[Federal Register Volume 60, Number 133 (Wednesday, July 12, 1995)]
[Proposed Rules]
[Pages 35878-35881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17064]



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DEPARTMENT OF THE TREASURY

Customs Service

19 CFR Part 102

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: On May 5, 1995, Customs published in the Federal Register a 
notice of proposed rulemaking that set forth proposed amendments to 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 and republished, 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 had also been published in the Federal Register on 
January 3, 1994. This document sets forth additional proposed 
amendments to the T.D. 94-4 interim regulations that were omitted from 
the May 5, 1995, notice of proposed rulemaking. Final action on the 
additional proposals set forth in this document will be included in the 
final action taken on the T.D. 94-4 interim regulations as discussed in 
the May 5, 1995, document.

DATES: Comments must be received on or before August 28, 1995.

ADDRESSES: Written comments (preferably in triplicate) may be addressed 
to the Regulations Branch, U.S. Customs Service, Franklin Court, 

[[Page 35879]]
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 NW., Suite 4000, Washington, 
DC

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 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).
    Since 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.
    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 internal review of 
the interim and proposed texts, Customs 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) were to remain 
in effect pending completion of such final rule action. In addition, 
Customs concluded that public comments should be solicited regarding 
the appropriate use of a delayed effective date for any final rule that 
results from the interim and proposed rules, including any new proposed 
changes thereto.
    Accordingly, on May 5, 1995, Customs published in the Federal 
Register (60 FR 22312) a document that (1) provided supplemental 
background information regarding the proposed uniform rule concept, (2) 
set forth proposals to amend the interim regulatory texts contained in 
T.D. 94-4 published at 59 FR 110 and corrected at 59 FR 5082, (3) 
republished (and thus replaced) all of the proposed regulatory 
amendments published at 59 FR 141 on January 3, 1994, with certain 
changes thereto, and (4) invited public comments on the appropriate 
effective date for a final rule on this matter. This May 5, 1995, 
document stated that it was the intention of Customs to address in that 
document only those comments submitted in response to the January 3, 
1994, notices that involved substantive changes to the interim or 
proposed texts requiring further public comment procedures; other such 
previously submitted comments would be addressed in an appropriate 
final rule or other document to be published at a later date. Comments 
would be accepted and considered in response to that document only in 
regard to (1) the proposed changes to the interim regulatory texts as 
discussed and set forth therein, (2) all other proposed regulatory 
amendments as discussed and set forth therein which represented a 
substantive change to the proposals published on January 3, 1994, and 
(3) the final rule delayed effective date issue. Therefore, comments 
which concerned other issues involved in the January 3, 1994, 
documents, or which did not otherwise relate to the new proposals set 
forth in the May 5, 1995, document, would not be accepted and 
considered by Customs. The May 5, 1995, document also stated that, for 
purposes of that document, the background sections of the January 3, 
1994, interim and proposed rule documents were applicable except where 
otherwise required by a change set forth in that document.
    After publication of the May 5, 1995, notice of proposed 
rulemaking, additional issues came to the attention of Customs that 
warrant publication of additional proposed changes to the interim 
regulatory texts published in T.D. 94-4, with opportunity for public 
comment thereon. Final action on the additional proposals set forth 
herein will be reflected in the single final rule document intended, as 
stated in the May 5, 1995, document, to cover both the T.D. 94-4 
interim regulations and the proposals set forth in the May 5, 1995, 
document. Since the present document sets forth proposals that are 

[[Page 35880]]
in addition to the proposed changes to the T.D. 94-4 interim 
regulations contained in the May 5, 1995, proposed rule document, the 
background section of that May 5, 1995, document is applicable for 
purposes of this document except where otherwise required by a change 
set forth herein. Comments submitted in response to this document will 
be accepted and considered only to the extent that they address 
specific proposals set forth herein; comments submitted in regard to 
matters raised in the May 5, 1995, proposed rule document that are not 
related to a specific proposal contained herein will remain subject to 
the public comment period specified in that earlier document. The 
additional proposed changes set forth in this document are discussed 
below.

Additional Proposed Changes to the Interim Texts

Subheadings 3808.10 and 3808.20-3808.90 (Insecticides, Fungicides, 
Herbicides, Rodenticides, and Pesticides)

