BACM Asks CBP to Withdraw Proposal to Expand Use of Part 102 Rules
CBP should take a different approach than the one it proposed for the rules of origin used on non-preferential claims and procurement under USMCA (see 2107010045), the Business Alliance for Customs Modernization said in comments to the agency. “BACM requests that CBP withdraw this [notice of proposed rulemaking] and engage the trade community in a dialogue about the type of rule of origin the United States should use for non-preferential purposes -- an objective test or a subjective test -- and then issue a new NPRM based on that input,” it said. BACM, which is made up of “large U.S.-based multinationals,” is the latest to come out against the proposal (see 2108120033 and 2108090027).
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Among other deficiencies with the proposal, BACM said, the legal basis for the Part 102 marking rules from NAFTA was repealed when the NAFTA Implementation Act was repealed by the USMCA Implementation Act. “Other than general references to the 'USMCA' and to certain regulations that authorize appropriate actions to implement the USMCA, the NPRM does not include any discussion of the legal basis for continuing to apply, and expanding the use of, the NAFTA Marking Rules,” the group said. Absent the legal justification, “the existence of the USMCA, by itself, does not confer unlimited authority for the United States to treat Canada and Mexico differently from other countries on trade-related issues not addressed in that agreement,” BACM said.
The proposal would actively disadvantage trade with other regions, the group said. “Given that the NAFTA Marking Rules are easier to apply, utilizing those rules to determine the origin of goods imported from Canada and Mexico for all non-preferential purposes, while applying the traditional substantial transformation test to goods from all other countries, provides a distinct advantage to products of Canada and [Mexico] vis-a-vis other countries,” it said. The use of “objective and easy-to-apply rules of origin” only for products from Canada and Mexico also likely goes against U.S. obligations under World Trade Organization agreements.
CBP's proposal is “puzzling” because it fails to resolve the two issues it seeks to, BACM said. “[T'here is a real possibility that applying these two rules to the same manufacturing operations results in two different origins,” the group said. “By contrast, today, that same company has to apply only one rule of origin in order to make that determination. Therefore, the proposal should not be adopted because it does not address the underlying issues.”
Instead of the CBP proposal, “[w]e submit that there are two better options for addressing these issues than the current proposal,” BACM said. “One option would be to utilize the NAFTA Marking Rules for all non-preferential origin determinations regardless of the country of export (i.e., stop using the traditional substantial transformation test). Another option would be to use the traditional substantial transformation test for all non-preferential origin determinations regardless of the country of export. Unlike the hybrid approach proposed in the NPRM, both of these options would eliminate having to apply two sets of rules of non-preferential rules of origin (and the inconsistent CBP rulings that result therefrom). Of course, the first option has the added benefit of utilizing objective tariff-based rules that are predictable and easier to apply.”
BACM is represented by Sidley Austin lawyer Ted Murphy, who noted some concerns soon after the proposal was issued (see 2107080040). Comments in the docket are due Sept. 7.