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CUSTOMS (AUSTRALIA-US FREE TRADE AGREEMENT) REGULATIONS 2004 2004 NO. 288
STATUTORY RULES 2004 NO. 288
Issued by the Authority of the Minister for Justice and Customs
Customs Act 1901
Customs (Australia-US Free Trade Agreement) Regulations 2004
Subsection 270(1) of the Customs Act 1901 (the Act) provides, in part, that the Governor-General may make regulations not inconsistent with the Act prescribing all matters which by the Act are required or permitted to be prescribed or as may be necessary or convenient to be prescribed for giving effect to the Act or for the conduct of any business relating to the Customs.
The US Free Trade Agreement Implementation Act 2004 (the FTA Act) consists of ten Schedules that amend the relevant Australian legislation to fulfil Australia's obligations under the Australia-US Free Trade Agreement (the Agreement). Part 1 of Schedule 1 to the FTA Act amends the Act to fulfil obligations under Chapters 4 and 5 of the Agreement, which deal with rules of origin. These rules determine whether goods imported into Australia are US originating goods and are thereby eligible for preferential rates of customs duty. These rules are contained in new Division 1C of Part VIII of the Act (new Division 1C), which is inserted into the Act by Part I of Schedule 1 of the FTA Act.
The FTA Act received the Royal Assent on 16 August 2004. Relevant provisions of the FTA Act which amend the Act are expressed to commence on the later of 1 January 2005 or the entry into force of the Agreement. Details of the commencement provisions are set out in Attachment A.
The purpose of the Regulations is to prescribe matters relating to the rules of origin that are required to be prescribed under new Division 1C (US originating goods). The relevant provisions of new Division 1C are set out in Attachment B.
The Regulations:
• set out a table in Schedule 1 detailing the product-specific requirements relevant to each tariff classification for goods other than clothing and textiles;
• set out a table in Schedule 2 detailing the product-specific requirements relevant to each tariff classification for goods that are clothing and textiles;
• explain the methods used to determine the regional value content of goods for the purposes of some of the product-specific requirements set out in Schedule 1;
• specify the valuation rules for different classes of goods; and
• prescribe other matters that are required to be prescribed under new Division 1C.
Details of the Regulations are set out in Attachment C.
The Regulations commence on the commencement of Schedule 1 to the FTA Act. Schedule 1 to the FTA Act commences on the later of 1 January 2005 or the entry into force of the Agreement for Australia.
0406199A
ATTACHMENT A
DETAILS OF THE COMMENCEMENT PROVISIONS FOR THE US FREE TRADE AGREEMENT IMPLEMENTATION ACT 2004 RELATING TO SCHEDULE 1 TO THAT ACT
The US Free Trade Agreement Implementation Act 2004 (the FTA Act) contains amendments to the Customs Act 1901 (the Act) to implement the rules of origin contained in Chapters 4 and 5 of the Australia-US Free Trade Agreement (the Agreement). These rules determine whether goods imported into Australia originate in the United States and are thereby eligible for preferential rates of customs duty. These rules are contained in new Division 1C of Part VIII of the Act, which is inserted by Part 1 of Schedule 1 to the FTA Act.
New Division 1C commences when Schedule 1 of the FTA Act commences, pursuant to item 2 of the table in subsection 2(1) of the FTA Act. Under this item, Schedule 1 commences on the later of 1 January 2005 or the day on which the Agreement comes into force for Australia. The item further provides that Schedule 1 will not commence at all if the Agreement does not come into force for Australia, and that the Minister for Trade must announce by notice in the Gazette the day the Agreement comes into force for Australia.
ATTACHMENT B
DETAILS OF PROVISIONS IN NEW DIVISION 1C OF PART VIII OF THE CUSTOMS ACT 1901 RELEVANT TO THE CUSTOMS (AUSTRALIA-US FREE TRADE AGREEMENT) REGULATIONS 2004
The US Free Trade Agreement Implementation Act 2004 (the FTA Act) inserts new Division 1C of Part VIII into the Customs Act 1901 (the Act). New Division 1C of Part VIII of the Act (new Division 1C) contains the rules of origin set out in Chapters 4 and 5 of the Australia-US Free Trade Agreement (the Agreement). These rules determine whether goods imported into Australia are US originating goods and are thereby eligible for preferential rates of customs duty.