    The interim rule for subheading 3808.10 allows a change to this 
subheading from any other subheading, except from subheading 1302.14, 
2916.19 or 2917.19. On the other hand, the interim rule for subheadings 
3808.20 through 3808.90 allows a change to these subheadings from any 
other subheading, including any subheading within the group. Except in 
the case of mixtures of two or more active ingredients of Chapter 28 or 
29, the production process for goods of heading 3808 involves 
standardized dilution. The bulk insecticide, fungicide, herbicide, 
rodenticide, or pesticide of Chapter 28 or 29, i.e., the active 
ingredient, is diluted with inert ingredients or solvents and packaged 
for retail sale. However, the essential character of these products of 
heading 3808 is imparted by the bulk organic chemical compounds of 
Chapter 28 or 29. Therefore, it is proposed to revise the rules for 
subheadings 3808.10, 3808.20, 3808.30 and 3808.90 to disallow changes, 
to products of heading 3808 consisting of only one active ingredient, 
from insecticides, fungicides, herbicides, rodenticides, or pesticides 
of Chapter 28 or 29 (the rule for disinfectants of subheading 3808.40 
would remain the same as in the interim texts). This proposed change 
makes clear that Customs is maintaining its longstanding position that 
origin changes will not result from the mere dilution, with inert 
ingredients, of these chemicals which are classified in bulk, undiluted 
form in Chapter 28 or 29, whether or not the standardized dilution is 
coupled with packaging for retail sale. See, e.g., HRL 555604 dated 
March 29, 1990. In fact, operations consisting of ``mere dilution with 
water or another substance that does not materially alter the 
characteristics of the material'' and ``simple * * * packaging without 
more than minor processing'', are already identified under interim 
Sec. 102.17 as non-qualifying operations, and thus any tariff shifts 
resulting solely from the operations described above would not confer 
origin. Hence, these proposed changes merely clarify and make more 
predictable the origin results that would be reached in the tariff 
shift circumstances described above.
    In addition, in the case of a mixing of different types of active 
ingredients of Chapter 28 or 29 which become a product of subheading 
3808.30 or 3808.90, it is further proposed to revise the rules for 
these subheadings to also allow a change from any other subheading in 
cases where a Chapter 28 or 29 ingredient of domestic origin 
constitutes no less than 40 percent by weight of the total Chapter 28 
or 29 chemical compound.

New Chapter 72 Note

    It is proposed to add a Note to the Chapter 72 rules to allow a 
change of origin as a result of cold reduction (cold rolling) of hot-
rolled, flat-rolled steel products. Cold reduction is a cold-working 
process which causes a significant reduction in the thickness of hot-
rolled, flat-rolled products and which changes the crystalline 
structure of the steel product by elongating it. As consistently 
expressed in rulings issued over the past 10 years, it is the position 
of Customs that this operation results in a substantial transformation 
of the hot-rolled, flat-rolled steel product. Thus, under the foregoing 
circumstances, notwithstanding the specific tariff shift rules for 
these goods, when cold-rolled steel is produced from cold reduction of 
hot-rolled, flat-rolled steel, the country of origin of the steel 
product will be the country in which the cold reduction (cold rolling) 
process occurred.

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, N.W., Suite 4000, 
Washington, D.C.

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 in 19 CFR Part 102

    Customs duties and inspections, Imports, Reporting and 
recordkeeping requirements, Rules of origin, Trade agreements.

Proposed Amendments to the Regulations

    For the reasons stated above, it is proposed to amend part 102, 
Customs Regulations (19 CFR part 102), as set forth below.

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, 3314.

    2. In Sec. 102.20, the table is amended by removing the entry for 
HTSUS 3808.20-3808.90 under Section VI, by adding a Chapter 72 Note 
under Section XV, and by adding and revising the following HTSUS 
entries in numerical order to read as follows:


Sec. 102.20  Specific rules by tariff classification.

* * * * *

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  HTSUS                Tariff shift and/or other requirements           
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                  *        *        *        *        *                 
3808.10..  A change to subheading 3808.10 from any other subheading,    
            except from subheading 1302.14 or from any insecticide of   
            Chapter 28 or 29.                                           

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3808.20..  A change to subheading 3808.20 from any other subheading,    
            except from fungicides of Chapter 28 or 29.                 
3808.30..  A change to subheading 3808.30 from any other subheading,    
            except from herbicides, antisprouting products and plant-   
            growth regulators of Chapter 28 or 29; or                   
           A change to a mixture of subheading 3808.30 from any other   
            subheading, provided that the mixture is made from two or   
            more active ingredients and a domestic active ingredient    
            constitutes no less than 40 percent by weight of the total  
            active ingredients.                                         
3808.40..  A change to subheading 3808.40 from any other subheading.    
3808.90..  A change to subheading 3808.90 from any other subheading,    
            except from rodenticides and other pesticides of Chapter 28 
            or 29; or                                                   
           A change to a mixture of subheading 3808.90 from any other   
            subheading, provided that the mixture is made from two or   
            more active ingredients and a domestic active ingredient    
            constitutes no less than 40 percent by weight of the total  
            active ingredients.                                         
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* * * * *
    Chapter 72 Note: Notwithstanding the specific rules of this 
chapter, hot-rolled flat-rolled steel which is cold-reduced (by cold 
rolling) shall be treated as a good of the country in which the 
cold-rolled steel is produced.
* * * * *
George J. Weise,
Commissioner of Customs.
    Approved: June 19, 1995.
John P. Simpson,
Deputy Assistant Secretary of the Treasury.
[FR Doc. 95-17064 Filed 7-11-95; 8:45 am]
BILLING CODE 4820-02-P