CBP Issues Instructions on Filing & Acceptance of Claims Under the DR-CAFTA (Part II)

To date, the President has declared that the DR-CAFTA will be in effect and implemented for El Salvador only. Therefore, for purposes of these instructions, CBP states that reference to a DR-CAFTA country is the U.S. and El Salvador. The DR-CAFTA took effect for El Salvador on March 1, 2006.

This is Part II of a multi-part series of summaries of this memorandum, and highlights the DR-CAFTA rules of origin, textiles and apparel, etc. See future issues of ITT for additional summaries.See ITT's Online Archives or 03/08/06 news, 06030805, for Part I of BP summary of CBP's memorandum, which discusses special program indicators, certification and other information for claims, etc.)

Non-Textile DR-CAFTA Rules of Origin

Generally, under DR-CAFTA, CBP states that a non-textile good is originating where:

(a) the good is wholly obtained or produced entirely in the territory of one or more of the parties (i.e., currently El Salvador only);

(b) the good is produced entirely in the territory of one or more of the DR-CAFTA parties and

(i) each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification specified in General Note (GN) 29(n); or

(ii) the good otherwise satisfies any applicable regional value content (RVC) specified in GN 29(n); and

the good satisfies all other applicable requirements; or

(c) the good is produced entirely in the territory of one of more of the DR-CAFTA parties exclusively from originating materials.

Textiles and Apparel DR-CAFTA Rules of Origin

CBP states that textiles and apparel products may qualify as originating under DR-CAFTA if they meet the requirements as specified in the DR-CAFTA. The duty rate for these goods will be identified in the "special" column. CBP notes that these requirements are similar to the North American Free Trade Agreement (NAFTA), but there are some substantial differences.

Below is a summary of the type of processes required for some of the more basic products in order for them to be considered eligible for DR-CAFTA. CBP cautions that there are exceptions even to these requirements, depending on the specific type of product it is. For more specific information CBP advises interested persons to refer to Annex I of the Modification to the HTS to implement DR-CAFTA, USITC Publication 3829 or GN29 to the HTS. CBP notes that for apparel in Chapters 61 & 62 and made-up textile articles in Chapter 63 only the component that determines the essential character for classification must meet the tariff shift rules. It should also be noted that regional sewing thread (U.S. or DR-CAFTA beneficiary) must be used for all articles in Chapters 61-63 in order to qualify for DR-CAFTA.

(a) Yarn - generally, fiber must originate in a DR-CAFTA beneficiary country or the U.S. to qualify for preferential tariff treatment.

(b) Fabric - generally, yarn must originate in a DR-CAFTA beneficiary country or the U.S. to qualify for preferential tariff treatment. Cotton and man-made knit fabric are under fiber forward rules, meaning the fiber must originate in a DR-CAFTA beneficiary country or the U.S. to qualify for preferential treatment.

(c) Apparel - generally, yarn must originate in a DR-CAFTA beneficiary country or the U.S. to qualify for preferential tariff treatment.

Note: CBP notes that there are a number of single transformation rules for luggage, cotton and man made fiber woven dresses other than corduroy, boxer shorts, brassieres and boys' and girls' woven pajamas and nightwear that exist, so one should become familiar with the tariff shift rule found in GN 29(n) for that particular product that you are importing before a CAFTA-DR claim is made.

(See ITT's Online Archives or 03/06/06 news, 06030610, for BP summary of interim procedures for commercial availability requests. See ITT's Online Archives or 03/09/06 news, 06030915, for BP summary of CBP instructions for retroactive benefits for DR-CAFTA textiles and apparel, which currently apply to El Salvador only.)

U.S. Fabric Cut in a DR-CAFTA Beneficiary Country

There is a special provision for goods of Chapter 61, 62 or 63 that are assembled from fabric wholly formed in the U.S. or components that are knit to shape in the U.S. that are cut in the U.S. or in a DR-CAFTA beneficiary country, or both, to pay the NTR rate of duty on only the value added in the DR-CAFTA beneficiary country. Sewing thread to assemble the good must by wholly formed in the U.S. to qualify for this provision (see GN29(d)(iv) and 9822.05.10).

DR-CAFTA Qualifying Based on a Tariff Preference Level (TPL)

There is a TPL for cotton and man-made fiber apparel cut and sewn and otherwise assembled in Nicaragua. However, Nicaragua is not yet a CAFTA-DR eligible country. Merchandise entered under this TPL must use Chapter 9915.61.01. There is no retroactive treatment for goods entering under a TPL.

Costa Rica Wool Apparel

CBP states that Costa Rica has a special provision for woven wool tailored apparel of headings 6203 or 6204 that is cut, sewn and otherwise assembled in Costa Rica. The goods must also meet, as applicable, the visible lining, narrow elastomeric fabric and sewing thread rules. However, Costa Rica is not yet a DR-CAFTA eligible country. Merchandise entered under this provision must use 9915.62.01 - 9915.62.20 and the duty rate for the merchandise entered under this provision is half of the (NTR) rate of duty up to specified annual quantities.

Treatment of Sets (Textile and Non-Textile)

According to CBP, notwithstanding the specific rules of origin set out in GN29, textile or apparel goods classified under General Rule of Interpretation (GRI) 3 of the HTS as goods put up in sets for retail sale shall not be regarded as originating goods unless each of the goods in the set is an originating good or the total value of the non-originating goods in the set does not exceed ten percent of the value of the set determined for purposes of assessing customs duties (see GN 29(c)(v)).

CBP states that non-textile goods classified under GRI 3 of the HTS as goods put up in sets for retail sale will be considered originating for purposes of receiving preferential tariff treatment only if each good in the set is originating per the specific rules of origin set forth in GN 29 or the value of the non-originating goods in the set does not exceed 15 percent of the adjusted value of the set.

(CBP adds that 19 CFR will be amended to implement the DR-CAFTA and the DR-CAFTA Implementation Act. As such, the instructions contained in this memorandum are subject to change once the regulations are issued.)

(See ITT's Online Archives or 03/03/06 news, 06030305, for BP summary of a CBP notice announcing the temporary non-ABI requirement (see Part I of this series of summaries for additional discussion), and removal of El Salvador's GSP, CBTPA, and CBERA benefits due to implementation of the DR-CAFTA for that country. See ITT's Online Archives or 03/02/06 news, 06030200, for Part I of a multi-part series of BP summaries on Proclamation 7987 implementing the DR-CAFTA.)

CBP Memorandum, including Attachment A (dated 03/03/06) available at http://www.cbp.gov/linkhandler/cgov/import/international_agreements/free_trade/dominican_republic/us_dominican.ctt/us_dominican.doc

BP Note

The DR-CAFTA is also referred to as "CAFTA-DR"