U.S. Customs and Border Protection ("Customs") has announced a proposal to amend its regulations to provide a uniform set of rules for country-of-origin determinations with respect to imported merchandise. All imported merchandise will be affected, but there will be particularly important changes to the country-of-origin rules for pipe fittings and flanges, printed greeting cards, glass optical fiber, and rice preparations. All clients importing goods from abroad, or exporting from foreign countries into the United States, will be affected and should be concerned.
Under the proposal, Customs generally would not apply judicial precedents on a case-by-case basis to determine when a product has undergone a "substantial transformation" warranting a new country-of-origin determination. Instead, Customs would apply the country-of-origin rules codified in 19 C.F.R. part 102, which currently are applied to goods imported from Canada and Mexico under NAFTA, to goods from all countries. Customs also has proposed specific amendments to 19 C.F.R. part 102 affecting tariff shifts for imports of pipe fittings and flanges, printed greeting cards, glass optical fiber, and rice preparations, in order to resolve "disparate outcomes" between the courts' application of the "substantial transformation" test and the application of the tariff shift schedule for NAFTA-country imports.
Customs believes that the change from a case-specific application of judicial precedents to a codified schedule of tariff shifts will provide better transparency and predictability in country-of-origin determinations and will aid the importer's exercise of reasonable care in reporting. Customs wants to replace ambiguities affecting classification shifts occasioned by transformations (say, raw lumber into a pallet) with fixed codes for declaring country of origin. Customs has asked for public comments on its proposal to be submitted no later than September 23, 2008.
Importers likely will want to examine carefully the proposed changes, and may want to participate in the public comment process to protect their interests.