CBP Issues KORUS Implementation Instructions
March 15, 2012
U.S. Customs and Border Protection (CBP) recently issued Implementation Instructions for the U.S.-Korea Free Trade Agreement (KORUS). KORUS takes effect for qualifying goods entered or withdrawn from warehouse for consumption on or after March 15, 2012. CBP’s memorandum provides information regarding issues such as KORUS rules of origin, de minimis provisions, and filing claims for KORUS duty benefits.
An originating good is one that meets the general and/or product specific rules of origin set forth in GN 33 and all other requirements of KORUS.
Transit and Transshipment
Goods that undergo further production outside the territory of Korea or the United States, other than unloading, reloading or other processes to preserve the condition of the good or to transport the good to the territory of Korea or the U.S., or goods that do not stay under customs control in the territory of a non-Party, will not be considered originating.
KORUS has a 10 percent, by value, de minimis provision for most goods, with exceptions for textiles in GN 33(d)(iv) and other goods enumerated in GN33(e)(ii). KORUS has a 7 percent, by weight, de minimis provision for textile or apparel goods that are not originating goods in cases where certain fibers or yarns used in the production of the component of the good that determines the tariff classification do not undergo an applicable change in tariff classification. Regardless of the de minimus allowance, a good containing elastomeric yarns in the component of the good that determines the tariff classification of the good shall be considered an originating good only if such yarns are wholly formed and finished in the territory of a Party.
Fiber, Yarn and Apparel
For yarn, fiber generally must originate in the U.S. or Korea to qualify for preferential treatment. For fabric and apparel, yarn generally must originate in the United States or Korea in order for the fabric to qualify for preferential treatment. Fabric used for visible linings in certain apparel, such as suits, coats and skirts, must be wholly formed and finished in a KORUS beneficiary country.
KORUS agricultural quotas apply to goods covered by HTS numbers 9822.07.10 through 9922.07.25.
Merchandise Processing Fee (MPF) Exemption
KORUS provides that originating goods are exempt from MPF.
Correction of a False/Unsupported KORUS Claim
An importer who has made a false or unsupported preference claim must submit a correction within 30 days of discovery and pay all duties and merchandise processing fees.
The importer may make a claim for preferential tariff treatment based on a written or electronic certification issued by the exporter or producer, or based on the importer’s knowledge, including a reasonable reliance on information in his possession. The importer must submit the certification and other information substantiating the preference claim to CBP upon request.
Tariff Change Rules (TCR)
Until revised TCRs are published, manufacturers of affected goods should classify both the good and its materials in accordance with the 2002 HTSUS when performing TCR analysis. The certification should indicate both the current HTSUS number and the corresponding 2002 HTSUS number used to perform the TCR analysis.
Verification by CBP
Under KORUS, the importer is responsible for substantiating the validity of a preference claim. The preference claim may be based on a certification, other documentation, or the importer’s knowledge. CBP will initiate a verification via a CBP Form 28, Request for Information, to the importer.
For further information regarding KORUS requirements or assistance filing KORUS preference claims, please contact a Barnes/Richardson attorney.