Trade Programs and
Trade Agreements
Listed in the General Notes
Lets look at the handout and the
Resources section of our book
Generalized System of Preferences
GSP / GN 4 / CFR 10.171-10.178
Free Duty if the product qualifies for GSP
A, A*,A+ is the letter assigned to GSP; look in the
Special Column
Need at least 35% of the article to be of GSP origin in
order to qualify for GSP free duty rate
10.176 - need more than mere packaging to claim GSP. Must be a
new and different article. (Country of Origin change by
substantial transformation)
Item must be Shipped Direct to USA (did not enter
commerce of other country)
All GSP participating countries are listed in GN 4
Generalized System of Preferences Continued
The 35% rule
If the product is 100% GSP Country of Origin
Only need a statement on the invoice declaring the product is 100% of
that Country
If less than 100% it must be at least 35% of appraised value from a
GSP country
Ex. Computer valued at $100
Indian part = $70 and Japan = $30 then OK
Documents needed when product is less than 100%:
If < 100% and more than 35%, need GSP Declaration prepared
by exporter – see form on 10.173 (not required for informal entry)
Place “A” in front of HTS # on entry
Cannot merge/mix with other GSP countries except:
“Associations of Countries”
Generalized System of Preferences Continued
A* in Special Column indicates exceptions
by HTS number and country
IF an A* exception applies, you pay regular
duty rate
GSP and most programs have some
exceptions such as textiles, watches,
leather products, etc…
Direct Cost of Processing
Direct Cost of Processing CFR 10.178
What costs can count to the 35% in addition
to the cost of materials.
What is included in the 35%
labor, dies, molds, research and development, and
costs of inspection
What is not part of Direct Cost of Processing
Business overhead, administrative expenses, salaries,
profit, and general business expenses
GSP example
Classify horse harness country of origin
Argentina
Is there an “A A* A+ in the special column??
Is Argentina on the GSP list?
Was the product shipped directly?
Is it 100% origin of Argentina? If not what do I
need?
Is this an exception (A*)
Place an “A” in front of HTS No. on entry
51. Based on the following costs, a table made in and exported
from Poland and invoiced at $16.50 is INELIGIBLE for
preferential treatment under GSP because _____.
$6.00 Wood from Germany
$4.25 Glass from Russia
$3.35 Paint from Poland
$2.90 Labor in Poland
A. Russia is not a designated beneficiary developing country
B. The direct cost of processing operations in Poland is less than
35 percent
C. The product was not directly exported from Germany
D. Poland is not a designated beneficiary developing country
(answer – check the List of countries)
E. Labor cannot be included in the direct processing costs
Caribbean Basin Economic Recovery Act - CBERA
GN 7 / CFR 10.191-10.198 / Duty Free if qualifies
E or E* in the special column
Country on List - GN 7(a)
Direct shipment
35% rule
Can Merge Countries
Caribbean Basin Economic Recovery Act - CBERA
PR & US VI count toward 35%
34% PR/VI and 1% CBERA – OK
Ex. Widget valued at 1.00
Jamaica .05 / US V.I. .30 / Japan .65 = OK CEBRA qualified
USA product OK
Up to 15% of the 35%
Ex. Valuation of Widget = $1.00
0.10 Haiti
0.10 Jamaica
0.20 USA
0.60 Japan
Can use only 0.15 of the USA portion to make the 35%
Caribbean Basin Economic Recovery Act - CBERA
Documents:
If it is 100 % origin only need a statement from
exporter
Less than 100% (mixed) - CBERA Declaration (10.198)
Place letter E in front of HTS No. on entry
E* = GN 7 (exclusions to CBERA listed here)
Sugar, Molasses, Beef, Veal, of certain countries
excluded
Watches, No Commie Parts
Textiles
US-Caribbean Basin Trade Partnership Act- CBTPA *NEW*
GN 17 / CFR 10.221-.227
Gives preferential treatment to apparel and textile
articles of CBERA Countries
Letter R
Direct Shipment
100% product of – or tariff shift under GN 12
applies to apparel articles knit to shape, assembled
from fabric cut and formed in US or beneficiary
country or US yarn, etc..
Can mix from CBERA countries
Country of Origin Certificate required
African Growth and Opportunity Act (AGOA) *NEW*
GN 16 / CFR 10.211-.217
Gives preferential treatment to apparel and textile
articles qualifying from the listed countries
Letter D
Direct Ship
35% rule applies
USA product up to 15% is OK (No PR or VI)
Can mix AGOA countries to get to 35%
applies to apparel articles knit to shape, assembled
from fabric cut and formed in US or beneficiary
country or US yarn, etc.
