from a plant that was transplanted from another
country, the product has its origin in the country in which the product
was harvested.
Headings 0904-0910 (Spices)
It is proposed to delete the second tariff shift rule for headings
0904-0910, which provides for a change to crushed, ground, or powdered
products of heading 0904 through 0910 (principally spice products) from
within Chapter 9, if put up for retail sale. Customs is of the opinion
that processing raw spices to create crushed, ground or powdered
spices, whether or not accompanied by cleaning, merely changes the form
of the spice and does not result in any significant change in the name,
character or use of the product. This view is consistent with previous
Customs rulings which have held that the processing of raw cheese into
grated cheese packed for retail sale does not constitute a substantial
transformation.
Subheading 1517.90 (Vegetable Oils Consisting of Preparations and
Mixtures)
The interim rule requires a change from any other chapter. It is
proposed to amend this rule by adding a second tariff shift rule which
would allow a change from any other heading so long as the resulting
product contains no more than 60 percent by volume of a single oil
ingredient from a single country. This change would make the rule for
mixtures of different types of oils consistent with the rule for a
similar type of product, mixtures of different types of fruit juices
(heading 2009.90), and would incorporate the results reached under the
traditional application of the substantial transformation rule with
respect to such types of products.
Headings 4104-4107 (Leather)
Based both on a comment and on further review by Customs, it is
proposed to delete the second tariff shift rule which allows a change
to finished leather of heading 4104 through 4107 from wet blue hides or
leather. This proposed change reflects the following considerations:
(1) There is no established definition of the term ``finished leather''
and, in fact, the meaning of the term can vary according to the end use
of the goods; and (2) the processes necessary to change wet blues to
finished leather can vary and may not, in all cases, result in a change
in the country of origin, as reflected in rulings issued by Customs.
New Chapter 42 Note
It is proposed to add a Note to the Chapter 42 rules to ensure that
a single country of origin always will be identifiable in the case of
textile goods. This new Note is modeled on Note 3 to the Section XI
rules and thus also reflects the proposed amendment to that Note as
discussed below.
Headings 4810-4814 (Coated Paper)
Customs proposes to revise this interim tariff shift rule by
dividing it into separate rules for heading 4810, subheading 4811.10
through 4811.31, subheading 4811.39, subheading 4811.40 through
4811.90, and headings 4812 through 4814. Of these five proposed new
rules, only the proposed rule for subheading 4811.39 would constitute a
substantive change from the current interim rule for headings 4810
through 4814. The proposed rule for subheading 4811.39 would disallow a
change from paper of heading 4804 to paper that is only ``coated,
impregnated or covered with plastics''. This is consistent with Customs
rulings which generally have held that laminating, coating or
encapsulating does not result in a substantial transformation.
Subheadings 4823.70-4823.90 (Other Paper, Paperboard, etc. Products)
It is proposed to amend the tariff shift rule which would remain
(if the ``substantial transformation'' rule is eliminated as proposed
above) to specify a change ``from any other subheading, including
another subheading within that group'' rather than a change ``from any
other chapter''. This amendment would result in a more liberal rule
which reflects the conclusions reached by Customs under the traditional
approach.
Section XI (Textiles)
The proposed amendments to the interim Sec. 102.20 specific rules
applicable to textiles as discussed below are intended to conform the
rules in question to the practice of, and positions taken by, Customs
in the case-by-case administration of Sec. 12.130 of the Customs
Regulations (19 CFR 12.130):
a. Note (1)d
In response to a comment, it is proposed to replace the word
``body'' by the words ``major parts'' and to delete the words
``together with its sleeves and/or legs'', in order to preclude
interpretation of this Note as not applying to garments that have
padding in the body and linings in the sleeves.
b. New Note (1)f
It is proposed to add a new Note (1)f to clarify the meaning of
``minor embellishments'' (see the proposed amendment to the specific
rules applicable to goods of headings 6302 and 6304 as discussed
below).
c. Note 3
It is proposed to amend Note 3 by adding a sentence at the end to
cover a case where more than one component determines classification or
where the component that determines classification is attributable to
more than one country. This new sentence provides that in such cases
the country of origin shall be the last country in which the good
underwent production other than minor processing. Customs believes that
this amendment is [[Page 22320]] necessary for purposes of
administration of the U.S. textile import program which makes no
provision for multiple countries of origin.
d. Heading 5105 (Wool Tops)
It is proposed to add a second tariff shift rule for headings 5101-
5105 in order to reflect the Customs position that the processing of
greasy wool into combed wool is a substantial transformation.
e. Heading 5609 (Articles of Yarn)
It is proposed to amend the tariff shift rule for heading 5609 to
include, in the exception language, a reference covering headings 5604
and 5605 which include different types of yarns. This proposed change
would reflect the Customs view that the assembly or other processing of
such yarns into articles classifiable in heading 5609 does not
constitute a substantial transformation.
f. Heading 5804 (Net Fabrics)
Customs has determined that, under certain circumstances, it is
commercially feasible to convert made up nets of heading 5608 to
netting of subheading 5804.10 by simple cutting, and Customs does not
believe that such a tariff shift should confer origin. Accordingly, it
is proposed to divide the interim heading 5804 tariff shift rules into
two sets of rules, one for subheading 5804.10 and the other for the
remainder of the heading, in order to add in the case of subheading
5804.10 an exception involving a change to that subheading from heading
5608.
g. Subheadings 5806.10-5806.39 (Narrow Fabrics)
It is proposed to amend the first tariff shift rule for subheadings
5806.10-5806.39 by adding heading 5801 to the listed exceptions.
Heading 5801 provides for woven pile and chenille fabrics, and it is
the position of Customs that the processing of those fabrics into goods
classifiable in subheadings 5806.10-5806.39 does not constitute a
substantial transformation.
h. Heading 5810 (Embroidered Fabric)
In response to several similar comments, it is proposed to
rearrange, and revise the wording of, the two tariff shift rules for
goods of this heading in order to conform to prior rulings regarding
the weight and effect of the embroidery.
i. Heading 5903 (Coated Fabrics)
It is proposed to amend the first tariff shift rule for this
heading by replacing the exclusion reference to subheadings ``5806.31
through 5806.39'' by a reference to heading ``5806''. This will have
the principal effect of widening the reference to include woven pile
fabrics which were inadvertently omitted from the exclusion language in
this tariff shift rule.
j. Headings 6101, 6102, 6201 and 6202 (Assembled Garments)
In response to a comment, it is proposed to amend the third tariff
shift rule for each of these headings in order to conform the wording
to that used in other Sec. 102.20 rules which specify a change ``to
assembled garments from unassembled parts''.
k. Subheadings 6103.21-6103.29, 6104.21-6104.29, 6203.21-6203.29 and
6204-21-6204.29 (Ensembles)
In response to a comment, it is proposed to add to each of these
subheadings two new tariff shift rules in order to make the rules for
suits (see, for example, the interim rules for subheadings 6103.11-
6103.19) applicable to sets of garments (ensembles) that are
essentially the same as suits.
l. Headings 6115-6117 and 6213-6214 (Shawls, Scarves, and the Like and
Handkerchiefs)
In response to a comment, it is proposed to divide the interim
tariff shift rule for headings 6115-6117 in order to set forth a
separate rule for subheading 6117.10 which would allow a change from
greige fabric to shawls, scarves, etc. by means of dyeing, printing,
cutting and stitching. The proposed separate rules set forth in this
document for headings 6115-6116 and for subheadings 6117.20-6117.90
reflect the terms of the interim rule.
In response to the same commenter, it is proposed to amend the
interim rule for headings 6213-6214: (1) to remove the knit-to-shape
proviso which does not appear to be appropriate for the type of goods
covered; and (2) to add a second tariff shift rule for the same reason
stated above for subheading 6117.10.
m. Heading 6205 (Shirts)
In response to a comment, it is proposed to delete the word
``shoulder'' before ``yokes'' in the second and third tariff shift
rules because (1) yokes on shirts by definition are only in the
shoulder area and (2) this would conform the wording to the terminology
used in the rules under headings 6105, 6106 and 6206.
n. Headings 6302 and 6304 (Bed Linen and Other Furnishings)
In response to a comment, it is proposed for each of these headings
to add a second tariff shift rule to the interim paragraph (1) rule to
reflect current Customs rulings. The proviso in each new rule, which
requires at least cutting ``finished fabric'' on all sides and hemming
``all cut edges'' and ``at least one other subsequent process'',
clarifies the fact that fabric finishing operations are not considered
and eliminates any uncertainty regarding the minimum amount of hemming
that must be performed. The present view of Customs is that such minor
embellishments should not be considered.
o. Heading 6303 (Curtains, Blinds and Valences)
In the second tariff shift rule, it is proposed to amend the
proviso as follows: (1) to require ``more than'' (rather than ``at
least'') cutting on all sides ``and'' hemming the cut edges; (2) by
removing the requirement for ``a significant sewing or assembly
operation''; and (3) by adding at the end the words ``and with no
consideration being given to minor processing''. Customs believes that
the ``minor processing'' standard, which is defined in Sec. 102.1(m),
is preferable to the undefined ``significant'' standard; thus,
processing which is other than ``minor'' should, by definition, be
considered significant.
