[Federal Register Volume 73, Number 144 (Friday, July 25, 2008)]
[Proposed Rules]
[Pages 43385-43394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-17025]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HOMELAND SECURITY

Bureau of Customs and Border Protection

DEPARTMENT OF THE TREASURY

19 CFR Parts 4, 7, 10, 102, 134 and 177

[USCBP-2007-0100]
RIN 1505-AB49


Uniform Rules of Origin for Imported Merchandise

AGENCIES: Customs and Border Protection, Department of Homeland 
Security; Department of the Treasury.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: This document proposes to amend the U.S. Customs and Border 
Protection (``CBP'') Regulations to establish uniform rules governing 
CBP determinations of the country of origin of imported merchandise. 
This proposal would extend application of the country of origin rules 
codified in 19 CFR part 102. Those rules have proven to be more 
objective and transparent and provide greater predictability in 
determining the country of origin of imported merchandise than the 
system of case-by-case adjudication they would replace. The proposed 
change also will aid an importer's exercise of reasonable care. In 
addition, this document proposes to amend the country of origin rules 
applicable to pipe fittings and flanges, printed greeting cards, glass 
optical fiber, and rice preparations. Finally, this document proposes 
amendments to the textile regulations set forth in Sec.  102.21 to make 
corrections so that the regulations reflect the language of section 
334(b)(5) of the Uruguay Round Agreement Act.

DATES: Comments must be received on or before September 23, 2008.

ADDRESSES: You may submit comments, identified by docket number, by one 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments via docket number 
USCBP-2007-0100.
     Mail: Trade and Commercial Regulations Branch, Regulations 
and Rulings, Office of International Trade, U.S. Customs and Border 
Protection, 1300 Pennsylvania Avenue, NW., (Mint Annex), Washington, DC 
20229.
    Instructions: All submissions received must include the agency name 
and docket number for this rulemaking. All comments received will be 
posted without change to http://www.regulations.gov, including any

[[Page 43386]]

personal information provided. For detailed instructions on submitting 
comments and additional information on the rulemaking process, see the 
``Public Participation'' heading of the SUPPLEMENTARY INFORMATION 
section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov. Submitted comments 
may be inspected during regular business days between the hours of 9 
a.m. and 4:30 p.m. at the Trade and Commercial Regulations Branch, 
Regulations and Rulings, Office of International Trade, U.S. Customs 
and Border Protection, 799 9th Street, NW., 5th Floor, Washington, DC. 
Arrangements to inspect submitted comments should be made in advance by 
calling Mr. Joseph Clark at (202) 572-8768.

FOR FURTHER INFORMATION CONTACT: Ned Leigh, Valuation and Special 
Programs, Office of International Trade, 202-572-8827; Heather K. 
Pinnock, Tariff Classification and Marking, Office of International 
Trade, 202-572-8828.

SUPPLEMENTARY INFORMATION: 

I. Public Participation

    Interested persons are invited to participate in this rulemaking by 
submitting written data, views, or arguments on all aspects of the 
proposed rule. CBP also invites comments that relate to the economic, 
environmental, or federalism effects that might result from this 
proposed rule. Comments that will provide the most assistance to CBP 
will reference a specific portion of the proposed rule, explain the 
reason for any recommended change, and include data, information, or 
authority that support such recommended change. See ADDRESSES above for 
information on how to submit comments.

II. Background

    CBP notes initially that in this document, references to the U.S. 
Customs Service or Customs concern the former U.S. Customs Service or 
actions undertaken by the former U.S. Customs Service prior to its 
transfer to the Department of Homeland Security (``DHS'') under the 
Homeland Security Act and the Reorganization Plan Modification for DHS 
of January 30, 2003.
    All merchandise imported into the United States is subject to a 
country of origin determination. The origin of imported goods is 
determined for various purposes, including admissibility into the 
United States, eligibility for preferential trade programs, country of 
origin marking requirements, and administration of the U.S. textile 
import program.
    It is important to note that origin-related determinations are also 
made in the context of the scope of investigations, orders or measures 
pertinent to the administration of the trade remedy laws and 
application of trade relief (e.g., antidumping and countervailing 
duties under Title VII of the Tariff Act of 1930, as amended, and 
safeguard remedies imposed pursuant to sections 201 or 421 of the Trade 
Act of 1974). Although such trade remedy origin-related scope 
determinations generally mirror the origin determinations made by CBP 
in its administration of the customs laws, they may differ, and in such 
cases, the origin-related scope determinations made by the 
administering authority (the Department of Commerce), and not CBP, are 
dispositive for purposes of administering the trade remedy laws.\1\
---------------------------------------------------------------------------

    \1\ The origin-related scope determination of the administering 
authority (Department of Commerce) is for trade remedy purposes 
only; it does not alter CBP's origin determination for customs 
purposes unrelated to trade remedies.
---------------------------------------------------------------------------

    Under current regulations, there are two primary methods that CBP 
uses to determine the country of origin of imported goods that are 
processed in, or contain materials from, more than one country. One 
method employs case-by-case adjudication to determine whether goods 
have been ``substantially transformed'' in a particular country, and 
the other method employs codified rules, also used to determine whether 
a good has been ``substantially transformed,'' primarily expressed 
through changes in tariff classification. The substantial 
transformation standard has developed from a series of federal court 
decisions issued over many years. The standard was first applied by the 
U.S. Supreme Court in the case of Anheuser-Busch Brewing Association v. 
United States, 207 U.S. 556 (1908). In that case, the Supreme Court 
considered whether the cleaning, sanitizing, and coating of imported 
beer bottle corks constituted a ``manufacture'' of the corks in the 
United States for drawback purposes. The Court concluded that the 
articles were not manufactured in the United States because the 
imported corks remained corks after the processing. According to the 
court, manufacture requires a ``transformation; a new and different 
article must emerge, `having a distinctive name, character or use.' '' 
Anheuser-Busch, 207 U.S. at 562 (quoting Hartranft v. Wiegmann, 121 
U.S. 609, 615 (1887)).
    In United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 
98 (1940), the U.S. Court of Customs and Patent Appeals applied the 
substantial transformation standard in a country of origin marking 
context, holding that imported wood brush blocks and toothbrush handles 
became products of the United States when processed into hairbrushes 
and toothbrushes, respectively. The court stated that the imported 
articles lost their identity and became ``an integral part of a new 
article having a new name, character, and use.'' Under this standard, a 
good must be substantially transformed in a country in order for it to 
be considered a product of that country. Because in almost all cases 
there can be only one country of origin for rules of origin purposes, 
the standard refers to the country in which the last substantial 
transformation occurs.
    Despite its heritage and apparent straightforwardness, 
administration of the substantial transformation standard has not been 
without problems. These problems derive in large part from the 
inherently subjective nature of judgments made in case-by-case 
adjudications as to what constitutes a new and different article and 
whether processing has resulted in a new name, character, and use. The 
substantial transformation standard has evolved over many years through 
numerous court decisions and CBP administrative rulings. Because the 
rule has been applied on a case-by-case basis to a wide range of 
scenarios and has frequently involved consideration of multiple 
criteria, the substantial transformation standard has been difficult 
for the courts and CBP to apply consistently and has often resulted in 
a lack of predictability and certainty for both CBP and the trade 
community.
    In an effort to simplify and standardize country of origin 
determinations, Customs developed a codified method that uses specified 
changes in tariff classification (tariff shifts) and other rules to 
express the substantial transformation concept. Under this codified 
method, the substantial transformation that an imported good must 
undergo in order to be deemed a good of the country where the change 
occurred is usually expressed in terms of a specified tariff shift as a 
result of further processing.
    The U.S. Customs Service originally proposed simplified and 
standardized rules for determining a product's country of origin in a 
document published in the Federal Register on September 25, 1991 (56 FR 
48448), proposing to amend the CBP Regulations to establish in Part 
102,

