[Federal Register Volume 63, Number 41 (Tuesday, March 3, 1998)]
[Notices]
[Pages 10408-10411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-5394]
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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 proposal concerning certain
goods of Chapters 82, 84, 85, and 90.
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EFFECTIVE DATE: February 5, 1998.
FOR FURTHER INFORMATION CONTACT: Eugene A. Rosengarden, Director,
Office of Tariff Affairs and Trade Agreements (O/TA&TA) (202-205-2595),
Chapter 82--Lawrence A. DiRicco (202-205-2606), Chapters 84-85, 90--
Craig Houser (202-205-2597). 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, Office of External Relations (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 Uruguay Round Agreement on
Rules of Origin (ARO), under the General Agreement on Tariffs and Trade
(GATT) 1994 and adopted along with the Agreement Establishing the World
Trade Organization (WTO).
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.
The ARO called 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. 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.
In March, 1997 (62 F.R. 11464, March 12, 1997), the Commission
solicited comments on its draft proposed rules of origin for Chapter 82
and Chapter 84. In July 1997 (62 F.R. 35834, July 2, 1997), the
Commission solicited comments on its draft proposed rules of origin for
Chapter 85 and Chapter 90.
During its review of the comments submitted in response to those
notices, the Commission has identified certain cases where application
of the proposed general rules, i.e., those based on a change-of-
classification of the goods, does not appear to satisfactorily
attribute origin to the country in which the goods were substantially
transformed. It was recognized at the outset of this investigation that
situations would arise in which application of change-of-classification
rules would cause anomolous or ambiguous origin determinations, and
that supplementary or residual rules would need to be developed to
account for those cases.
The Commission is therefore making available for public comment,
the following draft proposed supplemental rules affecting certain goods
of Chapter 82, e.g., tools of heading 82.04; Chapters 84, 85 and 90,
e.g., goods of headings or subheadings which specifically provide for
parts or parts and accessories and goods which undergo a change of
classification which results merely from the form in which they are
presented to Customs.
Draft Rules
Draft Supplemental Rule for Chapter 82
1. When the product specific rules provided in the matrix are not
determinant of origin, the following shall apply:
A. Goods produced from blanks.--Where a goods is produced from a
blank:
(1) Provided all the following criteria are met, the country of
origin of the good shall be the country in which the blank was
processed into a finished good:
(a) In its imported prefinished condition, the blank was not
capable of functioning for its ultimate use and was not advanced beyond
cleaning or working to remove flash, sprues, burrs or similar excess
material, and
(b) In the country in which the goods is finished:
(i) The blank was configured to final shape by the removal of
material (other than by honing or polishing), or by bending, hammering,
pressing, stamping or similar forming process; and
(ii) The blank underwent one or more of the following processes:
1. Hardening to a minimum hardness of 38 degrees Rockwell C or
equivalent standard of hardness; or
2. Assembly with five or more parts (other than parts of general
use as defined in Note 2 to Section XV).
(2) If the criteria of subparagraph 1(A)(1) above are not
satisfied, the country of origin of the good shall be the country of
origin of the blank.
B. Other Goods of This Chapter.--When paragraph 1(A) is not
applicable,
[[Page 10409]]
the country of origin shall be determined as follows:
(1) Goods obtained by assembly of components.--Goods obtained by
assembly of components which are classified as parts of goods of this
chapter (but not as unfinished goods), shall originate in the country
in which the parts were assembled into the finished good, provided that
the assembly used five or more parts (other than parts of general use
as defined in Note 2 to Section XV).
(2) Other.--If the requirements of subparagraph 1(B)(1) are not
met, the country of origin of the goods shall be the country in which
the working edge, working surface or working part underwent a change of
classification to a heading of this chapter from any other chapter
(e.g., from a bar or rod of Chapter 72 to a chisel of Heading 82.05).
