CBP Issues Interim Rule Amending Regulations for U.S.-Panama FTA

Panama FTA Tariff Changes Have Already Been Implemented

President Barack Obama issued a proclamation Oct. 30, 2012 formally implementing PATPA. The proclamation amended the Harmonized Tariff Schedule to implement PATPA, effective goods entered or withdrawn from warehouse for consumption on or after Oct. 31, 2012. CBP last year provided instructions for PATPA rules of origin, WCO tariff number discrepancies, verifying importer claims, the SPI "PA", post-importation claims and protests, etc (see 12111326).

The modifications to the HTS included the addition of a new General Note 35 incorporating the relevant PATPA rules of origin and the insertion throughout the HTS of the preferential duty rates applicable to individual products under the PATPA where the special program indicator ‘‘PA’’ appears in parenthesis in the ‘‘Special’’ rate of duty subcolumn. The modifications to the HTS also included a new Subchapter XIX to Chapter 99 to provide for temporary tariff-rate quotas and applicable safeguards implemented by the PATPA.

Certain Customs-Related Provisions Require Regulation

Certain customs-related PATPA provisions require implementation through regulation, said CBP. These include certain provisions within PATPA Chapter One (Initial Provisions), Chapter Two (General Definitions), Chapter Three (National Treatment and Market Access for Goods), Chapter Four (Rules of Origin and Origin Procedures), and Chapter Five (Customs Administration and Trade Facilitation).

Highlights of some of these provisions are as follows:

Claims for PATPA preferences. An importer may make a claim for PATPA preferential tariff treatment based on a certification by the importer, exporter, or producer or the importer’s knowledge that the good is an originating good. When an importer has reason to believe that a claim is based on inaccurate information, the importer must correct the claim and pay any duties that may be due. An importer who did not claim PATPA tariff benefits on a qualifying good at the time of importation may apply for a refund of any excess duties at any time within one year after the date of importation.

Certification. Upon request, the U.S. importer must submit a copy of the certification of the importer, exporter, or producer if the certification forms the basis for the claim. The certification must include certain information and may be used either for a single importation or for multiple importations of identical goods. Certification is not required for certain non-commercial or low-value importations.

Denial of benefits. The denial of PATPA tariff benefits is authorized if the importer fails to comply with any of the requirements under new Subpart S of 19 CFR Part 10.

Export requirements. The rule sets forth certain obligations of a person who completes and issues a certification for a good exported from the U.S. to Panama. A person who completes such a certification must provide a copy to CBP upon request and give prompt notification of any errors in the certification to every person to whom the certification was given. There are also certain recordkeeping requirements.

Rules of origin. The interim final rule codifies the rules of origin provisions of HTS General Note 35. It specifies those goods that are originating goods because they are wholly obtained or produced entirely in the territory of one or both of the parties. It also provides that goods that have been produced entirely in the territory of one or both of the Parties from non-originating materials each of which undergoes an applicable change in tariff classification and satisfies any applicable regional value content or other requirement set forth in HTS General Note 35, are originating goods. Essential to the rules are the specific rules of General Note 35.

Value content. In addition, there are provisions concerning the basic rules that apply for determining the value of a material for purposes of calculating the regional value content of a good as well as for purposes of applying the de minimis rules.

Accumulation. The interim final rule sets forth the rule by which originating materials from the territory of a Party that are used in the production of a good in the territory of the other Party will be considered to originate in the territory of that other country. In addition, it establishes that a good that is produced by one or more producers in the territory of one or both of the Parties is an originating good if the good satisfies all of the applicable requirements of the rules of origin of the PATPA.

De mimimis. There are also de minimis rules for goods that may be considered to qualify as originating goods even though they fail to qualify as originating goods under the rules. There are a number of exceptions to the de minimis rule set forth in PATPA Annex 4.6 as well as a separate rule for textile and apparel goods.

Accessories, spare parts, tools. The interim final rule specifies the conditions under which a good’s standard accessories, spare parts, or tools are: (1) treated as originating goods; and (2) disregarded in determining whether all non-originating materials undergo an applicable change in tariff classification under HTS General Note 35.

Goods put up in sets. Goods classifiable as goods put up in sets for retail sale as provided for in HTS General Rule of Interpretation 3, will not qualify as originating goods unless: (1) each of the goods in the set is an originating good; or (2) the total value of the non-originating goods in the set does not exceed 15% of the adjusted value of the set, or 10% of the adjusted value of the set in the case of textile or apparel goods.

Packaging and packing materials. Retail packaging materials and packing materials for shipment are to be disregarded with respect to their actual origin in determining whether nonoriginating materials undergo an applicable change in tariff classification under HTS General Note 35.

Indirect materials. Indirect materials are considered to be originating materials without regard to where they are produced.

Transit and transshipment. An originating good loses its originating status and is treated as a non-originating good if, subsequent to production in the territory of one or both of the Parties that qualifies the good as originating, the good: (1) Undergoes production outside the territories of the Parties, other than certain specified minor operations; or (2) does not remain under the control of customs authorities in the territory of a non-Party.

Verification. The interim final rule describes the conduct of verifications to determine whether imported goods are originating goods entitled to PATPA preferential tariff treatment, including the verification and enforcement procedures specifically relating to trade in textile and apparel goods. It also concerns the denial of preferential tariff treatment in situations in which there is a pattern of conduct by an importer, exporter, or producer of false or unsupported PATPA preference claims.

Penalties. The general application of penalties to PATPA transactions is outlined in the interim final rule, including an exception to the application of penalties in the case of an importer who promptly and voluntarily makes a corrected claim and pays any duties owing.

Goods returned after repair or alteration. The interim final rule also includes PATPA provisions regarding duty-free treatment for goods re-entered after repair or alteration in Panama.

(Federal Register 10/23/13)