Proposal to Extend NAFTA Origin to Remanufactured Goods

August 14, 2003

In a Federal Register notice published March 13, 2003, Customs has proposed a rule designed to extend NAFTA originating status to articles produced from the disassembly of used goods and the remanufacture or recycling of the recovered parts. Under the NAFTA rules of origin, goods produced in North America may be entitled to NAFTA benefits when, as a result of "production" in North America, they either undergo a specified change in tariff classification, satisfy the Regional Value Content requirement, or both. The NAFTA does not explicitly address whether disassembly to recover useable parts is "production." Thus, it is unclear whether parts or components, whose origin is non-NAFTA or is unknown, that are collected through the disassembly of used merchandise will qualify as originating if, as a result of the disassembly, they satisfy the applicable rule of origin.

To correct this ambiguity, Customs is proposing to recognize that recycling and remanufacturing, particularly in the automotive, photocopying and computer sectors, constitute identifiable business operations in North America. Treating these operations as "production" is consistent with the purposes of the NAFTA. To avoid circumvention of the NAFTA rules, the proposed rule requires that the recovered goods satisfy the applicable rule of origin. In those cases where the rule of origin does not require a specified Regional Value Content, the proposed rule adds an additional requirement that the recovered good undergo processing more than certain specified minor operations such as (1) cleaning or sterilizing; (2) the application of preservative or decorative coatings; (3) trimming, filing or cutting off small amounts of excess material; (4) unloading, reloading or any other operation necessary to maintain the good in good condition; (5) packing, repacking, packaging or repackaging; or (six) testing, marking, sorting, or grading.

Comments on the proposal must be received on or before May 12, 2003.