(Investigation No. 332-360)


AGENCY: United States International Trade Commission

ACTION: Request for public comment.

EFFECTIVE DATE: June 12, 1995

FOR FURTHER INFORMATION CONTACT: Eugene A. Rosengarden, Director, Office of Tariff Affairs and Trade Agreements (O/TA&TA) (202-205-2595), or Lawrence A. DiRicco (202-205-2606). Questions with regard to specific chapters of the Harmonized Tariff Schedule of the United States (HTS) should now be directed to the following coordinators in view of product reassignments:

Chapters 1-24, 41-49 Ronald H. Heller (202-205-2596)
Chapters 25-40 Edward J. Matusik (202-205-3356)
Chapters 50-63 Thomas W. Divers (202-205-2609)
Chapters 64-83, 86-89, 92-97 Lawrence A. DiRicco (202-205-2606)
Chapters 84-85, 90-91, 98-99 Craig M. Houser (202-205-2597)

Parties having an interest in particular products or HTS chapters and desiring to be included on a mailing list to receive available documents pertaining thereto should advise Diane Whitfield by phone (202-205-2610) or by mail at the Commission, 500 E St SW, Room 404, Washington, D.C. 20436. Hearing impaired persons are advised that information on this matter can be obtained by contacting the Commission's TDD terminal on 202-205-1810. The media should contact Margaret O'Laughlin, Director, Office of Public Affairs (202-205-1819).

BACKGROUND: Following receipt of a letter from the United States Trade Representative (USTR) on January 25, 1995, the Commission instituted Investigation No. 332-360, International Harmonization of Customs Rules of Origin, under section 332(g) of the Tariff Act of 1930 (60 FR 19605, April 19, 1995).

The investigation is intended to provide the basis for Commission participation in work pertaining to the Uruguay Round Agreement on Rules of Origin (ARO), under the General Agreement on Tariffs and Trade (GATT) 1994 and adopted along with the Agreement Establishing the World Trade Organization (WTO).

The ARO is designed to harmonize and clarify nonpreferential rules of origin for goods in trade on the basis of the substantial transformation test; achieve discipline in the rules' administration; and provide a framework for notification, review, consultation, and dispute settlement. These harmonized rules are intended to make country-of-origin determinations impartial, predictable, transparent, consistent, and neutral, and to avoid restrictive or distortive effects on international trade. The ARO provides that technical work to those ends will be undertaken by the Customs Cooperation Council (CCC) (now informally known as the World Customs Organization or WCO), which must report on specified matters relating to such rules for further action by parties to the ARO. Eventually, the WTO Ministerial Conference is to "establish the results of the harmonization work program in an annex as an integral part" of the ARO.

In order to carry out the work, the ARO calls for the establishment of a Committee on Rules of Origin of the WTO and a Technical Committee on Rules of Origin (TCRO) of the CCC. These Committees bear the primary responsibility for developing rules that achieve the objectives of the ARO.

A major component of the work program is the harmonization of origin rules for the purpose of providing more certainty in the conduct of world trade. To this end, the agreement contemplates a 3-year CCC program, to be initiated as soon as possible after the entry into force of the Agreement Establishing the WTO. Under the ARO, the TCRO is to undertake (1) to develop harmonized definitions of goods considered wholly obtained in one country, and of minimal processes or operations deemed not to confer origin, (2) to consider the use of change in Harmonized System classification as a means of reflecting substantial transformation, and (3) for those products or sectors where a change of tariff classification does not allow for the reflection of substantial transformation, to develop supplementary or exclusive origin criteria based on value, manufacturing or processing operations or on other standards.

To assist in the first phase of the Commission's participation in work under the Agreement on Rules of Origin (ARO), the Commission is publishing for public comment the following: (1) a proposed harmonized definition of the expression "goods that are to be considered as being wholly obtained in one country" and (2) a proposal on the definition of the expression "minimal operations or processes that do not by themselves confer origin on a good," the foregoing as set forth in Article 9:2(c)(i) of the ARO.

These proposals, which have been reviewed by interested government agencies, are intended to serve as the basis for the U.S. proposal to the Technical Committee on Rules of Origin (TCRO) of the Customs Cooperation Council (CCC) (now known as the World Customs Organization or WCO).

If eventually adopted by the TCRO for submission to the Committee on Rules of Origin of the World Trade Organization, these definitions would comprise the initial element of the ARO work program to develop harmonized, non-preferential country of origin rules, as discussed in the Commission's earlier notice. Thus, in view of the importance of these definitions, the Commission seeks to ascertain the views of interested parties concerning (1) the extent to which additional categories of goods or processes should be enumerated in, or named goods or processes omitted from, the proposed text set forth above, and (2) the need for other specific changes in or additions to the proposed definitions. Forthcoming Commission notices will advise the public on the progress of the TCRO's work and contain any harmonized definitions or rules that have been provisionally or finally adopted.