[[Page 43387]]

uniform rules governing the determination of the country of origin of 
imported merchandise that is wholly obtained or produced in a single 
country. Customs refined and expanded the original proposal with a 
second proposal that was published in the Federal Register on January 
3, 1994 (59 FR 141). In a document published in the Federal Register 
(59 FR 110) on the same day, Customs applied the proposed rules on an 
interim basis to trade among the NAFTA countries, in order to implement 
a commitment under Annex 311 of NAFTA. Based on a review of the 
comments received in response to the January 3, 1994, proposal, Customs 
published another document in the Federal Register on May 5, 1995 (60 
FR 22312) which, in part, provided further clarification and 
explanation of the intent behind the proposed uniform rule concept. 
Later that year, Congress, in section 334 of the Uruguay Round 
Agreements Act, mandated a codified approach for determining the origin 
of textile and apparel products, except for those textile and apparel 
products that are products of ``a country that is party to an agreement 
with the United States establishing a free trade area, which entered 
into force before January 1, 1987.'' (This includes only the U.S.-
Israel FTA.)
    In Treasury Decision (T.D.) 96-48, however, published in the 
Federal Register on June 6, 1996 (61 FR 28932), Customs announced its 
decision not to apply the Part 102 rules more broadly than to trade 
among NAFTA countries, at that time. Customs noted, however, that ``the 
proposal to extend section 102 to all trade * * * should remain under 
consideration for implementation at a later date.'' (In this context, 
it should also be noted that in Bestfoods v. United States, 165 F.3d 
1371 (Fed. Cir. 1999), the U.S. Court of Appeals for the Federal 
Circuit found Part 102 valid and that it was not necessary for Congress 
to amend the marking statute (19 U.S.C. 1304) to effect that change 
because ``nothing in the statute requires continued adherence to the 
case-by-case approach.'' (165 F.3d at 1375-76.) Shortly after the June 
publication of T.D. 96-48, Customs, on July 1, 1996, gave effect to 
section 334 of the Uruguay Round Agreements Act by implementing the 
Part 102 rules of origin relating to trade in textile and apparel 
products (found at 19 CFR 102.21), which are uniformly applicable to 
all textile and apparel imports except for purposes of determining 
whether goods originate in Israel, (see T.D. 95-69, published in the 
Federal Register on September 5, 1995 (60 FR 46188)).
    Consequently, since 1996 the Part 102 rules have applied to all 
imports from Canada and Mexico, and nearly all imports of textile 
products, accounting for approximately 40 percent of total U.S. 
imports. As a result, both the importing community and CBP have 
extensive experience in applying the Part 102 rules to goods from 
Canada and Mexico. CBP's experience in administering country of origin 
rules using the codified method has been that, by virtue of their 
greater specificity and transparency, codified rules result in 
determinations that are more objective and predictable than under the 
case-by-case adjudication method.
    Therefore, CBP is proposing to extend application of the Part 102 
rules of origin to all country of origin determinations made under the 
customs and related laws and the navigation laws of the United States, 
unless otherwise specified.\2\
---------------------------------------------------------------------------

    \2\ Origin-related scope determinations made by the 
administering authority for trade remedy purposes (Department of 
Commerce) may differ from the origin determinations made by CBP for 
customs purposes. For purposes of administering the trade remedy 
laws, the origin-related scope determinations made by the 
administering authority, not CBP, are controlling. However, the 
origin-related scope determination of the administering authority is 
for trade remedy purposes only; it does not alter CBP's origin 
determination for customs purposes unrelated to trade remedies.
---------------------------------------------------------------------------

    Specifically with regard to determining origin for purposes of 
applying preferential trade agreements, the Part 102 rules will not be 
used where agreements specify another origin test for that purpose. For 
example, application of tariff benefits under NAFTA are determined by 
the origin rules set out in Chapter Four of that agreement. Moreover, 
the Part 102 rules will not be used for making preference 
determinations for goods other than textile and apparel goods under the 
United States-Israel and United States-Jordan Free Trade Agreements 
because it has been the understanding of U.S. negotiators and trade 
officials of those governments that the case-by-case method would be 
used for making origin determinations for preference purposes under 
those agreements. CBP will, however, use the appropriate sections of 
Part 102 to make all other origin determinations (non-preference or 
preference) regarding goods from Israel and Jordan.
    The Part 102 rules of origin will, however, be used to administer 
those free trade agreements already negotiated that use the substantial 
transformation standard as part of the test to determine whether 
products qualify for reduced tariffs where under these agreements the 
trade negotiators had reached an understanding that the codified rules 
under Part 102 should guide those determinations, to date, the United 
States-Bahrain and United States-Morocco Free Trade Agreements. It is 
also CBP's intent to apply the Part 102 rules to any FTA negotiated in 
the future using the substantial transformation standard, unless 
otherwise specified.

A. Reasonable Care

    Under section 484 of the Tariff Act, as amended (19 U.S.C. 1484), 
the importer of record is responsible for using reasonable care to 
enter, classify, and determine the value of imported merchandise and to 
provide any other information necessary to enable CBP to assess duties 
properly, collect accurate statistics, and determine whether any other 
applicable legal requirements have been met. An importer's reasonable 
care obligations include ensuring that CBP entry documents reflect the 
correct country of origin of imported merchandise.
    As explained above, CBP believes that the proposed extension of the 
Part 102 country of origin rules to all trade will result in 
determinations that are more objective, transparent, and predictable 
and will therefore facilitate the exercise of reasonable care by 
importers with respect to their obligations regarding the 
identification of the proper country of origin of imported merchandise.

