The U.S. Bureau of Customs and Border Protection (CBP) and the U.S. Department of Agriculture (USDA) have recently issued rulemaking procedures that will significantly affect country of origin determinations and country of origin marking requirements on a wide range of goods.
CBP has proposed to change its rules for determining the country of origin of imported goods. Country of origin determinations affect a variety of factors for imported goods, including how they must be marked, how they are classified and what duty rate applies. The proposed change could significantly affect how any importer establishes the country of origin of imported goods and how to mark them properly. The proposed rule should be carefully considered in connection with all imported goods. CBP has invited comments on its proposed rule change that must be filed by September 23, 2008. A copy of the notice is available here.
Currently, CBP uses two primary methods for determining the country of origin for goods that are processed in or contain materials from more than one country. One method is a case-by-case adjudication to find whether goods have been “substantially transformed” in a particular country. The other method relies on codified rules in one or more free trade area agreements (FTAs), such as the North American Free Trade Agreement (NAFTA), typically expressed as a specified shift in tariff classification.
CBP has long considered adopting the codified rules approach to replace the more subjective case-by-case substantial transformation test. In its notice of July 25, 2008, CBP has now formally proposed to do so. Specifically, CBP proposes to extend application of the rules of origin codified in Part 102 of the customs regulations, 19 CFR Part 102, to all country of origin determinations made under the customs and related laws and the navigation laws of the United States. Specific origin rules for determining eligibility for various FTAs such as NAFTA will continue to apply, but under the new proposal the tariff shift rules codified in Part 102 will apply for most other purposes for which a “product of” or “country of origin” criterion is prescribed under the customs laws, including marking requirements.
In proposing this change in its country of origin determination process, CBP does not intend to impose changes or conflict with existing country of origin rulings issued under the case-by-case substantial transformation method. In fact, CBP found that its proposed application of the tariff shift rules under Part 102 would conflict with existing origin rulings on four specific types of products—pipe fittings and flanges, greeting cards, glass optical fiber and rice preparations. In its notice, therefore, CBP also proposes amending Part 102 to reflect the existing origin rulings for these products.
Separately, USDA issued on August 1, 2008, an interim final rule imposing mandatory country of origin labeling requirements on a wide range of agricultural commodities. These new marking rules applicable specifically to agricultural goods differ in some significant respects from the country of origin marking requirements that apply to non-agricultural items. Parties may file comments on the new USDA rule (a copy is available here ) by September 30, 2008.
Importers are encouraged to review their imported goods and establish whether the rules codified in Part 102 would impose any unintended changes on the determination of origin and, if so, these companies should consider bringing this to the attention of CBP in the comment period. Similarly, companies that deal in agricultural commodities should carefully study the new USDA rule to determine its application and the possible advisability of filing comments.