Industry News

Proposed USMCA Rule for Non-Preferential Origin Determinations

Jun. 15, 2021
By: Meaghan E. Vander Schaaf

As part of the regulatory agenda for Customs the Treasury Department has released information about a proposal to change USMCA non-preferential origin determination rules for merchandise imported from Canada or Mexico. Essentially, this proposal would clarify the correct rule when an article was imported from Canada or Mexico but did not qualify for treatment under USMCA. To this point, Customs and importers have argued for several potential analytical frameworks.

According to the notice, under the proposed rule Customs will apply the 19 CFR Part 102 Rules of Origin to determine when a non-USMCA good imported from Canada or Mexico has been “substantially transformed” resulting in an article with a new name, character, or use. Another way to describe this may be that the Part 102 rule eliminates the substantial transformation test in favor of a test based on tariff shifts and other objective criteria. To maintain consistency, the rule also proposes to modify the regulations for government procurement in 19 CFR Part 177. This clarification would modify the analysis Customs has developed with respect to Section 301 application to goods coming from Canada or Mexico, as well as modify other developing precedent.

Alongside this proposed rule, CBP will publish an interim final rule amending various regulations that will implement the USMCA for preferential tariff treatment claims. Among others, this rule will amend parts 102 and 134 of title 19 of the CFR to apply the rules set forth in the part 102 rules of origin for determining the country of origin for marking of goods imported from Canada or Mexico. However, the CBP rule would not mandate the application of part 102 for any other non-preferential purposes. Instead, importers will need to await the proposed Treasury rule for that use of Part 102.

The Treasury proposal remains under review by the Office of Information and Regulatory Affairs, within the Office of Management and Budget. If you have any questions on the rules of origin for goods imported from Mexico or Canada, regardless of whether they qualify for USMCA, do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.