Update on the Presidential Proclamation Which Implements the U.S.-Chile FTA

Most of the substance of Proclamation 7746 is contained in its Annexes (I and II).

January 1, 2004 Changes Made by Annex I

According to Annex I, the following changes are effective with respect to goods entered, or withdrawn from warehouse, for consumption on or after January 1, 2004 (partial list):

New HTS General Note 26. A new General Note 26 is added to the HTS that describes the eligibility requirements that goods of Chile must meet in order to benefit from the UCFTA. In addition, General Note 26 indicates that the HTS Column 1 "Special" subcolumn symbol for the UCFTA is "CL."

Included in General Note 26 are explanations of the following terms for purposes of the note (partial list):

General Note 26 also contains special rules for textile and apparel articles (the 7% weight rule for goods that would otherwise be considered non-originating, and the 10% value rule for retail sets that would otherwise be considered non-originating).

Also described in General Note 26 are the following:

de minimis

adjusted value

accumulation

regional value content

value of materials

accessories, spare parts, or tools

fungible goods and fungible materials

packaging materials and containers

indirect materials

record-keeping requirements and verification

interpretation of rules of origin

Importantly, General Note 26 also contains the UCFTA change in tariff-classification rules (used, and sometimes subject to other rules, to determine whether a good is considered originating for purposes of receiving UCFTA preferential treatment).

New HTS Chapter 99, Subchapter XI. A new Subchapter XI, with 23 U.S. Notes, is added to HTS Chapter 99 which, among other things, establishes temporary:

"regular" tariff rate quotas (TRQs) for certain UCFTA originating agricultural goods (In general, the in-quota duty rates for these TRQs are zero and the over-quota duty rates are subject to staged reductions until they become zero.);

"trade surplus" TRQs for certain UCFTA originating agricultural goods;

"value-limited" TRQs for certain UCFTA originating agricultural goods, which can be terminated if Chilean imports exceed certain value limitations;

"safeguard measures" which allow for the imposition of additional duties based on the value of goods imported into the U.S. for certain UCFTA originating agricultural goods; and

"3rdcountry" tariff preference levels (TPLs) for certain cotton or manmade fiber (MMF) fabric goods made from third country fiber or yarn, and certain cotton or MMF apparel made from third country fabric or yarn.

Modifications to HTS Chapter 98, Subchapter XXII. In addition, Annex I amends HTS Chapter 98, Subchapter XXII, to provide for TRQs on/after January 1, 2016 for what prior to that date were "trade surplus" TRQs and "3rdcountry" TPLs for certain cotton or MMF fabric goods made from third country fiber or yarn, and certain cotton or MMF apparel made from third country fabric or yarn.

Chile No Longer a GSP Country. HTS General Note 4 and the corresponding HTS Chapter 1-97 numbers are amended to reflect the fact that Chile is no longer eligible to receive the benefits of the Generalized System of Preferences (GSP) program.

January 1, 2004 Changes Made by Annex II

According to Annex II, the following changes are effective with respect to qualifying goods entered, or withdrawn from warehouse, for consumption on or after January 1, 2004 (partial list):

Immediate Zero Duty Rates. Annex II lists the HTS Chapter 1-98 tariff numbers that are duty-free immediately.

HTS Chapter 99 TRQs, etc. Annex II also adds references to certain HTS Chapter 1-97 tariff numbers for their corresponding HTS Chapter 99 TRQs.

Other Changes Made by Annex II

According to Annex II, the following other changes are being made to the HTS (partial list):

Staged UCFTA Duty Reductions. The UCFTA staged duty reductions (to zero) are listed for each affected HTS Chapter 1-99 eight-digit tariff number. The staged duty reductions usually take effect on January 1, 2004 and January 1 of subsequent years variously (until 2015 at the latest), depending on the tariff number's phase-out schedule.

Certain Other UCFTA Changes for HTS Chapter 98.Certain UCFTA modifications to HTS 9802.00.60, 9802.00.80, 9817.61.01, and 9818.00.05 in order to provide UCFTA duty-free entry effective January 1, 2013.

Other Changes Made by Proclamation 7746

Proclamation 7746 also contains provisions which (partial list):

Commencement of action for relief under the textile and apparel safeguard. Authorize the Committee for the Implementation of Textile Agreements (CITA) to exercise the authority of the President under the textile and apparel safeguard measure provisions of the U.S. Chile FTA Implementation Act to determine whether a Chilean textile or apparel article is being imported into the U.S. in such increased quantities and under such conditions as to cause serious damage, or actual threat thereof, to a domestic industry producing an article that is like, or directly competitive with, the imported article; and to provide relief from imports of an article that is the subject of such a determination.

See ITT's Online Archives or 01/02/04 news, 04010245, for previous BP summary on CBP's notice on the U.S.-Chile FTA agriculture TRQs.)

UCFTA Proclamation 7746 (FR Pub 12/31/03) available at

http://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/2003/pdf/03-32319.pdf

Annexes for UCFTA Proclamation 7746 (USITC Publication 3652) available at

ftp://ftp.usitc.gov/pub/reports/studies/PUB3652.PDF.