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Lag in Updating FTA Rules of Origin Not Reason to Deny Preferential Treatment, CBP Says

Friday, February 13, 2015
Sandler, Travis & Rosenberg Trade Report

U.S. Customs is proposing to modify a ruling to indicate that a delay in updating the tariff numbers in a free trade agreement’s rules of origin is not by itself sufficient reason to deny preferential tariff treatment under the FTA for qualifying goods. Comments on this proposed modification are due no later than March 6.

In NY N233747, CBP classified pheromone lures used as traps for certain types of insects as other insecticides under Harmonized Tariff Schedule of the U.S. subheading 3808.91.5000 but denied them preferential treatment under CAFTA-DR. CBP explained that the rules of origin in that agreement had not been updated to reflect technical updates that had been made to the HTSUS in 2007 and 2012 and that the lures therefore did not fall within the range of subheadings indicated in the CAFTA-DR text as eligible for special duty treatment.

CBP is now proposing to reverse this reasoning in ruling HQ H237563. CBP states that under the terms of the Compiler’s Note in the General Notes of the HTSUS (2012), while the CAFTA-DR rules of origin have not yet been updated to reflect the technical updates to the HTSUS, and the updated HTSUS subheading for the subject lures is therefore not listed in the appropriate tariff shift rule in the CAFTA-DR text, this alone is not a reason to deny preferential tariff treatment under the FTA. CBP adds that the change in subheading in which the lures are classified is not the result of a substantive change but merely due to technical updates to the HTSUS.

Having thus concluded that its original denial of preferential treatment under CAFTA-DR was unwarranted and reexamined the issue using the pre-2007 HTSUS classification of the lures, CBP nevertheless continues to find that the lures do not qualify for such treatment. CBP explains that the applicable CAFTA-DR tariff shift rule requires that 50 percent by weight of the active ingredients in the lures is originating but that the invoices provided by the importer do not definitely establish that this criterion was met.

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