Subdivisions D and E of new Division 1C relate to goods produced entirely in the United States (US) or entirely in the US and Australia and produced wholly or partly from non-originating materials (relevant goods).
Under new subsection 153YA (1) of the Act, 'non-originating materials' means goods that are not originating materials. Originating materials is further defined to mean:
(a) goods that are used in the production of other goods and that are US originating goods; and
(b) goods that are used in the production of other goods and that are Australian originating goods, being goods that are Australian originating goods under a law of the US that implements the Agreement; and
(c) indirect materials, being the following:
(i) goods used in the production, testing or inspection of other goods, but that are not physically incorporated in the other goods; or
(ii) goods used in the operation or maintenance of buildings or equipment associated with the production of other goods.
Subdivision D of new Division 1C relates to relevant goods that are other than clothing or textiles. In this Subdivision, new section 153YE of the Act provides that such goods are US originating goods if:
(a) a tariff classification that is specified in column 2 of the Schedule 1 tariff table applies to the goods; and
(b) any applicable requirement specified in column 3 of the Schedule 1 tariff table opposite the tariff classification for the goods is satisfied.
Further, new section 153YF of the Act provides that relevant goods classified to any of Chapters 28 to 40 (goods that are chemicals, plastics or rubber) in the Harmonized Commodity Description and Coding System (the Harmonized System) are US originating goods if:
(a) a tariff classification that is specified in column 2 of the Schedule 1 tariff table applies to the goods; and
(b) before the tariff classifications in column 2 of that table in relation to Chapter 28 or 39 of the Harmonized System, the regulations specify particular rules in column 3 of that table; and
(c) those rules apply in relation to the tariff classification for the goods; and
(d) the goods satisfy those rules.
New subsection 153YA (1) of the Act defines Schedule 1 tariff table to mean the table in Schedule 1 to the Regulations. The Regulations set out the Schedule 1 tariff table containing the requirements and rules mentioned in sections 153YE and 153YF.
Subdivision E of new Division 1C relates to relevant goods that are clothing or textiles. In this Subdivision, section 153YH provides that such goods are US originating goods if:
(a) a tariff classification that is specified in column 2 of the Schedule 2 tariff table applies to the goods; and
(b) any applicable requirement specified in column 3 of the Schedule 2 tariff table opposite the tariff classification for the goods is satisfied.
Further, new section 153YI of the Act provides that relevant goods that are classified to Chapter 62 of the Harmonized System (being articles of apparel and clothing accessories, not knitted or crocheted) are US originating goods if either:
(a) in any case-the goods satisfy Chapter Rule 2 for Chapter 62 that is set out in the Schedule 2 tariff table; or
(b) in the case of goods classified to subheading 6205.20 or 6205.30 of Chapter 62 of the Harmonized System-the goods satisfy the subheading rule for that subheading that is set out in the Schedule 2 tariff table.
New subsection 153YA (1) of the Act defines the Schedule 2 tariff table to mean the table in Schedule 2 to the Regulations. The Regulations set out the Schedule 2 tariff table containing the requirements and rules mentioned in sections 153YH and 153YI.
One of the requirements that may be specified in the Schedule 1 tariff table is a regional value content (RVC) requirement. New subsection 153YE (6) of the Act provides that the regulations may prescribe different RVC requirements for different kinds of goods. Generally, a RVC requirement requires that there is a RVC not less than a RVC based on one of three methods: the build-down method, the build-up method or the net cost method. The Schedule 1 tariff table sets out several different RVC requirements. For the purposes of these RVC requirements, the Regulations also specify the manner of calculating RVC using the build-down method, the build-up method and the net cost method.
Another of the requirements that may be specified in the Schedule 1 tariff table is a change in tariff classification. Under new subsection 153YE (2) of the Act, if a change in tariff classification is so specified, each of the non-originating materials used to produce the relevant good is required to satisfy the transformation test set out in new subsection 153YE (8). Alternatively, where the total value of the non-originating materials does not exceed 10 percent of the customs value of the relevant good, only those non-originating materials that are prescribed for the purposes of paragraph 153YE (2) (b) are required to satisfy the transformation test.
The Regulations prescribe the non-originating materials for the purposes of paragraph 153YE (2) (b) of the Act.
For the purposes of new Division 1C, new subsection 153YA (2) provides that the value of goods is to be worked out in accordance with regulations, and the regulations may prescribe different valuation rules for different kinds of goods.
