CSMS Message: 03-000595

FEBRUARY 5, 2003

TO: DIRECTORS, OFFICE OF FIELD OPERATIONS

FROM EXECUTIVE DIRECTOR, TRADE COMPLIANCE AND FACILITATION
OFFICE OF FIELD OPERATIONS

SUBJECT: PRESIDENTIAL PROCLAMATION TO MODIFY RULES OF ORIGIN
UNDER THE NORTH AMERICAN FREE TRADE AGREEMENT

ON THURSDAY, JANUARY 23, 2003, A PRESIDENTIAL PROCLAMATION TO
MODIFY RULES OF ORIGIN UNDER THE NORTH AMERICAN FREE TRADE AGREEMENT
(NAFTA) WAS PUBLISHED IN THE FEDERAL REGISTER, (68 FR 3163, JAN. 23,
2003).

THE PROCLAMATION IS ATTACHED AND CONTAINS A MODIFICATION TO THE NAFTA
RULES OF ORIGIN, WHICH ARE LOCATED IN GENERAL NOTE 12 OF THE HARMONIZED
TARIFF SCHEDULE OF THE UNITED STATES.

THE MODIFICATIONS MADE BY THE ANNEX TO THIS PROCLAMATION ARE EFFECTIVE
WITH RESPECT TO GOODS OF CANADA THAT ARE ENTERED, OR WITHDRAWN FROM
WAREHOUSE, FOR CONSUMPTION, ON OR AFTER JANUARY 1, 2003.
THE MODIFICATIONS MADE BY THE ANNEX WILL NOT TAKE EFFECT WITH RESPECT
TO GOODS OF MEXICO UNTIL THE UNITED STATES TRADE REPRESENTATIVE
ANNOUNCES AN EFFECTIVE DATE IN THE FEDERAL REGISTER.

PLEASE PASS THIS MEMORANDUM TO ALL PORT DIRECTORS, ASSISTANT PORT
DIRECTORS, NAFTA COORDINATORS AND IMPORT SPECIALISTS.

QUESTIONS CONCERNING THIS MEMORANDUM SHOULD BE DIRECTED TO
MS. CAROL MCDANIEL, NAFTA SUPERVISOR, AT (202) 927-1131, OR VIA E-MAIL.

/S/

ELIZABETH G. DURANT

ATTACHMENT

ATTACHMENT
TO MODIFY RULES OF ORIGIN UNDER THE
NORTH AMERICAN FREE TRADE AGREEMENT

BY THE PRESIDENT OF THE UNITED STATES OF AMERICA

A PROCLAMATION

1. PRESIDENTIAL PROCLAMATION 6641 OF DECEMBER 15, 1993, IMPLEMENTED THE
NORTH AMERICAN FREE TRADE AGREEMENT (THE "NAFTA") WITH RESPECT TO THE
UNITED STATES AND, PURSUANT TO THE NORTH AMERICAN FREE TRADE AGREEMENT
IMPLEMENTATION ACT (THE "NAFTA IMPLEMENTATION ACT"), INCORPORATED IN
THE HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (THE "HTS") THE
TARIFF MODIFICATIONS AND RULES OF ORIGIN NECESSARY OR APPROPRIATE TO
CARRY OUT THE NAFTA.

2. SECTION 202 OF THE NAFTA IMPLEMENTATION ACT PROVIDES RULES FOR
DETERMINING WHETHER GOODS IMPORTED INTO THE UNITED STATES ORIGINATE IN
THE TERRITORY OF A NAFTA PARTY AND THUS ARE ELIGIBLE FOR THE TARIFF
AND OTHER TREATMENT CONTEMPLATED UNDER THE NAFTA. SECTION 202(Q) OF
THE NAFTA IMPLEMENTATION ACT (19 U.S.C. 3332(Q)) AUTHORIZES THE
PRESIDENT TO PROCLAIM, AS A PART OF THE HTS, THE RULES OF ORIGIN
SET OUT IN THE NAFTA AND TO PROCLAIM MODIFICATIONS TO SUCH PREVIOUSLY
PROCLAIMED RULES OF ORIGIN, SUBJECT TO THE CONSULTATION AND LAYOVER
REQUIREMENTS OF SECTION 103(A) OF THE NAFTA IMPLEMENTATION ACT
(19 U.S.C. 3313(A)).

3. I HAVE DETERMINED THAT THE MODIFICATIONS TO THE HTS PROCLAIMED IN
THIS PROCLAMATION PURSUANT TO SECTIONS 201 AND 202 OF THE NAFTA
IMPLEMENTATION ACT ARE APPROPRIATE. FOR GOODS OF MEXICO, I HAVE DECIDED
THAT THE EFFECTIVE DATE OF THE MODIFICATIONS SHALL BE DETERMINED BY THE
UNITED STATES TRADE REPRESENTATIVE (USTR).

