Trade Programs and Trade Agreements

1. Trade Programs and Trade Agreements Listed in the General Notes Lets look at the handout and the Resources section of our book

2. Generalized System of PreferencesGSP / GN 4 / CFR 10.171-10.178 • Free Duty if the product qualifies for GSP • A, A*,A+ is the letter assigned to GSP; look in the Special Column • Need at least 35% of the article to be of GSP origin in order to qualify for GSP free duty rate • 10.176 - need more than mere packaging to claim GSP. Must be a new and different article. (Country of Origin change by substantial transformation) • Item must be Shipped Direct to USA (did not enter commerce of other country) • All GSP participating countries are listed in GN 4

3. Generalized System of Preferences ContinuedThe 35% rule • If the product is 100% GSP Country of Origin • Only need a statement on the invoice declaring the product is 100% of that Country • If less than 100% it must be at least 35% of appraised value from a GSP country • Ex. Computer valued at $100 • Indian part = $70 and Japan = $30 then OK • Documents needed when product is less than 100%: • If < 100% and more than 35%, need GSP Declaration prepared by exporter – see form on 10.173 (not required for informal entry) • Place “A” in front of HTS # on entry • Cannot merge/mix with other GSP countries except: • “Associations of Countries”

4. Generalized System of Preferences Continued • A* in Special Column indicates exceptions by HTS number and country • IF an A* exception applies, you pay regular duty rate • GSP and most programs have some exceptions such as textiles, watches, leather products, etc…

5. Direct Cost of Processing • Direct Cost of Processing CFR 10.178 • What costs can count to the 35% in addition to the cost of materials. • What is included in the 35% • labor, dies, molds, research and development, and costs of inspection • What is not part of Direct Cost of Processing • Business overhead, administrative expenses, salaries, profit, and general business expenses

6. GSP example • Classify horse harness country of origin Argentina • Is there an “A A* A+ in the special column?? • Is Argentina on the GSP list? • Was the product shipped directly? • Is it 100% origin of Argentina? If not what do I need? • Is this an exception (A*) • Place an “A” in front of HTS No. on entry

7. 51. Based on the following costs, a table made in and exported from Poland and invoiced at $16.50 is INELIGIBLE for preferential treatment under GSP because _____. • $6.00 Wood from Germany • $4.25 Glass from Russia • $3.35 Paint from Poland • $2.90 Labor in Poland A. Russia is not a designated beneficiary developing country B. The direct cost of processing operations in Poland is less than 35 percent C. The product was not directly exported from Germany D. Poland is not a designated beneficiary developing country (answer – check the List of countries) E. Labor cannot be included in the direct processing costs

8. Caribbean Basin Economic Recovery Act - CBERAGN 7 / CFR 10.191-10.198 / Duty Free if qualifies • E or E* in the special column • Country on List - GN 7(a) • Direct shipment • 35% rule • Can Merge Countries

9. Caribbean Basin Economic Recovery Act - CBERA • PR & US VI count toward 35% • 34% PR/VI and 1% CBERA – OK • Ex. Widget valued at 1.00 • Jamaica .05 / US V.I. .30 / Japan .65 = OK CEBRA qualified • USA product OK • Up to 15% of the 35% • Ex. Valuation of Widget = $1.000.10 Haiti0.10 Jamaica0.20 USA0.60 Japan • Can use only 0.15 of the USA portion to make the 35%

10. Caribbean Basin Economic Recovery Act - CBERA • Documents: • If it is 100 % origin only need a statement from exporter • Less than 100% (mixed) - CBERA Declaration (10.198) • Place letter E in front of HTS No. on entry • E* = GN 7 (exclusions to CBERA listed here) • Sugar, Molasses, Beef, Veal, of certain countries excluded • Watches, No Commie Parts • Textiles

11. US-Caribbean Basin Trade Partnership Act- CBTPA *NEW*GN 17 / CFR 10.221-.227 • Gives preferential treatment to apparel and textile articles of CBERA Countries • Letter R • Direct Shipment • 100% product of – or tariff shift under GN 12 • applies to apparel articles knit to shape, assembled from fabric cut and formed in US or beneficiary country or US yarn, etc.. • Can mix from CBERA countries • Country of Origin Certificate required

12. African Growth and Opportunity Act (AGOA) *NEW*GN 16 / CFR 10.211-.217 • Gives preferential treatment to apparel and textile articles qualifying from the listed countries • Letter D • Direct Ship • 35% rule applies • USA product up to 15% is OK (No PR or VI) • Can mix AGOA countries to get to 35% • applies to apparel articles knit to shape, assembled from fabric cut and formed in US or beneficiary country or US yarn, etc. • Country of Origin Certificate required

13. Andean Trade PactGN 11 / CFR 10.241-.248 • Ecuador and Colombia – see list GN 11 • Gives duty free or reduced tariff treatment to qualifying goods • J or J* • Direct Shipment • 35% rule applies • Need ATPA Declaration if not 100% 10.207 • OK to Merge within group and CBI countries • PR & VI OK up to 34.999999% • USA up to 15%

14. Israel Trade ActGN 8 • IL (No IL*) • Direct Ship • 35% rule applies • US content up to 15% • IL placed in front of HTS No. on entry

15. Civil AircraftGN6 / CFR 10.183 • C (no C*) • Any plane purchased by someone other than Department of Defense or Coast Guard • Direct or indirect shipment • Documents = FAA Certificate or Blanket Certificate • Any Country of Origin • Includes parts and Flight simulators

16. Auto Products ActGN 5 / 10.84 • B (No B*) • Manufactured in Canada for use in USA assembly • Bona Fide Manufacturer (15 Cars in One Year) • No Special Forms • Does anyone use this????

