On July 8, 2016, U.S. Customs and Border Protection (CBP) published in the Federal Register¬ a notice of proposed rulemaking [Docket No. USCBP-2016-0041] to amend its regulations to allow the North American Free Trade Agreement (NAFTA) preference override to apply to certain spice products and other food products in which a lesser degree of processing in a NAFTA party is required to constitute “production” which will confer originating status to certain non-NAFTA materials. The United States, Canada and Mexico have agreed to liberalize provisions of the NAFTA preference rules of origin that relate to certain goods, including certain spices. However, such liberalization cannot take effect in the U.S. unless CBP amends its regulations as proposed in the Federal Register notice.
General Note 12(a), Harmonized Tariff Schedule of the United States (HTSUS), provides that an imported good is eligible for preferential tariff treatment under the NAFTA only if it is an originating good of a NAFTA party and it qualifies to be marked as a good of Canada or Mexico under the rules for determining the country of origin of a good for purposes of Annex 311 of the NAFTA. The rules for determining the country of origin for marking in such cases are included in part 102, CBP regulations (19 C.F.R. part 102). In situations in which an imported good is determined under Article 401 of the NAFTA to be originating but fails to qualify as a good of Canada or Mexico under the other applicable provisions set forth in 19 C.F.R. part 102, the NAFTA preference override in § 102.19 may provide a basis for enabling the good to qualify as a good of Canada or Mexico. However, the preference override does not currently apply to “minor processing” operations.
CBP understands that, as a result of actions taken or interpretations adopted by the Governments of Canada and Mexico, the above-referenced spices and other food products subject to the NAFTA liberalizations are receiving NAFTA preferential tariff treatment when imported from the United States into Canada and Mexico (assuming compliance with all applicable requirements). To rectify the problem discussed above with respect to imports from Canada and Mexico, CBP is proposing to amend § 102.19 by adding a new paragraph (c) to allow the NAFTA preference override to apply to these specific goods. This proposed change, if finalized, will give effect to the intentions of the NAFTA parties by extending NAFTA preferential tariff treatment to certain goods imported from Canada and Mexico that, under the liberalized rules of origin in General Note 12(t), are considered NAFTA originating as a result of minor processing operations (e.g., packaging) performed in a NAFTA party.
Comments must be received on or before September 6, 2016.