4. SECTION 604 OF THE TRADE ACT OF 1974, AS AMENDED (THE "1974 ACT")
(19 U.S.C. 2483), AUTHORIZES THE PRESIDENT TO EMBODY IN THE HTS THE
SUBSTANCE OF THE RELEVANT PROVISIONS OF THAT ACT, OF OTHER ACTS
AFFECTING IMPORT TREATMENT, AND ACTIONS THEREUNDER, INCLUDING THE
REMOVAL, MODIFICATION, CONTINUANCE, OR IMPOSITION OF ANY RATE OF DUTY
DUTY OR OTHER IMPORT RESTRICTION.
NOW, THEREFORE, I, GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES
OF AMERICA, ACTING UNDER THE AUTHORITY VESTED IN ME BY THE CONSTITUTION
AND THE LAWS OF THE UNITED STATES, INCLUDING SECTION 604 OF THE 1974
ACT, SECTION 202 OF THE NAFTA IMPLEMENTATION ACT, AND SECTION 301 OF
TITLE 3, UNITED STATES CODE, DO HEREBY PROCLAIM:

(1) IN ORDER TO MODIFY THE RULES OF ORIGIN UNDER THE NAFTA, GENERAL
NOTE 12 TO THE HTS IS MODIFIED AS PROVIDED IN THE ANNEX TO THIS
PROCLAMATION.

(2) ANY PROVISIONS OF PREVIOUS PROCLAMATIONS AND EXECUTIVE ORDERS THAT
ARE INCONSISTENT WITH THE ACTIONS TAKEN IN THIS PROCLAMATION ARE
SUPERSEDED TO THE EXTENT OF SUCH INCONSISTENCY.

(3) THE MODIFICATIONS MADE BY THE ANNEX TO THIS PROCLAMATION SHALL BE
EFFECTIVE WITH RESPECT TO GOODS OF CANADA THAT ARE ENTERED, OR WITHDRAWN
FROM WAREHOUSE FOR CONSUMPTION, ON OR AFTER JANUARY 1, 2003. THE
MODIFICATIONS MADE BY SUCH ANNEX SHALL BE EFFECTIVE WITH RESPECT TO
GOODS OF MEXICO THAT ARE ENTERED, OR WITHDRAWN FROM WAREHOUSE FOR
CONSUMPTION, ON OR AFTER A DATE TO BE ANNOUNCED IN THE FEDERAL REGISTER BY
THE USTR.

IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND THIS DAY OF,
IN THE YEAR OF OUR LORD TWO THOUSAND TWO, AND OF THE INDEPENDENCE OF
THE UNITED STATES OF AMERICA THE TWO HUNDRED AND TWENTY-SEVENTH.

ANNEX

MODIFICATIONS TO THE RULES OF ORIGIN FOR THE NAFTA

EFFECTIVE WITH RESPECT TO GOODS OF CANADA ENTERED, OR WITHDRAWN FROM
WAREHOUSE FOR CONSUMPTION, ON OR AFTER JANUARY 1, 2003, AND TO GOODS
OF MEXICO ENTERED, OR WITHDRAWN FROM WAREHOUSE FOR CONSUMPTION, ON OR
AFTER A DATE TO BE ANNOUNCED IN THE FEDERAL REGISTER BY THE USTR,
GENERAL NOTE 12(T) IS MODIFIED AS FOLLOWS:

1. TARIFF CLASSIFICATION RULE (TCR) 7 FOR CHAPTER 22 IS DELETED AND THE
FOLLOWING NEW TCRS ARE INSERTED IN LIEU THEREOF:

"7. A CHANGE TO HEADINGS 2203 THROUGH 2207 FROM ANY HEADING
OUTSIDE THAT GROUP, EXCEPT FROM TARIFF ITEMS 2106.90.12,
2106.90.15 OR 2106.90.18 OR HEADINGS 2208 THROUGH 2209.

8. A CHANGE TO SUBHEADING 2208.20 FROM ANY OTHER HEADING, EXCEPT
FROM TARIFF ITEMS 2106.90.12, 2106.90.15 OR 2106.90.18 OR
HEADINGS 2208 THROUGH 2209.

9. NO REQUIRED CHANGE IN TARIFF CLASSIFICATION TO SUBHEADINGS
2208.30, THROUGH 2208.70, PROVIDED THAT THE NON-ORIGINATING
ALCOHOLIC INGREDIENTS CONSTITUTE NO MORE THAN 10 PERCENT OF
THE ALCOHOLIC CONTENT OF THE GOOD BY VOLUME.

10. A CHANGE TO SUBHEADING 2208.90 FROM ANY OTHER HEADING, EXCEPT
FROM TARIFF ITEMS 2106.90.12, 2106.90.15 OR 2106.90.18 OR
HEADINGS 2203 THROUGH 2207 OR 2209.