Purpose of Draft Supplemental Rule for Chapter 82
The rule provides a determination of origin in situations in which
the change of classification rules fail to confer origin because the
processing of the one or more of the input goods did not result in a
change classification even though there was a substantial
transformation. This occurs when the input is an incomplete or
unfinished article classifiable in the same heading or subheading as a
blank. It can also occur when goods are assembled from parts classified
in the same heading or subheading. Rule 1(A) applies in the former
instance and Rule 1(B) applies in the latter.
Draft Supplemental Rules for Chapters 84 and 85
1. Limitations on change of classification rules.--Notwithstanding
the product specific rules in the matrix, where a change of
classification (i.e., change of heading, subheading, split heading or
split subheading) results from one of the following circumstances,
origin shall be determined as indicated:
A. Disassembly.--Where a change in classification results from
disassembly of a previously assembled good, the origin of the good
shall be the origin prior to disassembly.
B. Packaging.--Where a change in classification results from
packaging or repackaging, the origin of the good shall be the origin
prior to such packaging or repackaging.
C. Collection of parts into kits.--Where a change in classification
results from the application of General Rule of Interpretation 2(a)
with respect to collections of parts that are presented as unassembled
articles of another heading or subheading, the individual parts shall
retain their origin prior to such collection.
D. Multi-function machines and composite machines.--Where a change
in classification results from application of note 3 to Section XVI,
the origin of the good shall be the origin of the machine or component
which determines the classification of the good under note 3 to section
XVI.
E. Functional units.--Where a change in classification results from
the application of note 4 to Section XVI to separately packaged goods
presented together in a single shipment, the separately packaged goods
shall retain their origin prior to such presentation.
2. Residual rules.--When neither the product specific rules
provided in the matrix nor legal note 1 above are determinant of
origin, the following shall apply:
A. Goods produced from incomplete or unfinished articles
classifiable in the same heading or subheading by application of GRI
2(a).--Where a good is produced from an incomplete or unfinished (other
than unassembled or disassembled) article which had the essential
character of the complete or finished good and was classifiable, by
application of GRI 2(a), in the same heading or subheading as the
complete or finished goods, origin of the presented good shall be
determined as follows:
(1) Goods produced from blanks.--Where a good is produced from a
blank:
(a) Provided all the following criteria are met, the country of
origin of the good shall be the country in which the blank was
processed into a finished good:
(i) In its imported prefinished condition, the blank was not
capable of functioning for its ultimate use and was not advanced beyond
cleaning or working to remove flash, sprues, burrs or similar excess
material, and
(ii) In the country in which the good is finished:
1. The blank was configured to final shape by the removal of
material (other than by honing or polishing), or by bending, hammering,
pressing, stamping or similar forming process; and
2. The blank underwent one or more of the following processes:
A. Hardening to a minimum hardness of 38 degrees Rockwell C or
equivalent standard of hardness; or
B. Assembly with five or more parts (other than parts of general
use as defined in Note 1(g) to Section XVI).
(b) If the criteria of subparagraph (a) above are not satisfied,
the country of origin of the good shall be the country of origin of the
blank.
(2) Goods produced from incomplete or unfinished articles, other
than blanks.--Where the good is produced from an incomplete or
unfinished article, other than a blank, the origin of presented goods
shall be the country of origin of the incomplete or unfinished article
from which it was produced.
B. Other rules for assembled goods.--Where neither the product
specific rules in the matrix nor the preceding legal notes are
determinant of origin, the following shall apply:
(1) Origin in the country of assembly.--Provided the following
criteria are met, the goods shall originate in the country of assembly:
(a) The assembly resulted in a device or apparatus capable of
performing one or more new mechanical or electrical function(s), and
either:
(i) The assembly involved 5 or more parts (other than parts of
general use, as defined in Note 1(g) to Section XVI), or
(ii) The assembly involved less than 5 parts (other than parts of
general use, as defined in Note 1(g) to Section XVI), and one or more
of the parts (other than parts of general use, as defined in Note 1(g)
to Section XVI), satisfies the product specific rules provided in the
matrix as having origin in the country of assembly.
