[Federal Register Volume 68, Number 239 (Friday, December 12, 2003)]
[Notices]
[Pages 69430-69431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30786]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE


Harmonization of Most Favored Nation Tariff Rates for the United 
States, Canada, and Mexico; Liberalization of the Rules of Origin 
Applicable Under Provisions of the North American Free Trade Agreement

AGENCY: Office of the United States Trade Representative.

ACTION: Notification of an opportunity to submit proposals to consider 
tariff harmonization and/or liberalization of the rules of origin under 
the North American Free Trade Agreement.

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SUMMARY: Section 202(q)(2) of the North American Free Trade Agreement 
Implementation Act (``the Act'') (19 USC 3331(b)) authorizes the 
President to proclaim modifications to the NAFTA rules of origin set 
forth in the Harmonized Tariff Schedule of the United States (HTS), 
subject to the consultation and layover provisions of section 103 of 
the Act. This notice is intended to inform the public of the 
opportunity to submit proposals to request the liberalization of the 
rules of origin under the NAFTA. In addition, this notice seeks 
proposals to request the harmonization of the most-favored-nation (MFN) 
tariff rates of the United States, Canada, and Mexico.

DATES: Public comments are due at USTR by noon, Friday, February 6, 
2004.

ADDRESSES: Submission by electronic mail: [email protected]. 
Submissions by facsimile: Kent Shigetomi, Director, Mexico and NAFTA 
Affairs, at (202) 395-9675. The public is strongly encouraged to submit 
documents electronically rather than by facsimile. See requirements for 
submissions below.

FOR FURTHER INFORMATION CONTACT: Kent Shigetomi, Director, Mexico and 
NAFTA Affairs, Office of Western Hemisphere Affairs, Office of the 
United States Trade Representative, Room 523, 600 17th Street, NW., 
Washington, DC 20508; telephone: (202) 395-3412; fax: (202) 395-9675. 
E-mail to [email protected].

SUPPLEMENTARY INFORMATION: On October 7, 2003, the Free Trade 
Commission (``FTC'' or ``the Commission''), the body responsible for 
the implementation of the NAFTA, agreed to pursue further 
liberalization of the NAFTA rules of origin. The Commission also agreed 
to commence a study of the MFN tariffs of each of the Parties. (In the 
case of the United States these are the general or normal trade 
relations (NTR) rates referenced in general note 3(a)(ii) of the HTS.) 
The study is to determine whether harmonizing these tariffs could 
further promote North American trade by reducing export-related 
transaction costs. Each of the Parties to the NAFTA agreed to initiate 
consultations with its respective domestic industries to determine 
which products could be covered by this exercise.

Rules of Origin

    The NAFTA and the Act provide for preferential tariff and trade 
treatment of goods of U.S., Canadian, and Mexican origin. Goods qualify 
for preferential treatment when imported into the United States if they 
meet the requirements of the general NAFTA rules of origin set out in 
section 202 of the Act (19 U.S.C. 3332) and the specific rules 
incorporated into the HTS. The NAFTA provides that the NAFTA Parties 
can agree to amend the NAFTA's origin rules. Section 202(q)(2) of the 
Act authorizes the President to proclaim modifications to the NAFTA 
rules of origin set forth in the HTS, subject to the consultation and 
layover provisions of section 103 of the Act.
    Since the NAFTA entered into force, the Parties have modified many 
of the rules of origin. Modifications were made in order to conform the 
rule of origin to tariff classification changes, to make them less 
restrictive, and to make them less burdensome to administer.

Tariff Harmonization

    Beginning in 1994, the Parties have undertaken four separate tariff 
acceleration exercises, speeding the elimination of tariffs on several 
hundred line items, covering billions of dollars in trade. With 
virtually all tariffs between

[[Page 69431]]

the countries now eliminated, the Parties are considering harmonizing 
their MFN tariffs. Under NAFTA Article 308, the three countries did 
harmonize at zero tariff rates for computers/computer parts, local area 
network equipment and semiconductors.
    Tariff harmonization could eliminate the need for preferential rule 
of origin requirements. Currently, NAFTA rules of origin are designed 
to ensure that tariff free treatment applies to all goods that 
originate or are substantially modified in North America while enabling 
NAFTA Parties to apply their own tariff rates to products of third 
country origin. Harmonizing MFN tariff rates at zero could eliminate 
the need for preferential rules of origin since the origin 
determination would be made when a good first enters the NAFTA area, 
making it unnecessary to have additional origin requirements for intra-
NAFTA trade.