In addition, it is proposed to amend the third tariff shift rule by
adding a reference to heading 5811 so as to include quilted fabrics in
the listed exceptions since a good may contain a small amount of
quilted fabric without being considered a ``quilted article''.
p. Subheadings 6306.91-6306.99 (Awnings, Sunblinds and Camping Goods)
It is proposed to amend this tariff shift rule by adding language
at the end of the proviso to clarify that minor processing may not be
considered in determining whether the proviso conditions have been met.
q. Subheading 6307.90 (Made up Articles)
Customs believes that the interim tariff shift rule should be
amended to prescribe that the sewing or assembly operation be
``substantial'' in amount rather than simply ``significant''. While
this proposed amendment appears to be minor and does not materially
alleviate the subjectivity of the rule, Customs notes that it: (1)
effectively changes the test for manufacturing or processing
[[Page 22321]] operations from a qualitative standard to a quantitative
standard, which is how Customs has been applying Sec. 12.130; and (2)
conforms the terminology used in the rule to the wording of
Sec. 12.130.
New Chapter 65 Note
It is proposed to add a Note to the Chapter 65 rules to ensure that
a single country of origin always will be identifiable in the case of
textile goods. As in the case of the new Note proposed for the Chapter
42 rules as discussed above, this new Note is modeled on Note 3 to the
Section XI rules and thus reflects the proposed amendment to that
Section XI Note as discussed above.
Headings 7010-7018 (Glass Articles)
With particular regard to lead crystal stemware of heading 7013, a
commenter argued that the interim rules for headings 7010-7018
represent an abandonment of existing principles used for determining
country of origin and such action would significantly harm its client's
business. This commenter cited, as an example of an existing principle,
Headquarters Ruling Letter (HRL) 734387 dated June 8, 1992, in which
Customs held that the processing in Ireland of uncut lead crystal
stemware ``blanks'' originating in various continental European
countries ``substantially transformed'' the ``blanks'' into ``formal
crystal stemware'', thus making Ireland the country of origin of the
finished product.
Customs on a number of occasions has previously ruled on the
question of whether extensive and intricate cutting of crystal
constituted a substantial transformation. In HRL 734387 mentioned by
the commenter, Customs ruled that crystal glassware ``blanks'' were
substantially transformed into formal, elegant stemware suitable for
indoor decoration by the extensive hand-cutting operations performed in
Ireland. Customs based this determination on the fact that the hand-
cutting operation was a substantial and intricate processing operation
performed by highly skilled craftsmen which significantly changed the
appearance and the shape of the stemware, imparting a decorative use to
the glassware. Customs also noted that the glassware lost its identity
as mere glassware and became a new article bought primarily for its
appearance rather than for its utilitarian use. Similarly, in HRL
734283 dated June 16, 1992, Customs found that a crystal blank bowl,
vase and basket were substantially transformed as a result of extensive
and intricate hand-cutting done in Ireland. In another ruling, HRL
734653 dated October 22, 1992, Customs found that crystal blank bowls,
which were hand-cut in the United States, were substantially
transformed by the extensive operations performed there.
Most recently, Customs held in HRL 735310 dated April 6, 1994, that
hand-cutting and acid polishing crystal stemware blanks in the United
States resulted in a substantial transformation of the blanks. Customs
found in this case that the hand-cutting and polishing operations were
extensive and intricate and were performed entirely in a single
country, the United States.
The foregoing cases are to be distinguished from HRL 731617 dated
September 1, 1989, in which Customs held that the grinding and
polishing of aluminum trays and bowls in Mexico did not substantially
transform the articles. Customs held that neither the grinding nor the
polishing changed the fundamental character or use of the articles.
Rather, Customs concluded that it was the constituent material,
aluminum alloy, coupled with the shape and design of the articles
created by the U.S. sandcasting process, that imparted the essential
character to the finished articles and determined their ultimate use.
Customs, however, also concluded that in certain cases the
operation of cutting stemware did not result in a substantial
transformation. One such case was HRL 733036 dated April 9, 1990, in
which Customs found that there was no change in name, character or use
caused by the simple hand cuts made to the glass in East Germany which,
although attractive, did not increase the value of the stemware.
The case-by-case application of the substantial transformation
standard in this area has been very controversial over the years.
Therefore, in order to allow the results that would be achieved under
the case-by-case approach while promoting objectivity and
predictability of origin determinations involving these articles,
Customs is proposing in this document to amend the interim rules
prescribed for headings 7010-7018 to include a new rule that specifies
a change from uncut and unpolished glassware blanks of heading 7013 to
cut and polished glassware of that heading, provided that there has
been a substantial amount of both cutting and polishing operations in a
single country. As an example, Customs would consider the goods covered
by HRL 735310, discussed above, as meeting this proposed new standard.
Also, upon further review of these rules, Customs has discovered
that the specific rule applicable to goods classified in heading 7011,
which covers glass envelopes and parts thereof for electrical lamps,
cathode-ray tubes or similar items, does not reflect Customs position
regarding substantial transformation. This rule allows changes from
glass profiles, classified in subheading 7003.30. In HRL 557387 dated
October 1, 1993, Customs ruled that glass face plates for cathode ray
tubes, classified in subheading 7011.20, which were produced in Mexico
from Korean-origin glass profiles classified in subheading 7003.30, had
not been substantially transformed into a product of Mexico. Customs
concluded that ``the essential form, shape and character of the glass
product [the face plates] were determined by the manufacturing
operation in Korea'' for the production of the profiles. Since Customs
continues to maintain the position stated in HRL 557387, it is proposed
to modify the interim Sec. 102.20 specific rules to disallow a change
to heading 7011 from subheading 7003.30.
Finally, Customs has reconsidered the necessity for that provision
contained in the interim rules for headings 7010 through 7018 which
precludes a tariff shift from heading 7020. Customs believes that in
order for such a change in tariff classification to occur, there would
have to be either (1) a genuine creation of a new and different article
having a new name, character or use, or (2) a tariff classification
change resulting solely from a non-qualifying operation, such as a
``change in end use'' or ``dismantling or disassembly'', which pursuant
to Sec. 102.17 would not confer origin. Since the Part 102 rules
already accomplish the purpose behind the limitation regarding a shift
from heading 7020, it is proposed to remove that limitation. In
addition, it is proposed to modify the interim rules to specifically
allow a change from another heading within the group, because the same
principles would apply in such a case.
Accordingly, in order to reflect the above considerations, it is
proposed to replace the interim rules for headings 7010-7018 with a new
structure involving one rule for heading 7010, one rule for heading
7011, and two rules for headings 7012-7018.
Subheadings 8301.10-8301.50 (Padlocks, Locks, Clasps and Frames)
It is proposed to amend the tariff shift rule for these subheadings
in order to rectify the incorrect reference ``8301.40'' which should
read ``8301.50'' so as to correspond to the subheadings covered in the
``HTSUS'' column. [[Page 22322]]
Section XVI--Note
This note, which disallows tariff changes within Chapters 84 and 85
occurring only as a result of the application of GRI 2(a), would no
longer appear necessary since the proposed amendment to interim
Sec. 102.17(e), as discussed above, would accomplish the same purpose.
Accordingly, it is proposed to delete this note.
Subheading 8401.20 (Machinery and Apparatus for Isotopic Separation)
It is proposed to modify the text of the interim tariff shift rule,
and to add a second tariff shift rule, in order to clarify that no
change is allowed from parts of subheading 8401.20 to parts of the same
subheading. Thus, under the proposed new standard for subheading
8401.20, a change from parts of subheading 8401.20 is allowed only if
the change is to completed machinery and apparatus of that subheading.
Subheading 8415.90 (Parts of Air Conditioning Machines)
The interim rule allows a change to this subheading ``from any
other heading, except a change resulting from a simple assembly.'' It
is proposed to revise this rule to allow a change to this subheading
``from any other subheading, except when the change is from heading
7411, 7608, 8414, 8501, and 8535 through 8537 as a result of merely a
simple assembly.'' Under this proposed change, the simple assembly
limitation is specified only with reference to headings from which a
tariff shift could possibly result merely from a simple assembly as
defined in Sec. 102.1(o).
Subheadings 8470.10-8471.91 (Calculating, Accounting and ADP Machines)
The interim rule allows a change to these subheadings ``from any
other subheading, except when resulting from a simple assembly.'' It is
proposed to revise this rule to allow a change to these subheadings
either ``from any subheading outside that group, except from heading
8473'' or ``from any subheading within that group or from heading 8473,
provided the change is not the result of merely a simple assembly.''
Under this proposed change, the simple assembly limitation is specified
only with reference to that heading from which a tariff shift could
possibly result merely from a simple assembly as defined in
Sec. 102.1(o). Thus, under the proposed rule, changes would be allowed
to subheading 8470.10 through 8471.91 from any subheading outside that
group, except heading 8473.
Subheadings 8471.92-8472.90 (Other Machines for Transcribing or
Processing Coded Data and Other Office Machines)
The interim rule allows a change to these subheadings ``from any
other subheading, except when resulting from a simple assembly.'' It is
proposed to revise this rule in the same manner, and for the same
reasons, as stated above for subheadings 8470.10-8471.91.
