CSMS Message: 97-000026

TO : ALL ABI BROKERS.

FROM : GARY ZZ-MANES

SUBJECT : NAFTA FACT SHEET #29 UPDATE

DATE : 01/13/97

7010072
JANUARY 13, 1997

DATE : JANUARY 9, 1997

TO : U.S.. CUSTOMS PERSONNEL, BROKERS, IMPORTERS,
AND INTERESTED PARTIES

FROM : DIRECTOR, TRADE AGREEMENTS

SUBJECT : NAFTA MARKING--REISSUANCE OF FACT SHEET #29 DATED
MARCH 3, 1994 A RESULT OF THE JUNE 6, 1996 FINAL NAFTA
MARKING RULE

THE FOLLOWING ANSWERS TO QUESTIONS PREVIOUSLY ADDRESSED IN FACT
SHEET #29, REFLECT A CHANGE IN THE APPLICATION OF THE CUSTOMS
REGULATIONS DUE TO THE PUBLICATION OF THE FINAL MARKING RULE
PUBLISHED AS T.D. 96-48 61 FED. REG. 28932 DATED JUNE 6, 1996.

Q. WHAT ARE THE MARKING RULES AND WHAT IS THEIR PURPOSE?

A. FOR GOODS MADE IN ONE COUNTRY WITH NO FOREIGN INPUTS,
DETERMINATION OF THE COUNTRY OF ORIGIN IS EASY--IT IS THE COUNTRY
OF PRODUCTION. INCREASINGLY, HOWEVER, GOODS ARE PROCESSED IN
MULTIPLE COUNTRIES USING BOTH DOMESTIC AND FOREIGN MATERIALS,
THEREBY COMPLICATING DETERMINATIONS OF THE COUNTRY OF ORIGIN. TO
PROVIDE GREATER CERTAINTY TO THIS DETERMINATION, THE NAFTA STATES
THAT CANADA, MEXICO AND THE UNITED STATES SHALL WRITE SPECIFIC
RULES DEFINING "COUNTRY OF ORIGIN". THESE RULES, WHICH
ESSENTIALLY CODIFY THE SUBSTANTIAL TRANSFORMATION TEST PREVIOUSLY
USED IN THE UNITED STATES, ARE DISTINCT FROM THE RULES OF ORIGIN
THAT ARE USED TO DETERMINE WHETHER A GOOD IS ORIGINATING UNDER
ARTICLE 401 OF THE AGREEMENT. IN THE UNITED STATES, THE MARKING
RULES WERE PUBLISHED IN THE FEDERAL REGISTER AS A FINAL RULE ON
JUNE 6, 1996 AS T.D. 96-48 61 FED. REG. 28932.

IT IS IMPORTANT TO ESTABLISH THE COUNTRY OF ORIGIN NOT ONLY FOR
COUNTRY-OF-ORIGIN MARKING PURPOSES BUT ALSO BECAUSE THE DUTY
REDUCTIONS THAT WERE NEGOTIATED UNDER THE CFTA WERE RETAINED
UNDER NAFTA. THUS, A GOOD PRODUCED BOTH IN MEXICO AND CANADA MAY
UNQUESTIONABLY ORIGINATE ACCORDING TO THE TERMS OF ARTICLE 401,
YET THERE MAY BE DOUBTS AS TO WHETHER THE COUNTRY OF ORIGIN IS
MEXICO OR CANADA. 19 C.F.R. 102 WILL DETERMINE WHICH IS THE
COUNTRY OF ORIGIN AND WHETHER THE "MX" OR THE "CA" RATE APPEARING
IN THE TARIFF APPLIES.

- 2 -

IN ADDITION, ORIGINATING CANADIAN GOODS ARE NO LONGER SUBJECT TO
THE MPF WHEREAS MEXICAN GOODS ARE. ONCE AGAIN, PART 102 WILL BE
USED TO DETERMINE THE ORIGIN OF THE GOODS AND, CONSEQUENTLY,
WHETHER THEY ARE SUBJECT TO MPF.

Q. HOW DOES PART 134 OF THE CUSTOMS REGULATIONS RELATE TO PART
102?

A. PART 102 IS USED TO DETERMINE THE COUNTRY OF ORIGIN; PART 134
GOVERNS COUNTRY-OF-ORIGIN MARKING. THUS, ALL THE PROVISIONS OF
PART 134, INCLUDING THE EXCEPTIONS TO MARKING PROVIDED FOR IN
134.22, APPLY TO GOODS WHOSE ORIGIN IS DETERMINED IN ACCORDANCE
WITH PART 102.

WHENEVER A GOOD UNDERGOES PROCESSING IN CANADA OR MEXICO, PART
102 MUST BE USED TO DETERMINE THE COUNTRY OF ORIGIN OF THAT GOOD.
PART 102 CREATES A "HIERARCHY" OF RULES; ONE PROCEEDS THROUGH
THIS HIERARCHY OF RULES UNTIL A CONDITION IS MET AND THE COUNTRY
OF ORIGIN IS THEREBY ESTABLISHED. FOR EXAMPLE, 19 C.F.R. 102.11
(A) (1) SAYS THAT IF A GOOD IS WHOLLY OBTAINED OR PRODUCED IN A
COUNTRY, THAT COUNTRY IS THE COUNTRY OR ORIGIN. IF THE COUNTRY
OR ORIGIN CANNOT BE DETERMINED UNDER 19 C.F.R. 102.11 (A) (1),
ONE PROCEEDS TO 19 C.F.R. 102.11 (A) (2), WHICH STATES THAT IF
THE GOOD IS PRODUCED EXCLUSIVELY FROM DOMESTIC MATERIALS (I.E.,
MATERIALS WHOSE COUNTRY OF ORIGIN AS DETERMINED UNDER THE MARKING
RULES IS THE SAME COUNTRY OF ORIGIN AS THE COUNTRY IN WHICH THE
GOOD IS PRODUCED), THAT COUNTRY IS THE COUNTRY OF ORIGIN. IF
ORIGIN CANNOT BE DETERMINED UNDER 19 C.F.R. 102.11 (A) (2), ONE
CONTINUES THROUGH THE HIERARCHY UNTIL A CONDITION IS MET AND THE
ORIGIN ESTABLISHED. TRADERS SHOULD CONSULT 102.11 FOR THIS
HIERARCHY OF RULES.

