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3.3 Rules of Origin

The country of origin of merchandise imported into the customs territory of the US (the 50 states, the District of Columbia and Puerto Rico) is important for several reasons. The country of origin can affect, among other things, the rate of duty, eligibility for special programmes, admissibility, quota, procurement by government agencies and marking requirements.

There are non-preferential and preferential rules of origin. Non-preferential rules are those that generally apply to merchandise in the absence of bi-lateral or multi-lateral trade agreements. Preferential rules are those that apply to merchandise to determine eligibility for special treatment under various trade agreements or special legislation.

A. Non-preferential Rules of Origin

Non-preferential rules of origin schemes are used for several purposes.

  • MFN or NTR treatment
  • Country-of-origin marking
  • Government procurement
  • Textile and apparel products

A brief discussion of these schemes is set forth below.

a) MFN or NTR Treatment

A special rule of origin scheme is used to determine if products qualify for MFN or NTR duty treatment. This scheme employs “wholly obtained” and “substantial transformation” criteria for goods.

  • “Wholly obtained” goods are those that are wholly the growth, product or manufacture of a particular country.
  • The “substantial transformation” criterion is based on a change in name/character/use; i.e., an article that consists in whole or in part of materials from more than one country is a product of the last country in which it has been substantially transformed into a new and different article of commerce with a name, character, and use distinct from that of the article or articles from which it was so transformed.

b) Country-of-origin Marking

The following are the two rules of origin schemes for country-of-origin marking purposes.

  1. To determine the origin of products from all countries except Canada and Mexico, rules of origin similar to those discussed above for NTR duty treatment are used.
  2. To determine the origin of products imported from Canada or Mexico, rules of origin based on NAFTA Annex 311 are used.

Legislation and Implementing Regulations for Country-of-Origin Marking

  • 19 USC 1304 for marking requirements
  • 19 CFR 134
  • 19 CFR 102.0

c) Government Procurement

For the purpose of granting waivers of certain “Buy American” restrictions on government procurement of products from eligible countries, an article is a product of a country or instrumentality only if:

  • it is wholly the growth, product or manufacture of that country or instrumentality, or
  • in the case of an article that consists in whole or in part of materials from another country or instrumentality, it has been substantially transformed into a new and different article of commerce with a name, character or use distinct from the article from which it was so transformed.

Legislation and Implementing Regulations for Government Procurement

  • 19 USC 2511 et seq. (specifically § 2518(4)(B))
  • 19 CFR 177.21

d) Textile and Apparel Products

A rule of origin is used to determine the country of origin for textile and apparel products. This scheme employs the substantial transformation criterion, which is expressed or based exclusively on a tariff shift method.

Coverage

Country-of-origin rules for textile and apparel products apply to the items classified in HTSUS Chapters 50 through 63 and to the following textile items in the HTSUS classifications listed below.

3005.90

Wadding, gauze, bandages and the like (non-adhesive)

3921.12

Cellular plates, sheets, film, foil and strip of plastics of polymers of vinyl chloride, combined with textile materials

3921.13

Cellular plates, sheets, film, foil and strip of plastics, of polymers of polyurethanes, combined with textile materials

3921.90

Cellular plates, sheets, film, foil and strip of plastics of polymers, other, combined with textile materials

4202.12

Trunks, suitcases, vanity cases, attaché cases, briefcases, school satchels, and similar containers with outer surface of textile materials

4202.22

Handbags with outer surface of textile materials

4202.32

Articles carried in the pocket or handbag with outer surface of textiles

4202.92

Other containers of heading 4202 with outer surface of textile materials

6405.20

Footwear with soles and uppers of wool felt

6406.10

Footwear uppers with 50% or more of the external surface area of textile materials

6406.99

Leg warmers and gaiters of textile material

6501-6505

Headwear of textiles

6601.10-99

Umbrellas

7019

Yarns and woven fabrics of glass fibres

8708.21

Safety seat belts for motor vehicles

8804

Parachutes; their parts and accessories

9113.90

Watch straps, bands and bracelets of textile materials

9404.90

Comforters, quilts, pillows and cushions, and similar articles of textile materials

9502.91

Doll clothing

9612.10

Woven typewriter ribbons or similar ribbons, of man-made fibres

Principles behind the Rules of Origin for Textiles and Apparel

(1) General Rules

In general, for purposes of customs laws and the administration of quantitative restrictions, a textile or apparel product originates in a country, territory or insular possession according to the following rules.

