United States: Many Unhappy With Proposed Changes To Country-Of-Origin

(Mondaq International Law)

The comment period has just closed on a proposal published last July in which U.S. Customs and Border Protection (“CBP”) suggested significant changes to the way in which the country of origin is determined for goods subjected to processing in more than one country (see previous alert here for more information). The proposed changes would affect not only such CBP issues as country of origin marking and duty rates, but also, potentially, government contracting, coastwise trade, and numerous other areas of commerce. Instead of continuing to employ a case-by-case analysis to determine whether a good undergoes a “substantial transformation” in a particular country – a technique dating back approximately a century – CBP has suggested a “tariff-shift”-based codification (currently used for NAFTA country-of-origin-marking purposes) that, according to CBP, would greatly improve the administration of the law by eliminating subjectivity and uncertainty, by promoting transparency and predictability, and by aiding importers’ exercise of reasonable care.

Judging from the scores of comments submitted by the twice-extended December 1, 2008 deadline, CBP appears to be quite alone in that view. The criticism leveled at CBP’s proposal falls essentially into three broad categories: (1) opposition to extending tariff shift principles to areas of the law where, contrary to CBP’s suggestion, doing so would be illegal, would overturn existing law, or both; (2) opposition to applying the tariff shift rules as written where, contrary to CBP’s assurance, the new rules will produce a result at odds with the body of law they were expected to codify; and (3) opposition in general to the proposed implementation of new rules on multiple grounds, including substantially increased costs, uncertainty, and burden on members of the trading community; substantially increased complexity; and abysmally poor timing. Read the complete article here.