11. A CHANGE TO HEADING 2209 FROM ANY OTHER HEADING, EXCEPT FROM
TARIFF ITEMS 2106.90.12, 2106.90.15 OR 2106.90.18 OR HEADINGS
2203 THROUGH 2208."

2. THE FOLLOWING NEW CHAPTER RULE IS INSERTED IMMEDIATELY BELOW THE
SIDE HEADING "CHAPTER 27":

"CHAPTER RULE: FOR THE PURPOSES OF HEADING 2710, THE FOLLOWING
PROCESSES CONFER ORIGIN:

(A) ATMOSPHERIC DISTILLATION - A SEPARATION PROCESS IN WHICH
PETROLEUM OILS ARE CONVERTED, IN A DISTILLATION TOWER, INTO
FRACTIONS ACCORDING TO BOILING POINT AND THE VAPOR THEN
CONDENSED INTO DIFFERENT LIQUEFIED FRACTIONS. LIQUEFIED
PETROLEUM GAS, NAPHTHA, GASOLINE, KEROSENE, DIESEL/HEATING
OIL, LIGHT GAS OILS AND LUBRICATING OIL ARE PRODUCED FROM
PETROLEUM DISTILLATION;

(B) VACUUM DISTILLATION - DISTILLATION AT A PRESSURE BELOW
ATMOSPHERIC BUT NOT SO LOW THAT IT WOULD BE CLASSED AS
MOLECULAR DISTILLATION. VACUUM DISTILLATION IS USEFUL FOR
DISTILLING HIGH-BOILING AND HEAT-SENSITIVE MATERIALS SUCH
AS HEAVY DISTILLATES IN PETROLEUM OILS TO PRODUCE LIGHT TO
HEAVY VACUUM GAS OILS AND RESIDUUM. IN SOME REFINERIES
GAS OILS MAY BE FURTHER PROCESSED INTO LUBRICATING OILS;

(C) CATALYTIC HYDROPROCESSING - THE CRACKING AND/OR TREATING OF
PETROLEUM OILS WITH HYDROGEN AT HIGH TEMPERATURE AND UNDER
PRESSURE, IN THE PRESENCE OF SPECIAL CATALYSTS. CATALYTIC
HYDROPROCESSING INCLUDES HYDROCRACKING AND HYDROTREATING;

(D) REFORMING (CATALYTIC REFORMING) - THE REARRANGEMENT OF MOLECULES
IN A NAPHTHA BOILING RANGE MATERIAL TO FORM HIGHER OCTANE
AROMATICS (I.E., IMPROVED ANTIKNOCK QUALITY AT THE EXPENSE
OF GASOLINE YIELD). A MAIN PRODUCT IS CATALYTIC REFORMATE,
A BLEND COMPONENT FOR GASOLINE. HYDROGEN IS ANOTHER
BY-PRODUCT;

(E) ALKYLATION - A PROCESS WHEREBY A HIGH-OCTANE BLENDING
COMPONENT FOR GASOLINES IS DERIVED FROM CATALYTIC
COMBINATION OF AN ISOPARAFFIN AND AN OLEFIN;

(F) CRACKING - A REFINING PROCESS INVOLVING DECOMPOSITION AND
MOLECULAR RECOMBINATION OF ORGANIC COMPOUNDS, ESPECIALLY
HYDROCARBONS OBTAINED BY MEANS OF HEAT, TO FORM MOLECULES
SUITABLE FOR MOTOR FUELS, MONOMERS, PERTOCHEMICALS, ETC.;

(I) THERMAL CRACKING - EXPOSES THE DISTILLATE TO TEMPERATURES OF
APPROXIMATELY 540 DEGREES C TO 650 DEGREES C FOR VARYING PERIODS OF
TIME. PROCESS PRODUCES MODEST YIELDS OF GASOLINE AND HIGHER YIELDS OF
RESIDUAL PRODUCT FOR FUEL OIL BLENDING;

(II) CATALYTIC CRACKING - HYDROCARBON VAPORS ARE PASSED AT
APPROXIMATELY 400 DEGREES C OVER A METALLIC CATALYST (E.G., SILICA-
ALUMINA OR PLATINUM); THE COMPLEX RECOMBINATIONS (ALKYLATION,
POLYMERIZATION, ISOMERIZATION, ETC.) OCCUR WITHIN SECONDS TO YIELD
HIGH-OCTANE GASOLINE. PROCESS YIELDS LESS RESIDUAL OILS AND LIGHT
GASES THAN THERMAL CRACKING;

(G) COKING - A THERMAL CRACKING PROCESS FOR THE CONVERSION OF HEAVY
LOW-GRADE PRODUCTS, SUCH AS REDUCED CRUDE, STRAIGHT RUN PITCH,
CRACKED TARS AND SHALE OIL, INTO SOLID COKE (CARBON) AND LOWER
BOILING HYDROCARBONS PRODUCTS WHICH ARE SUITABLE AS FEED FOR
OTHER REFINERY UNITS FOR CONVERSION INTO LIGHTER PRODUCTS; OR

(H) ISOMERIZATION - THE REFINERY PROCESS OF CONVERTING PETROLEUM
COMPUNDS INTO THEIR ISOMERS."