(i) The country of origin is the country in which a textile or apparel product is wholly obtained or produced when the product is completely produced or manufactured in one country (except for de minimis materials, as defined in 19 CFR 102.13).

(ii) The country of origin of yarn, thread, twine, cordage, rope, cable or braiding is:

  • staple yarn, etc. - the country in which staple fibres are spun into yarn;
  • filament yarn, etc. - the country in which filament is extruded; and
  • plied gimped and cabled yarns, etc. - the country in which the fibres or filaments used in the yarn are spun or extruded.

(iii) The country of origin of a fabric is the country in which the fabric is woven, knitted, needled, tufted, felted, entangled or created by any other fabric-making process.

Note: The country of origin of quilted fabrics is the country in which the fabrics are formed (one of the specific exceptions listed below).

(iv) The country of origin of all other textile and apparel products is the country in which the components of the product are wholly assembled (except for minor attachments such as buttons, beads, spangles, embroidery, etc., or minor subassemblies such as collars, cuffs, pockets, plackets, etc.).

Note: The rules generally provide that processing operations or assembly (particularly for apparel), not cutting components, confer country of origin.

(2) Special Rules

(i) Specified HTSUS Classifications

Special rules govern the articles in the following 16 HTSUS classifications (each followed by a general description).

  • Articles produced from yarns: the country of origin of articles made from yarn, strips, twine, cordage, rope or cables is the country in which the yarn, etc., is produced.

5609        

articles made from yarn, strips, twine, cordage, rope or cables

  • Articles produced from fabric: the country of origin of certain articles made from fabric in the following HTSUS classifications is the country in which the fabric is produced.

5807

Labels, badges, emblems

5811

Quilted textile products in the piece (i.e., lengths or rolls of quilted fabrics)

6209.20

Baby diapers (cotton woven)

6213

Handkerchiefs

6214

Shawls, scarves, mufflers, mantillas, veils and the like

6301

Blankets, travelling rugs

6302

Bed linen, table linen, toilet linen, kitchen linen

6303

Curtains, drapes, interior blinds, valances

6304

Bedspreads, furnishings

6305

Sacks and bags for packing

6306

Tarpaulins, awnings, sunblinds, tents, sails, camping goods

6307.10

Dust cloths, mop cloths, polishing cloths, shop towels, bar mops, dish cloths

6307.90

Labels, cords, tassels, corset and footwear lacings, toys for pets, wall banners, surgical towels, surgical drapes, tufted towels, pillow shells, quilt and comforter shells, national flags, moving pads, and other made-up textile articles not specifically provided for elsewhere

6308

Needlecraft sets

9404. 90

Comforters, quilts, pillows and cushions, and similar articles of textile materials

Note: The country of origin of certain articles is affected by special rules set forth in section (iii), Dyed and Printed Fabrics and Articles Made from Such Fabrics, below.

(ii) Knitted-to-shape Products

The country of origin of knitted-to-shape products is the country in which major parts are knitted or crocheted directly to the shape used in the finished product.

Knitted-to-shape means that the panels or parts (not including parts such as collars, cuffs, waistbands, plackets, pockets, linings, paddings, trim or similar parts) are knitted to the shape used in the final assembly process (rather than knitted into a tube or blanket of material that is cut to shape). Minor cutting, trimming or sewing does not affect whether components are knitted to shape. Knitted-to-shape applies when 50% or more of the exterior surface area (not including patch pockets, appliqués, etc.) is formed by major parts that have been knitted or crocheted directly to the shape used in the good.