(b) For purposes of the subparagraph (a) above, the following shall
not be considered assembly operations:
(i) The attachment of machinery to a base,
(ii) The installation of machinery or apparatus into cabinets or
similar encasements,
(iii) The attachment of dials, knobs, hand cranks, and other
consumer-operated controls,
(iv) The attachment of a power cord, or
(v) Installation of batteries, accumulators or other articles not
designed to become a permanent part of the good.
(2) Other.--If the requirements of subparagraph (1) above are not
met, the following shall apply:
(a) If the principal rule applicable to the goods in the product
specific matrix includes an exception to a change of classification
from a particular heading or subheading and a non-originating part
classifiable in such heading or subheading was used in the assembly of
the good, the country of origin of the good shall be the country of
origin of such excepted part.
(b) In all other cases, the country of origin shall be the country
in which the majority of the parts originated. If there is no majority,
the country of origin shall be the country of origin of the part which
appears last in the Nomenclature.
[[Page 10410]]
Purpose of Draft Supplemental Rules for Chapters 84 and 85
Rule 1 supercedes the change of classification rules for those
situations in which a change of classification occurs, either by virtue
of the presentation of the goods or by application of one of the legal
notes to the Harmonized System, but the change of classification does
not necessarily reflect a substantial transformation of the goods. For
each of the situations specified, the change of classification rules
are superseded by the rule provided therein. On the other hand, Rule 2
provides a determination of origin in situations in which the change of
classification rules fail to confer origin because the processing of
the one or more of the input goods did not result in a change
classification even though there was a substantial transformation. This
occurs when the input is an incomplete or unfinished article
classifiable in the same heading or subheading as the complete or
finished article, by application of General Rule of Interpretation
2(a). In particular, this applies to the processing of blanks into
finished goods. It can also occur when ``major'' parts of goods, i.e.
subassemblies, are assembled from ``minor'' parts classified in the
same parts heading or subheading. Rule 2(A) applies in the former
instance and Rule 2(A) applies in the latter.
Draft Supplemental Rules for Chapter 90
1. Limitations on change of classification rules.--Notwithstanding
the product specific rules in the matrix, where a change of
classification (i.e., change of heading, subheading, split heading or
split subheading) results from one of the following circumstances,
origin shall be determined as indicated:
A. Disassembly.--Where a change in classification results from
disassembly of a previously assembled good, the origin of the good
shall be the origin prior to disassembly.
B. Packaging.--Where a change in classification results from
packaging or repackaging, the origin of the good shall be the origin
prior to such packaging or repackaging.
C. Collection of parts into kits.--Where a change in classification
results from the application of General Rule of Interpretation 2(a)
with respect to collections of parts that are presented as unassembled
articles of another heading or subheading, the individual parts shall
retain their origin prior to such collection.
D. Functional units.--Where a change in classification results from
the application of note 4 to Section XVI to separately packaged goods
presented together in a single shipment, the separately packaged goods
shall retain their origin prior to such presentation.
2. Residual rules.--When neither the product specific rules
provided in the matrix nor legal note 1 above are determinant of
origin, the following shall apply:
A. Goods produced from incomplete or unfinished articles
classifiable in the same heading or subheading by application of GRI
2(a).--Where a good is produced from an incomplete or unfinished (other
than unassembled or disassembled) article which had the essential
character of the complete or finished good and was classifiable, by
application of GRI 2(a), in the same heading or subheading as the
complete or finished goods, origin of the presented good shall be
determined as follows:
(1) Goods produced from blanks.--Where a good is produced from a
blank:
(a) Provided all the following criteria are met, the country of
origin of the good shall be the country in which the blank was
processed into a finished good:
(i) In its imported prefinished condition, the blank was not
capable of functioning for its ultimate use and was not advanced beyond
cleaning or working to remove flash, sprues, burrs or similar excess
material, and
(ii) In the country in which the good is finished:
1. The blank was configured to final shape by the removal of
material (other than by honing or polishing), or by bending, hammering,
pressing, stamping or similar forming process; and
2. The blank underwent one or more of the following processes:
A. Hardening to a minimum hardness of 38 degrees Rockwell C or
equivalent standard of hardness; or
B. Assembly with five or more parts (other than parts of general
use as defined in Note 1(g) to Section XVI).