B. Tariff Shift Rules for Pipe Fittings and Flanges, Printed Greeting 
Cards, Glass Optical Fiber, Rice Preparations, and Certain Textile 
Products

    After over 10 years of concurrently administering the codified and 
the case-by-case methods for determining origin, CBP has identified 
five specific product areas in which the outcomes of the two systems 
have been inconsistent and for which we believe the codified rules in 
Part 102 should be altered: Pipe fittings and flanges, greeting cards, 
glass optical fiber, rice preparations, and certain textile products. 
The disparate outcomes for pipe fittings and flanges have been known to 
exist since the original proposal for the Part 102 rules; they stem 
from disparate outcomes in earlier adjudications under the case-by-case 
method. The inconsistencies for printed greeting cards, glass optical 
fiber, and certain textile products stem from errors in drafting Part 
102. The change for rice preparations stems from a recent change in 
practice by CBP.

[[Page 43388]]

1. Pipe Fittings and Flanges
    In Midwood Industries, Inc. v. United States, 64 Cust. Ct. 499, 
C.D. 4026, 313 F. Supp. 951 (1970), appeal dismissed, 57 CCPA 141 
(1970), the U.S. Customs Court determined that the U.S. processor of 
imported rough steel forgings who subjected the forgings to several 
machining processes, such as boring, facing, spot facing, drilling, 
tapering, threading, bevelling, and heating and compressing, was the 
ultimate purchaser of the forgings for purposes of the country of 
origin marking statute, 19 U.S.C. 1304, and therefore the resulting 
finished fittings and flanges were not required to carry country of 
origin markings. In determining that the steel forgings were 
substantially transformed in the United States, the court found it 
relevant that the imported forgings were changed from producers' goods 
to consumers' goods.
    Customs noted in a document published in the Federal Register on 
May 5, 1995 (60 FR 22312, 22315), that the Part 102 rules of origin do 
not stipulate that all forgings manufactured into fittings and flanges 
undergo a substantial transformation, and that the U.S. Court of 
International Trade has not employed the ``consumer-good-versus-
producer-good'' analysis used by the Customs Court in Midwood. Customs 
further stated that it believed that the proposed Part 102 tariff shift 
rules relating to fittings and flanges would be sustained by the U.S. 
Court of International Trade in light of more recent court decisions as 
well as changes in industry practices since the date of the Midwood 
decision (1970). Following the 1995 notice, in T.D. 00-15, ``Final 
Interpretation: Application of Producers' Good Versus Consumers' Good 
Test in Determining Country of Origin Marking,'' published in the 
Federal Register on March 12, 2000 (65 FR 13827), Customs announced 
that it would no longer rely on the distinction between producers' 
goods and consumers' goods in making origin determinations and that all 
pipe fittings and flanges produced in the United States from imported 
forgings must be marked with the country of origin of the imported 
forgings. In addition, Customs informed interested parties in a notice 
published in the Customs Bulletin and Decisions on June 7, 2000 (34 
Cust. B. & Dec. 51 (2000)), that it intended to revoke or modify (as 
applicable), pursuant to 19 U.S.C. 1625(c)(1), the pipe fitting and 
flange Customs rulings that used the distinction between producers' and 
consumers' goods in making country of origin marking determinations. 
The notice of final revocation/modification was published in the 
Customs Bulletin and Decisions on August 2, 2000 (34 Cust. B. & Dec. 10 
(2000)).
    In Boltex Manufacturing Co. v. United States, 24 CIT 972, 140 F. 
Supp. 2d 1339 (2000), the U.S. Court of International Trade vacated 
T.D. 00-15, determining that Customs had abused its discretion by 
encroaching on judicial authority and relying on a legal conclusion in 
deciding that Midwood and the producers' goods-consumers' goods 
distinction was no longer good law, rather than engaging in and 
providing a reasoned factual analysis in support of its determination 
that the forgings had to be marked. Id. at 1347, 1348. Accordingly, CBP 
rescinded the action announced in the August 2, 2000, Customs Bulletin 
notice, which had relied on vacated T.D. 00-15. Because the court in 
Boltex stated that CBP need not rely on Midwood in all instances, and 
that it may well be possible that Midwood would be decided differently 
today, CBP published in the Customs Bulletin and Decisions on November 
21, 2001 (35 Cust. B. & Dec. 35 (2001)), a notice of proposed 
modification/revocation of rulings explaining why Midwood should no 
longer be followed for determining the country of origin applicable to 
pipe fittings and flanges. Following a review of the comments received 
and after further consideration of the judicial guidance in Boltex, CBP 
believes the codification of the substantial transformation standard as 
it relates to the processing of forgings into fittings and flanges is 
best reflected by the proposed rule set forth below, which is 
consistent with the result in Midwood.
    Section 102.20(n) (Section XV: Chapters 72 through 83) of the CBP 
Regulations (19 CFR 102.20(n)) sets forth the tariff shift rule for 
determining the country of origin of goods imported from Canada or 
Mexico that are classified in headings 7301 through 7307, HTSUS, which 
include forgings, pipe fittings, and flanges of heading 7307. According 
to the rule, which requires ``[a] change to heading 7301 through 7307 
from any other heading, including another heading within that group,'' 
the processing of unfinished pipe fittings and flanges into finished 
goods does not result in a change of origin for articles imported from 
a NAFTA country. As noted above, this rule was intended to codify what 
CBP believed reflected current industry practices and general 
principles enunciated by the courts since the Midwood decision. Based 
on the comments received in response to the November 21, 2001, Customs 
Bulletin notice, and in considering Boltex, CBP is proposing to amend 
the Part 102 rule for goods classified in heading 7301 through 7307 to 
provide (consistent with the result in Midwood) for a change within 
heading 7307 from fitting forgings or flange forgings to fittings or 
flanges made ready for commercial use by certain processing, including 
bevelling, bore threading, center or step boring, face machining, heat 
treating, recoining or resizing, taper boring, machining ends or 
surfaces other than a gasket face, drilling bolt holes, and burring or 
shot blasting.
2. Greeting Cards
    In this document, CBP also proposes to amend the specific change in 
tariff classification rule set forth in Sec.  102.20(j) (Section X, 
Chapters 47 through 49) for headings 4901 through 4911 of the HTSUS, 
which includes printed greeting cards. This tariff shift rule currently 
provides for ``[a] change to heading 4901 through 4911 from any other 
heading, including another heading within that group.'' With respect to 
greeting cards, the effect of this rule is a change in origin of an 
unfinished greeting card bearing no textual message (classified in 
heading 4911) when it is further processed in a second country by the 
addition of printed text (becoming a good of heading 4909). However, an 
unfinished greeting card bearing some printed text (classified in 
heading 4909) will not satisfy the tariff shift rule (and therefore 
will not undergo a change in origin) when it is further processed in a 
second country, regardless of the work performed, as the card remains 
classified in heading 4909. See Headquarters Ruling Letter (``HRL'') 
962603, dated May 14, 2002.
    To avoid such disparate origin results for greeting cards, this 
document proposes to amend the tariff shift rule for HTSUS headings 
4901 through 4911 in Sec.  102.21(j) by the creation of a specific rule 
for heading 4909, providing for a change to that heading from any other 
heading except from heading 4911 when the change is a result of adding 
text. The effect of this amendment is to enable the country of origin 
of all printed greeting cards to be determined according to the country 
of initial printing of literary text, photographs, graphic designs, or 
illustrations. This revised rule for goods of heading 4909, which 
reflects CBP practice in applying the substantial transformation 
standard to printed materials, will facilitate application of the 
tariff shift rule when greeting cards