For hosiery, the addition of gussets or top elastics or the closing of toes does not affect the status of knitted-to-shape.

(iii) Dyed and Printed Fabrics and Articles Made from Such Fabrics

Special rules are applicable to certain fabrics and articles made from fabrics that are dyed and printed when accompanied by two or more specified finishing operations.

  • Fabrics – The country of origin of fabric classified under the HTSUS as of silk, cotton, man-made fibre or vegetable fibre is the country in which the fabric is both dyed and printed when accompanied by two or more of the following finishing operations: bleaching; shrinking; fulling; napping; decating; permanent stiffening; weighting; permanent embossing; or moireing.
  • Articles Made From Fabric - Notwithstanding the rule set forth in (2)(i) above, the country of origin of certain articles made from fabric in the following 18 HTSUS classifications is the country in which the fabric is both dyed and printed when accompanied by two or more of the following finishing operations: bleaching; shrinking; fulling; napping; decating; permanent stiffening; weighting; permanent embossing; or moireing. This rule does not apply to goods classified under such headings as of cotton or wool or consisting of fibre blends containing 16% or more by weight of cotton.

6117.100

knitted or crocheted shawls, scarves, mufflers, mantillas, veils and the like

6213

handkerchiefs, not knitted or crocheted

6214

shawls, scarves, mufflers, mantillas, veils and the like, not knitted or crocheted

6302.22

printed bed linen, not knitted or crocheted, of man-made fibres

6302.29

printed bed linen, not knitted or crocheted, of other textile materials

6302.52

table linen, not knitted or crocheted, of flax

6302.53

table linen, not knitted or crocheted, of man-made fibres

6302.59

table linen, not knitted or crocheted, of other textile materials

6302.92

toilet and kitchen linen of flax

6302.93

toilet and kitchen linen of man-made fibres

6302.99

toilet and kitchen linen of other textile materials

6303.92

curtains, including drapes, interior blinds, and bed valences, of synthetic fibres

6303.99

curtains, including drapes, interior blinds and bed valences, not knitted or crocheted, of other textile materials

6304.19

bedspreads, not knitted or crocheted

6304.93

other furnishing articles, not knitted or crocheted, of synthetic fibres

6304.99

other furnishing articles, not knitted or crocheted, of other textile materials

9404.90.85

quilts, eiderdowns, comforters and similar articles

9404.90.95

other articles of bedding and similar furnishings

(3) Multi-country Rule

If the country of origin of a textile or apparel product cannot be determined by one of the above rules and the product is created as a result of processing in two or more countries, the country of origin is:

(i) The country in which the most important assembly or manufacturing process occurs.

The most important processing operation must be determined on a case-by-case basis through binding rulings and court decisions. The resulting body of rulings and court decisions may serve as guidelines in the future.

(ii) If the most important assembly or manufacturing process cannot be determined, the country of origin is the last country in which an important assembly or manufacturing operation occurred.

  • Example 1 – a coat: The right half is assembled in one country and the left half is assembled in another country. Provided that the processing steps in each country are equally balanced, then the country of origin is probably the country in which the two halves are sewn together because each half is equally important.

More realistically, if one yarn of a plied yarn is produced in one country and the other yarn is produced in a second country, and the yarns are twisted to form a plied yarn, then, assuming both yarns are equal in the final product, the country in which the yarns are twisted together is the country of origin because each yarn is equally important.

  • Example 2 – a tent: The fabric for the roof and floor are produced in one country, the fabric for the walls is produced in another country, and all the fabrics are cut and assembled in a third country. As a tent is classified in heading 6306, its origin should be based on where the fabric for the tent is formed. But as the fabric is formed in different countries, and it is difficult to argue that fabric for roofs and floors is more important than fabric for walls, where the fabrics are cut and sewn into the tent is the country of origin.

Hierarchy of Rules for Textiles and Apparel Products

The above rules are arranged in a hierarchy to be applied in the following sequential order, as specified in 19 CFR 102.21(c).