The Regulations prescribe how the value of materials is to be worked out for the purposes of new Division 1C and the Regulations.
New subsection 153YH (5) of the Act provides that certain relevant goods that are clothing or textiles and put up in a set for retail sale are only US originating goods if all the goods in the set are US originating goods, or if the total value of goods in the set that are not US originating goods does not exceed 10 percent of the customs value of the set of goods. For the purposes of new subsection 153YH (5) of the Act, and under subsection 153YA (2) of the Act, the Regulations prescribe how the value of each individual clothing or textile good put up in a set for retail sale is to be worked out.
Under new subsection 153YJ (2) of the Act, the regulations must require the value of certain accessories, spare parts or tools imported together with relevant goods to be taken into account for the purposes of any RVC requirement applicable to the relevant goods. For the purposes of new subsection 153YJ (2) of the Act, the Regulations require that the value of such accessories, spare parts or tools be taken into account for the purposes of any RVC requirement applicable to the relevant goods, and prescribe how such value is to be worked out and taken into account.
Under new subsection 153YK (2) of the Act, the regulations must require the value of certain packaging materials or containers used to package relevant goods for retail sale to be taken into account for the purposes of any RVC requirement applicable to the relevant goods. For the purposes of new subsection 153YK (2) of the Act, the Regulations require that the value of such packaging materials or containers be taken into account for the purposes of any RVC requirement applicable to the relevant goods, and prescribe how such value is to be worked out and taken into account.
ATTACHMENT C
DETAILS OF THE CUSTOMS (AUSTRALIA-US FREE TRADE AGREEMENT) REGULATIONS 2004
PART 1 INTRODUCTORY
Regulation 1.1 - Name of Regulations
Regulation 1.1 provides that the Regulations are the Customs (Australia-US Free Trade Agreement) Regulations 2004.
Regulation 1.2 - Commencement
Regulation 1.2 provides that the Regulations commence on the commencement of Schedule 1 to the US Free Trade Agreement Implementation Act 2004 (the FTA Act). Schedule 1 to the FTA Act will commence on the later of 1 January 2005 or the entry into force of the Australia-US Free Trade Agreement (the Agreement).
Regulation 1.3 - Definitions
Regulation 1.3 provides that in the Regulations, "Act" means the Customs Act 1901 (the Act), and the following words and expressions have the meanings as in new Division 1C of Part VIII of the Act (new Division 1C):
(a) Agreement;
(b) Harmonized System;
(c) Harmonized US Tariff Schedule;
(d) non-originating materials;
(d) originating materials;
(e) produce;
(f) used; and
(g) US originating goods.
New Division 1C is inserted into the Act by Schedule 1 to the FTA Act.
PART 2 REGIONAL VALUE CONTENT REQUIREMENT (BUILD-UP METHOD AND BUILD DOWN METHOD)
Regulation 2.1 Regional value content
Regulation 2.1 provides that for the purposes of the Schedule 1 tariff table (see below), Part 2 explains how regional value content is determined using the build-up method and the build-down method. For Part 2, the term ´regional value content' is abbreviated to RVC.
The Schedule 1 tariff table specifies rules and requirements for imported goods produced entirely in the United States (US) or entirely in the US and Australia and produced wholly or partly from non-originating materials (relevant goods), that are other than clothing or textiles. Under new subsection 153YA (1) of the Act, 'non-originating materials' means goods that are not originating materials. Originating materials is further defined to mean:
(a) goods that are used in the production of other goods and that are US originating goods; or
(b) goods that are used in the production of other goods and that are Australian originating goods, being goods that are Australian originating goods under a law of the US that implements the Agreement; or
(c) indirect materials, being the following:
(i) goods used in the production, testing or inspection of other goods, but that are not physically incorporated in the other goods; or
(ii) goods used in the operation or maintenance of buildings or equipment associated with the production of other goods,
including:
(iii) fuel; and
(iv) tools, dies and moulds: and
(v) lubricants, greases compounding materials and other similar goods:
(vi) gloves, glasses, footwear, clothing, safety equipment and supplies for any of these things; and
(vii) catalysts and solvents.
The rules and requirements in the Schedule 1 tariff table are set out for each tariff classification of the relevant goods (other than for clothing and textiles) and, if satisfied, determine that such relevant goods are US originating goods. Some of the requirements set out involve the determination of RVC using the build-down method or the build-up method or the net cost method (for which, see Part 3 below).