Additional Information

    No decisions have been made to pursue rule of origin changes or 
harmonization of MFN tariffs, or the scope or degree of such changes. A 
decision to do so will consider several factors including (1) The 
expected reduction in transaction and manufacturing costs in North 
America and increase in trade that could result from either action; (2) 
the feasibility of devising, implementing and monitoring new rules of 
origin or harmonized MFN tariffs; (3) the level and breadth of interest 
in such an exercise by manufacturers, processors, traders and consumers 
in North America.
    The following factors are also being considered as part of a 
possible framework for such an initiative:
    (1) Harmonization would occur as countries with the higher MFN 
duties reduce such duties to the level of the lowest current duty rate 
applied by a NAFTA country, or move to a rate lower than any currently 
applied.
    (2) Harmonization at a zero rate of duty is the most attractive 
option, and is the only option that could eliminate the need for 
preferential rules of origin.
    (3) As was the case for products covered under Article 308, 
harmonization of an entire sector or broad range of goods would provide 
more benefits and be easier to implement and enforce.
    (4) The NAFTA governments expect to proceed on the basis of 
consensus; that is, proposed rule of origin changes or tariff 
harmonization would be broadly supported by interested parties within 
each country.

Requirements for Comments/Proposals

    A. Governments encourage submissions that enjoy broad support. 
Submitters should indicate if they have discussed their proposals with 
representatives of the affected sector in the other NAFTA countries 
and, if so, the result of such discussions. if representatives of an 
affected sector in one of the other NAFTA countries supports the 
proposal and the similar organization in the third NAFTA country does 
not support the proposal, such information should be included. 
Governments encourage interested parties to explore submitting 
proposals from organizations in all three countries.
    B. Scope and Coverage of Proposals. Governments encourage 
interested parties to review the broadest appropriate range of items 
and to submit proposals that reflect a consensus reached after such a 
broad-based review. A single proposal can thus include requests 
covering multiple tariff headings. Proposals should cover entire 8-
digit tariff subheadings, and may also be submitted at the 6, 4, or 2 
digit level where the intent is to cover all subsidiary duties.
    Requirements for Submissions: In order to facilitate the prompt 
processing of submissions, the Office of the United States Trade 
Representative strongly urges and prefers electronic (e-mail) 
submissions to [email protected] in response to this notice. Documents 
should be submitted as WordPerfect, Microsoft Word, or text (.TXT) 
files. In the event that an e-mail submission is impossible, 
submissions should be made by facsimile. Supporting documentation 
submitted in the form of spreadsheets is acceptable in Quattro Pro or 
Excel format. For any document containing business confidential 
information submitted electronically, the file name of the business 
confidential version should begin with the characters ``BC-'' and the 
file name of the public version should begin with the characters 
``P-.'' The P- or BC- should be followed by the name of the submitter. 
Persons who make submissions by e-mail should not provide separate 
cover letters; information that might appear in a cover letter should 
be included in the submission itself. Similarly, to the extent 
possible, any attachments to the submission should be included in the 
same file as the submission itself, and not as separate files. Written 
comments will be placed in a file open to public inspection pursuant to 
15 CFR 2003.5, except confidential business information exempt from 
public inspection in accordance with 15 CFR 2003.6. Confidential 
business information submitted in accordance with 15 CFR 2003.6 must be 
clearly marked ``BUSINESS CONFIDENTIAL'' at the top of each page, 
including any cover letter or cover page, and must be accompanied by a 
nonconfidential summary of the confidential information. All public 
documents and nonconfidential summaries shall be available for public 
inspection in the USTR Reading Room. The USTR Reading Room is open to 
the public, by appointment only, from 10 a.m. to 12 noon and 1 p.m. to 
4 p.m., Monday through Friday. An appointment to review the file may be 
made by calling (202) 395-6186. Appointments must be scheduled at least 
48 hours in advance.

Regina K. Vargo,
Assistant United States Trade Representative for the Americas.
[FR Doc. 03-30786 Filed 12-11-03; 8:45 am]
BILLING CODE 3190-W3-M