Country of Origin Certificate required
Andean Trade Pact
GN 11 / CFR 10.241-.248
Ecuador and Colombia – see list GN 11
Gives duty free or reduced tariff treatment to
qualifying goods
J or J*
Direct Shipment
35% rule applies
Need ATPA Declaration if not 100% 10.207
OK to Merge within group and CBI countries
PR & VI OK up to 34.999999%
USA up to 15%
Israel Trade Act
GN 8
IL (No IL*)
Direct Ship
35% rule applies
US content up to 15%
IL placed in front of HTS No. on entry
Civil Aircraft
GN6 / CFR 10.183
C (no C*)
Any plane purchased by someone other
than Department of Defense or Coast
Guard
Direct or indirect shipment
Documents = FAA Certificate or Blanket
Certificate
Any Country of Origin
Includes parts and Flight simulators
Auto Products Act
GN 5 / 10.84
B (No B*)
Manufactured in Canada for use in USA
assembly
Bona Fide Manufacturer (15 Cars in One
Year)
No Special Forms
Does anyone use this????
Insular Possessions
GN 3(a)
Insular possessions are listed in CFR 7,
Guam
Samoa
Kingman Reef
Johnston Island
Midway
7501 = “Y” (this is in Gen. Stat. Notes)
No Letter appears in Columns
Mixed Product OK
Not more that 70% foreign product (foreign means anything not duty
free in other programs such as GSP, CBI)
Direct Shipment
Documents - CF3229
Anything from the USA is not considered “FOREIGN MATERIAL”
providing it meets the “18 Month Rule” goods can only be in the US
possession less than 18 months!
Free Association States
GN 10
Includes three places
Marshall Islands
Micronesia
Republic of Palau
“Z” goes on 7501 (from Gen Statistical notes)
Direct shipment
35% rule (15% of 35% USA is OK)
Exceptions
Tuna
Skipjack
Watches
NAFTA
GN 12 and CFR 181
The NAFTA territory is Canada, USA, Mexico
100% from NAFTA country – CA or MX in front of HTS
No. on CF 7501, also need cert. of origin
Rules of Origination (NAFTA Country of Origin)
The good is wholly produced or obtained in Mexico, Canada, or
the US.
The good is substantially transformed in Mexico, Canada, or the
US, so that any non- originating (or non NAFTA material)
material undergoes a tariff shift (and or meets a regional value
content listed below).
It is a good produced in the NAFTA countries with product
exclusively from the NAFTA region.
NAFTA
GN 12 and CFR 181
Ex. of a tariff shift (See GN 12(t) the shift list)
Frozen pork meat (HTS 0203) is imported to the US
from Hungary. It is combined with spices and grains
from the US…. and made into Chorizo sausage (HTS
1601). Then exported to Mexico.
See the Tariff Shift list in GN 12(t), find chapter 16 in the
shift list. It states the item qualifies for NAFTA
Preferential Duty Treatment if it was transformed to
HTS 1601 from any other chapter.
Since the pork(HTS 0203) shifted to sausage (HTS
1601), the sausage now qualifies for NAFTA according
to the shift list.
NAFTA continued
Regional Value Content
If it is a mixed good or a transformed good, it may
require a tariff shift and calculation of the
Regional Value Content (RVC)
RVC is basically a formula to determine how much
of the product is actually NAFTA product
There are two different formulas; the transaction
value and the net cost value and the manufacturer
can choose which to use
NAFTA RVC continued
TRANSACTION VALUE METHOD / 60% required
Transaction value – Non originating material
÷ x 100
Transaction value
NAFTA RVC continued
NET COST METHOD / 50% required
Net Cost – Non originating material
÷ x 100
Net Cost
NAFTA RVC continued
Example:
Invoice Value = USD 550 (50 is profit)
Foreign Value = USD 250.00
Transaction Value RVC =
(550-250) ÷ 550 X 100 = 54 % (does not qualify)
Net Cost RVC =
(500-250) ÷ 500 X 100 =50% (does qualify)
($550 - $ 50 Profit = Net Cost)
US Singapore Free Trade Act
GN 25
Gives preferential duty treatment if good
qualifies
Letter SG
Applies to originating goods as set out in the
trade act rules of origin (just like NAFTA)
Has a tariff shift list (just like NAFTA)
Has a Regional Value Content issue
US Chile Free Trade Act
GN 26 (10.401 – 10.490)
Gives preferential duty treatment if good
qualifies
Letter CL
Applies to originating goods as set out in the
trade act rules of origin (just like NAFTA)
Has a tariff shift list (just like NAFTA)
Has a Regional Value Content issue
US Morocco FTA
GN 27
Gives preferential duty treatment to qualifying
goods
Letter MA
35% rule and also has a tariff shift list and must
have direct shipment
Australia – UAFTA
Gen. Note 28
Gives preferential duty treatment if good
qualifies
Letter AU
Applies to originating goods as set out in the
trade act rules of origin (just like NAFTA)
Has a tariff shift list (just like NAFTA)
Has a Regional Value Content issue
Dominican Republic Central American Free Trade
Implementation Act – CAFTA (GN 29)
Gives preferential duty treatment if good
qualifies
Letter P or P+
Applies to originating goods as set out in the
trade act rules of origin (just like NAFTA)
Has a tariff shift list (just like NAFTA)
Has a Regional Value Content issue
US – Bahrain FTA
GN 30
Gives preferential duty treatment to qualifying
goods
Letter BH
35% rule and also has a tariff shift list and must
have direct shipment
Others keep coming
Peru, Oman, Korea, etc…