CBP Issues Interim Rule to Implement Australia FTA Customs Provisions

(AUFTA was implemented in the HTS by Presidential Proclamation 7857 of Dec. 20, 2004, effective for goods of Australia entered or withdrawn from warehouse for consumption on or after Jan. 1, 2005 (see 05010315).)

Overview of Interim Regulatory Amendments

The following is an overview of some of the interim regulations' amendments to 19 CFR Part 10 (articles conditionally free, subject to a reduced rate, etc.) and Part 24 (Customs financial and accounting procedure). Most of the interim regulatory amendments occur in 19 CFR Part 10, including the creation of a new Subpart L to provide for the AUFTA.

Temporary Importations Under Bond. The interim rule amends Section 10.31(f) concerning temporary importations under bond by adding references to certain goods originating in Australia for which -- like goods originating in Canada, Mexico, Singapore, Chile, Morocco, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic, Costa Rica, Bahrain, Oman, Peru, South Korea and Colombia -- no bond or other security will be required when imported temporarily for prescribed uses.

Import Requirements for Claiming AUFTA Preferential Treatment, Certification, Etc.

Claiming preferential treatment. Section 10.723 sets forth the procedure for claiming AUFTA preferential tariff treatment at the time of entry. It says that an importer may make a claim for AUFTA preferential tariff treatment based on the importer’s knowledge that the good is an originating good. This section also provides that when an importer has reason to believe that a claim is invalid, the importer must correct the claim and pay any duties that may be due.

Certification of treatment. Section 10.724 requires a U.S. importer, upon request, to submit a supporting statement setting forth the reasons a good qualifies as an AUFTA originating good. The supporting statement may either be used for a single importation or for multiple importations of identical goods.

Importer obligations. Section 10.725 sets forth certain importer obligations regarding the truthfulness of information and documents submitted in support of a claim for preferential tariff treatment.

Non-commercial, low-value shipments. Section 10.726 provides that the supporting statement is not required for certain non-commercial or low-value importations.

Maintenance of records. Section 10.727 implements AUFTA provisions concerning the maintenance of relevant records regarding the imported good.

Denial of AUFTA tariff benefits. Section 10.728 authorizes the denial of AUFTA tariff benefits if the importer fails to comply with any of the requirements under 19 CFR Part 10, Subpart L.

AUFTA Rules of Origin

Sections 10.729 through 10.741 provide the implementing regulations regarding the rules of origin provisions of HTS General Note 33, as follows:

General rules of origin. Section 10.730 sets forth the basic rules of origin established in the AUFTA, Implementation Act, and HTS General Note 28(b). The provisions of this section apply both to (i) the determination of the status of an imported good as an originating good for purposes of preferential tariff treatment and to (ii) the determination of the status of a material as an originating material used in a good which is subject to a determination under HTS General Note 28.

• Paragraph (a) of this section specifies those goods that are originating goods because they are wholly obtained or produced entirely in the territory of Australia or the U.S..
• Paragraph (b) of this section provides that goods that have been produced entirely in the territory of Australia or the U.S. from non-originating materials, each of which undergoes an applicable change in tariff classification and satisfies any applicable regional value content or other requirement set forth in HTS General Note 28(n), are originating goods.
• Paragraph (c) to this section provides that goods that have been produced entirely in the territory of U.S. or Australia exclusively from originating materials are originating goods.
• Paragraph (d) says goods are also considered originating if they otherwise qualify as originating goods under HTS General Note 28.

Textile and apparel goods "put up in sets". Section 10.731 provides that, notwithstanding the specific rules of HTS General Note 28(n), goods classifiable as "goods put up in sets for retail sale" under HTS General Rule of Interpretation 3 will not qualify as originating goods unless: (1) each of the goods in the set is an originating good; or (2) the total value of the non-originating goods in the set does not exceed 10 percent of the value of the set.

De minimis. Section 10.732 sets forth de minimis rules for goods that may be considered to qualify as originating goods even though they fail to qualify as originating goods under the rules specified in Section 10.730. There are a number of exceptions to the de minimis rule set forth in AUFTA Annex 5-A as well as a separate rule for textile and apparel goods.