Heading 8473 (Parts and Accessories of Machines of Headings 8469-8472)
The interim tariff shift rule provides for a change to this heading
``from any other heading, except heading 8501, when resulting from a
simple assembly.'' Upon a further review, Customs has identified other
provisions from which a change to heading 8473 could possibly result
merely from a simple assembly as defined in Sec. 102.1(o). Therefore,
it is proposed to revise this rule to allow a change to this heading
``from any other heading, except when the change is from heading 8414,
8501, 8504, 8534, 8541, or 8542 as a result of merely a simple
assembly.''
Subheadings 8474.10-8474.80 (Machinery for Sorting, Grinding, etc.)
The interim rule allows a change to these subheadings ``from any
other subheading, except when resulting from a simple assembly.'' It is
proposed to revise this rule to allow a change to these subheadings
either ``from any subheading outside that group, except heading 8501''
or ``from a subheading within that group or heading 8501, provided the
change is not the result of a simple assembly.'' Under this proposed
change the simple assembly limitation is specified only with reference
to those tariff provisions from which a tariff shift could possibly
result merely from a simple assembly as defined in Sec. 102.1(o), in
consideration of the fact that the machinery in this group is very
similar and frequently consists of little more than a motor with some
form of attachment.
Subheadings 8482.10-8482.80 (Bearings)
A commenter cited HRL 083455 dated September 6, 1989, which held
that the assembly of a tapered roller bearing was a simple assembly
that did not result in a substantial transformation; therefore, the
country of origin was held to be Romania where the cup and cone were
manufactured. This commenter noted that although the second tariff
shift rule under subheadings 8482.10-8482.80 is not a total departure
from this ruling since the rule provides for bearings with domestic
inner and outer races, nevertheless, this tariff shift rule is
inconsistent with the ruling insofar as it allows for assemblies of
parts which incorporate only domestic balls/rollers. Another commenter
asserted that the rollers or balls represent a small percentage of the
value (5 to 10 percent of the cost of production) and cited a finding
by the Commission of the European Communities that the process or
operations which result in the manufacture of balls or rollers or
needle bearings and cages are of minor importance compared with the
manufacture of the inner and outer rings and may be disregarded for the
purposes of defining the origin of roller bearings.
In light of both the imputed minimal value of the balls/rollers and
the fact that the above-cited ruling held that the cup and cone provide
the essential character of the bearing, it is proposed to amend the
second tariff shift rule for goods of subheadings 8482.10-8482.80 to
not allow origin to be based upon the country where the balls and
rollers are made.
Subheading 8512.40 (Windshield Wipers, Defrosters and Demisters)
The interim rule allows a change to this subheading ``from any
other subheading, except when resulting from a simple assembly.'' It is
proposed to revise this rule to allow a change to this subheading
``from any other subheading, except when the change is from subheading
8512.90 or heading 8501 as a result of a simple assembly.'' Under this
proposed change, the simple assembly limitation is specified only with
reference to those tariff provisions from which a tariff shift could
possibly result merely from a simple assembly as defined in
Sec. 102.1(o).
Subheadings 8517.10-8517.82 (Telephone and Telegraph Apparatus)
The interim rule allows a change to these subheadings ``from any
other subheading, including another subheading within that group,
except when resulting from a simple assembly.'' It is proposed to
revise this rule to allow a change to these subheadings either ``from
any subheading outside that group, except from subheading 8517.90'' or
``from subheading 8517.90, provided the change is not the result of a
simple assembly.'' Under this proposed change, the simple assembly
limitation is specified only with reference to that subheading from
which a tariff shift could possibly result merely from a simple
assembly as defined in Sec. 102.1(o). [[Page 22323]]
Subheadings 8528.10-8528.20 (Television Receivers)
The interim rule allows a change to these subheadings ``from any
other subheading, including another subheading within that group.''
Thus, the interim rule allows a change from television tubes. Customs
believes that the television tube may determine origin for some
television sets. Accordingly, it is proposed to add an exclusion for
television tubes (subheadings 8540.11 through 8540.12).
Subheadings 8531.10-8531.80 (Other Electric Sound or Visual Signaling
Apparatus)
The interim rule allows a change to these subheadings ``from any
other subheading, including another subheading within that group,
except when resulting from a simple assembly.'' It is proposed to
revise this rule to allow a change to these subheadings ``from any
other subheading, including another subheading within that group,
except when the change is from subheading 8531.90 as a result of a
simple assembly.'' Under this proposed change, the simple assembly
limitation is specified only with reference to that subheading from
which a tariff shift could possibly result merely from a simple
assembly as defined in Sec. 102.1(o).
Headings 8541-8542 (Semiconductor Devices and Integrated Circuits)
It is proposed to modify the second and third interim tariff shift
rules for these headings. The proposed change to the second rule would
clarify that, under this rule, a change from an unmounted chip, die or
wafer of heading 8541 or 8542 is allowed only if the change is to a
mounted chip, die or wafer of heading 8541 or 8542. With regard to the
third tariff shift rule, which refers to a change ``to any programmed
chips from any unprogrammed chips'', the proposed change is intended to
align the rule more closely with the court decision upon which the rule
was based (Data General Corporation v. United States, 4 CIT 182 (1982),
discussed above, in which the court specifically held that the
programming of PROMs is a substantial transformation).
Headings 9101-9107 (Clocks and Watches) and Headings 9108-9109
(Finished Clock and Watch Movements)
Under the interim Sec. 102.20 rule applicable to headings 9101-
9107, a change in classification to that group from any other heading,
except headings 9108-9110, will result in a country of origin change.
Headings 9108-9110 encompass complete and incomplete watch and clock
movements, assembled and unassembled. Under the interim Sec. 102.20
rule applicable to headings 9108-9109 (complete and assembled watch and
clock movements), a change to either of these headings from any other
heading, with the exception of heading 9110, will effect a country of
origin change. Heading 9110 includes: complete watch and clock
movements, unassembled or partly assembled (movement sets); incomplete
watch or clock or watch movements, assembled; and ``rough'' watch or
clock movements (sets of unassembled parts of the type described in
Additional U.S. Note 1(g)).
A commenter stated that since, under current international
practice, the movement will often originate in one country or in
several countries while assembly of the watch or clock may take place
in another country, country of origin will not be determined on the
basis of the interim Sec. 102.20 tariff shift rule applicable to
watches and clocks of headings 9101-9107. With respect to finished
movements of headings 9108-9109, this commenter was similarly of the
opinion that the specified interim Sec. 102.20 tariff shift rule will
frequently be inapplicable since parts of movements classified under
heading 9110 often originate in one country while the movement may be
assembled in a second country. This commenter argued that the interim
rules do not reflect commercial reality because substantial assembly
operations may take place in the country where the movement is
assembled.
It has been the longstanding position of Customs that the country
of origin of a watch or clock is the country of manufacture of the
watch or clock movement. The addition of the hands, dial, case, or
watchband add definition to the watch but do not change the character
or use of the watch or clock movement which is the ``guts'' of the time
piece. See, for example, HRL 735197 dated January 4, 1994. This Customs
position is based on the determination that the last substantial
transformation of a finished watch or clock is the assembly of the
movement. The interim Sec. 102.20 rule applicable to watches and clocks
(the rule for headings 9101-9107) was intended to track current
practice, and does so, with the exception noted below. The interim
Sec. 102.20 rule applicable to complete movements (the rule for
headings 9108-9109) also essentially followed present practice, with
the exception noted below, since incomplete or partial movements
encompassed by heading 9110 are the ``guts'' of the complete movement.
Customs notes, however, that heading 9110 also includes ``complete
watch or clock movements, unassembled'' and ``rough'' watch or clock
movements. Since under current practice Customs has repeatedly held
that the assembly of individual parts to create a movement (or other
similar good of heading 9110) results in a substantial transformation
(see, for example, HRL 733533 dated August 3, 1990), it is apparent
that the exception language in the interim Sec. 102.20 rules for
watches and clocks of headings 9101-9107 and for complete and assembled
movements of headings 9108-9109 does not reflect this practice.
Accordingly, it is proposed to amend the Sec. 102.20 rules for
clocks and watches and for complete and assembled movements by adding
in each case a second rule to allow changes from complete movements,
unassembled (movement sets), of subheadings 9110.11 or 9110.90, or from
rough movements of subheading 9110.19 or 9110.90.
Subheadings 9404.10-9404.30 and 9404.90 (Bedding and Similar
Furnishings)
It is proposed to replace the Sec. 102.20 listings for subheadings
9404.10-9404.30 and 9404.90 by the following: (1) subheadings 9404.10-
9404.29, the tariff shift rule for which would be in substance the same
as the interim rule prescribed for subheadings 9404.10-9404.30; and (2)
subheadings 9404.30-9404.90, the tariff shift rule for which would, in
the case of sleeping bags, comforters, pillows, and similar filled
articles, allow a change in the country of origin as a result of the
insertion of down and/or feathers but not as a result of the insertion
of other materials. In addition, it is proposed to add a Note to the
Chapter 94 rules which would set forth a country of origin rule for
goods of subheadings 9404.30 through 9404.90 which do not meet the
appropriate tariff shift rule specified for those subheadings.
