CBP Final Rule Interprets the Term "Production" under NAFTA to Include the Disassembly of Used Goods
U.S. Customs and Border Protection (CBP) has issued a final rule, effective August 1, 2005, which adopts as final, with some changes, proposed amendments to 19 CFR Part 181 concerning the North American Free Trade Agreement (NAFTA), in order to promote recycling and remanufacturing in North America.
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"Production" Under NAFTA to Include the Disassembly of Used Goods
CBP states that the changes adopted in its final rule interpret the term "production" to include disassembly and clarify that components recovered from the disassembly of used goods in a NAFTA country are entitled to NAFTA originating status when imported into the U.S. provided that the recovered components satisfy the applicable NAFTA rule of origin requirements.
CBP's final rule also states that disassembly will not be considered production in the case of components that are recovered from new goods.
(According to CBP, NAFTA does not explicitly address the question of whether disassembly occurring in a NAFTA country may be considered NAFTA origin-conferring "production" when the recovery of components by the disassembly operation satisfies the applicable rules of origin listed in NAFTA Annex 401.)
Final Rule Adds New 19 CFR 181.132 on Disassembly
CBP's final rule amends the NAFTA regulations in Subpart L of 19 CFR 181 by adding a new section 181.132 on disassembly which reads as follows:
(a) Treated as production. For purposes of implementing the rules of origin provisions of Harmonized Tariff Schedule (HTS) General Note 12 and NAFTA Chapter 4, except as provided in 181.132(b), disassembly is considered to be production, and a component recovered from a good disassembled in the territory of a Party will be considered to be originating as a result of such disassembly provided that the recovered component satisfies all applicable requirements of Annex 401 and Part 181.
(b) Exception: new goods. Disassembly, as provided for in 181.132(a), will not be considered production in the case of components that are recovered from new goods. For purposes of this paragraph, a "new good" means a good which is in the same condition as it was when it was manufactured and which meets the commercial standards for new goods in the relevant industry.
(According to CBP, in response to the comments it received on its March 2003 proposed rule and after further review of the matter, CBP's final rule reflects the following changes from its proposed rule:
the deletion of the proposed (additional) requirement for 181.132(a) that if the rule of origin in Annex 401 applicable to the recovered component does not include a regional value content requirement, the recovered component must be subsequently advanced in value or improved in condition by means of additional processing operations (other than certain listed minor operations); and
the deletion of proposed paragraph 19 CFR 181.132(c) on the application of 181.32 when determining whether automotive components/goods are originating. (According to CBP, this proposed paragraph is unnecessary, and notes that commenters stated that remanufactured goods are not used as original equipment in the production of motor vehicles.)
See ITT's Online Archives or 03/18/03 news, 03031805, for BP summary of CBP's proposed rule.)
CBP contact - Shari Suzuki (202) 572-8818
CBP final rule (CBP Dec. 05-24, FR Pub 06/30/05) available at http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-12902.pdf.