paragraph 4.2 of the ministerial decision of 19 December 2015 on preferential rules of origin for Least Developed Countries

Communication by the United States

The following communication, dated 23 December 2016, is being circulated at the request of the delegation of the United States.

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1  Introduction

1.1.  Paragraph 4.2 of the Nairobi Ministerial Decision "Preferential Rules of Origin for Least Developed Countries" (WT/MIN(15)/47 - WT/L/917) requires developed Preference-granting Members to inform the Committee on Rules of Origin (CRO) of the measures being taken to implement the provisions of that Decision.  This notification provides information on three U.S. preference programmes:  the Generalized System of Preferences (GSP); the African Growth and Opportunity Act (AGOA); and the Caribbean Basin Economic Recovery Act (CBERA).

1.2.  This notification supplements the information that the United States has provided in the past through its annual reports to the General Council in support of its waivers, the guides to U.S. preferences programmes in the WTO Database on Preferential Trade Arrangements, and information provided in meetings of the Committee on Rules of Origin and the Committee on Trade and Development.

2  requirements for the asessment of sufficient or substantiAl transFoRMATION

2.1.  Generally speaking, the three aforementioned U.S. preference programmes apply a method of calculation based on the amount of originating material.  For each of these programmes, in order for a good to qualify for preferential treatment, the cost or value of materials produced in one or more designated beneficiary countries, plus the direct costs of processing operations performed in the beneficiary country, must be at least 35% of the appraised value of that good.  In the case of AGOA and CBERA, up to 15% of the 35% local value content requirement may be attributable to the cost or value of materials produced in the United States.

2.2.  Paragraph 1.1(c) of the Nairobi Decision states that Preference-granting Members shall "consider the deduction of any costs associated with the transportation and insurance of inputs from other countries to LDCs."  The issue of whether to deduct costs associated with transportation and insurance of inputs applies to calculations based on non-originating material.  When a calculation system based on originating material is used (as is the case with the aforementioned preference programmes), it is advantageous to add such expenses to value of the inputs.  The United States allows the costs of freight, insurance, packing, and all other costs incurred in transporting the materials to the manufacturer's plant to be added to the value of the inputs.

2.3.  Paragraph 1.3(a) of the Nairobi Decision states that "Preference-granting Members shall, to the extent provided for in their respective non-reciprocal preferential trade arrangements, allow as follows:  (a) if applied to clothing of chapters 61 and 62 of the Harmonized System nomenclature, the rule shall allow assembling of fabrics into finished products".  AGOA provides duty-free treatment for apparel made in "lesser developed" beneficiary countries regardless of the source of the fabric or yarn, subject to an annual quantitative limit.  The HOPE II Act, as amended by the Haiti HELP Act, provides for duty-free access for up to 200 million square meter equivalents (SME) of knit apparel (with some t-shirt and sweatshirt exclusions) and 200 million SMEs of woven apparel without regard to the country of origin of the fabric or components, as long as the apparel is wholly assembled or knit-to-shape in Haiti.

2.4.  The United States does not impose a combination of ad valorem, tariff shift, and specific manufacturing requirements for determining sufficient transformation under the aforementioned preference programmes.

3  CUMULATION

3.1.  All three of the aforementioned U.S. preference programmes provide for cumulation, but in different ways.

3.2.  All AGOA and CBERA beneficiary countries may cumulate (i.e., use inputs from other countries to meet the local value content requirement) with countries in their respective programmes.  In the case of AGOA and CBERA, up to 15% of the 35% local value content requirement may be attributable to the cost or value of materials produced in the United States.  In addition, AGOA and CBERA beneficiaries may cumulate with former beneficiaries of their respective programmes.  A "former beneficiary" is defined as a country that ceases to be designated as a beneficiary country under the particular preference programme because the country has become a Party to a free trade agreement with the United States.

3.3.  Under GSP, certain associations of countries are treated as one country for origin purposes.  In other words, inputs from certain beneficiary countries in specific regional groupings may contribute to satisfying the local value content requirement.  The specific countries and regional groupings can be found in General Note 4 of the Harmonized Tariff Schedule of the United States.

4  documentary requirements

4.1.  Paragraph 3.1(a) of the Nairobi Decision states that Preference-granting Members shall "[a]s a general principle, refrain from requiring a certificate on non-manipulation for products originating in a LDC but shipped across countries unless there are concerns regarding transshipment, manipulation, or fraudulent documentation".  For each of the three aforementioned U.S. preference programmes, an originating article maintains its originating status if it was shipped through a beneficiary country or was shipped through a country other than a beneficiary country and the invoices and other documents from the beneficiary country do show the United States as the final destination.  If not the case, the importer must have documentation that demonstrates that the conditions set forth in the regulations were met; and must be prepared to explain, upon request from U.S. Customs and Border Protection, how the records and internal controls referred to above justify the importer's claim for preferential treatment.  However, the United States does not require a certificate of non-manipulation if other documentation demonstrates these conditions.

4.2.  The United States has procedures to expedite customs clearance for low value shipments.  In the United States, an "informal entry" involves the importation of merchandise that does not exceed US$2,500 in value.  Informal entries do not require a posting of a Customs bond and are liquidated at the time of release.  Informal entries are used for both personal and commercial importations.  Informal entries may not be used for commercial importations of goods subject to quota, Anti-dumping or Countervailing duties.  In addition, in March 2016, the United States raised the value of a shipment of merchandise imported by one person on one day that generally may be imported free of duties and taxes from US$200 to US$800. 

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