3. TCR 4 FOR CHAPTER 27 IS DELETED AND THE FOLLOWING NEW TCRS ARE
INSERTED IN LIEU THEREOF:

"4. (A) A CHANGE TO HEADING 2710 FROM ANY OTHER HEADING, EXCEPT
FROM HEADINGS 2711 THROUGH 2715; OR

(B) PRODUCTION OF ANY GOOD OF HEADING 2710 AS THE RESULT OF ATMOSPHERIC
DISTILLATION, VACUUM DISTILLATION, CATALYTIC HYDROPROCESSING, CATALYTIC
REFORMING, ALKYLATION, CATALYTIC CRACKING, THERMAL CRACKING, COKING OR
ISOMERIZATION.

4A. A CHANGE TO HEADINGS 2711 THROUGH 2715 FROM ANY HEADING OUTSIDE
THAT GROUP, EXCEPT FROM HEADING 2710."

4. TCRS 8 THROUGH 10, INCLUSIVE, FOR CHAPTER 29 ARE DELETED AND THE
FOLLOWING NEW TCRS ARE INSERTED IN LIEU THEREOF:

"8. A CHANGE TO SUBHEADINGS 2905.11 THROUGH 2905.49 FROM ANY OTHER
SUBHEADING, INCLUDING ANOTHER SUBHEADING WITHIN THAT GROUP."

5. TCR 2 FOR CHAPTER 71 IS DELETED AND THE FOLLOWING NEW TCR IS
INSERTED IN LIEU THEREOF:

"2. A CHANGE TO HEADINGS 7113 THROUGH 7118 FROM ANY HEADING OUTSIDE
THAT GROUP."

6. TCR 69 TO CHAPTER 85 IS DELETED AND THE FOLLOWING NEW TCR IS
INSERTED IN LIEU THEREOF:

"69. (A) A CHANGE TO SUBHEADING 8518.30 FROM ANY OTHER HEADING; OR

(B) A CHANGE TO SUBHEADING 8518.30 FROM SUBHEADINGS 8518.10, 8518.29 OR
8518.90, WHETHER OR NOT THERE IS ALSO A CHANGE FROM ANY OTHER HEADING,
PROVIDED THERE IS A REGIONAL VALUE CONTENT OF NOT LESS THAN:

(1) 60 PERCENT WHERE THE TRANSACTION VALUE METHOD IS USED, OR

(2) 50 PERCENT WHERE THE NET COST METHOD IS USED."

7. TCRS 14 AND 15 TO CHAPTER 87 ARE DELETED AND THE FOLLOWING NEW TCRS
ARE INSERTED IN LIEU THEREOF:

"14. A CHANGE TO TARIFF ITEMS 8706.00.03 OR 8706.00.15 FROM ANY OTHER
HEADING, EXCEPT FROM SUBHEADINGS 8708.50 OR 8708.60, PROVIDED THERE IS
A REGIONAL VALUE CONTENT OF NOT LESS THAN 50 PERCENT UNDER THE NET COST
METHOD.

15. A CHANGE TO TARIFF ITEMS 8706.00.05, 8706.00.25, 8706.00.30 OR
8706.00.50 FROM ANY OTHER HEADING, EXCEPT FROM SUBHEADINGS 8708.50 OR
8708.60, PROVIDED THERE IS A REGIONAL VALUE CONTENT OF NOT LESS THAN 50
PERCENT UNDER THE NET COST METHOD."

8. TCRS 24, 24A AND 24B FOR CHAPTER 90 ARE DELETED AND THE FOLLOWING
NEW TCRS ARE INSERTED IN LIEU THEREOF:

"24. A CHANGE TO SUBHEADINGS 9009.91 THROUGH 9009.93 FROM ANY
SUBHEADING OUTSIDE THAT GROUP, EXCEPT FROM TARIFF ITEM 9009.99.80.

24A. A CHANGE TO TARIFF ITEM 9009.99.40 FROM SUBHEADINGS 9009.91,
9009.92 OR 9009.93, TARIFF ITEM 9009.99.80 OR ANY OTHER HEADING,
PROVIDED THAT AT LEAST ONE OF THE COMPONENTS OF SUCH ASSEMBLY NAMED IN
CHAPTER RULE 3 TO CHAPTER 90 IS ORIGINATING.

24B. A CHANGE TO SUBHEADING 9009.99 FROM ANY OTHER SUBHEADING."