WRITTEN SUBMISSIONS: Interested persons are invited to submit written statements concerning this phase of the Commission's investigation. Written statements should be submitted as quickly as possible, and follow-up statements are permitted; but all statements must be received at the Commission by the close of business on July 15, 1995, in order to be considered in the drafting of the final U.S. proposal to the TCRO. Information supplied to the Customs Service in statements filed pursuant to notices of that agency has been given to us and need not be separately provided to the Commission. Again, the Commission notes that it is particularly interested in receiving input from the private sector on the effects of the various proposed rules and definitions on U.S. exports. Commercial or financial information which a submitter desires the Commission to treat as confidential must be submitted on separate sheets of paper, each marked "Confidential Business Information" at the top. All submissions requesting confidential treatment must conform with the requirements of section 201.6 of the Commission's Rules of Practice and Procedure (19 CFR 201.6). All written submissions, except for confidential business information, will be available for inspection by interested persons. All submissions should be addressed to the Office of the Secretary, United States International Trade Commission, 500 E Street SW., Washington, DC 20436.

By order of the Commission.

Donna R. Koehnke

Issued: June 13, 1995


At its first session, the Technical Committee on Rules of Origin (TCRO) undertook discussions on the definition of goods wholly obtained in one country. This work is part of the first phase of development of worldwide harmonization of non-preferential rules of origin, as envisaged by the World Trade Organization (WTO) in its Agreement on Rules of Origin.

The TCRO invited comments on the draft definition of goods considered to be "wholly obtained in a single country". The United States Administration submits the following comments and proposals.

The approach put forward by the Secretariat in the working document provides a useful basis for considering the definition of goods wholly obtained in one country. However, we are proposing a number of modifications which are intended to:

- provide greater certainty as to the product scope of individual provisions,

- present the rules for goods of similar materials together and to the extent practical in the order in which they occur in the Harmonized System, and

- clarify the presentation of the rules.

Further, we endorse the decision by the TCRO to make use of explanatory notes to provide guidance, but without legal effect, in the interpretation of the rules of origin, thereby enhancing an understanding of the rules.

Accordingly, the United States submits the following proposal:

Goods obtained or produced wholly in a country shall be taken as originating in that country.

The following are to be considered as being wholly obtained in one country:

A. The following goods:

(1) live animals born and raised in that country;
(2) products obtained by hunting, trapping or fishing in that country;
(3) products obtained from live animals in that country;
(4) fish, shellfish and other marine life taken from the sea by vessels of that country;
(5) goods produced on board factory ships of that country from the goods of paragraph (4) of that country;
(6) plant and plant products harvested or gathered in that country;
(7) mineral goods extracted from the territory, soil, subsoil, airspace, territorial waters, sea-bed or beneath the sea-bed of that country,
(8) mineral goods extracted by that country from marine soil or subsoil outside that country's territorial waters, or from outer space, provided that country has rights to recover such goods;
(9) waste and scrap and used goods of any material, collected in that country and fit only for the recovery of raw materials or for disposal.

B. Goods produced in a country from materials of that country referred to in paragraph A, or derived therefrom, which do not contain constituents obtained from any other country and which have not undergone processing in any other country at any stage of production.


At its first meeting, the Technical Committee on Rules of Origin (TCRO) invited comments on the subject of minimal processing operations that are considered not to confer origin. The United States administration accordingly submits the following comments and proposal.

While there are numerous operations that, in specific instances, will not confer origin, there are only a few operations that never or almost never effect a substantial transformation. Consequently, only a limited number of minimal processing operations should be recognized in a general rule as not conferring origin. Although for any specific product certain processes ought not to confer origin, it is the view of the U.S. administration that such situations are best addressed by tariff shift rules that do not recognize particular processes as origin-conferring for a specific product.

The rule should apply to negate only the operation of the tariff shift rules. The rule would operate to preclude conferring origin only when an origin-conferring change in tariff classification is accomplished solely by means of one or more of the listed processing operations. The rule would not operate to preclude conferring origin on goods if the change in tariff classification occurred as a result of other operations, even though one or more of the "minimal processing" operations occurred as well.

The rule should not affect the definition of wholly obtained goods or apply to any supplementary rules, even when those goods undergo such listed operations. The U.S. administration believes the following ought to be included in this enumeration:

Change in tariff classification resulting solely from a change in the use of the article;

Simple packing or packaging for retail sale;

Mere dilution with water or another substance that does not alter the essential character of the good; and

Dismantling or disassembly in order to facilitate transportation.

The U.S. administration wishes to emphasize that the appropriate content of this enumeration depends heavily on the nature and effect of the tariff shift rules yet to be considered. As a result, this issue should be reconsidered after the tariff shift rules have been completed.