On March 10, 2008, the U.S. International Trade Commission (ITC) announced that it would begin an investigation into the effects of certain proposed modifications to the rules of origin under the U.S.-Chile Free Trade Agreement (US-Chile FTA). The ITC is commencing the investigation at the request of the U.S. Trade Representative (USTR) to provide advice on the probable economic effect that the proposed modifications will have on U.S. trade and on domestic producers of certain articles. A report by the ITC is expected by October 31, 2008.

The US-Chile FTA authorizes the President to proclaim modifications to the agreement’s rules of origin. One of the requirements, however, is that the President must obtain the advice of the ITC regarding any proposed changes. The proposed changes could have a significant impact on the importation of a broad range of products, including:

  • certain herbs and spices;
  • coffee;
  • cocoa and cocoa preparations;
  • miscellaneous edible preparations;
  • products of the chemical or allied industries;
  • rubber and related articles;
  • natural or cultured pearls;
  • nuclear reactors, boilers, machinery, mechanical appliances, and related parts;
  • electrical equipment (sound and television recorders) and related parts; and
  • optical, medical, measuring, or checking instruments and apparatus.

This is the first investigation regarding rules of origin changes under the US-Chile FTA. However, it is not the only United States’ trade agreement that contains a provision allowing unilateral modifications by presidential proclamation. For example, the U.S.-Bahrain Free Trade Agreement (US-Bahrain FTA) and U.S.-Singapore Free Trade Agreement both contain similar authorization for the President to proclaim modifications subject to certain requirements, including that the President obtain the advice of the ITC. In addition, the NAFTA Implementation Act authorizes the President to proclaim modifications to the rules of origin of that agreement, subject to consultation and layover requirements similar to those found in the US-Bahrain FTA and US-Chile FTAs.

The President has previously sought advice from the ITC on at least three separate occasions as to the effect of modifications of NAFTA rules of origin, and in fact, changes to the NAFTA rules of origin have been implemented as a result of such investigations. Although the ITC will not hold hearings in connection with its investigation, the ITC is seeking input for this investigation and will be accepting written submissions for the record. If you would like additional details regarding the proposed changes and their potential impact on products your company imports, are interested in submitting comments, or if you would like to explore the possibility of a rule of origin change on another product or in the context of one of the other Free Trade Agreements, please contact the attorney with whom you work or one of the authors below who specializes in customs matters.