3. Part 134
Section 134.32
In Sec. 134.32 of the Customs Regulations (19 CFR 134.32), it is
proposed to remove paragraph (r) (which was adopted in T.D. 94-4 in
order to add an exception to marking requirements in the case of non-
textile U.S. goods that are exported and returned after repairs or
alterations performed abroad). In light of the proposed removal of
interim Sec. 102.14 as discussed above, Customs believes that
[[Page 22324]] this paragraph would no longer be appropriate or
necessary.
Section 134.43
T.D. 94-4 amended Sec. 134.43 of the Customs Regulations (19 CFR
134.43) by adding a new paragraph (e) which prescribed specific methods
of marking goods covered by interim Sec. 102.14. In light of the
proposed removal of interim Sec. 102.14 as discussed above, Customs
proposes to remove this paragraph (e) which would no longer appear
necessary or appropriate.
B. Proposed Changes to the Proposed Regulatory Amendments
As stated above, the purpose of this document is also to republish
all of the proposed regulatory amendments contained in the January 3,
1994, notice of proposed rulemaking in order that certain changes
thereto may be proposed with opportunity for public comment thereon.
The changes to the January 3, 1994, proposals reflected in this
document are discussed below.
Elimination of Proposed Amendment to Sec. 4.80b
The January 3, 1994, notice of proposed rulemaking included a
proposal to amend Sec. 4.80b of the Customs Regulations (19 CFR 4.80b)
by adding at the end of paragraph (a) a sentence stating that the Part
102 rules apply for purposes of determining whether merchandise is
manufactured or processed into a new and different product. On further
review, Customs has determined that this proposed amendment should not
be made.
The Jones Act (46 U.S.C. App. 883), pursuant to which Sec. 4.80b is
promulgated, is designed to reserve the coastwise trade for qualified
U.S. vessels, a purpose which is not necessarily related to the origin
of the goods involved in such trade. Thus, the term ``new and different
product'' as used in Sec. 4.80b relates only to the criteria for
deeming merchandise not to have been ``transported coastwise'' for
purposes of the Jones Act. Customs has not interpreted the Sec. 4.80b
language to be synonymous with the term ``substantial transformation'',
that is, the requirement that an article be subjected to a processing
that results in a ``new and different article of commerce, having a new
name, character and/or use'' different from that which it originally
possessed. For example, pursuant to T.D. 91-32 and several rulings
issued in accordance with this T.D., Customs has established a practice
under Sec. 4.80b to determine, solely on the basis of whether there has
been a change in ASTM grade, whether a ``new and different product''
results from a fuel oil blending operation. Such a minimal change has
not been ruled sufficient in itself to effect a ``substantial
transformation''.
Accordingly, the proposed amendments set forth in this document do
not include a proposal to amend Sec. 4.80b.
Removal of Sec. 10.22
Section 10.22 of the Customs Regulations (19 CFR 10.22) provides
that for all assembled goods which are ``entitled to'' (whether or not
they are in fact the subject of a claim for) a duty allowance under
subheading 9802.00.80, HTSUS, the country of assembly is the country of
origin of such goods for marking purposes. Thus, Sec. 10.22 operates in
practice as an exception to the country of origin marking requirements
of Part 134 of the Customs Regulations.
Subheading 9802.00.80 duty treatment can be properly applied to
assembled goods having only a few U.S. components, with most of the
other components originating in countries other than either the United
States or the country of assembly. In such a case, the true country of
origin as determined under the Part 102 rules may be one of those other
foreign countries, whereas by application of Sec. 10.22 the country of
origin for marking purposes would be the country of assembly. Thus, if
the regulatory amendments set forth in the January 3, 1994, notice of
proposed rulemaking and republished in this document (the basic intent
of which is to result in uniform application of the rules of origin
contained in Part 102) are adopted as a final rule, retention of
Sec. 10.22 could lead to incorrect or inconsistent country of origin
determinations and country of origin marking. Accordingly, Customs
proposes in this document to remove Sec. 10.22.
Additional Amendment to Sec. 177.22(a)
The January 3, 1994, notice of proposed rulemaking included a
proposed amendment to Sec. 177.22(a) of the Customs Regulations (19 CFR
177.22(a)) which defines ``country of origin'' for purposes of
government procurement country of origin determinations. This proposed
amendment consisted of adding at the end thereof a sentence stating
that the expression ``wholly the growth, product, or manufacture''
refers to articles wholly obtained or produced within the meaning of
interim Sec. 102.1(g).
In response to a comment from the Office of General Counsel,
General Services Administration (GSA), Customs is proposing to revise
Sec. 177.22(a) in order to also make reference to use of the Part 102
rules for determining when there is a ``new and different article'' for
purposes of that section. This provision would be similar to the
proposals to amend Secs. 10.176 and 10.195 of the Customs Regulations
(19 CFR 10.176 and 10.195) as contained in the January 3, 1994, notice
of proposed rulemaking and as set forth below. Customs also notes that,
as stated to Customs by the GSA, this additional amendment will be
consistent with Article 1004 of the NAFTA which requires that, if the
parties apply the marking rules established pursuant to NAFTA Annex 311
in their normal course of trade (as Customs is proposing in this
document to apply the Part 102 rules), such rules will be applicable
for NAFTA government procurement purposes.
C. Final Rule Delayed Effective Date
In consideration of the fact that the regulatory amendments set
forth in the January 3, 1994, notice of proposed rulemaking, as
republished in this document with the changes discussed above, would
have the effect of making the Part 102 interim rules applicable for all
country of origin determinations under the Customs and related laws,
including for purposes of country of origin marking, Customs believes
that, in keeping with the principle enunciated in National Juice
Products Association v. United States, 10 CIT 48, 628 F.Supp. 978 (CIT
1986), it would be an appropriate exercise of administrative discretion
in this particular case to solicit comments from the public regarding a
proposed delayed effective date.
Although National Juice Products involved a change of Customs
position effected through an interpretive ruling rather than through
amendments to the Customs Regulations, and notwithstanding the fact
that the Part 102 rules merely codify Customs' existing position
regarding substantial transformation, Customs believes that the
circumstances cited by the Court to justify a delayed effective date in
that case would be no less applicable here.
Accordingly, it is proposed that, if Customs determines that the
proposed amendments set forth in the January 3, 1994, notice of
proposed rulemaking as republished in this document with the changes
discussed above, together with the interim regulations published as
T.D. 94-4 and the proposed changes thereto as set forth in this
document, should be adopted as a final rule with whatever changes as
may be necessary to address comments submitted by the
[[Page 22325]] public, the regulatory changes incorporated in the final
rule would become effective 90 days after the date of publication of
that final rule document in the Federal Register. Comments from the
public are invited on this proposal for a delayed effective date.
Comments
Before adopting the proposed amendments as a final rule,
consideration will be given to any written comments (preferably in
triplicate) timely submitted to Customs. Comments submitted will be
available for public inspection in accordance with the Freedom of
Information Act (5 U.S.C. 552), Sec. 1.4, Treasury Department
Regulations (31 CFR 1.4), and Sec. 103.11(b), Customs Regulations (19
CFR 103.11(b)), on regular business days between the hours of 9:00 a.m.
and 4:30 p.m. at the Regulations Branch, Office of Regulations and
Rulings, Franklin Court, 1099 14th Street, NW., Suite 4000, Washington,
DC.
Executive Order 12866
This document does not meet the criteria for a ``significant
regulatory action'' as specified in E.O. 12866.
Regulatory Flexibility Act
Pursuant to the provisions of the Regulatory Flexibility Act (5
U.S.C. 601 et seq.), it is certified that, if adopted, the proposed
amendments will not have a significant economic impact on a substantial
number of small entities. Accordingly, the proposed amendments are not
subject to the regulatory analysis or other requirements of 5 U.S.C.
603 and 604.
Drafting Information
The principal author of this document was Francis W. Foote, Office
of Regulations and Rulings, U.S. Customs Service. However, personnel
from other offices participated in its development.
List of Subjects
19 CFR Part 10
Customs duties and inspection, Imports, Reporting and recordkeeping
requirements.
19 CFR Part 12
Customs duties and inspection, Labeling, Marking, Reporting and
recordkeeping requirements, Textiles and textile products.
19 CFR Part 102
Customs duties and inspections, Imports, Reporting and
recordkeeping requirements, Rules of origin, Trade agreements.
19 CFR Part 134
Country of origin, Customs duties and inspections, Imports,
Labeling, Marking, Packaging and containers.
19 CFR Part 177
Administrative practice and procedures, Customs duties and
inspection, Imports, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
For the reasons stated above, it is proposed to amend Chapter I of
Title 19, Code of Federal Regulations (19 CFR Chapter I), as set forth
below.
PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE,
ETC.
1. The general authority citation for part 10 and the specific
authority citations for Secs. 10.171-10.178 and Secs. 10.191-10.198
continue to read as follows, and the specific authority citation for
Sec. 10.22 is removed:
Authority: 19 U.S.C. 66, 1202 (General Note 17, Harmonized
Tariff Schedule of the United States), 1321, 1481, 1484, 1498, 1508,
1623, 1624;
* * * * *
Sections 10.171-10.178 also issued under 19 U.S.C. 2461 et seq.;
Sections 10.191-10.198 also issued under 19 U.S.C. 2701 et seq.;
* * * * *
2. Section 10.12 is amended by revising the last sentence of
paragraph (e) to read as follows:
Sec. 10.12 Definitions.
