Limiting Use of Part 102 Rules for Origin to USMCA Claims 'Unsupportable,' Customs Lawyer Says
CBP's proposed use of Part 102 marking rules to determine the country of origin for non-preferential claims under USMCA (see 2107010045) would create an imbalance between USMCA member countries and the rest of the world, possibly in violation of U.S. commitments to the World Trade Organization, Sidley Austin lawyer Ted Murphy said in a blog post. There is questionable legal basis for continued use of the NAFTA marking rules in USMCA and the expanded use for determining origin on non-preferential claims, he said. “CBP may be attempting to gloss over this issue by trying to tie the proposal to the 'implementation' of USMCA (see the title of the notice of proposed rulemaking),” Murphy said.
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Without an explicit USMCA provision for non-preferential origin findings, “CBP had a couple of options as to how to proceed,” he said. “It could have let the NAFTA Marking Rules expire and use the same subjective test for all non-preferential origin determinations regardless of country of export, or it could have proposed applying the NAFTA Marking Rules for all non-preferential origin determinations regardless of country of export (something it has proposed doing on two separate occasions in the past). Instead, it adopted a hybrid approach -- it proposes to use an objective test for determining the origin of articles imported from Canada and Mexico, and to use a subjective test for determining the origin of articles imported from everywhere else.”
This means that “under CBP’s proposal, a company that produces an article in Singapore has to apply the subjective, traditional substantial transformation test; while its competitor in Canada is able to apply the objective tariff shift-based test,” he said. “In addition to the Canadian company getting an answer more cheaply and with more certainty, there is now an increasing chance that the answers under the two tests may be different (there may be a substantial transformation under the tariff shift test; but not under the subjective traditional substantial transformation test).” An approach that “applies one test to articles imported from 2 countries, and a very different test to articles imported from everywhere else, seems like a strange (and unsupportable) choice.”