NAFTA Tariff Shifts

Thank you for joining us for our series on classification. Last Monday, we discussed the classification of decals, stickers and labels. Today, we will explore the meaning of tariff shifts in relationship to the free trade agreements.

A non-originating article may be considered originating if that article undergoes a tariff shift. The degree of change necessary in order to confer origin through tariff shift is based solely on the rules and guidelines found in General Note 12(t). The NAFTA Tariff Shift Rules are organized in order by Chapter, and tariff shift rules vary widely from Chapter to Chapter in that listing. This extensive and detailed list for NAFTA makes up more than 100 pages of the General Notes. Some of the other Free Trade Agreements also utilize the concept of tariff shifts, which are provided in the other General Notes, but for this article, we’ll focus on the NAFTA tariff shifts.

A tariff shift may be made from one heading in a chapter to another heading in the same chapter.

Example 1:
A good classified in Chapter 17, under 1704, needs only to have been changed into heading 1704 from any other heading, which may include headings 1701, 1702, or 1703.

In some cases, the list in GN 12(t) specifies that a shift must be from one specific chapter to another specific chapter.

Example 2:
In order for a good classified in Chapter 5 to be eligible under NAFTA, the good must have been changed into a good of Chapter 5 from any other chapter of the HTSUS.

Sample Question
Will a travel kit, imported into the U.S. from Mexico qualify for NAFTA if it is classified under HTS 9605.00.0000, and contains components that originate in the U.S. or Mexico except for the following non-originating items?
· A plastic case classified under HTS 3923.10
· Sewing thread classified under HTS 5204.20
· Sewing needles classified under HTS 7319.90
· Toothpaste classified under HTS 3306.10
· A toothbrush classified under HTS 9603.21

Answer: No.
First, we should look up the HTSUS number provided to make sure it is eligible for duty-free treatment from Mexico. We find the symbol "MX" in the Special subcolumn which indicates that the HTSUS is indeed eligible for duty-free treatment if the non-originating items satisfy the tariff shift. Turning over to General Note 12(t), we find the tariff shift must be from any other chapter to Chapter 96. All of the non-originating products on our list EXCEPT the toothbrush meets this requirement. No preferential treatment is allowed because the non-originating toothbrush classified in HTS 9603.21 does not make the tariff shift to Chapter 96 from any other chapter.

Join us next week as we tackle another challenging classification issue. If you have any specific commodities or sections of the HTSUS that you would like to see discussed in this series, please feel free to post a comment or send your suggestions to wizard@boskage.com.