* * * * *
(e) * * * If the article consists wholly or partially of foreign
components or materials, the manufacturing process must be such that
the foreign components or materials have been substantially transformed
as provided in Sec. 10.14(b).
3. Section 10.14 is amended by revising the text in paragraph (b)
preceding the examples to read as follows:
Sec. 10.14 Fabricated components subject to the exemption.
* * * * *
(b) Substantial transformation of foreign-made articles or
materials. Foreign-made articles or materials will become products of
the United States if they undergo a process of manufacture in the
United States which results in their substantial transformation.
Substantial transformation occurs when under part 102 of this chapter,
the country of origin of a good which is produced in the United States
from foreign materials is determined to be the United States.
* * * * *
4. Section 10.22 is removed.
5. Section 10.171 is amended by adding a new paragraph (c) to read
as follows:
Sec. 10.171 General.
* * * * *
(c) Wholly the growth, product, or manufacture defined. For
purposes of Secs. 10.171 through 10.178, the expression ``wholly the
growth, product, or manufacture'' refers to articles and materials
wholly obtained or produced within the meaning of Sec. 102.1(g) of this
chapter.
6. Section 10.176(a) is revised to read as follows:
Sec. 10.176 Country of origin criteria.
(a) Merchandise produced in a beneficiary developing country or any
two or more countries which are members of the same association of
countries. Any article which is wholly the growth, product, or
manufacture of a beneficiary developing country or of any two or more
countries that are members of the same association of countries or
which is a new or different article of commerce that has been grown,
produced, or manufactured in a beneficiary developing country, and
which is imported directly from such beneficiary developing country or
member countries, may qualify for duty-free entry under the Generalized
System of Preferences (GSP). However, duty-free entry under GSP may be
accorded only if the sum of the cost or value of the materials produced
in the beneficiary developing country or any two or more countries
which are members of the same association of countries that is treated
as one country under section 502(a)(3), Trade Act of 1974, as amended
(19 U.S.C. 2462(a)(3)), plus the direct costs of processing operations
performed in such beneficiary developing country or member countries,
is not less than 35 percent of the appraised value of the article at
the time of its entry into the customs territory of the United States.
For purposes of this section, a ``new and different article of
commerce'' exists when under part 102 of this chapter, the country of
origin of a good, which is produced in a beneficiary developing country
from foreign materials, is determined to be that beneficiary developing
country.
* * * * *
7. Section 10.191(b)(3) is revised to read as follows:
[[Page 22326]]
Sec. 10.191 General.
* * * * *
(b) Definitions.
* * * * *
(3) Wholly the growth, product, or manufacture. For purposes of
Sec. 10.191 through Sec. 10.198, the expression ``wholly the growth,
product, or manufacture'' refers to articles and materials wholly
obtained or produced within the meaning of Sec. 102.1(g) of this
chapter.
* * * * *
8. Section 10.195(a)(1) is amended by adding a sentence at the end
to read as follows:
Sec. 10.195 Country of origin criteria.
(a) Articles produced in a beneficiary country. (1) * * * For
purposes of this section, a ``new and different article of commerce''
exists when under part 102 of this chapter, the country of origin of a
good, which is produced in a beneficiary country from foreign
materials, is determined to be that beneficiary country.
* * * * *
PART 12--SPECIAL CLASSES OF MERCHANDISE
1. The authority citation for part 12 continues to read in part as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 20,
Harmonized Tariff Schedule of the United States (HTSUS)), 1624;
* * * * *
Sections 12.130 and 12.131 also issued under 7 U.S.C. 1854;
* * * * *
2. Section 12.130 is amended by removing paragraphs (d) and (e) and
redesignating paragraphs (f) through (i) as paragraphs (d) through (g),
and by revising paragraph (b) to read as follows:
Sec. 12.130 Textiles and textile products country of origin.
* * * * *
(b) Country of origin. For the purpose of this section and except
as provided in paragraph (c) of this section, a textile or textile
product, subject to section 204, Agricultural Act of 1956, as amended,
imported into the customs territory of the United States shall be a
product of a particular foreign territory or country, or insular
possession of the U.S., if it is wholly obtained or produced (as
defined in Sec. 102.1(g) of this chapter) in that foreign territory or
country, or insular possession. However, except as provided in
paragraph (c) of this section, a textile or textile product, subject to
section 204 of the Agricultural Act of 1956, as amended, which consists
of materials produced or derived from, or processed in, more than one
foreign territory or country, or insular possession of the U.S., shall
be a product of that foreign territory or country, or insular
possession, where it last underwent a substantial transformation. A
textile or textile product will be considered to have undergone a
substantial transformation when under part 102 of this chapter, the
country of origin of a good, which is produced in a country from
foreign materials, is determined to be that country.
* * * * *
PART 102--RULES OF ORIGIN
1. The authority citation for part 102 is revised to read as
follows:
Authority: 19 U.S.C. 66, 1202 (General Note 20, Harmonized
Tariff Schedule of the United States), 1624, and the North American
Free Trade Agreement Implementation Act, Pub. L. 103-182, 107 Stat.
2057.
2. Section 102.0 is revised to read as follows:
Sec. 102.0 Scope.
This part sets forth rules for determining the country of origin of
imported goods for purposes of the Customs and related laws and the
navigation laws of the United States. The rules in this part regarding
goods wholly obtained or produced in a country are intended to apply
for all such purposes. The rules in this part which determine when a
good becomes a new and different article of commerce as a result of
manufacturing processes in a given country, also are intended to apply
for all purposes where this requirement exists for ``country of
origin'' or ``product of'' determinations under the Customs laws. The
rules in this part also will be applied by the United States for
determining when a good is a good of a North American Free-Trade
Agreement (NAFTA) country for the purposes specified under Annex 311 of
the NAFTA.
Sec. 102.1 [Amended]
3. In section 102.1, paragraph (p) is removed and paragraph (q) is
redesignated as paragraph (p).
4. Section 102.11(d) is revised to read as follows:
Sec. 102.11 General rules.
* * * * *
(d) Where the country of origin of a good cannot be determined
under paragraph (a), (b) or (c) of this section, the country of origin
of the good shall be determined as follows:
(1) If the good was produced only as a result of minor processing,
the country of origin of the good is the country or countries of origin
of each material that merits equal consideration for determining the
essential character of the good;
(2) If the good was produced by simple assembly and the assembled
parts that merit equal consideration for determining the essential
character of the good are from the same country, the country of origin
of the good is the country of origin of those parts; or
(3) If the country of origin of the good cannot be determined under
paragraph (d)(1) or (d)(2) of this section, the country of origin of
the good is the last country in which the good underwent production.
Sec. 102.14 [Removed]
5. Section 102.14 is removed and reserved.
Sec. 102.16 [Removed]
6. Section 102.16 is removed and reserved.
7. Section 102.17 is amended by revising the introductory text and
paragraph (e) to read as follows:
Sec. 102.17 Non-qualifying operations.
A foreign material shall not be considered to have undergone an
applicable change in tariff classification specified in Sec. 102.20 or
to have met any other applicable requirements of that section merely by
reason of one or more of the following:
* * * * *
(e) Collecting parts that, as collected, are classifiable in the
same tariff provision as an assembled good pursuant to General Rule of
Interpretation 2(a), without any additional operation other than minor
processing.
8. Section 102.18 is revised to read as follows:
Sec. 102.18 Rules of interpretation.
(a) When General Rule of Interpretation (GRI) 2(a) is referred to
in Sec. 102.20 as an exception to an allowed change in tariff
classification, this means that such change will not be acceptable for
purposes of that section if the change results from the assembly of
parts into an incomplete or unfinished good which is classifiable in
the same manner as a complete or finished good pursuant to GRI 2(a).
(b)(1) For purposes of identifying the material or materials that
impart the essential character of a good under Sec. 102.11, the only
materials that shall be taken into consideration are those domestic or
foreign materials that are classified in a tariff provision from which
a change in tariff classification is [[Page 22327]] not allowed under
the Sec. 102.20 specific rule or other requirements applicable to the
good. For purposes of this paragraph (b)(1):
(i) The materials that may be considered must be classified in a
tariff provision from which a change in tariff classification is not
allowed under the specific rule or other requirements applicable to the
good under consideration. For example, in the case of a good classified
in HTSUS subheading 8607.11 (the rule for which specifies a change to
subheading 8607.11 from any other subheading, except from subheading
8607.12, and except from subheading 8607.19 when that change is
pursuant to GRI 2(a)), the only materials that may be considered for
purposes of identifying the materials that impart the essential
character of the good are those that are classified in subheadings
8607.11, 8607.12 and, if the tariff shift is pursuant to GRI 2(a),
8607.19; and
(ii) Materials that may be considered include materials produced by
the producer of the good and incorporated in the good. For example, if
a producer of a good purchases raw materials and converts those raw
materials into a component that is incorporated in the good, that
component is a material that may be considered for purposes of
identifying the materials that impart the essential character of the
good, provided that the component is classified in a tariff provision
from which a change in tariff classification is not allowed under the
specific rule or other requirements applicable to the good.
(2) For purposes of determining which material or materials impart
the essential character of a good under Sec. 102.11, various factors
may be examined depending upon the type of good involved. These factors
include, but are not limited to, the following:
(i) The nature of each material, such as its bulk, quantity, weight
or value; and
(ii) The role of each material in relation to the use of the good.
