Investigation No. 332-360

International Harmonization of Customs Rules of Origin

AGENCY: United States International Trade Commission

ACTION: Request for public comments on draft proposals for chapters 85 and 90

EFFECTIVE DATE: June 26, 1997

FOR FURTHER INFORMATION CONTACT: Eugene A. Rosengarden, Director, Office of Tariff Affairs and Trade Agreements (O/TA&TA) (202-205-2595), or Craig Houser, Nomenclature Analyst (202-205-2597).

Parties having an interest in particular products or HTS chapters and desiring to be included on a mailing list to receive available documents pertaining thereto should advise Diane Whitfield by telephone (202-205-2610) or by mail at the Commission, 500 E Street SW., Room 404, Washington, DC 20436. 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 in the Office of External Relations (202-205-1819).

BACKGROUND: Following receipt of a letter from the United States Trade Representative (USTR) on January 25, 1995, the Commission instituted Investigation No. 332-360, International Harmonization of Customs Rules of Origin, under section 332(g) of the Tariff Act of 1930 (60 FR 19605, April 19, 1995).

The investigation is intended to provide the basis for Commission participation in work pertaining to the Uruguay Round Agreement on Rules of Origin (ARO), which has adopted along with the Agreement Establishing the World Trade Organization (WTO).

The ARO is designed to harmonize and clarify nonpreferential rules of origin for goods in trade on the basis of the substantial transformation test; achieve discipline in the rules' administration; and provide 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 this work, the ARO called for the establishment of a Committee on Rules of Origin of the WTO, and a Technical Committee on Rules of Origin (TCRO) of the WCO. These Committees bear the primary responsibility for developing rules that achieve the objectives of the ARO.

A major component of the work program is the harmonization of origin rules for the purpose of providing more certainty in the conduct of world trade. To this end, the agreement contemplates a 3-year WCO program, which was formally initiated in July, 1995. 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 other standards.

The draft U.S. proposed rules for the goods of:

     Chapter 85 --  Electrical machinery and equipment and parts thereof; 
		    sound recorders and reproducers, television image and 
		    sound recorders and reproducers, and parts and 
		    accessories of such articles 

     Chapter 90 --  Optical, photographic, cinematographic, measuring, 
		    checking, precision, medical or surgical instruments 
		    and apparatus; parts and accessories thereof
of the Harmonized System that are being made available for public comment cover goods that are not considered to be wholly made in a single country. The rules rely largely on the change of heading as a basis for ascribing origin.

Copies of the proposed revised rules will be available from the Office of the Secretary at the Commission, from the Commission's Internet home page (, or by submitting a request on the Office of Tariff Affairs and Trade Agreements voice messaging system (202-205-2592).

These proposals are intended to serve as the basis for the U.S. proposal to the TCRO of WCO. The proposals may undergo change as proposals from other government administrations and the private sector are received and considered. Under the circumstances, the proposals should not be cited as authority for the application of current domestic law.

If eventually adopted by the TCRO for submission to the Committee on Rules of Origin of the World Trade Organization, these proposals would comprise an important element of the ARO work program to develop harmonized, non- preferential country of origin rules, as discussed in the Commission's earlier notice. Thus, in view of the importance of these rules, the Commission seeks to ascertain the views of interested parties concerning the extent to which the proposed rules reflect the standard of substantial transformation provided in the Agreement.

In addition, the proposed draft rules released at this time do not contain any special provisions concerning the origin of goods classified either as unfinished articles or parts of articles and which undergo significant processing or assembly operations sufficient to result in a substantial transformation but which do not result in a change of classification. Comments are requested with respect to the extent that processing and/or assembly operations performed in those circumstances should be recognized as origin - conferring for purposes of these rules, particularly for chapters 84 through 90.

Forthcoming Commission notices will advise the public on the progress of the TCRO's work and will contain any harmonized definitions or rules that have been provisionally or finally adopted.

WRITTEN SUBMISSIONS: Interested persons are invited to submit written statements concerning this phase of the Commission's investigation. Written statements should be submitted as quickly as possible, and follow-up statements are permitted; but all statements must be received at the Commission within 30 days of the date of publication of this notice in the Federal Register (in this case, by August 1), in order to be considered. Again, the Commission notes that it is particularly interested in receiving input from the private sector on the effects of the various proposed rules and definitions on U.S. exports as well as imports. 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, U.S. International Trade Commission, 500 E Street SW., Washington DC 20436.

By order of the Commission.

Donna R. Koehnke

Issued: June 26, 1997