[Federal Register Volume 60, Number 187 (Wednesday, September 27, 1995)]
[Notices]
[Pages 49858-49861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23981]



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INTERNATIONAL TRADE COMMISSION
[Investigation No. 332-360]


International Harmonization of Customs Rules of Origin

AGENCY: United States International Trade Commission.

ACTION: Request for public comment on draft rules for Harmonized System 
chapters 25, 26, and 27.

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EFFECTIVE DATE: September 15, 1995.

FOR FURTHER INFORMATION CONTACT: Eugene A. Rosengarden, Director, 
Office of Tariff Affairs and Trade Agreements (O/TA&TA) (202-205-2595), 
or Lawrence A. DiRicco (202-205-2606). Questions with regard to 
specific chapters of the Harmonized Tariff Schedule of the United 
States (HTS) should now be directed to the following coordinators in 
view of product reassignments:
Chapters 1-24, 41-49--Ronald H. Heller (202-205-2596)
Chapters 25-40--Edward J. Matusik (202-205-3356)
Chapters 50-63--Janis L. Summers (202-205-2605)
Chapters 64-83, 86-89, 92-97--Lawrence A. DiRicco (202-205-2606)
Chapters 84-85, 90-91, 98-99--Craig M. Houser (202-205-2597)

    Parties having an interest in particular products or HTS chapters 
and desiring to be included on a mailing list to receive available 
documents pertaining thereto should advise Diane Whitfield by phone 
(202-205-2610) or by mail at the Commission, 500 E St SW, Room 404, 
Washington, DC 20436. Hearing impaired persons are advised that 
information on this matter can be obtained by contacting the 
Commission's TDD terminal on 202-205-1810. The media should contact 
Margaret O'Laughlin, Director, Office of Public Affairs (202-205-1819).

Background

    Following receipt of a letter from the United States Trade 
Representative (USTR) on January 25, 1995, the Commission instituted 
Investigation No. 332-360, International Harmonization of Customs Rules 
of Origin, under section 332(g) of the Tariff Act of 1930 (60 FR 19605, 
April 19, 1995).
    The investigation is intended to provide the basis for Commission 
participation in work pertaining to the Agreement on Rules of Origin 
(ARO), developed during the Uruguay Round of trade negotiations and 
adopted along with the Agreement Establishing the World Trade 
Organization (WTO), as part of the General Agreement on Tariffs and 
Trade (GATT) 1994.
    The ARO is designed to harmonize and clarify nonpreferential rules 
of origin for goods in trade on the basis of the substantial 
transformation test; achieve discipline in the rules' administration; 
and provide a framework for notification, review, consultation, and 
dispute settlement. These harmonized rules are intended to make 
country-of-origin determinations impartial, predictable, transparent, 
consistent, and neutral, and to avoid restrictive or distortive effects 
on international trade. The ARO provides that technical work to those 
ends will be undertaken by the Customs Cooperation Council (CCC) (now 
informally known as the World Customs Organization or WCO), which must 
report on specified matters relating to such rules for further action 
by parties to the ARO. Eventually, the WTO Ministerial Conference is to 
``establish the results of the harmonization work program in an annex 
as an integral part'' of the ARO.
    In order to carry out the work, the ARO calls for the establishment 
of a Committee on Rules of Origin of the WTO and a Technical Committee 
on Rules of Origin (TCRO) of the CCC. These Committees bear the primary 
responsibility for developing rules that achieve the objectives of the 
ARO.
    A major component of the work program is the harmonization of 
origin rules for the purpose of providing more certainty in the conduct 
of world trade. To this end, the agreement contemplates a 3-year CCC 
program, to be initiated as soon as possible after the entry into force 
of the Agreement Establishing the WTO. Under the ARO, the TCRO is to 
undertake (1) to develop harmonized definitions of goods considered 
wholly obtained in one country, and of minimal processes or operations 
deemed not to confer origin, (2) to consider the use of change in 
Harmonized System classification as a means of reflecting substantial 
transformation, and (3) for those products or sectors where a change of 
tariff classification does not allow for the reflection of substantial 
transformation, to develop supplementary or exclusive origin criteria 
based on value, manufacturing or processing operations or on other 
standards.
    To assist in the Commission's participation in work under the 
Agreement on Rules of Origin (ARO), the Commission is publishing for 
public comment a draft of proposed rules for goods of chapters 25, 26, 
and 27 of the Harmonized System that are not considered to be wholly 
made in a single country. The rules rely largely on the change of 
heading as a basis for ascribing origin.
    These proposals, which have been reviewed by interested government 
agencies, are intended to serve as the basis for the U.S. proposal to 
the Technical Committee on Rules of Origin (TCRO) of the Customs 
Cooperation Council (CCC) (now known as the World Customs Organization 
or WCO). The proposals do not necessarily reflect or restate existing 
Customs treatment with respect to country of origin applications for 
all current non-preferential purposes. Based upon a decision of the 
Trade Policy Staff Committee, the proposals are intended for future 
harmonization for the nonpreferential purposes indicated in the ARO for 
application on a global basis. They seek to take into account not only 
U.S. Customs' current positions on substantial transformation but 
additionally seek to consider the views of the business community and 
practices of our major trading partners as well. As such they represent 
an attempt at reaching a basis for agreement among the contracting 
parties. The proposals may undergo change as proposals from other 
administrations and the private sector are received and considered. 
Under the circumstances, the proposals should not be cited as authority 
for the application of current domestic law.
    If eventually adopted by the TCRO for submission to the Committee 
on Rules of Origin of the World Trade Organization, these proposals 
would comprise an important element of the ARO work program to develop 
harmonized, non-preferential country of origin rules, as discussed in 
the Commission's earlier notice. Thus, in view of the importance of 
these rules, the Commission seeks to ascertain the views of interested 
parties concerning the extent to which the proposed rules reflect the 
standard of substantial transformation provided in the Agreement. In 
addition, comments are also invited on the format of the proposed rules 
and whether it is preferable to another presentation, such as the 
format for the presentation of the NAFTA origin or marking rules.