9. Section 102.19 is revised to read as follows:
Sec. 102.19 NAFTA preference override.
(a) Except in the case of goods covered by paragraph (b) of this
section, if a good which is originating within the meaning of
Sec. 181.1(q) of this chapter is not determined under Sec. 102.11 (a)
or (b) to be a good of a single NAFTA country, the country of origin of
such good is the last NAFTA country in which that good underwent
production other than minor processing, provided that a Certificate of
Origin (see Sec. 181.11 of this chapter) has been completed and signed
for the good.
(b) If, under any other provision of this part, the country of
origin of a good which is originating within the meaning of
Sec. 181.1(q) of this chapter is determined to be the United States and
that good has been exported from, and returned to, the United States
after having been advanced in value or improved in condition in another
NAFTA country, the country of origin of such good for Customs duty
purposes is the last NAFTA country in which that good was advanced in
value or improved in condition before its return to the United States.
10. In Sec. 102.20, the table is amended by revising the Note and
removing the entry for HTSUS 09.04-09.10 under Section II, by adding a
Chapter 42 Note under Section VIII, by removing the entry for HTSUS
4810-4814 under Section X, by revising Note (1)d and adding a new Note
(1)f and revising Note (3) and removing the entry for HTSUS 5804 and
removing the entry for HTSUS 6115-6117 under Section XI, by adding a
Chapter 65 Note under Section XII, by removing the entry for HTSUS
7010-7018 under Section XIII, by removing the Note to Section XVI, by
adding a Chapter 94 Note and removing the entry for HTSUS 9404.10-
9404.30 and removing the entry for HTSUS 9404.90 under Section XX, and
by adding and revising the following HTSUS entries in numerical order
to read as follows:
Sec. 102.20 Specific rules by tariff classification.
* * * * *
HTSUS--Tariff Shift and/or Other Requirements
* * * * *
(b) Section II: Chapters 6 through 14.
Note: Notwithstanding the specific rules of this section, an
agricultural or horticultural good grown in the territory of a
country shall be treated as a good of that country even if grown
from seed or bulbs, root stock, cuttings, slips or other live parts
of plants, or from whole plants, imported from a foreign country.
* * * * *
0904-0910 A change to heading 0904 through 0910 from any other
chapter; or A change to subheading 0910.91 from any other subheading,
provided that a single spice ingredient of foreign origin constitutes
no more than 60 percent by weight of the good.
* * * * *
1517.90 A change to subheading 1517.90 from any other chapter; or A
change to subheading 1517.90 from any other heading provided that no
single oil ingredient of foreign origin constitutes more than 60
percent by volume of the good.
* * * * *
1901.90 A change to subheading 1901.90 from any other heading.
* * * * *
2103.90 A change to subheading 2103.90 from any other subheading.
* * * * *
4104-4107 A change to headings 4104 through 4107 from any other
heading, including another heading within that group.
* * * * *
Chapter 42 Note: For the purposes of Sec. 102.11(b) of the
General Rules, except for sets, where a textile good classifiable in
Chapter 42 does not meet the tariff shift and/or other requirements
of the heading or subheading under which it is classifiable, the
country of origin of that good shall be the country of origin of the
component which determines the classification of that good. However,
if more than one component determines classification or the
component that determines classification has its origin in more than
one country, the country of origin of the good shall be the last
country in which the good underwent production other than minor
processing.
* * * * *
4810 A change to heading 4810 from any other heading.
4811.10-4811.31 A change to subheading 4811.10 through 4811.31 from
any other heading.
4811.39 A change to subheading 4811.39 from any other heading, except
from heading 4804.
4811.40-4811.90 A change to subheading 4811.40 through 4811.90 from
any other heading.
4812-4814 A change to heading 4812 through 4814 from any other
heading, including a heading within that group.
* * * * *
4823.20-4823.59 A change to subheading 4823.20 through 4823.59 from
any other chapter.
* * * * *
4823.70-4823.90 A change to subheading 4823.70 through 4823.90 from
any other subheading, including another subheading within that group.
* * * * *
(k) Section XI: Chapters 50 through 63.
Notes: (1) * * *
d. The phrase ``fully lined, fully padded, or fully insulated'',
as used in chapters 61 and 62, means that the major parts of the
garment are entirely lined, padded, or insulated, but this does not
include waistbands less than fifteen centimeters wide, cuffs less
than ten centimeters wide, plackets, collars, shoulder straps, and
the like.
* * * * * [[Page 22328]]
f. The phrase ``minor embellishments'', as used in headings 6302
and 6304, refers to relatively insignificant methods used to enhance
the visual appeal of a good, e.g., piping, capping, small amounts of
embroidery.
* * * * *
(3) For the purposes of Sec. 102.11(b) of the General Rules,
except for sets, where a good classifiable in Chapter 61 through 63
does not meet the tariff shift and/or other requirements of the
heading or subheading under which it is classifiable, the country of
origin of that good shall be the single country where the component
which determines the classification of that good was cut or formed
(e.g. knit to shape). However, if more than one component determines
classification or the component that determines classification has
its origin in more than one country, the country of origin of the
good shall be the last country in which the good underwent
production other than minor processing.
* * * * *
5101-5105 A change to heading 5101 through 5105 from any other
chapter; or A change to combed wool of heading 5105 from greasy wool of
heading 5101.
* * * * *
5609 A change to heading 5609 from any other heading except from
heading 5004 through 5007, 5106 through 5113, 5204 through 5212, 5306
through 5311, 5401 through 5408, 5508 through 5516, and 5604 through
5607.
* * * * *
5804.10 A change to subheading 5804.10 from any other heading except
from heading 5608; or
A change from greige fabric of subheading 5804.10 to finished
fabric of that same subheading by dyeing and printing, plus two or more
of the following finishing operations--bleaching, shrinking, fulling,
napping, decating, permanent stiffening, weighting, permanent
embossing, or moireing.
5804.21-5804.30 A change to subheadings 5804.21 through 5804.30 from
any subheading outside that group; or
A change from greige fabric of subheadings 5804.21 through 5804.30
to finished fabric of those same subheadings by dyeing and printing,
plus two or more of the following finishing operations--bleaching,
shrinking, fulling, napping, decating, permanent stiffening, weighting,
permanent embossing, or moireing.
* * * * *
5806.10-5806.39 A change to subheading 5806.10 through 5806.39 from
any heading except from heading 5007, 5111 through 5113, 5208 through
5212, 5309 through 5311, 5407 through 5408, 5512 through 5516, and
5801; or
A change from greige fabric of subheading 5806.10 through 5806.39
to finished fabric of those same subheadings by dyeing and printing,
plus two or more of the following finishing operations--bleaching,
shrinking, fulling, napping, decating, permanent stiffening, weighting,
permanent embossing, or moireing.
* * * * *
5810 A change of the ground fabric to heading 5810 from any other
chapter except heading 5007, 5111 through 5113, 5208 through 5212, 5309
through 5311, 5407 through 5408, 5512 through 5516, 5602, 5603, 5608,
5903, 5907, 6001, and 6002; or
Where the weight of the embroidery comprises seven percent or more
of the weight of the foreign fabric and the embroidery changes the
commercial character of the base fabric, a change to heading 5810 from
any other heading.
* * * * *
5903 A change to heading 5903 from any other heading except from
heading 5007, 5111 through 5113, 5208 through 5212, 5309 through 5311,
5407 through 5408, 5512 through 5516, 5803, 5806, 5808, and 6002; or
(1) For woven fabric, a change to heading 5903 from any other
heading, provided that the impregnation, coating, covering, or
lamination accounts for at least 15 percent of the total weight of the
fabric; or
(2) For knit fabric, a change to heading 5903 from any other
heading, provided that the impregnation, coating, covering, or
lamination accounts for at least 20 percent of the total weight of the
fabric.
* * * * *
6101 A change to heading 6101 from any other chapter; or
A change to assembled garments of heading 6101, except (1) anoraks,
windbreakers, and similar articles, not fully lined, fully padded, or
fully insulated, and (2) capes, cloaks, and similar articles, from
either subheading 6117.90 or subheading 6217.90, provided that no major
part has been knit to shape; or
A change to assembled garments from unassembled parts classified in
heading 6101 as a result of the application of GRI 2(a), except (1)
anoraks, windbreakers, and similar articles, not fully lined, fully
padded, or fully insulated, and (2) capes, cloaks, and similar
articles, provided that no major part has been knit to shape.
6102 A change to heading 6102 from any other chapter; or
A change to assembled garments of heading 6102, except (1) anoraks,
windbreakers, and similar articles, not fully lined, fully padded, or
fully insulated, and (2) capes, cloaks, and similar articles, from
either subheading 6117.90 or subheading 6217.90, provided that no major
part has been knit to shape; or
A change to assembled garments from unassembled parts classified in
heading 6102 as a result of the application of GRI 2(a), except (1)
anoraks, windbreakers, and similar articles, not fully lined, fully
padded, or fully insulated, and (2) capes, cloaks, and similar
articles, provided that no major part has been knit to shape.
