(Investigation No. 332-360)

INTERNATIONAL HARMONIZATION OF CUSTOMS RULES OF ORIGIN

AGENCY: United States International Trade Commission

ACTION: Institution of investigation and request for public comment.

EFFECTIVE DATE: April 7, 1995

FOR FURTHER INFORMATION CONTACT: Eugene A. Rosengarden, Director, Office of Tariff Affairs and Trade Agreements (O/TA&TA) (202-205-2592), or Holm J. Kappler, Deputy Director, O/TA&TA (202-205-2598). Questions with regard to specific products may also be referred to the following coordinators:

Chapters 1-24, 44-49: Ronald H. Heller (202-205-2596)
Chapters 25, 26, 64-83, 86-89: Lawrence A. DiRicco (202-205-2606)
Chapters 27-40: Edward J. Matusik (202-205-3356)
Chapters 41-43, 61-63, 93-97: Thomas W. Divers (202-205-2609)
Chapters 50-60: Larry B. Clayton (202-205-2603)
Chapters 84, 85, 90-92: Craig M. Houser (202-205-2597).

Hearing impaired persons are advised that information on this matter can be obtained by contacting the Commission's TDD terminal on 202-205-1810. The media should contact Margaret O'Laughlin, Director, Office of Public Affairs (202-205-1819).

BACKGROUND AND SCOPE OF INVESTIGATION: Following receipt of a letter from the United States Trade Representative (USTR) on January 25, 1995, the Commission has instituted investigation No. 332-360, International Harmonization of Customs Rules of Origin, under section 332(g) of the Tariff Act of 1930. The investigation is intended to provide the basis for Commission participation in work pertaining to the Uruguay Round Agreement on Rules of Origin (ARO), negotiated in the Uruguay Round of Multilateral Trade Negotiations under the General Agreement on Tariffs and Trade (GATT) 1994 and adopted along with the Agreement Establishing the World Trade Organization (WTO).

The ARO is aimed at obtaining the harmonization and clarification of nonpreferential rules of origin for goods in trade on the basis of the substantial transformation test; at achieving discipline in the rules' administration; and at providing a framework for notification, review, consultation, and dispute settlement. These harmonized rules are intended to make country-of-origin determinations impartial, predictable, transparent, consistent, and neutral, and to avoid restrictive or distortive effects on international trade. The ARO provides that technical work to those ends will be undertaken by the Customs Cooperation Council (CCC) (now informally known as the World Customs Organization or WCO), which must report on specified matters relating to such rules for further action by parties to the ARO. Eventually, the WTO Ministerial Conference is to "establish the results of the harmonization work program in an annex as an integral part" of the ARO.

In order to carry out the work, the ARO calls for the establishment of a Committee on Rules of Origin of the WTO and a Technical Committee on Rules of Origin (TCRO) of the CCC. These Committees bear the primary responsibility for developing rules that achieve the objectives of the ARO.

A major component of the work program is aimed at harmonizing origin rules for the purpose of providing more certainty in the conduct of world trade. To this end, the agreement contemplates a 3-year CCC program, to be initiated as soon as possible after the entry into force of the Agreement Establishing the WTO. Under the ARO, the TCRO is to undertake (1) to develop harmonized definitions of goods considered wholly obtained in one country, and of minimal processes or operations deemed not to confer origin, (2) to consider the use of change in Harmonized System classification as a means of reflecting substantial transformation, and (3) for those products or sectors where a change of tariff classification does not allow for the reflection of substantial transformation, to develop supplementary or exclusive origin criteria based on value, manufacturing or processing operations or on other standards.

Coordination and representation of U.S. positions will be managed by the TPSC subcommittee on Origin (chaired by USTR) which is principally concerned with matters before the WTO Origin Committee and by the Interagency Committee on CCC Matters (chaired by Customs) which is principally concerned with technical issues before the TCRO.

CONDUCT OF THE INVESTIGATION: This investigation will provide the basis for the Commission's participation in the harmonization work program and will include (1) soliciting public input to ensure that U.S. business interests are recognized in the development of U.S. proposals, (2) participating in the development and representation of U.S. proposals before the CCC and the WTO, and (3) conducting such other research as the exigencies of the technical work may require.

The Commission will from time to time issue notices and solicit comments and proposals with respect to the development of the work. This initial notice seeks comments with respect to the Rules of Origin published by the U.S. Customs Service as Part 102 of Title 19 of the Code of Federal Regulations which will serve as a starting point in preparing the initial U.S. positions with respect to the CCC and WTO work programs. Subsequent notices will invite comments and proposals on draft U.S. proposals on the rules, which generally will be issued on a product sector basis and will provide information on the status of the work. Finally, during the course of the work program, the Commission will make the results of the TCRO's work available for public comment and hearing.

As called for in the request from the Trade Representative, the Commission is conducting a technical review of the Customs Service's "change of tariff classification" provisions in 19 C.F.R. Part 102. The Commission will address the sufficiency of these change of tariff classification provisions as a means of determining when substantial transformation has occurred, so as to result in origin being ascribed to the situs country. Specifically, the Commission will attempt to identify instances in which these change of classification rules may lead to different results than the substantial transformation standard, as the latter test has been traditionally applied in determining origin for nonpreferential purposes by U.S. courts and the U.S. Customs Service. In addition, the Commission's analysis will help identify those products or sectors where the change-of-classification approach does not reflect substantial transformation, requiring the use of supplementary or exclusive criteria based upon value, manufacturing or processing operations, or other standards. The Commission will assist in the development of harmonized definitions of goods considered wholly obtained in one country, and of minimal processes or operations deemed not to confer origin. Moreover, the Commission will help analyze foreign proposals and develop U.S. counterproposals as the CCC and WTO work programs progress, and will review provisionally adopted harmonized rules proposed by the CCC Technical Committee.

WRITTEN SUBMISSIONS: Interested persons are invited to submit written statements concerning this investigation, and, in particular, the change of tariff classification provisions set out in section 102.20 of the U.S. Customs Service Rules of Origin referenced above. Written statements are encouraged early in the investigative process, and follow-up statements are permitted; but all such statements must be received at the Commission by the close of business on June 15, 1995, in order to be considered. Information supplied to the Customs Service in statements filed pursuant to notices of that agency have been supplied to us and need not be separately provided to the Commission. The Commission is particularly interested in receiving views from the private sector on the suitability of the draft rules as a basis for determining origin for U.S. exports. Commercial or financial information which a submitter desires the Commission to treat as confidential must be submitted on separate sheets of paper, each marked "Confidential Business Information" at the top. All submissions requesting confidential treatment must conform with the requirements of section 201.6 of the Commission's Rules of Practice and Procedure (19 CFR 201.6). All written submissions, except for confidential business information, will be available for inspection by interested persons. All submissions should be addressed to the Office of the Secretary, United States International Trade Commission, 500 E Street SW., Washington, DC 20436.

PUBLIC HEARING: A public hearing in connection with this investigation may be held upon the request of interested parties. Any such hearing will be announced in a future public notice.

By order of the Commission.

Donna R. Koehnke
Secretary

Issued: April 10, 1995