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CBP Proposes NAFTA Preference Override for Some Spices and Other Food Products

Friday, July 08, 2016
Sandler, Travis & Rosenberg Trade Report

U.S. Customs and Border Protection is proposing to amend its regulations to extend NAFTA preferential tariff treatment to certain spice products and other food products imported from Mexico and Canada that currently are not receiving such treatment despite the fact that they qualify as NAFTA originating. This change would eliminate the customs duties and merchandise processing fees currently required for goods classifiable under HTSUS headings 0907, 0908 or 0909 or subheadings 0910.11, 0910.12, 0910.30, 0910.99 or 1207.91, provided that a NAFTA certificate of origin has been completed and signed.

Under Article 401 of NAFTA, an imported good qualifies as originating if (1) it is wholly obtained or produced in one or more of the NAFTA parties, (2) it is produced entirely in one or more of the NAFTA parties exclusively from materials that originate in those parties, or (3) each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification as a result of production occurring entirely in the territory of one or more of the parties and satisfies any other applicable requirement (which may include a regional value-content requirement). HTSUS General Note 12(a) provides that an imported good is eligible for preferential tariff treatment under NAFTA only if it is an originating good of a NAFTA party and it qualifies to be marked as a good of Canada or Mexico under the NAFTA marking rules in 19 CFR part 102.

The NAFTA preference override provides that if an imported good is originating under Article 401 but fails to qualify as a good of Canada or Mexico under the other applicable provisions in 19 CFR part 102, the country of origin of the good is determined to be the last NAFTA country in which the good underwent production other than minor processing. This allows NAFTA preferential tariff treatment to be granted to certain goods that otherwise would be ineligible.

A February 2005 presidential proclamation liberalized various rules of origin for spices and other food products in General Note 12(t) to permit minor processing operations in a NAFTA party, such as packaging, to confer originating status. However, CBP states that these goods are not receiving NAFTA preferential tariff treatment when imported into the U.S. from Canada or Mexico because they do not qualify to be marked as goods of Canada or Mexico under the NAFTA marking rules. CBP is therefore proposing to allow the NAFTA preference override to apply to these specific goods and thus extend NAFTA preferential tariff treatment to them.

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