* * * * *
6103.21-6103.29 Each garment in an ensemble shall be treated
separately and the marking rule applicable to each garment is the rule
that would apply if the garment were separately entered; or
If the ensemble contains a suit-like jacket or blazer, a change to
assembled garments of subheading 6103.21 through 6103.29 from either
subheading 6117.90 or subheading 6217.90; or
If the ensemble contains a suit-like jacket or blazer, a change to
assembled garments from unassembled parts classified in subheading
6103.21 through 6103.29 as a result of the application of GRI 2(a),
provided that no major part has been knit to shape.
* * * * *
6104.21-6104.29 Each garment in an ensemble shall be treated
separately and the marking rule applicable to each garment is the rule
that would apply if the garment were separately entered; or
If the ensemble contains a suit-like jacket or blazer, a change to
assembled garments of subheading 6104.21 through 6104.29 from either
subheading 6117.90 or subheading 6217.90; or
If the ensemble contains a suit-like jacket or blazer, a change to
assembled garments from unassembled parts classified in subheading
6104.21 through 6104.29 as a result of the [[Page 22329]] application
of GRI 2(a), provided that no major part has been knit to shape.
* * * * *
6115-6116 A change to heading 6115 through 6116 from any other
chapter.
6117.10 A change to subheading 6117.10 from any other chapter except
chapter 60; or A change to subheading 6117.10 from greige fabric of
chapter 60 by bleaching, dyeing, printing, cutting on all sides, and
stitching.
6117.20-6117.90 A change to subheading 6117.20 through 6117.90 from
any other chapter.
6201 A change to heading 6201 from any other chapter, provided that no
major part has been knit to shape; or
A change to assembled garments of heading 6201, except (1) anoraks,
windbreakers, and similar articles, not fully lined, fully padded, or
fully insulated, and (2) capes, cloaks, and similar articles, from
either subheading 6217.90 or subheading 6117.90, provided that no major
part has been knit to shape; or
A change to assembled garments from unassembled parts classified in
heading 6201 as a result of the application of GRI 2(a), except (1)
anoraks, windbreakers, and similar articles, not fully lined, fully
padded, or fully insulated, and (2) capes, cloaks, and similar
articles, provided that no major part has been knit to shape.
6202 A change to heading 6202 from any other chapter; or
A change to assembled garments of heading 6202, except (1) anoraks,
windbreakers, and similar articles, not fully lined, fully padded, or
fully insulated, and (2) capes, cloaks, and similar articles, from
either subheading 6217.90 or subheading 6117.90, provided that no major
part has been knit to shape; or
A change to assembled garments from unassembled parts classified in
heading 6202 as a result of the application of GRI 2(a), except (1)
anoraks, windbreakers, and similar articles, not fully lined, fully
padded, or fully insulated, and (2) capes, cloaks, and similar
articles, provided that no major part has been knit to shape.
* * * * *
6203.21-6203.29 Each garment in an ensemble shall be treated
separately and the marking rule applicable to each garment is the rule
that would apply if the garment were separately entered; or
If the ensemble contains a suit-like jacket or blazer, a change to
assembled garments of subheading 6203.21 through 6203.29 from either
subheading 6217.90 or subheading 6117.90; or
If the ensemble contains a suit-like jacket or blazer, a change to
assembled garments from unassembled parts classified in subheading
6203.21 through 6203.29 as a result of the application of GRI 2(a),
provided that no major part has been knit to shape.
* * * * *
6204.21-6204.29 Each garment in an ensemble shall be treated
separately and the marking rule applicable to each garment is the rule
that would apply if the garment were separately entered; or
If the ensemble contains a suit-like jacket or blazer, a change to
assembled garments of subheading 6204.21 through 6204.29 from either
subheading 6217.90 or subheading 6117.90; or
If the ensemble contains a suit-like jacket or blazer, a change to
assembled garments from unassembled parts classified in subheading
6204.21 through 6204.29 as a result of the application of GRI 2(a),
provided that no major part has been knit to shape.
* * * * *
6205 A change to heading 6205 from any other chapter, provided that no
major part has been knit to shape; or
A change to assembled tailored long sleeve shirts with collars,
cuffs, full-front openings with plackets, and yokes, or to assembled
fully lined, fully padded, or fully insulated shirts, of heading 6205,
from either subheading 6217.90 or subheading 6117.90, provided that no
major part has been knit to shape; or
A change to assembled tailored long sleeve shirts with collars,
cuffs, full-front openings with plackets, and yokes, or to assembled
fully lined, fully padded, or fully insulated shirts, from unassembled
parts classified in heading 6205 as a result of the application of GRI
2(a), provided that no major part has been knit to shape.
* * * * *
6213-6214 A change to heading 6213 through 6214 from any other chapter
except from heading 5007, 5111 through 5113, 5208 through 5212, 5309
through 5311, 5407 through 5408, 5512 through 5516, 5602 through 5603,
5801 through 5806, 5808 through 5811, 5901, 5903, and 5906 through
5907; or
A change to heading 6213 through 6214 from greige fabric of heading
5007, 5111 through 5113, 5208 through 5212, 5309 through 5311, 5407
through 5408, 5512 through 5516, 5602 through 5603, 5801 through 5806,
5808 through 5811, by bleaching, dyeing, printing, cutting on all
sides, and stitching.
* * * * *
6302 (1) Except for quilted goods provided for in (2) below, a change
to heading 6302 from any other heading except from heading 5007, 5111
through 5113, 5208 through 5212, 5309 through 5311, 5407 through 5408,
5512 through 5516, 5602 through 5603, 5801 through 5804, 5806, 5809
through 5810, 5901, 5903, 5906 through 5907, and 6001 through 6002; or
Except for quilted goods provided for in (2) below, a change to
heading 6302 from heading 5007, 5111 through 5113, 5208 through 5212,
5309 through 5311, 5407 through 5408, 5512 through 5516, 5602 through
5603, 5801 through 5804, 5806, 5809 through 5810, 5901, 5903, 5906
through 5907, and 6001 through 6002, provided that the change is the
result of cutting finished fabric on all sides and hemming all cut
edges plus at least one other subsequent process, with no consideration
being given to the addition of minor embellishments.
(2) For quilted goods, either (a) a change to heading 6302 from any
other heading except from subheading 6307.90, provided that both the
cutting of the top and bottom fabrics, and the entire assembly of the
quilted goods, are done in one country; or (b) If (a) is not satisfied,
then the country of origin shall be the country which produced the
fabric, or fabrics, which impart the essential character to the goods.
6303 (1) For quilted goods, a change to heading 6303 from any other
heading except from subheading 6307.90, provided that both the cutting
of the top and bottom fabrics, and the entire assembly of the quilted
goods, are done in one country. If this rule is not satisfied, then the
country of origin shall be the country which produced the fabric, or
fabrics, which impart the essential character to the goods; or
(2) For curtains, drapes, or valances, [[Page 22330]] except for
goods provided for in (1) above, a change to heading 6303 from any
other heading, provided that the change is the result of more than
cutting on all sides and hemming the cut edges and with no
consideration being given to minor processing.
(3) For goods not meeting paragraphs (1) or (2) above, and all
other goods, a change to heading 6303 from any other heading except
from heading 5007, 5111 through 5113, 5208 through 5212, 5309 through
5311, 5407 through 5408, 5512 through 5516, 5602 through 5603, 5801
through 5804, 5806, 5809 through 5810, 5811, 5901, 5903, 5906 through
5907, and 6001 through 6002.
6304 (1) Except for quilted goods, pillow covers, and pillow shams
provided for in (2) and (3) below, a change to heading 6304 from any
other heading except from heading 5007, 5111 through 5113, 5208 through
5212, 5309 through 5311, 5407 through 5408, 5512 through 5516, 5602
through 5603, 5801 through 5804, 5806, 5809 through 5810, 5901, 5903
through 5904, 5906 through 5907, and 6001 through 6002; or
Except for quilted goods, pillow covers, and pillow shams provided
for in (2) and (3) below, a change to heading 6304 from any other
heading except heading 5007, 5111 through 5113, 5208 through 5212, 5309
through 5311, 5407 through 5408, 5512 through 5516, 5602 through 5603,
5801 through 5804, 5806, 5809 through 5810, 5901, 5903, 5906 through
5907, and 6001 through 6002, provided that the change is the result of
cutting finished fabric on all sides and hemming all cut edges plus at
least one other subsequent process, with no consideration being given
to the addition of minor embellishments.
(2) For quilted goods, a change to heading 6304 from any other
heading except from subheading 6307.90, provided that both the cutting
of the top and bottom fabrics, and the entire assembly of the quilted
goods, are done in one country. If this rule is not satisfied, then the
country of origin shall be the country which produced the fabric, or
fabrics, which impart the essential character to the goods;
(3) For pillow covers and pillow shams, a change to heading 6304
from any other heading.
* * * * *
6306.91-6306.99 A change to subheading 6306.91 through 6306.99 from
any other heading except from subheading 6307.90, provided that the
change is the result of more than cutting and hemming processes and
with no consideration being given to minor processing.
* * * * *
6307.90 A change to subheading 6307.90 from any other heading,
provided that the change is the result of at least cutting and a
substantial amount of either sewing or assembly operations.