[[Page 49859]]

    Forthcoming Commission notices will advise the public on the 
progress of the TCRO's work and will contain any harmonized definitions 
or rules that have been provisionally or finally adopted.

Written Submissions

    Interested persons are invited to submit written statements 
concerning this phase of the Commission's investigation. Written 
statements should be submitted as quickly as possible, and follow-up 
statements are permitted; but all statements must be received at the 
Commission by the close of business on October 20, 1995, in order to be 
considered in the drafting of the final U.S. proposal to the TCRO. 
Information supplied to the Customs Service in statements filed 
pursuant to notices of that agency has been given to us and need not be 
separately provided to the Commission. Again, the Commission notes that 
it is particularly interested in receiving input from the private 
sector on the effects of the various proposed rules and definitions on 
U.S. exports. Commercial or financial information which a submitter 
desires the Commission to treat as confidential must be submitted on 
separate sheets of paper, each marked ``Confidential Business 
Information'' at the top. All submissions requesting confidential 
treatment must conform with the requirements of Sec. 201.6 of the 
Commission's Rules of Practice and Procedure (19 CFR 201.6). All 
written submissions, except for confidential business information, will 
be available for inspection by interested persons. All submissions 
should be addressed to the Office of the Secretary, United States 
International Trade Commission, 500 E Street SW., Washington, DC 20436.

    Issued: September 18, 1995.

    By order of the Commission.
Donna R. Koehnke,
Secretary.

Annex--Draft Proposal by The United States Harmonized Rules of 
Origin

Chapter 25--Salt; Sulphur; Earths and Stone; Plastering Materials, Lime 
and Cement

General Rule

    Except as otherwise provided in the additional rules specified 
below, goods of this chapter that are not wholly obtained in one 
country are deemed to be goods of the last country where non-
originating materials have undergone a change of classification to a 
heading of this chapter from any other heading, including another 
heading within the chapter.

Additional Rules

    1. Goods which have been subjected to the following processes or 
have undergone a specified change of classification at the subheading 
level are deemed to be goods of the last country where such processes 
were performed or where the change of subheading occurred:
    (a) Calcining of uncalcined materials of headings 25.11, 25.12, 
25.18, 25.20, 25.28 or 25.30, provided the process results in a change 
in the chemical structure of such goods;
    (b) A change to subheading 2517.30 (tarred macadam) from any other 
subheading;
    (c) A change to tarred dolomite of subheading 2518.30 from 
subheadings 2518.10 or 2518.20; and
    (d) Fusing of materials of headings 25.18 or 25.19.