[[Page 43389]]

classified under 4909, HTSUS, are printed in multiple countries.
3. Glass Optical Fiber
    CBP is also proposing in this document to amend the specific change 
in tariff classification rule set forth in Sec.  102.20(q) (Section 
XVIII, Chapters 90 through 92) for subheading 9001.10 of the HTSUS, 
which encompasses optical fibers and optical fiber bundles and cables. 
This tariff shift rule presently provides for ``[a] change to 
subheading 9001.10 from any other subheading, except from subheading 
8544.70.''
    In HRL 560660 dated April 9, 1999, Customs considered whether 
imported glass preforms, which are solid glass rods made from fused 
silica, are substantially transformed in the United States for purposes 
of the country of origin marking statute (19 U.S.C. 1304) when 
``drawn'' to create glass optical fiber. Customs determined that no 
substantial transformation results from the drawing process as the 
information presented established that the specifications and qualities 
of the optical fiber are predetermined by the chemical and other 
critical attributes of the glass preform. Therefore, it was determined 
that the optical fiber must be marked to indicate that its country of 
origin is the country where the preform was produced.
    Glass preforms are classified in heading 7002, HTSUS, while glass 
optical fiber is classified in subheading 9001.10.00, HTSUS. Under the 
current tariff shift rule in Sec.  102.20(q) for subheading 9001.10, 
HTSUS, a change in origin results when a glass preform is drawn into 
optical fiber. To eliminate the inconsistency between the country of 
origin determination in HRL 560660 and the change in tariff 
classification rule for HTSUS subheading 9001.10, this document 
proposes to amend the tariff shift rule by providing for a change to 
subheading 9001.10 from any other subheading, except from subheading 
8544.70 or glass preforms of heading 7002.
4. Rice Preparations
    CBP is also proposing in this document to amend the specific change 
in tariff classification rule set forth in Sec.  102.20(d) (Section IV, 
Chapters 16 through 24) for subheading 1904.90 of the HTSUS, which 
encompasses certain rice preparations. This tariff shift rule presently 
provides for ``[a] change to subheading 1904.90 from any other 
heading.''
    In HRL 967925 dated February 28, 2006, CBP considered whether rice 
is substantially transformed for purposes of the country of origin 
marking statute (19 U.S.C. 1304) when it was processed with 2% water, 
0.4% sunflower oil, 0.2% salt and 0.4% soy lecithin, placed into cups 
and sealed, and thermally processed. The final rice preparation was 
ready for consumption after the consumer places the cup in a microwave. 
Customs determined that no substantial transformation of the rice 
results from the additional mixture with the ingredients or thermal 
processing as the essential character of the rice was maintained. The 
rice was still discernable in the final product and the product was 
marketed as a rice product. Therefore, it was determined that the rice 
preparation must be marked to indicate that its country of origin is 
the country or countries where the rice originated. This outcome is in 
accord with National Juice Products Association v. United States, 628 
F. Supp. 978 (CIT 1986), where the court held that foreign 
manufacturing concentrate processed into frozen concentrated orange 
juice in the United States and reconstituted orange juice was not 
substantially transformed in the United States.
    Rice is classified in heading 1006, HTSUS, and in subheading 
1008.90, HTSUS, as other cereals (including wild rice), while rice 
preparations are classified in subheading 1904.90, HTSUS. Under the 
current tariff shift rule in Sec.  102.20(d) for subheading 1904.90, 
HTSUS, a change in origin results when rice is made into a rice 
preparation. To eliminate the inconsistency between the country of 
origin determination in HRL 967925 and the change in tariff 
classification rule for HTSUS subheading 1904.90, this document 
proposes to amend the tariff shift rule by providing for a change to 
subheading 1904.90 from any other heading, except from heading 1006 or 
wild rice of subheading 1008.90.
    As changes in law necessitate, or when it is determined that a 
tariff shift rule in Part 102 does not reflect the substantial 
transformation standard, appropriate changes to the affected specific 
rules may be made.
5. Corrections to the Rules of Origin for Textile and Apparel Products
    It has come to CBP's attention that the rules of origin for textile 
and apparel products set forth in 19 CFR 102.21 are out of alignment 
with the language of the statute, 19 U.S.C. 3592, in two instances. 
With regard to fabrics of chapter 59 of the Harmonized Tariff Schedule 
of the United States (HTSUS), the statute provides that a fabric of 
chapter 59 derives its origin from where ``the constituent fibers, 
filaments, or yarns are woven, knitted, needled, tufted, felted, 
entangled, or transformed by any other fabric-making process.'' See 19 
U.S.C. 3592(b)(1)(C). However, in the case of plastic laminated fabrics 
of heading 5903, HTSUS, sequential application of the Sec.  102.21 
regulations allows for the origin of laminated plastic fabrics to 
derive from the lamination, or assembly, process and not from the 
fabric-formation process as intended by the statute. In order to align 
the regulation with the statute, CBP proposes to amend Sec.  
102.21(c)(3)(ii) by adding ``fabrics of chapter 59 and'' after ``Except 
for'' and before ``goods of''. The amended text would read ``Except for 
fabrics of chapter 59 and goods of heading * * *'' This amendment would 
preclude the application of the wholly assembled rule set forth in 
Sec.  102.21(c)(3)(ii) to fabrics of chapter 59 and lead to application 
of the most important assembly or manufacturing process rule set forth 
in Sec.  102.21(c)(4). As the statute makes clear that fabric formation 
is the origin conferring process for fabrics of chapter 59, the statute 
would be followed in applying Sec.  102.21(c)(4) and determining the 
most important manufacturing process for purposes of determining the 
origin of fabrics of chapter 59.
    In addition, CBP has become aware of an oversight in the drafting 
of the tariff shift rule for goods of heading 6212 set forth in Sec.  
102.21(e). As currently written, ``brassieres, girdles, corsets, 
braces, suspenders, garters and similar articles and parts thereof, 
whether or not knitted or crocheted,'' of heading 6212 are grouped with 
goods of headings 6210 and 6211. The tariff shift rules for these goods 
do not provide for the possibility of knit to shape goods. The body 
supporting garments of heading 6212 may be knitted or crocheted and may 
be knit to shape. Therefore, in order to ensure that a knit to shape 
good of heading 6212 is found to derive its origin from where the good 
was knit to shape in accordance with 19 U.S.C. 3592(b)(2)(A)(ii), CBP 
proposes to amend Sec.  102.21(e) as follows: (1) The tariff shift 
rules currently designated for headings ``6210--6212'' will be 
designated as for headings ``6210--6211''; (2) separate tariff shift 
rules will be added to Sec.  102.21(e) for heading 6212 which will 
repeat the current rules applicable for that heading with the addition 
of language limiting application of the rules to goods which are not 
knit to shape and an additional tariff shift rule will be added for 
knit to shape goods. The proposed tariff shift rules for heading 6212 
will read:

    (1) If the good is not knit to shape and consists of two or more 
component parts, a

[[Page 43390]]

change to an assembled good of heading 6212 from unassembled 
components, provided that the change is the result of the good being 
wholly assembled in a single country, territory, or insular 
possession.
    (2) If the good is not knit to shape and does not consist of two 
or more component parts, a change to heading 6212 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 5806, 5809 through 5811, 5903, 5906 
through 5907, 6001 through 6006, and 6217, and subheading 6307.90, 
and provided that the change is the result of a fabric-making 
process.
    (3) If the good is knit to shape, a change to heading 6212 from 
any other heading, provided that the knit to shape components are 
knit in a single country, territory, or insular possession.

C. Relation to International Standardization Effort

    The United States has been an active participant in the ongoing 
effort to standardize non-preferential rules of origin on the 
international level. This effort, under the auspices of the World Trade 
Organization and in cooperation with the World Customs Organization, 
also focuses on change in tariff classification as a means to express 
substantial transformation. When the undertaking began in 1994, 
participants intended to complete their work within three years. It is 
still ongoing at this time. This proposal to extend application of the 
Part 102 rules is in no way intended to supplant U.S. participation or 
positions in that effort.

III. Discussion of Proposals

    This document proposes to amend Part 102 of the CBP Regulations, 
Sec.  102.0 (Scope), to set forth the scope of areas for which the 
rules of origin set forth in Part 102 are to be used to make country of 
origin determinations. As a result of the proposed changes to Sec.  
102.0, the Part 102 rules of origin will be applicable for all purposes 
for which a ``product of'' or ``country of origin'' criterion is 
prescribed under the customs and related laws, the navigation laws of 
the United States, and the CBP Regulations, except for the purpose of 
determining whether a good other than a textile or apparel good is 
entitled to preferential treatment under our free trade agreements with 
Israel and Jordan, or unless otherwise specified,\3\ or as otherwise 
provided for by statute. The term ``product of'' encompasses any 
requirement that a good be ``wholly the growth, product or 
manufacture'' of a country; substantially transformed in a country; a 
new and different product or a new or different article of commerce as 
a result of processing performed in a country; or the growth, product 
or manufacture of a country. In addition, Sec.  102.0 is proposed to be 
amended by removing the specific reference to the U.S.--Bahrain Free 
Trade Agreement, as this reference is no longer necessary as a result 
of the proposed changes described above.
---------------------------------------------------------------------------

    \3\ Origin-related scope determinations made by the 
administering authority for trade remedy purposes (Department of 
Commerce) may differ from the origin determinations made by CBP for 
customs purposes. For purposes of administering the trade remedy 
laws, the origin-related scope determinations made by the 
administering authority, not CBP, are controlling. However, the 
origin-related scope determination of the administering authority is 
for trade remedy purposes only; it does not alter CBP's origin 
determination for customs purposes unrelated to trade remedies.
---------------------------------------------------------------------------

    Consistent with the proposed changes to Sec.  102.0 described 
above, this document also proposes to add a cross-reference to the 
definition of ``wholly obtained or produced in a country'' set forth in 
Sec.  102.1(g) to all provisions in the CBP Regulations where the 
phrase ``wholly the growth, product or manufacture'' or a similar 
phrase is used for origin purposes, except where otherwise defined by 
statute (e.g., U.S.-Morocco and U.S.-Bahrain Free Trade Agreements). 
Similarly, CBP proposes to add a cross-reference to the rules of origin 
in Part 102 to all provisions in the CBP Regulations in which the 
phrases ``country of origin,'' ``substantial transformation,'' a ``new 
and different product,'' and a ``new and different article of 
commerce'' are used for origin purposes. These proposed amendments 
affect Parts 4, 7, 10, 102, 134, and 177, CBP Regulations (19 CFR parts 
4, 7, 10, 102, 134, and 177).
    As a result of the proposed amendments set forth in this document, 
the Part 102 rules would be used to determine whether a good meets the 
``product of'' criterion for receiving duty preference under General 
Note (``GN'') 3(a)(iv), HTSUS (U.S. insular possessions); GN 3(a)(v), 
HTSUS (West Bank, Gaza Strip or qualifying industrial zones); GN 4(b) 
and (c), HTSUS (Generalized System of Preferences (``GSP'')); GN 7(b), 
HTSUS (Caribbean Basin Economic Recovery Act (``CBERA''); GN 10(b), 
HTSUS (Freely Associated States); GN 11(b), HTSUS (Andean Trade 
Preferences Act (``ATPA'')); GN 16(b), HTSUS (African Growth and 
Opportunity Act (``AGOA'')); GN 27(b)(ii), HTSUS (U.S.-Morocco Free 
Trade Agreement); and GN 30(b)(ii), HTSUS (U.S.-Bahrain Free Trade 
Agreement). The applicable value-content requirements and any other 
rules under these programs, however, must still be met in order for a 
good to qualify for the duty preference.
    The proposed amendments to Part 134 concerning country of origin 
marking also propose that the Part 102 rules would be used to determine 
both the country of origin of imported foreign articles and whether 
imported articles that are further processed become goods of the United 
States for purposes of identifying the goods' ``ultimate purchaser.''
    In addition, this document proposes to change the specific tariff 
shift rules set forth in 19 CFR 102.20 that apply to printed greeting 
cards classified in heading 4909 of the HTSUS, fittings and flanges 
classified in heading 7307, HTSUS, glass optical fiber classified in 
subheading 9001.10, HTSUS, and rice preparations classified in 
subheading 1904.90, HTSUS.
    Finally, this document proposes amendments to the textile 
regulations set forth in Sec.  102.21 in order to more closely align 
the regulations with the language of the statute, 19 U.S.C. 3592, and 
also to remedy an oversight in the drafting of the tariff shift rule 
for goods of heading 6212 set forth in Sec.  102.21(e).