* * * * *
Chapter 65 Note: For the purposes of Sec. 102.11(b) of the
General Rules, except for sets, where a textile good classifiable in
Chapter 65 does not meet the tariff shift and/or other requirements
of the heading or subheading under which it is classifiable, the
country of origin of that good shall be the country of origin of the
component which determines the classification of that good. However,
if more than one component determines classification or the
component that determines classification has its origin in more than
one country, the country of origin of the good shall be the last
country in which the good underwent production other than minor
processing.
* * * * *
6811.90 A change to subheading 6811.90 from any other heading.
* * * * *
6812.90 A change to subheading 6812.90 from any other heading.
* * * * *
6814.90 A change to subheading 6814.90 from any other heading.
* * * * *
7010 A change to heading 7010 from any other heading.
7011 change to heading 7011 from any other heading, except from
subheading 7003.30.
7012-7018 A change to heading 7012 through 7018 from any other
heading, including another heading within that group; or
A change from uncut and unpolished glassware blanks of heading 7013
to cut and polished glassware of heading 7013, provided that there has
been a substantial amount of both cutting and polishing operations in a
single country.
* * * * *
7019.90 A change to subheading 7019.90 from any other heading.
7020 A change to heading 7020 from any other heading, except from
heading 7010 through 7018.
* * * * *
8301.10-8301.50 A change to subheading 8301.10 through 8301.50 from
any other subheading, including any subheading within that group,
except a change from subheading 8301.60 when that change is pursuant to
GRI 2(a).
* * * * *
8401.20 A change to subheading 8401.20 from any other subheading; or
A change to completed machinery and apparatus of subheading 8401.20
from parts of that same subheading.
* * * * *
8415.90 A change to subheading 8415.90 from any other subheading,
except when the change is from heading 7411, 7608, 8414, 8501, and 8535
through 8537 as a result of a simple assembly.
* * * * *
8470.10-8471.91 A change to subheading 8470.10 through 8471.91 from
any subheading outside that group, except from heading 8473; or
A change to subheading 8470.10 through 8471.91 from any subheading
within that group or from heading 8473, provided the change is not the
result of a simple assembly.
8471.92-8472.90 A change to subheading 8471.92 through 8472.90 from
any subheading outside that group, except heading 8473; or
A change to subheading 8471.92 through 8472.90 from any subheading
within that group or from heading 8473, provided the change is not the
result of a simple assembly.
8473 A change to heading 8473 from any other heading, except when the
change is from heading 8414, 8501, 8504, 8534, 8541, or 8542 as a
result of a simple assembly.
8474.10-8474.80 A change to subheading 8474.10 through 8474.80 from
any subheading outside that group, except heading 8501; or
A change to subheading 8474.10 through 8474.80 from any subheading
within that group or heading 8501, provided the change is not the
result of a simple assembly.
* * * * *
8482.10-8482.80 A change to subheading 8482.10 through 8482.80 from
any other heading; or
A change to subheading 8482.10 through 8482.80 from any other
subheading, including another subheading within that group, except from
inner or outer races or rings of subheading 8482.99.
* * * * * [[Page 22331]]
8512.40 A change to subheading 8512.40 from any other subheading,
except when the change is from subheading 8512.90 or heading 8501 as a
result of a simple assembly.
* * * * *
8517.10-8517.82 A change to subheading 8517.10 through 8517.82 from
any subheading outside that group, except from subheading 8517.90; or
A change to subheading 8517.10 through 8517.82 from subheading
8517.90, provided the change is not the result of a simple assembly.
* * * * *
8528.10-8528.20 A change to subheading 8528.10 through 8528.20 from
any other subheading, including another subheading within that group,
except from subheading 8540.11 through 8540.12.
* * * * *
8531.10-8531.80 A change to subheading 8531.10 through 8531.80 from
any other subheading, including another subheading within that group,
except when the change is from subheading 8531.90 as a result of a
simple assembly.
* * * * *
8541-8542 A change to heading 8541 through 8542 from any other
subheading, including another subheading within that group; or
A change to a mounted chip, die or wafer of heading 8541 or 8542
from an unmounted chip, die or wafer of heading 8541 or 8542; or
A change to a programmed ``read only memory'' (ROM) chip from an
unprogrammed ``programmable read only memory'' (PROM) chip.
* * * * *
8708.99 A change to subheading 8708.99 from any other subheading.
* * * * *
9101-9107 A change to heading 9101 through 9107 from any heading
outside that group, except heading 9108 through 9110; or
A change to heading 9101 through 9107 from complete movements,
unassembled, of subheading 9110.11 or 9110.90, or from rough movements
of subheading 9110.19 or 9110.90.
9108-9109 A change to heading 9108 through 9109 from any heading
outside that group, except heading 9110; or
A change to heading 9108 through 9109 from complete movements,
unassembled, of subheading 9110.11 or 9110.90, or from rough movements
of subheading 9110.19 or 9110.90.
9110 A change to heading 9110 from any other heading, except from
subheading 9114.90.
* * * * *
Chapter 94 Note: For a good classifiable in subheadings 9404.30
through 9404.90 which does not meet the appropriate tariff shift
rule specified for those subheadings, the country of origin is the
country where all cutting and sewing operations required to form the
outer shell were performed. If all cutting and sewing operations
required to form the outer shell were not performed in a single
country, the country of origin will be the single country where the
component of the outer shell which determines the classification of
that good was produced. If a single country did not produce a
component of the outer shell which determines the classification of
that good, then the country of origin will be the country in which
the good last underwent a substantial assembly process.
* * * * *
9401.90 A change to subheading 9401.90 from any other heading, except
from subheading 9403.90.
* * * * *
9403.90 A change to subheading 9403.90 from any other heading, except
from subheading 9401.90.
9404.10-9404.29 A change to subheading 9404.10 through 9404.29 from
any other heading.
9404.30-9404.90 A change to down and/or feather filled goods of
subheading 9404.30 through 9404.90 from any other heading; or
For all other goods of subheading 9404.30 through 9404.90, a change
from any other heading except from heading 5007, 5111 through 5113,
5208 through 5212, 5309 through 5311, 5407 through 5408, 5512 through
5516, 5602 through 5603, 5801 through 5804, 5806, 5809 through 5810,
5901, 5903 through 5904, 5906 through 5907, 6001 through 6002, and
6307.90.
* * * * *
9606.21-9606.29 A change to subheading 9606.21 through 9606.29 from
any other heading.
* * * * *
PART 134--COUNTRY OF ORIGIN MARKING
1. The authority citation for part 134 is revised to read as
follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202 (General Note 20,
Harmonized Tariff Schedule of the United States), 1304, 1624.
2. Section 134.1 is amended by revising paragraph (b),
redesignating paragraphs (d) through (j) as (e) through (k), adding a
new paragraph (d), and revising newly designated paragraphs (e) (1) and
(2) to read as follows:
Sec. 134.1 Definitions.
* * * * *
(b) Country of origin. ``Country of origin'', when used with
reference to any article of foreign origin imported into the United
States, means the country in which the article was wholly obtained or
produced within the meaning of Sec. 102.1(e) of this chapter, or, in
the case of an article not wholly obtained or produced in one country,
the country where the article last underwent a substantial
transformation prior to its importation into the United States.
* * * * *
(d) Substantial transformation. ``Substantial transformation''
occurs when, under part 102 of this chapter, the country of origin of a
good, which is produced in a country from foreign materials, is
determined to be that country.
(e) Ultimate purchaser. * * *
(1) If an imported article will be used in further processing, the
processor will be the ``ultimate purchaser'' if he subjects the
imported article to a process which results in a substantial
transformation of the article.
(2) If the process does not result in a substantial transformation
of the imported article, the consumer or user of the article, who
obtains the article after the processing, will be regarded as the
``ultimate purchaser''.
* * * * *
Sec. 134.32 [Amended]
3. In Sec. 134.32, paragraph (r) is removed.
4. Section 134.35 is revised to read as follows:
Sec. 134.35 Articles substantially transformed after importation.
If an imported article will be used in further processing in the
United States, the processor will be considered the ultimate purchaser
if such article is determined to be a good of the United States under
part 102 of this chapter. In such a case, the imported article is
excepted from individual marking pursuant to 19 U.S.C. 1304(a)(3)(D)
and Sec. 134.32(d), provided the container in which it is imported will
reasonably indicate the country of origin of the article to the
ultimate purchaser.
Sec. 134.43 [Amended]
5. In Sec. 134.43, paragraph (e) is removed.
PART 177--ADMINISTRATIVE RULINGS
1. The general authority citation for part 177 is revised to read
as follows:
[[Page 22332]] Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1202
(General Note 20, Harmonized Tariff Schedule of the United States),
1624;
* * * * *
2. In Sec. 177.22, paragraph (a) is revised to read as follows:
Sec. 177.22 Definitions.
(a) Country of origin. For the purpose of this subpart, 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'' shall 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, an article is ``wholly the growth, product,
or manufacture'' of a country or instrumentality if it is wholly
obtained or produced (as defined in Sec. 102.1(g) of this chapter) in
that country or instrumentality, and a ``new and different article of
commerce'' exists when under part 102 of this chapter, the country of
origin of a good, which is produced in a country or instrumentality
from foreign materials, is determined to be that country or
instrumentality.
* * * * *
George J. Weise,
Commissioner of Customs.
Approved: April 19, 1995.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 95-10856 Filed 5-4-95; 8:45 am]
BILLING CODE 4820-02-P