(b) If the criteria of subparagraph (a) above are not satisfied,
the country of origin of the good shall be the country of origin of the
blank.
(2) Goods produced from incomplete or unfinished articles, other
than blanks.--Where a good is produced from an incomplete or unfinished
article, other than a blank, the origin of presented goods shall be the
country of origin of the incomplete or unfinished article from which it
was produced.
B. Other rules for assembled goods.--Where neither the product
specific rules in the matrix nor the preceding legal notes are
determinant of origin, the following shall apply:
(1) Origin in the country of assembly.--Provided the following
criteria are met, the good shall originate in the country of assembly:
(a) The assembly resulted in a device or apparatus capable of
performing one or more new mechanical or electrical function(s), and
either:
(i) The assembly involved 5 or more parts (other than parts of
general use, as defined in Note 1(g) to Section XVI), or
(ii) The assembly involved less than 5 parts (other than parts of
general use, as defined in Note 1(g) to Section XVI), and one or more
of the parts (other than parts of general use, as defined in Note 1(g)
to Section XVI), satisfies the product specific rules provided in the
matrix as having origin in the country of assembly.
(b) For purposes of the subparagraph (a) above, the following shall
not be considered assembly operations:
(i) The attachment of machinery to a base,
(ii) The installation of machinery or apparatus into cabinets or
similar encasements,
(iii) The attachment of dials, knobs, hand cranks, and other
consumer-operated controls,
(iv) Tthe attachment of a power cord, or
(v) Installation of batteries, accumulators or other articles not
designed to become a permanent part of the good.
(2) Other.--If the requirements of subparagraph (1) above are not
met, the following shall apply:
(a) If the principal rule applicable to the goods in the product
specific matrix includes an exception to a change of classification
from a particular heading or subheading and a non-originating part
classifiable in such heading or subheading was used in the assembly of
the good, the country of origin of the good shall be the country of
origin of such excepted part.
(b) In all other cases, the country of origin shall be the country
in which the majority of the parts originated. If there is no majority,
the country of origin shall be the country of origin of the part which
appears last in the Nomenclature.
Purpose of Draft Supplemental Rules for Chapter 90
Rule 1 supercedes the change of classification rules for those
situations in which a change of classification occurs, either by virtue
of the presentation of the goods or by application of one of the legal
notes to the Harmonized System, but the change of classification does
not necessarily reflect a substantial transformation of the goods. For
each of the situations
[[Page 10411]]
specified, the change of classification rules are superceded by the
rule provided therein. On the other hand, Rule 2 provides a
determination of origin in situations in which the change of
classification rules fail to confer origin because the processing of
the one or more of the input goods did not result in a change
classification even though there was a substantial transformation. This
occurs when the input is an incomplete or unfinished article
classifiable in the same heading or subheading as the complete or
finished article, by application of General Rule of Interpretation
2(a). In particular, this applies to the processing of blanks into
finished goods. It can also occur when ``major'' parts of goods, i.e.
subassemblies, are assembled from ``minor'' parts classified in the
same parts heading or subheading. Rule 2(A) applies in the former
instance and Rule 2(B) applies in the latter.
These proposals have been reviewed by interested government
agencies and are intended to serve as the basis for the U.S. proposal
to the Technical Committee on Rules of Origin of the World Customs
Organization or to the Technical Committee of the World Trade
Organization. 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 government 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.
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 March 18, 1998, in order to be
considered. 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
section 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.
World Wide Web Access: This notice may be obtained from the ITC
Internet web server: http://www.usitc.gov.
Issued: February 25, 1998.
By order of the Commission.
Donna R. Koehnke,
Secretary.
[FR Doc. 98-5394 Filed 2-28-98; 8:45 am]
BILLING CODE 7020-02-P