17. Insular PossessionsGN 3(a) • Insular possessions are listed in CFR 7, • Guam • Samoa • Kingman Reef • Johnston Island • Midway • 7501 = “Y” (this is in Gen. Stat. Notes) • No Letter appears in Columns • Mixed Product OKNot more that 70% foreign product (foreign means anything not duty free in other programs such as GSP, CBI) • Direct Shipment • Documents - CF3229 • Anything from the USA is not considered “FOREIGN MATERIAL” providing it meets the “18 Month Rule” goods can only be in the US possession less than 18 months!

18. Free Association StatesGN 10 • Includes three places • Marshall Islands • Micronesia • Republic of Palau • “Z” goes on 7501 (from Gen Statistical notes) • Direct shipment35% rule (15% of 35% USA is OK) • Exceptions • Tuna • Skipjack • Watches

19. N A F T AGN 12 and CFR 181 • The NAFTA territory is Canada, USA, Mexico • 100% from NAFTA country – CA or MX in front of HTS No. on CF 7501, also need cert. of origin • Rules of Origination (NAFTA Country of Origin) • The good is wholly produced or obtained in Mexico, Canada, or the US. • The good is substantially transformed in Mexico, Canada, or the US, so that any non- originating (or non NAFTA material) material undergoes a tariff shift (and or meets a regional value content listed below). • It is a good produced in the NAFTA countries with product exclusively from the NAFTA region.

20. N A F T AGN 12 and CFR 181 • Ex. of a tariff shift (See GN 12(t) the shift list) • Frozen pork meat (HTS 0203) is imported to the US from Hungary. It is combined with spices and grains from the US…. and made into Chorizo sausage (HTS 1601). Then exported to Mexico. • See the Tariff Shift list in GN 12(t), find chapter 16 in the shift list. It states the item qualifies for NAFTA Preferential Duty Treatment if it was transformed to HTS 1601 from any other chapter. • Since the pork(HTS 0203) shifted to sausage (HTS 1601), the sausage now qualifies for NAFTA according to the shift list.

21. NAFTA continued • Regional Value Content • If it is a mixed good or a transformed good, it may require a tariff shift and calculation of the Regional Value Content (RVC) • RVC is basically a formula to determine how much of the product is actually NAFTA product • There are two different formulas; the transaction value and the net cost value and the manufacturer can choose which to use

22. NAFTA RVC continued • TRANSACTION VALUE METHOD / 60% required Transaction value – Non originating material ÷ x 100 Transaction value

23. NAFTA RVC continued • NET COST METHOD / 50% required Net Cost – Non originating material ÷ x 100 Net Cost

24. NAFTA RVC continued • Example: • Invoice Value = USD 550 (50 is profit) • Foreign Value = USD 250.00 • Transaction Value RVC = • (550-250) ÷ 550 X 100 = 54 % (does not qualify) • Net Cost RVC = • (500-250) ÷ 500 X 100 =50% (does qualify) • ($550 - $ 50 Profit = Net Cost)

25. US Singapore Free Trade ActGN 25 • Gives preferential duty treatment if good qualifies • Letter SG • Applies to originating goods as set out in the trade act rules of origin (just like NAFTA) • Has a tariff shift list (just like NAFTA) • Has a Regional Value Content issue

26. US Chile Free Trade ActGN 26 (10.401 – 10.490) • Gives preferential duty treatment if good qualifies • Letter CL • Applies to originating goods as set out in the trade act rules of origin (just like NAFTA) • Has a tariff shift list (just like NAFTA) • Has a Regional Value Content issue

27. US Morocco FTAGN 27 • Gives preferential duty treatment to qualifying goods • Letter MA • 35% rule and also has a tariff shift list and must have direct shipment

28. Australia – UAFTAGen. Note 28 • Gives preferential duty treatment if good qualifies • Letter AU • Applies to originating goods as set out in the trade act rules of origin (just like NAFTA) • Has a tariff shift list (just like NAFTA) • Has a Regional Value Content issue

29. Dominican Republic Central American Free Trade Implementation Act – CAFTA (GN 29) • Gives preferential duty treatment if good qualifies • Letter P or P+ • Applies to originating goods as set out in the trade act rules of origin (just like NAFTA) • Has a tariff shift list (just like NAFTA) • Has a Regional Value Content issue

30. US – Bahrain FTAGN 30 • Gives preferential duty treatment to qualifying goods • Letter BH • 35% rule and also has a tariff shift list and must have direct shipment

31. Others keep coming • Peru, Oman, Colombia, Korea, etc…