President Issues Proclamation Modifying NAFTA Rules of Origin (Canada Changes in Effect, Mexico Changes Pending)

NAFTA TCRs Amended for Certain Products in HTS Chapters 9, 12, 13, 21, 71, 84, 85, 90, and 95

In a report on these modifications, the International Trade Commission (ITC) indicates that the affected products are certain: tea and spices (Chapters 9 and 12), carrageenan (Chapter 13), seasonings (Chapter 21), precious metals (Chapter 71), speed drive controllers and their printed circuit assemblies (Chapter 85), household appliances (Chapters 84 and 85), loudspeakers (Chapter 85), thermostats (Chapter 90), parts for various machinery (Chapters 84, 85, and 90), and toys (Chapter 95).

Modifications effective January 1, 2005 for Canada. According to the proclamation and its annex, the changes to the below TCRs for subject originating goods of Canada are effective for goods entered, or withdrawn from warehouse, for consumption on or after January 1, 2005.

Modifications not yet in effect for Mexico. The proclamation and its annex also state that the changes to the TCRs for subject originating goods of Mexico will be effective on or after the date that is announced by the U.S. Trade Representative (USTR) in a Federal Register notice.

(ITC sources state that the changes for Mexico will come into force following their ratification by the Mexican Senate.)

Overview of the NAFTA TCR Modifications

Acccording to the ITC, NAFTA TCR modifications to most of the HTS numbers below will likely have no more than a negligible effect on U.S. trade and U.S. industries.

However, for the five tariff numbers marked with an asterisk *, the ITC states some greater than negligible effects are likely. Among the affected products are parts of voltage regulators (8511.90); parts of microphones and stands, headphones, earphones, telephone handsets, and amplifiers (8518.90); and parts of oscilloscopes, spectrum analyzers, and other measuring instruments and apparatus (9030.90).

(See ITC report for full discussion of trade effects, for all listed HTS numbers.)

Tea and Spices.

The new rules allow tea that is fermented and/or tea that is packaged in the NAFTA territory to satisfy the rules of origin. The rules also allow the crushing or grinding in the NAFTA territory of certain non-originating spices such as pepper, cinnamon, cloves, nutmeg, ginger, turmeric, and dill seeds to confer origin.

Affected tariff numbers:

Carrageenan

The new rule allows originating carrageenan (food thickener) to be blended with specified quantities of non-originating carrageenan without losing its originating status.

Affected tariff number: 1302.39 *

Seasonings

The new rule of origin allows mixed condiments or seasonings containing non-originating ingredients classified in Chapter 21 to qualify as originating.

Affected tariff number: 2103.90

Precious Metals

The new rules allow the use of non-originating unrefined precious metals and secondary precious metals in the production of originating precious metals

Affected tariff numbers:

Speed Drive Controllers and their Printed Circuit Assemblies

The new rule of origin allows speed drive controllers made with non-originating printed circuit assemblies to qualify as originating; the printed circuit assemblies will be subject to a less onerous tariff change rule.

Affected tariff numbers: 8504.40.bb * and 8504.90.aa

Household Appliances

Under these rules, products like personal fans, food mixers, heaters, hair dryers, microwave ovens, coffee makers and toasters no longer have to satisfy a regional value content requirement.

Affected tariff numbers:

Loudspeakers

The new rule reduces the regional value content requirement level and allows the use of a broader range of non-originating components provided the regional value content is met.

Affected tariff numbers: 8518.10-8518.29 and 8518.90 *

Parts

In consideration that some parts used to make parts designated for specified equipment or machinery are not separately provided for under different classification provisions, these rules remove the limits on the type of non-originating inputs that can be used provided the regional value content is met.

Affected tariff numbers:

(note that the above are slightly out of order numerically after 8540.99)

Thermostats

The modification allows for the use of a broader range of non-originating components provided the regional value content is met.

Affected tariff number: 9032.10

Toys

The modification allows for the use of a broader range of non-originating components provided that the toys satisfy the regional value content requirement.

Affected tariff numbers: 9501.00-9505.90

(These modifications are the result of an agreement between the U.S., Canada and Mexico to liberalize the NAFTA rules of origin for these products. See ITT's Online Archives or 08/19/04 news, 04081935 for BP summary of institution of ITC investigation (NAFTA-103-6) on the probable effect of these changes.)

(According to ITC sources, the text descriptions above, although provided by a Canadian government notice on these NAFTA Rules of Origin modifications, also apply to the U.S.)

(The tariff numbers listed above are taken from the ITC report on these TCR modifications, rather than the proclamation. As a result, the above list does not include certain tariff numbers that are in the proclamation but do not have modified TCRs.)

¹ Also called 'tariff shift rules'

Proclamation 7870 (FR Pub 02/14/05) available at http://a257.g.akamaitech.net/7/257/2422/15feb20050800/edocket.access.gpo.gov/2005/pdf/05-2937.pdf

ITC report No. NAFTA-103-6 on the probable effects of these NAFTA rules of origin modifications, dated 09/04, available at http://hotdocs.usitc.gov/docs/pubs/103/NAFTA_103_6.pdf

Canada notice on these NAFTA rules of origin modifications (dated 01/11/05), available at http://www.dfait-maeci.gc.ca/nafta-alena/amendment-401-en.asp