IV. The Regulatory Flexibility Act and Executive Order 12866

    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 because the amendments reflect recent judicial 
guidance and standardize country of origin marking requirements for 
NAFTA and non-NAFTA trade. Accordingly, the proposed amendments are not 
subject to the regulatory analysis or other requirements of 5 U.S.C. 
603 and 604. This document does not meet the criteria for a 
``significant regulatory action'' as specified in E.O. 12866.

V. Signing Authority

    This document is being issued by CBP in accordance with Sec.  
0.1(a)(1) of the CBP Regulations (19 CFR 0.1(a)(1)), pertaining to the 
authority of the Secretary of the Treasury (or his/her delegate) to 
approve regulations related to certain CBP revenue functions.

List of Subjects

19 CFR Part 4

    Administrative practice and procedure, Cargo vessels, Coastwise 
trade, Freight, Imports, Landing, Merchandise, Shipping, Vessels.

[[Page 43391]]

19 CFR Part 7

    Customs duties and inspection, Imports, Insular possessions, 
Reporting and recordkeeping requirements.

19 CFR Part 10

    American goods, Assembly, Customs duties and inspection, Entry, 
Imports, Preference Programs, Reporting and recordkeeping requirements, 
Shipments, Trade agreements.

19 CFR Part 102

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

19 CFR Part 134

    Canada, Country of origin, Customs duties and inspection, Imports, 
Labeling, Marking, Mexico, Packaging and containers, Reporting and 
recordkeeping requirements, Trade agreements.

19 CFR Part 177

    Administrative practice and procedure, Government procurement, 
Reporting and recordkeeping requirements, Rulings, Trade agreements.

Proposed Amendments to the Regulations

    Accordingly, CBP proposes to amend parts 4, 7, 10, 12, 102, 134, 
and 177 of the CBP Regulations (19 CFR parts 4, 7, 10, 102, 134, and 
177) as set forth below:

PART 4--VESSELS IN FOREIGN AND DOMESTIC TRADES

    1. The general authority citation for part 4 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 19 U.S.C. 66, 1431, 1433, 1434, 1624, 
2071 note; 46 U.S.C. App. 3, 91.
* * * * *

    2. Section 4.80b is amended by adding a sentence at the end of 
paragraph (a) to read as follows:


Sec.  4.80b  Coastwise transportation of merchandise.

    (a)* * * For purposes of this section, merchandise is manufactured 
or processed into a new and different product when it has undergone a 
change in country of origin under the provisions of Sec. Sec.  102.1 
through 102.21 of this chapter.
* * * * *

PART 7--CUSTOMS RELATIONS WITH INSULAR POSSESSIONS AND GUANTANOMO 
BAY NAVAL STATION

    3. The authority citation for part 7 continues to read as follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized 
Tariff Schedule of the United States), 1623, 1624; 48 U.S.C. 1406i.

    4. Section 7.3 is amended by revising paragraph (b) to read as 
follows:


Sec.  7.3  Duty-free treatment of goods imported from insular 
possessions of the United States other than Puerto Rico.

* * * * *
    (b) Origin of goods. (1) For purposes of this section, and subject 
to paragraph (b)(2) of this section, goods shall be considered to be 
the growth, product of, or manufactured or produced in, an insular 
possession if:
    (i) The goods are wholly the growth or product of the insular 
possession; or
    (ii) The goods became a new and different article of commerce as a 
result of production or manufacture performed in the insular 
possession.
    (2) For purposes of this section, the expression ``wholly the 
growth or product'' refers to articles and materials wholly obtained or 
produced within the meaning of Sec.  102.1(g) of this chapter. For 
purposes of paragraph (b) of this section, a ``new and different 
article of commerce'' exists when the country of origin of a good which 
is produced in an insular possession from foreign materials is 
determined to be that insular possession under Sec. Sec.  102.1 through 
102.21 of this chapter.
* * * * *

PART 10--ARTICLES CONDITIONALLY FREE, SUBJECT TO A REDUCED RATE, 
ETC.

    5. The general authority citation for part 10 continues to read as 
follows:

    Authority: 19 U.S.C. 66, 1202 (General Note 3(i), Harmonized 
Tariff Schedule of the United States), 1321, 1481, 1484, 1498, 1508, 
1623, 1624, 3314.

* * * * *
    6. 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) of this part.
    7. Section 10.14 is amended by revising paragraph (b) 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. For 
purposes of this section and Sec.  10.12(e) of this part, substantial 
transformation occurs when the country of origin of a good which is 
produced in the United States from foreign materials is determined to 
be the United States under Sec. Sec.  102.1 through 102.21 of this 
chapter.

    Example 1. Unfinished automotive crankshaft forgings, classified 
in subheading 8483.10, HTSUS, are imported into the United States 
for further processing. In the United States, the importer machines, 
drills, and heat treats the forging to produce a finished 
crankshaft. The finished article also is classified in subheading 
8483.10, HTSUS. Under Sec.  102.20 of this chapter, the applicable 
tariff shift rule for goods classified in subheading 8483.10 
requires a change to that subheading from any other subheading. The 
further processing does not result in the article becoming a product 
of the United States because the requisite tariff shift is not 
satisfied. By application of the residual rules in Sec.  102.11, the 
origin of the finished crankshaft is determined to be the country of 
origin of the imported forging.
    Example 2. Optical fiber, classified in subheading 9001.10, 
HTSUS, is imported into the United States. After importation, the 
U.S. importer sheaths and insulates the individual optical fibers in 
color-coated plastic. The further-processed optical fiber is 
classified in 8544.70, HTSUS. The applicable tariff shift rule in 
Sec.  102.20 of this chapter for articles classified within 
subheadings 8544.11 through 8544.70, HTSUS, requires a change in 
tariff classification from any other subheading, including a 
subheading within that group, except when the tariff shift results 
from a simple assembly. Because the further processing results in a 
change from a good of subheading 9001.10 to a good of subheading 
8544.70 (by more than a simple assembly), the tariff shift 
requirement is satisfied and the finished optical fibers are 
determined to be products of the United States.

    8. 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 Sec. Sec.  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.

[[Page 43392]]

    9. Section 10.176 is amended by adding a sentence at the end of 
paragraph (a)(1) to read as follows:


Sec.  10.176  Country of origin criteria.