Regulation 2.2 Build-down method
Subregulation 2.2 (1) sets out the build-down method as the following formula:
RVC = adjusted value-value of non-originating materials X 100
adjusted value
where:
adjusted value means the customs value of the goods, as worked out under Division 2 of Part VIII of the Act; and
value of non-originating materials means the value of non-originating materials that are acquired and used in the production of the goods. The value of these non-originating materials be worked out under Part 4 of the Regulations.
Subregulation 2.2 (2) provides that RVC is to be expressed as a percentage.
Regulation 2.3 Build-up method
Subregulation 2.3 (1) sets out the build-up method as the following formula:
RVC = value of originating materials X 100
adjusted value
where:
adjusted value means the customs value of the goods, worked out under Division 2 of Part VIII of the Act.
value of originating materials means the value of originating materials that are acquired, or self-produced, and used in the production of the goods. The value of these originating materials is worked out under Part 4 of the Regulations.
Subregulation 2.3 (2) provides that RVC is to be expressed as a percentage.
PART 3 REGIONAL VALUE CONTENT REQUIREMENT (NET COST METHOD)
Regulation 3.1 Definitions
Regulation 3.1 defines for Part 3:
(a) automotive component to mean a good classified in:
(i) subheading 8408.20, 8407.31, 8407.32, 8407.33 or 8407.34 in the Harmonized Commodity Description and Coding System (the Harmonized System); or
(ii) heading 8409, 8706, 8707 or 8708 in the Harmonized System.
(b) class of motor vehicles to mean any of the following classes of motor vehicles:
(i) motor vehicles classified in subheading 8701.10, 8701.20, 8701.30-8701.90, 8703.21-8703.90, 8704.10, 8704.21, 8704.22, 8704.23, 8704.31, 8704.32 or 8704.90 in the Harmonized System;
(ii) motor vehicles classified in heading 8705 or 8706 in the Harmonized System;
(iii) motor vehicles for the transport of 16 or more persons, classified in subheading 8702.10 or 8702.90 in the Harmonized System;
(iv) motor vehicles for the transport of 15 or fewer persons, classified in subheading 8702.10 or 8702.90 in the Harmonized System.
(c) generally accepted accounting principles to mean:
(i) a recognised consensus in the US; or
(ii) an opinion with substantial authoritative support in the US;
relating to:
(iii) the recording of revenues, expenses, costs, assets and liabilities; and
(iv) the disclosure of information; and
(v) the preparation of financial statements.
(d) model line to mean a group of motor vehicles that have the same platform or model name.
(e) motor vehicle to mean a good classified in heading 8701, 8702, 8703, 8704 or 8705 in the Harmonized System.
(f) net cost to be the cost worked out using Regulations 3.3, 3.4 and 3.5.
(g) non-allowable interest costs to mean interest costs incurred by the manufacturer of a good that exceed 700 basis points above the US official interest rate for comparable maturities.
(h) value of non-originating materials to mean the value of non-originating materials that are acquired and used in the production of the goods.
Regulation 3.2 Regional value content
Regulation 3.2 provides that for the purposes of the Schedule 1 tariff table, Part 3 explains how regional value content is determined using the net cost method. For Part 3, the term 'regional value content' is abbreviated to RVC.
Regulation 3.3 Net cost method
Subregulation 3.3 (1) sets out the net cost method as the following formula:
RVC = net cost - value of non-originating materials X 100
net cost
The value of non-originating materials is worked out under Part 4 of the Regulations. The net cost method is applicable to goods that are automotive components or motor vehicles as defined in Regulation 3.1
Subregulation 3.3 (2) provides that RVC is to be expressed as a percentage.
Regulation 3.4 - Working out net cost
Regulation 3.4 provides that the net cost of the good is worked out using any of the methods in the following table:
| Method
|
Start
by
|
Then
|
Then
|
| 1
|
Working
out the total cost to produce all goods that are produced by the producer
|
Deduct
the following costs that are included in the total cost to produce the goods: (a) sales promotion; (b) marketing; (c) after-sales service; (d) royalties; (e) packing and shipping; (f) non-allowable interest costs
|
Reasonably
allocate the net cost to produce the goods to the relevant good
|
| 2
|
Working
out the total cost to produce all goods that are produced by the producer
|
Reasonably
allocate the total cost to the relevant good
|
Deduct
the following costs that are included in the portion of the total cost
allocated to the relevant good: (a) sales promotion; (b) marketing; (c) after-sales service; (d) royalties; (e) packing and shipping; (f) non-allowable interest costs
|
| 3
|
Reasonably
allocating each cost that forms part of the total cost to produce the goods Do not include the following costs in relation to the relevant good: (a) sales promotion; (b) marketing; (c) after-sales service; (d) royalties; (e) packing and shipping; (f) non-allowable interest costs
|
Regulation 3.5 Net cost calculations
Regulation 3.5 sets out the relevant parameters that may be used as the basis for net cost calculations, being the calculation of RVC under regulation 3.3 and the working out of net cost under regulation 3.4.