Explanation

    Except where the context of the heading permits additional 
processing (e.g., calcining, roasting, agglomeration, sintering, or 
other heat-treatment), Chapter 25 covers only minerals in their crude 
state. Goods of Chapter 25 that have been processed beyond that 
permitted by Chapter Note 1 tend to fall within Chapter 28 or Chapter 
68.
    Consequently, most goods of this chapter are in or nearly in their 
condition as extracted and many can be expected to be wholly obtained 
in a single country. With the notable exceptions of macadam of slag, 
dross or other industrial waste (subheading 2517.20), tarred macadam 
(subheading 2517.30), and certain slag cements (heading 25.23), most 
goods of the chapter cannot be derived from headings outside the 
chapter and will not undergo a change to a heading of Chapter 25 from a 
heading outside that chapter. Accordingly, the general rule of origin 
for Chapter 25 has been drafted to reflect this situation.
    Within Chapter 25, most headings cover a distinct category of goods 
that are not derived from goods of other headings within the chapter. 
Again, exceptions occur, such as under heading 25.17 which includes 
crushed stone, chips, etc., of stone of other headings within the 
chapter. In those cases change in heading occurs and in our opinion 
reflects a substantial transformation (i.e., significant reduction in 
size). In some cases, a substantial transformation occurs, but there is 
no change in heading or only a change from one subheading to another 
subheading. To account for those situations, Additional Rules to the 
General Origin Rule have been provided:
    Additional Rule 1(a) reflects the substantial transformation of 
uncalcined minerals of specified headings by calcination (a process 
that alters the chemical form of the mineral) where both uncalcined and 
calcined forms of the minerals fall within the same heading. We note 
here that the proposed rule would cover all the goods of the chapter 
where calcined goods remain to be classified in the chapter, except in 
the case of clays of headings 2507 and 2508. Calcining of clay serves 
merely to drive off water of hydration, does not result in modifying 
the chemical structure of the material, and does not result in 
substantially transforming the clay.
    Additional Rule 1(b) reflects the substantial transformation of 
mineral products covered by other subheadings of Heading 2517 into 
tarred macadam by mixing with bituminous products of other chapters.
    Additional Rule 1(c) reflects the substantial transformation of 
dolomite of subheadings 2518.10 or 2518.20 resulting from mixing with 
bituminous products of other chapters.
    Additional Rule 1(d) reflects the substantial transformation of 
minerals of the specified headings by fusing where both the fused and 
untreated minerals fall within the same heading.

Draft Proposal by the United States Harmonized Rules of Origin

Chapter 26--Ores, Slag and Ash

General Rule

    Except as otherwise provided in the additional rules specified 
below, goods of this chapter that are not wholly obtained in one 
country are deemed to be goods of the last country where non-
originating materials have undergone a change of classification to a 
heading of this chapter from any other heading, including another 
heading within the chapter.

Additional Rules

    1. Goods which have been subjected to the following processes or 
have undergone a specified change of classification at the subheading 
level are deemed to be goods of the last country where such processes 
were performed or where the change of heading or subheading occurred:
    (a) Conversion of ores of headings 26.01 through 26.17 to 
concentrates of that group;
    (b) Calcining or roasting of concentrates of headings 26.01 through 
26.17, provided that the process results in a change in the chemical 
structure of the material.

[[Page 49860]]


Explanation

    Except where the headings permit additional processing (e.g., 
roasting, agglomeration), Chapter 26 covers only ores (i.e., certain 
metalliferous minerals defined in Note 1 to the Chapter) in their crude 
state, concentrates of such ores derived by processes that do not alter 
the chemical composition of the basic material, ash and residues of a 
kind used in industry either for the extraction of metals or as a basis 
for the manufacture of chemical compounds, and all other ash and 
residues.
    Most goods classified in this chapter are in or nearly in their 
condition as extracted, physically concentrated, or produced. In most 
cases it is expected that these goods will be wholly obtained in a 
single country.
    With the exception of the ash and residues of headings 26.20 and 
26.21, the goods of this chapter cannot be derived from goods 
classified outside the chapter. In most cases, these goods are unlikely 
to undergo a change of classification from one heading to another 
within the chapter. It is recognized that there could be cases where 
part of an ore may undergo a change of heading within the chapter 
(e.g., crude copper ores of heading 26.03 containing lead, silver, and 
gold, that are processed into copper concentrates of heading 26.03, 
lead concentrates of heading 26.07 and precious metal concentrates of 
heading 26.16).
    Additional rule 1(a) reflects the substantial transformation 
resulting from the concentration of crude ores, even though a change of 
heading or subheading is unlikely to occur. Similarly, Additional rule 
1(b) recognizes calcining or roasting of concentrates to be substantial 
transformations that confer origin.

Draft Proposal by the United States Harmonized Rules of Origin

Chapter 27--Mineral Fuels, Mineral Oils and Products Of Their 
Distillation; Bituminous Substances; Mineral Waxes

Chapter 27

General Rule

    Except as otherwise provided in the additional rules specified 
below, goods of this chapter that are not wholly obtained in one 
country are deemed to be goods of the last country where non-
originating materials have undergone a change of classification to 
headings of this chapter from any other heading, including another 
heading within the chapter.