    (a) * * *
    (1) * * * For purposes of this section, a ``new and different 
article of commerce'' exists when 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 under 
Sec. Sec.  102.1 through 102.21 of this chapter.
* * * * *
    10. Section 10.191 is amended by revising paragraph (b)(3) to read 
as follows:


Sec.  10.191  General.

* * * * *
    (b) * * *
    (3) Wholly the growth, product, or manufacture. For purposes of 
Sec.  10.191 through Sec.  10.199, 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.
* * * * *
    11. Section 10.195 is amended by adding a sentence at the end of 
paragraph (a)(1) to read as follows:


Sec.  10.195  Country of origin criteria.

    (a) * * *
    (1) * * * For purposes of this section, a ``new and different 
article of commerce'' exists when the country of origin of a good which 
is produced in a beneficiary country from foreign materials is 
determined to be that beneficiary country under Sec. Sec.  102.1 
through 102.21 of this chapter.
* * * * *
    12. Section 10.199 is amended by adding a sentence at the end of 
paragraph (e)(1) to read as follows:


Sec.  10.199  Duty-free entry for certain beverages produced in Canada 
from Caribbean rum.

* * * * *
    (e) * * *
    (1) * * * For purposes of this section, 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, and a ``new and different article of commerce'' exists 
when the country of origin of a good which is produced in a beneficiary 
country or the U.S. Virgin Islands from foreign materials is determined 
to be that beneficiary country or the U.S. Virgin Islands under 
Sec. Sec.  102.1 through 102.20 of this chapter.
* * * * *
    13. Section 10.202 is amended by revising paragraph (d) to read as 
follows:


Sec.  10.202  Definitions.

* * * * *
    (d) Wholly the growth, product, or manufacture. 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.
    14. Section 10.205 is amended by redesignating paragraph (b) as 
paragraph (c) and adding a new paragraph (b) to read as follows:


Sec.  10.205  Country of origin criteria.

* * * * *
    (b) New and different article of commerce. For purposes of this 
section, a ``new and different article of commerce'' exists when the 
country of origin of a good which is produced in a beneficiary country 
from foreign materials is determined to be that beneficiary country 
under the provisions of Sec. Sec.  102.1 through 102.21 of this 
chapter.
* * * * *
    15. Section 10.252 is amended by adding a new definition in 
alphabetical order to read as follows:


Sec.  10.252  Definitions.

* * * * *
    Wholly the growth, product, or manufacture. ``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.
    16. Section 10.253 is amended by redesignating paragraph (c)(2) as 
paragraph (c)(3) and by adding a new paragraph (c)(2) to read as 
follows:


Sec.  10.253  Articles eligible for preferential treatment.

* * * * *
    (c) * * *
    (2) New and different article of commerce. For purposes of this 
section, a ``new and different article of commerce'' exists when the 
country of origin of a good which is produced in an ATPDEA beneficiary 
country from foreign materials is determined to be that beneficiary 
country under the provisions of Sec. Sec.  102.1 through 102.21 of this 
chapter.
* * * * *
    17. Section 10.769 is amended by revising paragraph (i) to read as 
follows:


Sec.  10.769  Definitions.

* * * * *
    (i) New or different article of commerce. A ``new or different 
article of commerce'' exists when the country of origin of a good which 
is produced in a Party from foreign materials is determined to be that 
country under the provisions of Sec. Sec.  102.1 through 102.21 of this 
chapter.
* * * * *

PART 102--RULES OF ORIGIN

    18. The authority citation for part 102 continues to read as 
follows:

    Authority: 7 U.S.C. 1854, 19 U.S.C. 66, 1202 (General Note 3(i), 
Harmonized Tariff Schedule of the United States), 1624, 3314, 3592.

    19. 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. Except for the purpose of 
determining whether goods are entitled to preferential treatment under 
the U.S.-Israel or U.S,-Jordan FTAs, or unless otherwise specified \4\, 
or as otherwise provided for by statute, the rules set forth in 
Sec. Sec.  102.1 through 102.20 apply for all such purposes where a 
requirement exists to determine the ``country of origin'' of a good or 
whether a good is: wholly the growth, product or manufacture of a 
country; substantially transformed in a country; a new and different 
product or a new or different article of commerce as a result of 
processing performed in a country; or the growth, product or 
manufacture of a country. The rules in Sec. Sec.  102.1 through 102.20 
also apply for determining the country of origin of imported goods for 
the purposes specified under Annex 311 of the North American Free Trade 
Agreement (``NAFTA''). The rules for determining the country of origin 
of textile and apparel products set forth in Sec.  102.21 and Sec.  
102.22 also apply for the other purposes stated in those sections. 
Sections 102.23 through 102.25 set forth certain procedural 
requirements relating to the importation of apparel products.
---------------------------------------------------------------------------

    \4\ Origin-related scope determinations made by the 
administering authority for trade remedy purposes (Department of 
Commerce) may differ from the origin determinations made by CBP for 
customs purposes. For purposes of administering the trade remedy 
laws, the origin-related scope determinations made by the 
administering authority, not CBP, are controlling. However, the 
origin-related scope determination of the administering authority is 
for trade remedy purposes only; it does not alter CBP's origin 
determination for customs purposes unrelated to trade remedies.
---------------------------------------------------------------------------

    20. In the table in Sec.  102.20:

[[Page 43393]]

    A. Paragraph (d), titled ``Section IV: Chapters 16 through 24,'' is 
amended by revising the entry for 1904.90;
    B. Paragraph (j), titled ``Section X: Chapters 47 through 49,'' is 
amended by removing the entry for 4901-4911, and by adding three new 
entries for 4901-4908, 4909, and 4910-4911;
    C. Paragraph (n), titled ``Section XV: Chapters 72 through 83,'' is 
amended by revising the entry for 7301-7307; and
    D. Paragraph (q), titled ``Section XVIII: Chapters 90 through 92,'' 
is amended by revising the entry for 9001.10.
    The additions and revisions read as follows:


Sec.  102.20   Specific rules by tariff classification.

* * * * *

------------------------------------------------------------------------
          HTSUS                Tariff shift and/or other requirements
------------------------------------------------------------------------
 
                              * * * * * * *
(d)......................  Section IV: Chapters 16 through 24.
 
                              * * * * * * *
1904.90..................  A change to subheading 1904.90 from any other
                            heading, except from heading 1006 or wild
                            rice of subheading 1008.90.
 
                              * * * * * * *
(j)......................  Section X: Chapters 47 through 49.
 