Subregulation 3.5 (1) provides that for the purposes of net cost calculations in respect of a motor vehicle:
(a) a calculation may be averaged over a producer's fiscal year, using 1 of the following categories:
(i) the same model line of motor vehicle, in the same class of motor vehicles produced in the same factory in the US;
(ii) the same class of motor vehicles produced in the same factory in the US;
(iii) the same model line of motor vehicle produced in the same factory in the US; and
(b) the averaging may be done using:
(i) all motor vehicles in a category; or
(ii) all motor vehicles in a category that are exported to Australia.
Subregulation 3.5 (2) provides that for the purposes of net cost calculations in respect of automotive components that are produced in the same factory:
(a) a calculation may be averaged over the fiscal year of the motor vehicle producer to which the automotive component is sold if the automotive component was produced during that fiscal year; and
(b) the calculation may be averaged over any quarter or month of the fiscal year of the motor vehicle producer to which the automotive component is sold if the automotive component was produced during that quarter or month; and
(c) the calculation may be averaged over the fiscal year of the producer of the motor vehicle component if the automotive component was produced during that fiscal year; and
(d) the averaging mentioned in paragraph (a), (b) or (c) may be done separately for automotive components sold to 1 or more motor vehicle producers; and
(e) the averaging mentioned in paragraph (a), (b), (c) or (d) may be done separately for all automotive components that are imported into Australia.
PART 4 DETERMINATION OF VALUE
For the purposes of new Division 1C, new subsection 153YA (2) provides that the value of goods is to be worked out in accordance with regulations, and the regulations may prescribe different valuation rules for different kinds of goods.
Part 4 deals with the determination of the value of different kinds of goods for the purposes of new Division 1C.
Regulation 4.1 Definition for Part 4
For Part 4, Regulation 4.1 defines materials to mean originating materials and non-originating materials.
Regulation 4.2 Value of materials
Regulation 4.2, for the purposes of new Division 1C and the Regulations, sets out how the value of materials is to be worked out.
Subregulation 4.2 (1) provides that the value of materials is to be worked out using the principles set out in the following table:
| Item
|
Materials
|
Principles
|
| 1
|
Materials
imported into the US by the producer of goods that are produced using the
materials
|
The
value is the value (the US adjusted value) worked out under
Section 402 of the Tariff Act of 1930 of the US, as amended by the Trade
Agreements Act of 1979
|
| 2
|
Materials: (a) acquired by the producer of goods that are produced using the materials; and (b) not imported into the US by the producer of the goods
|
The
value is the US adjusted value, worked out as if the materials had been
imported into the US and as if the producer of goods that are produced using
the materials were the importer
|
| 3
|
Materials
that are self-produced
|
The
value is the sum of all costs incurred by the producer of the materials in
producing the materials, including: (a) the producer's general expenses; and (b) an amount for profit that is the equivalent of the amount of profit that the producer make in respect of the materials in the ordinary course of trade
|
Subregulation 4.2 (2) provides that for materials that are originating materials, their value may include the costs of the following matters, to the extent that they have not been taken into account under Subregulation 4.2 (1):
(a) freight, insurance, packing, shipping and any other transportation of the materials to the producer:
(i) in the US; or
(ii) between Australia and the US;
(b) duties, taxes and customs brokerage fees on the materials that:
(i) have been paid in either or both of Australia and the US; and
(ii) have not been waived or, refunded; and
(iii) are not refundable or otherwise recoverable;
including any credit against duties or taxes that have been paid or that are payable; and
(c) waste and spoilage resulting from the use of the materials in the production of goods, reduced by the value of renewable scrap or by-products.
