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1 1 (February 17, 2021)

handle is hein.crs/govechk0001 and id is 1 raw text is: Congressional Research Service Inforrning the legislative debate since 1914 Updated February 17, 2021 Rules of Origin Background What are Rules of Origin? Rules of origin (ROO) are laws, regulations, and procedures used for ascertaining the nationality of imported products. ROO are important for many reasons, including determining the admissibility of imported goods, assessing duty rates, country of origin marking, applying tariff quotas, enforcing U.S. trade laws, establishing eligibility for preferential programs and free- trade agreements (FTAs), and collecting trade statistics. Determining origin is relatively straightforward if all of a product's raw materials and parts are manufactured and assembled in one country. However, in today's global economy, parts of manufactured goods to be assembled into products such as automobiles, computers, or clothing, often come from many countries. This can make determining origin a complex process. Non-preferential ROO apply to imports from all countries with which the importing country has normal trade relations (NTR), and are consistent with World Trade Organization (WTO) obligations. For the United States, NTR applies to all WTO members, except those that have an FTA with the United States or receive another kind of U.S. preferential trade treatment. Non-preferential ROO are used to assess tariffs, enforce trade laws (e.g., antidumping and countervailing duties), collect statistics, and for other purposes. For non-preferential ROO, there is no specific U.S. law or legislative methodology that specifically defines the term country of origin. Instead, U.S. Customs and Border Protection (CBP) administers non-preferential rules based on a body of CBP regulations, prior agency interpretations, and court decisions. When the country of origin is in doubt, an importer may apply to CBP for an advance customs ruling. Preferential ROO apply to FTAs such as the United States-Mexico-Canada Agreement (USMCA) and certain nonreciprocal trade preferences, like the African Growth and Opportunity Act (AGOA) and the Generalized System of Preferences (GSP). Preferential ROO are important because they ensure only eligible trading partners receive the tariff benefits of the special program or FTA. Some preferential ROO may also be crafted to limit the impact of these programs on import-sensitive industries. They are unique to each special trade program or FTA. Preferential ROO in FTAs are negotiated by the parties to the agreement and approved by Congress as part of the FTA implementing legislation. For special U.S. trade programs like AGOA and GSP, they are drafted and approved by Congress. Enforcement. CBP interprets, administers, and enforces rules of origin, as well as country of origin labeling, tariff classification, customs valuation, and many other laws relating to U.S. imports. International Commitments. The 1994 WTO Agreement on Rules of Origin requires WTO members not to use ROO to disrupt trade, to apply ROO in a consistent, transparent, nondiscriminatory, and reasonable manner, and to notify other members about any rule changes. The WTO agreement also set up an ongoing program to harmonize non-preferential rules, with negotiations conducted by a WTO Rules of Origin committee and a technical committee under the World Customs Organization (WCO). The WCO also facilitates trade by providing assistance to customs administrations worldwide on interpreting ROO and other technical issues. Figure I. Rules of Origin Uses Preferential U Free trade agreements U U n ilatera il p[reerewz prorams' 1 No-prefred-rtial n Antiumprrvaling uieand (mos ttavored-ntation)ni countervaiing dties 'Safeguard measures (ourtr/ of origin tAbeling [Quantilat ve restrictions Tarff quotas WGovernment procurerment; and Trade statistics Source: World Customs Organization. Graphic by CRS. Rules of Origin in FTAs ROO in FTAs generally stipulate how much manufacturing must come from within the FTA region in order to receive trade benefits (e.g., duty-free treatment). Although FTAs are individually negotiated, there are many common elements across agreements. Originating Goods. In order to receive the benefits of an FTA, imported products must originate in one of the partner countries by satisfying one of three conditions. They must be: (1) grown, harvested, or fished in the FTA region; (2) produced in the FTA region using only materials made in the FTA region; or (3) produced in the FTA region with non-FTA country components while meeting additional product-specific ROO requirements. Specific Rules of Origin. Each U.S. FTA has a chapter containing general ROO provisions, combined with an annex that lists ROO for individual products. These product-specific ROO generally take one of three forms (see Figure 2). Change of Tariff Classification or tariff-shift rules require that a product be substantially transformed as illustrated by a change in its Harmonized Tariff Schedule ps://crsreports.congress.go

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