                              * * * * * * *
4901-4908................  A change to heading 4901 through 4908 from
                            any other heading, including another heading
                            within that group.
4909.....................  A change to heading 4909 from any other
                            heading, except from heading 4911 when the
                            change is a result of adding text.
4910-4911................  A change to heading 4910 through 4911 from
                            any other heading, including another heading
                            within that group.
 
                              * * * * * * *
(n)......................  Section XV: Chapters 72 through 83.
 
                              * * * * * * *
7301-7307................  A change to heading 7301 through 7307 from
                            any other heading, including another heading
                            within that group, or a change within
                            heading 7307 from fitting forgings or flange
                            forgings to fittings or flanges made ready
                            for commercial use by:
                           (a) at least one of the following processes:
                           (1) bevelling;
                           (2) threading of the bore;
                           (3) center or step boring; or
                           (4) machining the gasket face; and
                           (b) at least two of the following processes:
                           (1) heat treating;
                           (2) recoining or resizing;
                           (3) taper boring;
                           (4) machining ends or surfaces other than a
                            gasket face;
                           (5) drilling bolt holes; or
                           (6) burring or shot blasting.
 
                              * * * * * * *
(q)......................  Section XVIII: Chapters 90 through 92.
9001.10..................  A change to subheading 9001.10 from any other
                            subheading, except from subheading 8544.70
                            or glass preforms of heading 7002.
 
                              * * * * * * *
------------------------------------------------------------------------

    21. Section 102.21 is amended by revising paragraph (c)(3)(ii) and 
by removing the entry for 6210-6212 and adding new entries for 6210-
6211 and 6212 in the table in paragraph (e)(1) to read as follows:


Sec.  102.21   Textile and apparel products.

* * * * *
    (c) * * *
    (3) * * *
    (ii) Except for fabrics of chapter 59 and goods of heading 5609, 
5807, 5811, 6213, 6214, 6301 through 6306, and 6308, and subheadings 
6209.20.5040, 6307.10, 6307.90, and 9404.90, if the good was not knit 
to shape and the good was wholly assembled in a single country, 
territory, or insular possession, the country of origin of the good is 
the country, territory, or insular possession in which the good was 
wholly assembled.
* * * * *
    (e) * * *
    (1) * * *

------------------------------------------------------------------------
          HTSUS                Tariff shift and/or other requirements
------------------------------------------------------------------------
 
                              * * * * * * *
6210-6211................  (1) If the good consists of two or more
                            component parts, a change to an assembled
                            good of heading 6210 through 6211 from
                            unassembled components, provided that the
                            change is the result of the good being
                            wholly assembled in a single country,
                            territory, or insular possession.

[[Page 43394]]

 
                           (2) If the good does not consist of two or
                            more component parts, a change to heading
                            6210 through 6211 from any heading outside
                            that group, 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, 5809 through 5811, 5903, 5906
                            through 5907, 6001 through 6006, and 6217,
                            and subheading 6307.90, and provided that
                            the change is the result of a fabric-making
                            process.
6212.....................  (1) If the good is not knit to shape and
                            consists of two or more component parts, a
                            change to an assembled good of heading 6212
                            from unassembled components, provided that
                            the change is the result of the good being
                            wholly assembled in a single country,
                            territory, or insular possession.
                           (2) If the good is not knit to shape and does
                            not consist of two or more component parts,
                            a change to heading 6212 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 5806, 5809 through 5811, 5903, 5906
                            through 5907, 6001 through 6006, and 6217,
                            and subheading 6307.90, and provided that
                            the change is the result of a fabric-making
                            process.
                           (3) If the good is knit to shape, a change to
                            heading 6212 from any other heading,
                            provided that the knit to shape components
                            are knit in a single country, territory, or
                            insular possession.
 
                              * * * * * * *
------------------------------------------------------------------------

PART 134--COUNTRY OF ORIGIN MARKING

    22. The authority citation for part 134 continues to read as 
follows:

    Authority: 5 U.S.C. 301, 19 U.S.C. 66, 1202 (General Note 3(i), 
Harmonized Tariff Schedule of the United States (HTSUS)), 1304, 
1624.

    23. Section 134.1 is amended by revising paragraphs (b), (d)(1) and 
(d)(2) to read as follows:


Sec.  134.1   Definitions.

* * * * *
    (b) Country of origin. ``Country of origin'' means the country of 
manufacture, production, or growth of any article of foreign origin 
entering the United States as determined under Sec. Sec.  102.1 through 
102.21 of this chapter.
* * * * *
    (d) * * *
    (1) If an imported article will be further processed in the United 
States, the processor will be the ``ultimate purchaser'' if the country 
of origin of the processed good is determined to be the United States 
under Sec. Sec.  102.1 through 102.21 of this chapter.
    (2) If the country of origin of the processed good is not 
determined to be the United States under Sec. Sec.  102.1 through 
102.21 of this chapter, the consumer or user of the article, who 
obtains the article after the processing, will be regarded as the 
``ultimate purchaser.''
* * * * *
    24. Section 134.35 is revised to read as follows:


Sec.  134.35  Articles effecting a change in country of origin.

    If an imported article will be used in further processing in the 
United States, the processor will be considered the ultimate purchaser 
if the processed good is determined to be a good of the United States 
under Sec. Sec.  102.1 through 102.21 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) of this part, provided the 
outermost container in which it is imported will reasonably indicate 
the country of origin of the article to the ultimate purchaser.

PART 177-ADMINISTRATIVE RULINGS

    25. The authority citation for part 177 continues to read as 
follows:

    Authority: 5 U.S.C. 301, 19 U.S.C. 66, 1202 (General Note 3(i), 
Harmonized Tariff Schedule of the United States), 1502, 1624, 1625.
    26. Section 177.22 is amended by revising paragraph (a) to read as 
follows:


Sec.  177.22  Definitions.

    (a) Country of origin. (1) For purposes of this subpart, an article 
is a product of a country or instrumentality only if:
    (i) It is wholly the growth, product, or manufacture of that 
country or instrumentality; or
    (ii) 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.
    (2) The term ``instrumentality'' will 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, the expression ``wholly the 
growth, product, or manufacture'' refers to articles wholly obtained or 
produced within the meaning of Sec.  102.1(g) of this chapter, and a 
substantial transformation into a ``new and different article of 
commerce'' occurs when the country of origin of an article which is 
produced in a country or instrumentality from foreign materials is 
determined to be that country or instrumentality under Sec. Sec.  102.1 
through 102.21 of this chapter.
* * * * *

W. Ralph Basham,
Commissioner, U.S. Customs and Border Protection.
    Approved: July 21, 2008.
Timothy E. Skud,
Deputy Assistant Secretary of the Treasury.
 [FR Doc. E8-17025 Filed 7-24-08; 8:45 am]
BILLING CODE 9111-14-P