Wednesday, November 27, 2013

Heads Up: Georgetown 2014

I will again be moderating a panel at the annual Georgetown CLE International Trade Update in February. This is one of the premier trade-related educational events of the year and well worth the time and expense to attend. Other than my panel, which is a survey of recent developments in customs law, highlights include an always lively discussions with Court of International Trade and Court of Appeals for the Federal Circuit judges and a panel covering legislative issues. As a bonus, there will be ethics credit available.

Click here to read the program brochure.

Wednesday, November 20, 2013

The Pesky Problem of Preference Criteria

Those who are responsible for NAFTA compliance are very familiar with the NAFTA Certificate of Origin and the Preference Criteria to be recorded in Field 7.  The criteria are used to indicate to the importer as well as to the customs authorities in the country of importation exactly how the goods qualify as originating. Under the NAFTA, there are six possible preference criteria with preference criterion B being the most common. When Customs sees a B in Field 7, it knows that the finished good contains non-originating material and that the good qualifies as originating because the non-originating materials made a qualifying change in tariff classification as a result of production in North America and, if applicable, the finished good satisfies the Regional Value Content requirement.

That is all simple enough under NAFTA. But, under the subsequent free trade agreements, no one ever specified a coding system for the preference criteria. As far as I am concerned, the lack of a uniform coding methodology is a travesty. Nevertheless, U.S. Customs and Border Protection's instructions on the implementation of the various agreements require that the certifying party specify how the good came to be originating.

Apparently, Customs has found this to be a bit of a problem as well. I gather that based on the fact that Customs just issued a reminder to the trade that FTA claims need to specify the basis for the origin determination. In that message, Customs also provided examples. Here is the text of the message free of copyright and in glorious courier font:

For importations into the United States under a free trade agreement (FTA), when a producer, exporter or importer issues an FTA certification of origin (a.k.a. Implementation Instructions, Attachment A), the “Preference Criterion” field should indicate how the good originates (meets the terms of the agreement) with the greatest specificity possible.


For example, with respect to an importation of lead sheet under the Peru TPA classified in HTSUS 7804.11.00, the “Preference Criterion” field of the certification of origin* should indicate how the good originates, as follows:

           If the good is wholly obtained:

HTSUS General Note 32(b)(i) or alternatively, Peru TPA Article 4.1(1)(a)

           If the good is produced entirely in Peru and all non-originating materials undergo the required tariff shift (and/or regional value content) specified in the corresponding specific rule of origin:

HTSUS General Note 32(n)78.2**  or alternatively, Peru TPA Annex 4.1, Chapter 78, Item 2

           If the good is produced entirely in a Peru exclusively from originating materials:

HTSUS General Note 32(b)(iii) or Peru TPA Article 4.1(1)(c)

This methodology should be used for all “tariff-shift” FTAs*** unless the Agreement, Regulations, or other officially published material provides for an alternate method. (e.g. The NAFTA provides for criterion “A,” “B and “C”.)

If no rule of origin is met, FTA preference cannot be claimed.

*   The Peru TPA certification of origin is available at trade_programs/international_agreements/free_trade/peru/a.ctt/a.pdf and the certifications of origin for our other FTAs are available on by searching the country name and selecting the corresponding SmartLink.

**  The General Note citation is preferable for ease of use and because it is periodically modified to incorporate World Customs Organization updates to the Harmonized System nomenclature.

***  The FTAs that employ a tariff-shift methodology to confer origination are: NAFTA, Chile FTA, Singapore FTA, Australia FTA, CAFTA-DR, Peru TPA, Colombia TPA, and Panama TPA.

Questions may be directed to

Thursday, November 07, 2013

Paper Punches Not for Making Up Paper

Remember the Wilton case on hand-actuated paper punches? The United States Court of Appeals for the Federal Circuit has affirmed the decision of the Court of International Trade that the punches are properly classified in HTSUS Heading 8203 as perforating punches and similar hand tools. The importer had argued for classification in Heading 8441 as "Other machinery for making up paper pulp, paper or paperboard, including cutting machines of all kinds . . . ."

Wilton got hung up on the "for making up" part of that heading. The Court of Appeals held that term to refer to the industrial manufacture of paper and paper products. These punches, which are used for craft projects, are not industrial machines for making up paper products. Thus, under General Rule of Interpretation 1, the correct classification is in 8203.

If you want to read it, the opinion is here.

An interesting procedural note here is that the plaintiff had actually convinced U.S. Customs and Border Protection to classify many of the subject punches in 8441. Despite that agreement, the Court of International Trade and the Court of Appeals both noted their obligation to reach the correct result and rejected that agreed classification.