New Guidance on NAFTA Preference Override
Jul. 14, 2006
In June 2006, Customs published a notice revoking its prior treatment of the NAFTA Preference Override (19 CFR § 102.19) as it relates to NAFTA country of origin marking of US goods exported from and returned to the US after being advanced in value or improved in condition in another NAFTA country. Customs’ new position is that the Override does not apply to origin marking in this situation. 40 Cust.Bull. 786 (
The NAFTA Preference Override consists of two parts. The first part (19 CFR § 102.19(a)) states that if a good which is originating is not determined under 19 CFR § 102.11(a) or (b) or § 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing . The second part, (section 102.19(b)) states that if the country of origin is the United States and that good has been exported from, and returned to, the United States after having been advanced in value or improved in condition in another NAFTA country, then the country of origin of such good for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the United States. The revocation involves the second part of the Override, section 102.19(b).
Customs’ new position is that section 102.19(b) of the Override applies only for determining the NAFTA country of origin for duty purposes and not for marking purposes. Customs reached this conclusion based on the express language of section 102.19(b), which incorporates the phrase “the country of origin of such good for Customs duty purposes.” Customs is construing this as expressly barring the use of section 102.19(b) for determining the NAFTA country of origin marking of US goods returned after having been advanced in value or improved in condition in another NAFTA country. This signals a change in Customs’ interpretation of the NAFTA marking law, as historically it had applied section 102.19(b) in those applicable situations.
Customs’ changed position on § 102.19(b)’s applicability to marking raises the question of whether Customs intends to limit section 102.19 (a) to non-marking situations as well. In the proposed ruling, Customs states, somewhat ambiguously, that “[t]here is no indication in 102.19(b) or elsewhere that specifies that the “NAFTA Preference Override” should be used to determine the country of origin for marking purposes”. One might argue that section 102.19(a) also makes no mention of marking; contrarily, one might say that the omission of the words “for duty purposes” in section 102.19(b) means that the intention was to exclude marking from subsection (b) only.
Further complicating the matter, 19 CFR §102.0, entitled “Scope”, specifies that “With the exception of §§ 102.21 through 102.25, this part sets forth rules for determining the country of origin of imported goods for the purposes specified in paragraph 1 of Annex 311 of the North American Free Trade Agreement (“NAFTA”'). These specific purposes are: country of origin marking . . . . .” One might deduce from this that the entirety of sections 102.1-102.20 apply to marking, regardless of the inclusion of the phrase “for duty purposes” in section 102.19(b). Customs new position on §102.19(b) appears to be inconflict with such a construction of section 102.0.