Subregulation 4.2 (3) provides that for materials that are non-originating materials, their value may include the costs of the following matters, to the extent that they have not been taken into account under Subregulation 4.2 (1):
(a) freight, insurance, packing, shipping and any other transportation of the materials to the producer:
(i) in the US; or
(ii) between Australia and the US;
(b) duties, taxes and customs brokerage fees on the materials that:
(i) have been paid in either or both of Australia and the US; and
(ii) have not been waived or refunded; and
(iii) are not refundable or otherwise recoverable;
including any credit against duties or taxes that have been paid or that are payable; and
(c) waste and spoilage resulting from the use of the materials in the production of goods, reduced by the value of renewable scrap or by-products;
(d) originating materials that are used in the production of the non-originating materials in the US; and
(e) other costs incurred in Australia or the US in the production of the non-originating materials, reduced by the cost of materials used in their production.
Regulation 4.3 Value of accessories, spare parts or tools
Under new subsection 153YJ (1) of the Act, if goods (the underlying goods) are imported into Australia with standard accessories, spare parts or tools, the accessories, spare parts or tools are US originating goods if
(a) the underlying goods are US originating goods; and
(b) the accessories, spare parts or tools are not invoiced separately from the underlying goods; and
(c) the quantities and value of the accessories, spare parts or tools are the usual quantities and value in relation to the underlying goods.
However, new subsection 153YJ (2) provides that in working out if the underlying goods are US originating goods, if the goods must satisfy a RVC requirement, the regulations must require the value of the accessories, spare parts or tools to be taken into account for the purposes of the RVC requirement.
Regulation 4.3 provides that for subsection 153YJ (2) of the Act, if underlying goods mentioned in subsection 153YJ (1) of the Act must satisfy a RVC requirement under Subdivision D of new Division 1C:
(a) in working out the RVC of the underlying goods:
(i) the value of accessories, spare parts or tools that are imported with the underlying goods and are US originating goods must be included in the value of originating materials used in the production of the underlying goods; and
(ii) the value of accessories, spare parts or tools that are imported with the underlying goods and are not US originating goods must be included in the value of non-originating materials used in the production of the underlying goods; and
(b) the value of accessories, spare parts or tools is to be worked out under regulation 4.1 as if the accessories, spare parts or tools were materials used in the production of underlying goods.
Regulation 4.4 Value of packaging materials and containers
Under new subsection 153YK (1) of the Act, if:
(a) goods are packaged for retail sale in packaging material or a container; and
(b) the packaging material or container is classified with the goods in accordance with Rule 5 of the Interpretation Rules of the Harmonized System,
then the packaging material or container is disregarded for the purposes of new Division 1C, with 1 exception.
Under new subsection 153YK (2), the exception is that in working out if the goods are US originating goods, if the goods must satisfy a RVC requirement, the regulations must require the value of the packaging material or container to be taken into account for the purposes of that RVC requirement.
Regulation 4.4 provides that for subsection 153YK (2) of the Act, if goods mentioned in subsection 153YK (1) of the Act must satisfy a RVC requirement under Subdivision D of new Division 1C:
(a) in working out the RVC of such goods:
(i) the value of the packaging material or container in which such goods are packaged and that is an US originating good must be included in the value of originating materials used in the production of the relevant goods; and
(ii) the value of the packaging material or container in which such goods are packaged and that is not an US originating good must be included in the value of non-originating materials used in the production of the relevant goods; and
(b) the value of the packaging material or container in which such goods are packaged is to be worked out under regulation 4.1 as if the packaging material or container were a material used in the production of the relevant goods.
Regulation 4.5 Value of goods put up in a set for retail sale
New subsection 153YH (5) of the Act provides for an additional rule of origin for relevant goods that are clothing or textiles and that are put up in a set for retail sale and classified in accordance with Rule 3 of the Interpretation Rules for the Harmonized System. It provides that such goods are US originating goods only if:
(a) all of the goods in the set are US originating goods; or
(b) the total value of the goods in the set that are not US originating goods does not exceed 10 percent of the customs value of the set of goods.
Regulation 4.5 provides that, under new subsection 153YA (2) and for the purposes of paragraph 153YH (5) (d) of the Act, the value of a good in a set is worked out by reasonably allocating the customs value of the set to each of the goods in the set, ensuring that the total value of the goods as allocated is equal to the customs value of the set.