Accumulation. Section 10.733 sets forth the rule by which originating materials from the territory of Australia or the U.S. that are used in the production of a good in the territory of the other country will be considered to originate in the territory of that other country. In addition, this section also establishes that a good that is produced by one or more producers in the territory of Australia and/or the U.S. is an originating good if the good satisfies all of the applicable requirements of the rules of origin of the AUFTA.

Value content. Section 10.734 concerns the basic rules that apply for purposes of determining whether an imported good satisfies a minimum regional value content (RVC) requirement. Section 10.735 sets forth the rules for determining the value of a material for purposes of calculating the RVC of a good as well as for purposes of applying the de minimis rules.

Accessories, spare parts, or tools. Section 10.736 specifies the conditions under which a good's standard accessories, spare parts, or tools are: (1) treated as originating goods; and (2) disregarded in determining whether all non-originating materials undergo an applicable tariff shift under HTS General Note 28(n).

Fungible goods and materials. Section 10.737 sets forth the rules by which “fungible” goods or materials may be claimed as originating.

Packaging and packing materials. Sections 10.738 and 10.739 provide that retail packaging materials and packing materials for shipment are to be disregarded with respect to their actual origin in determining whether non-originating materials undergo an applicable change in tariff classification under HTS General Note 28(n). These sections also set forth the treatment of packaging and packing materials for purposes of the regional value content requirements.

Indirect materials. Section 10.740 provides that indirect materials, as defined in Section 10.729(h) (General definitions), are considered originating regardless of where they are produced.

Transit and transshipment. Section 10.741 sets forth the rule that an originating good loses its originating status and is treated as a non-originating good if, subsequent to production in the territory of one or both of Australia and/or the U.S. that qualifies the good as originating, the good undergoes production outside their territories.

Origin Verifications and Determinations (General and for Textiles & Apparel)

Section 10.742 concerns the conduct and application of verifications to determine whether imported goods are originating goods entitled to AUFTA preferential tariff treatment. This section also governs the conduct of verifications directed to producers of materials that are used in the production of a good for which AUFTA preferential duty treatment is claimed. Section 10.743 sets forth the verification and enforcement procedures specifically relating to trade in textile and apparel goods.

Section 10.744 provides the procedures that apply when preferential tariff treatment is denied on the basis of an origin verification conducted under Subpart L of Part 10.

Penalty Exceptions for AUFTA Transactions

Sections 10.745 - 10.747 concern the application of penalties to AUFTA transactions, with Section 10.745 setting out general application of penalties, and following provisions providing for corrections of claims:

Exception for importer corrected claims. Section 10.746 concerns an exception to the application of penalties in the case of an importer who promptly and voluntarily makes a corrected claim and pays any duties owed. The importer has at least a year to make such a correction..

Prompt & voluntary corrections or notifications. Section 10.747 sets forth the circumstances under which a corrected claim or supporting statement is considered “promptly and voluntarily." Corrected claims or certifications that fail to meet these requirements are not excepted from penalties, although the U.S. importer making the corrected claim or supporting statement may, depending on the circumstances, qualify for a reduced penalty as a prior disclosure under 19 USC 1592(c)(4). This section also specifies the content of the statement that must accompany each corrected claim or certification.

Goods Returned After Repair or Alteration

Section 10.748 concerns duty-free treatment for goods re-entered after repair or alteration in Australia.

MPF is Not Applicable to Qualifying Originating Goods Under AUFTA

CBP is amending Section 24.23(c), to provide that the merchandise processing fee (MPF) is not applicable to goods that qualify as originating goods under the AUFTA.

(CBP made other minor conforming changes to 19 CFR Parts 162, 163, and 178. See interim regulations for complete details.)

CBP Contacts:

Textile Operational Aspects -- Diane Liberta (202) 863-6241

Other Operational Aspects -- Katrina Chang (202) 863-6532

Legal Aspects -- Yuliya Gulis (202) 325-0042

(Federal Register 02/10/15)