Sunday, July 27, 2008

CBP Proposes Elimination of Substantial Transformation Rule

On Friday, July 25, the Federal Register contained a Notice of Proposed Rulemaking (NPR), which proposes to eliminate the use of substantial transformation as one of the two methods for determining origin of imported goods.

Under the 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 provides for case-by-case adjudication to determine whether goods have been “substantially transformed'' in a particular country. The other method uses the codified rules in 19 CFR Part 102 , also known as the “tariff shift rules”, which also determine whether a good has been “substantially transformed'' by assessing changes in tariff classification.

CBP proposes to apply the Part 102 rules to future free trade agreements. This change will also affect many of the current free trade agreements such as GSP, CBERA and the AGOA; however, these rules will not be applied where current agreements specify another origin test for determining origin. Since use of FTA’s are often complex, please consult the notice in the Federal Register for more detail concerning these changes

CBP believes that the use of one codified standard will result in more objective uniform country of origin determinations instead of the subjective determinations that have resulted from the use of substantial transformation rules.

Comments related to this notice must be received on or before September 23, 2008. Make your opinion count and post your comments! Comments must be identified by docket number and submitted by one of the following methods.

Federal eRulemaking Portal: Docket number USCBP-2007-0100


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.

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