(1) Textile or apparel products wholly produced in one country.

(2) Each foreign material undergoes requisite tariff shift (as provided in 19 CFR 102.21).

Explanation: All textile and apparel products are listed by four-digit to 10-digit HTSUS classifications or groups of classifications in the tariff shift rules. The tariff shift rules simply explain the requirements to change the country of origin of textile and apparel products by using tariff classifications rather than product descriptions. These rules state that, for any given classification, to change the country of origin of a textile or apparel product (a) there must be a shift from one HTSUS classification to another, as listed in the tariff shift rules, and/or (b) the processing that occurs must meet any other requirement specified in the tariff shift rules in 19 CFR 102.21(e).

Example: One group of classifications in the tariff shift rules is 5208 through 5212, which covers cotton woven fabrics. The tariff shift rule for classifications 5208-5212 states that:

(i) a change from greige fabric of heading 5208 through 5212 to finished fabric of heading 5208 through 5212 by both dyeing and printing when accompanied by two or more of the following finishing operations: bleaching; shrinking; fulling; napping; decating; permanent stiffening; weighting; permanent embossing; or moireing; or

(ii) if the country of origin cannot be determined under (i) above, a change of heading 5208 through 5212 from any classification outside that group, provided that the change is the result of a fabric-making process.

To confer country of origin to a cotton fabric, a greige fabric must have been dyed and printed and accompanied by two or more of the specified finishing operations. For example, a greige fabric formed in China that is imported into Pakistan, where it is dyed, printed, shrunk and permanently embossed, will have Pakistan as its country of origin.

In the alternative, the creation of fabric must be from some product other than another cotton woven fabric; for example, the fabric could be formed from cotton yarns or from polyester and cotton yarns, from fibres or any other product except cotton woven fabric (e.g., joining two narrow fabrics). The second requirement of creating a fabric from a fabric-forming process must also be met. This tariff shift rule merely restates the fabric rule (in the section above) using tariff classification terms or definitions.

The result is that the determination of the country of origin is defined in objective tariff classification shifts rather than subjective terms such as “substantial assembly” or “new commercial product”. By using HTSUS classifications, there is no doubt when a change in the country of origin occurs. If a shipper knows the classification of a textile product he is exporting, he merely has to locate the classification in the tariff shift rules to see if the required change of classification occurred when the product was produced or manufactured. If the tariff shift has occurred and any other listed requirement is met, then the country of origin is changed by the processing.

(3) Textile or apparel products for which the major parts are knit-to-shape.

(4) Textile or apparel products wholly assembled in one country except for the 16 specified exceptions.

When the product is manufactured in two or more countries and the country of origin cannot be determined by the four rules above, the country of origin is:

(5) the country in which the most important assembly or manufacturing process occurs; or, if that cannot be determined,

(6) the last country in which an important assembly or manufacturing process occurs.

Note: Cutting will almost never confer country of origin. For garments, the above rules are based on assembly operations, not on cutting.

Special Exceptions and Considerations for Textiles and Apparel Products

(1) US-Israel FTA

Israel is an exception to the country-of-origin rules. The country of origin for textile and apparel products from Israel is determined by the rules set forth in 19 CFR 12.130; e.g., the origin of most garments is the country in which the components are cut to shape, although for tailored or complex garments, the origin is the country in which the garments are wholly assembled.

(2) US Insular Possessions

The country of origin rules in 19 CFR 102.21 apply to the insular possessions of the US. The rules are used to determine whether the goods qualify as a product of the insular possession under HTSUS General Note 3(a)(iv).

(3) CBI: Components Cut in the US from Foreign Fabric and Assembled Abroad 

The value of components cut to shape in the US from foreign fabric and exported for assembly abroad into an article that is then returned is not included in the dutiable value of the finished article imported into the US (19 CFR 10.25).

(4) NAFTA Override

Any NAFTA override rules currently in existence will continue to be applied if a NAFTA preference is claimed.