Additional Rules

    1. Goods of any heading or subheading of this chapter (other than 
heading 2709) which have undergone a chemical reaction, including 
refinery processes such as cracking, catalytic reforming, 
desulfurization (removal of bound sulfur) or dehydroalkylation, are 
deemed to be goods of the country where the reaction occurred.
    2. Goods of headings 27.07 or 27.10 which have been formulated by 
blending are deemed to be goods of the country where blending occurred, 
provided the following conditions are satisfied:
    (a) The goods have been deliberately blended to conform to specific 
predetermined physical specifications, such as boiling point range, 
viscosity, solidification temperature, random or motor octane numbers, 
or cetane number, which are different from the specifications of the 
input materials, and
    (b) In the case of motor fuels (other than diesel fuels) or motor 
fuel blend stock, the good has undergone a minimum change of 10 octane 
units, and
    (c) In the case of other goods, the product is suitable for end use 
without further processing and not more than 70 percent by weight of 
the product is composed of materials originating from a country other 
than the country where the blending occurred.
    3. Goods of heading 27.11 which have undergone a deliberate process 
of separation into individual gases of heading 27.11 and residual 
components resulting from such separation are deemed to be goods of the 
country where the separation occurred.
    4. Calcining of petroleum coke of subheading 2713.12 from 
uncalcined petroleum coke of subheading 2713.11 is deemed to have 
origin in the country where such process was performed.
    5. The following processes are not to be considered origin-
conferring:
    (a) Cleaning, decanting, desalting, dewatering or dehydrating, 
filtering, coloring, or marking, separately or in combination, of any 
of the goods of chapter 27;
    (b) Blending of materials of subheading 27.13.20 or heading 27.14 
to produce goods of heading 27.15.

Explanation

    Chapter 27 covers crude petroleum, bituminous materials, and crude 
products from the cracking, fractional distillation, or heating of 
these materials (such as coking). Chapter 27 also covers crude benzene, 
toluene, xylene, and other coal tar products. These are distinguished 
from the pure chemicals of chapter 29 by their purity levels. Crude 
coal tar products will have a purity range from 50 to 95 percent by 
weight, while products of chapter 29 tend to have a purity of 95 
percent or higher.
    Most goods of this chapter are the result of basic refinery 
operations, including cracking and fractional distillation. The inputs 
for these operations include coal, crude petroleum and petroleum gases, 
which are classified in chapter 27, and the outputs may remain to be 
classified in the same or other headings of this chapter or other 
chapters.
    Certain refinery and formulation processes, such as blending of 
fuel components, are considered to result in substantial transformation 
for the purposes of conferring origin because the result of the 
operation is a product which possesses specific properties or 
characteristics that render it different (and further finished), than 
the starting material. The additional rules attempt to account for 
instances of substantial transformation where a change of heading or 
subheading does not occur, and these are detailed below.
    In addition, there are several minor processes that would result in 
a change of subheading, but substantial transformation is deemed not to 
have occurred because the changes are either only changes in the 
physical state (i.e., from gas to liquid), or they represent only minor 
phases of refinery processing.
    Additional Rule 1 reflects the processing of many materials that 
undergo a chemical reaction resulting in a substantial transformation, 
but without a change in classification necessarily occurring.
    Additional Rule 2 reflects the transformation of raw materials to 
finished goods as a result of blending operations for goods of headings 
27.07 and 27.10 that are classified within the same heading or 
subheading as the starting material. The rule requires discriminate 
blending in order to conform the product to stated requirements, such 
as those contained in ASTM standards, for origin to be conferred. 
Additional Rule 2(c) recognizes that the blending of covered products 
results in a substantial transformation in cases where no more than 70 
percent by weight of the blending stock originates in a single country 
other than the country where the blending occurs.
    Additional Rule 3 concerns the substantial transformation resulting 
from the physical separation of petroleum hydrocarbons into individual 

[[Page 49861]]
gases and residual products. These processes do not include the 
incidental separation of individual components of a gas during its 
conveyance through a pipeline.
    Additional Rule 4 reflects the substantial transformation of 
uncalcined petroleum coke of subheading 2713.12 to calcined petroleum 
coke of subheading 2713.11.
    Additional Rule 5(a) enumerates preparatory operations involved in 
refineries and processing plants that are not considered to be origin 
conferring.
    Additional rule 5(b) provides that blending of bituminous materials 
of subheading 27.13.20 or heading 27.14 to produce bituminous mixtures 
of heading 27.15 is not to be considered origin conferring.

[FR Doc. 95-23981 Filed 9-26-95; 8:45 am]
BILLING CODE 7020-02-P