Q. WHAT IS THE NAFTA PREFERENCE OVERRIDE?

A. THE NAFTA PREFERENCE OVERRIDE (19 C.F.R. 102.19) STATES THAT
IF APPLICATION OF THE MARKING RULES RESULTS IN A DETERMINATION
THAT THE COUNTRY OF ORIGIN OF THE GOOD IS NOT A SINGLE NAFTA
COUNTRY UNDER 19 C..R. 102.11 (A) (WHOLLY OBTAINED OR PRODUCED)
OR (B) (PRODUCED EXCLUSIVELY FROM DOMESTIC MATERIALS), THE
COUNTRY OF ORIGIN IS THE LAST NAFTA COUNTRY IN WHICH THE GOOD
UNDERWENT PRODUCTION OTHER THAN MINOR PROCESSING, PROVIDED THAT A
CERTIFICATE OF ORIGIN HAS BEEN COMPLETED AND SIGNED FOR THE GOOD.
IF, HOWEVER, THE UNITED STATES IS DETERMINED TO BE THE COUNTRY OF
ORIGIN, THEN THE LAST NAFTA COUNTRY IN WHICH THAT GOOD WAS
ADVANCED IN VALUE OR IMPROVED IN CONDITION BEFORE ITS RETURN TO
THE U.S. IS THE COUNTRY OF ORIGIN FOR DUTY PURPOSES ONLY (19 CFR
102.19 (B)).

- 3 -

Q. IS IT TRUE THAT NAFTA PROVIDES FOR MORE FLEXIBLE METHODS OF
MARKING OF THE COUNTRY OF ORIGIN?

A. YES. IF UNDER 19 C.F.R. THE COUNTRY OF ORIGIN OF A GOOD IS
MEXICO OR CANADA, THE GOOD IS SUBJECT TO THE MORE FLEXIBLE
MARKING STANDARDS ESTABLISHED IN ANNEX 311 OF THE NAFTA AND SET
FORTH UNDER THE AMENDMENTS TO PART 134 OF THE CUSTOMS REGULATIONS
BY T.D. 95-68 (SEE 60 FED. REG. 46334). THESE MORE FLEXIBLE
STANDARDS, FOR EXAMPLE, ALLOW THE GOOD TO BE MARKED IN SPANISH,
ENGLISH OR FRENCH, USING ANY REASONABLE METHOD, INCLUDING
STICKERS, LABELS, TAGS OR PAINT UNLESS 19 USC 1304 REQUIRES A
SPECIFIC TYPE OF MARKING SUCH AS THE MARKING OF PIPES AND
FITTINGS UNDER 19 USC 1304(C).

APPLICATION OF 19 C.F.R. 102, HOWEVER, MAY RESULT IN A COUNTRY OR
ORIGIN OTHER THAN MEXICO OR CANADA. WHEN THE COUNTRY OR ORIGIN
IS OTHER THAN MEXICO OR CANADA, THE TRADITIONAL PROVISIONS ON
COUNTRY-OF-ORIGIN MARKING APPLY. THIS IS TRUE EVEN IF THE GOOD
UNDERWENT SOME PROCESSING IN MEXICO AND/OR CANADA.

Q. 19 C.F.R. 134.45 (A) (2) SAYS THE COUNTRY OF ORIGIN OF NAFTA
GOODS MAY BE MARKED IN SPANISH, ENGLISH OR FRENCH. DOES THIS
EXTEND TO ACCOMPANYING PHRASES SUCH AS "MADE IN," "PRODUCT OF,"
ETC. EXAMPLE: MAY A GOOD BE MARKED "PRODUCTO DE MEXICO" OR "FAIT
AU CANADA"?

A. THE OFFICE OF REGULATIONS AND RULINGS HAS NOT YET RULED ON
THIS MATTER.

Q. MAY GOODS BE MARKED "MADE IN NORTH AMERICA"?

A. NO.

Q. HOW CAN I GET AN ADVANCE RULING ON THE COUNTRY OF ORIGIN OF A
GOOD UNDER PART 102 OF THE CUSTOMS REGULATIONS?

A. BINDING RULINGS ON THE COUNTRY OF ORIGIN OF A GOOD, AS
DETERMINED UNDER 19 C.F.R. 102, AND WHETHER A GOOD OF MEXICO OR
CANADA SATISFIES COUNTRY-OF-ORIGIN MARKING REQUIREMENTS UNDER
PART 134 OF THE CUSTOMS REGULATIONS, MAY BE REQUESTED IN
ACCORDANCE WITH 19 C.F.R. 181.93.

- 4 -

QUESTIONS REGARDING THIS MESSAGE MAY BE DIRECTED TO THE NAFTA
CENTER AT 972-574-4061.

(SIGNED)
JOYCE METZGER