Example: China is the country of origin of comforter shells and also the country of origin of down used to fill the shells. Both of these components are sent to Canada where the down is inserted into the shells. The country of origin of the finished comforter under Section 334 of the Uruguay Round Agreements Act is China. However, NAFTA provides for an override rule that applies if a claim is made. Because the processing in Canada (a NAFTA country) satisfies the NAFTA duty preference rule, if a claim is made for duty preference at the time of entry (or within one year), the country-of-origin is Canada. The NAFTA preference rule continues to override the §334 country of origin rules in determining the country of origin for NAFTA products.

(5) US Goods Sent Abroad for Processing

For a US-produced textile good sent abroad for processing that results in an advancement in value or improvement in condition:

(i) for duty assessment purposes, the good will continue to be considered foreign under Note 2(a), Subchapter II, HTSUS Chapter 98; and

(ii) the origin for marking purposes will be determined solely by the rules under 19 CFR 102.21.

(6) Sets

If one or more components in a set are textile articles and there is no single country of origin for these components, the country of origin for each textile component of the set is determined separately. A composite good is considered as one combined good. 

Example 1: The country of origin of a comforter set consisting of a flat sheet, a fitted sheet and pillow cases produced in Pakistan and a comforter, a dust ruffle and pillow shams produced in India would be determined separately for each textile component of the set. Thus, the comforter, dust ruffle and pillow shams that were wholly obtained or produced in India have a country of origin of India. The sheets and pillowcases that were wholly obtained or produced in Pakistan have a country of origin of Pakistan.

Example 2: A woman’s dress, self-fabric belt and shawl that are wholly assembled in Korea are considered a “composite good” in which the dress imparts the essential character. As such, the country of origin of the dress will determine the origin of the composite good and the country of origin of the accompanying self-fabric belt and shawl are not determined separately.

Accordingly, per the terms of 19 CFR 102.21(c)(2) and 19 CFR 102.21(e), as the dress is composed of two or more component parts and is wholly assembled in a single country (i.e., Korea), the country of origin of the dress, self-fabric belt and shawl is Korea.

Legislation and Implementing Regulations for Textiles and Apparel Products

  • 7 USC 1854
  • 19 USC 3592
  • 19 CFR 102.21

B. Preferential Rules of Origin

Preferential rules of origin schemes are used for many special tariff programmes.

  • African Growth and Opportunity Act (AGOA)
  • Andean Trade Preference Act (ATPA)
  • Andean Trade Promotion and Drug Eradication Act (ATPDEA)
  • Automotive Products Trade Act
  • Caribbean Basin Economic Recovery Act (CBERA)
  • Caribbean Basin Trade Partnership Act (CBTPA)
  • Compact of Free Association Act
  • Generalized System of Preferences (GSP)
  • Insular possessions of the US
  • NAFTA
  • Products of the West Bank, the Gaza Strip, or a Qualifying Industrial Zone (QIZ)
  • US-Chile FTA
  • US-Israel FTA
  • US-Jordan FTA
  • US-Singapore FTA
  • US-Australia FTA
  • US-Morocco FTA
  • US-Bahrain FTA
  • US-Oman FTA
  • US-Peru TPA
  • US-Dominican Republic-Central American FTA (DR-CAFTA)

Most of these schemes are set forth in the General Notes of the HTSUS. They employ the “wholly obtained” criterion for goods that are wholly the growth, product or manufacture of a particular country. On the other hand, for goods that consist in whole or in part of materials from more than one country, the majority of these schemes are based on:

  • a change in name, character and use (substantial transformation); or
  • a required minimum local value content (unless specified otherwise, the cost of foreign materials may not be included in local value content unless they undergo a double substantial transformation).

Other preferential rules of origin (e.g., NAFTA) are based on a tariff-shift method and/or regional value content method for goods that are not wholly obtained from the applicable region or country.

Under these preferential programmes, qualifying goods may enter the customs territory of the US duty-free or at reduced rates of duty.

Content provided by Hong Kong Trade Development Council
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