PART 5 EXCEPTIONS TO THE DE MINIMIS REQUIREMENT IN ARTICLE 5.2 OF THE AGREEMENT
New subsection 153YE (2) of the Act relates to the transformation requirement that may be applicable to relevant goods other than clothing and textiles in determining if these goods are US originating goods. This requirement applies if a change in tariff classification is specified in column 3 of the Schedule 1 tariff table opposite the tariff classification applicable to the relevant good. Under paragraph 153YE (2) (a), the transformation requirement is satisfied if each of the non-originating materials used to produce the relevant good satisfies the transformation test set out in subsection 153YE (8).
Under new paragraph 153YE (2) (b), the transformation requirement is also satisfied if:
(i) the total value of the non-originating materials does not exceed 10 percent of the customs value of the relevant good; and
(ii) if one or more of the non-originating materials are prescribed for the purposes of this paragraph-each of those non-originating materials satisfies the transformation test set out in subsection 153YE (8).
Subparagraph 153YE (2) (b) (i) is the De Minimis requirement set out in Article 5.2 of the Agreement, which operates as an exception to the transformation requirement. The effect of subparagraph 153YE (2) (b) (ii) is to enable exceptions to the De Minimis requirement to be prescribed in the regulations. Part 5 prescribes the non-originating materials for the purposes of paragraph 153YE (2) (b).
Regulation 5.1 US originating goods (except clothing and textiles)
Regulation 5.1 relate to the exceptions to the De Minimis requirement for goods other than clothing and textiles.
Subregulation 5.1 (1) provides that in subregulations (2) and (3), a reference to a chapter, heading or subheading is a reference to a chapter, heading or subheading of the Harmonized System.
Subregulation 5.1 (2) prescribes, for paragraph 153YE (2) (b) of the Act, the non-originating materials set out in the following table:
| Item
|
Non-originating
materials classified in
|
And
used in the of classified in production goods
|
| 1
|
Chapter
4 or subheading 1901.90
|
Chapter
4, subheading 1901.10, 1901.20 or 1901.90, heading 2105, or subheading 2106.90,
2202.90 or 2309.90;
|
| 2
|
Heading
0805 or subheading 2009.11 to 2009.30
|
Subheading
2009.11 to 2009.30, subheading 2106.90 or subheading 2202.90
|
| 3
|
Chapter
15
|
Heading
1501 to 1508, heading 1512, heading 1514 or heading 1515
|
| 4
|
Heading
1701
|
Heading
1701 to 1703
|
| 5
|
Chapter
17 or heading 1805
|
Subheading
1806.10
|
| 6
|
Heading
2203 to 2208
|
Heading
2207 or 2208
|
Subregulation 5.1 (3) prescribes, for paragraph 153YE (2) (b) of the Act, non-originating materials:
(a) that are used in the production of goods classified in Chapters 1 to 21; and
(b) that are classified in the same subheading in which those goods are classified.
SCHEDULE 1 PRODUCT-SPECIFIC REQUIREMENTS FROM ANNEX 5-A TO THE AGREEMENT
New subsection 153YA (1) of the Act defines the Schedule 1 tariff table to mean the table in Schedule 1 to the Regulations.
Schedule 1 sets out the Schedule 1 tariff table, which specifies the different product-specific requirements applicable to relevant goods (other than clothing and textiles) for each tariff classification in the Harmonized System (other than the tariff classifications for clothing and textiles). Schedule 1 also sets out interpretation provisions relevant to the product-specific requirements in the Schedule 1 tariff table.
Part 1 of Schedule 1 sets out the General Interpretive Note relevant to the product-specific requirements specified in the Schedule 1 tariff table.
Part 2 of Schedule 1 sets out the Schedule 1 tariff table.
Schedule 1 is based on Annex 5-A to the Agreement.
SCHEDULE 2 PRODUCT-SPECIFIC REQUIREMENTS FROM ANNEX 4-A TO THE AGREEMENT (TEXTILE AND APPAREL GOODS)
New subsection 153YA (1) of the Act defines the Schedule 2 tariff table to mean the table in Schedule 1 to the Regulations.
Schedule 2 sets out the Schedule 2 tariff table, which specifies the different product-specific requirements applicable to the relevant goods that are clothing and textiles for each tariff classification for clothing and textiles in the Harmonized System. Schedule 2 also sets out interpretation provisions relevant to the product-specific requirements.
Part 1 of Schedule 2 sets out the General Interpretive Note relevant to the product-specific requirements specified in the Schedule 2 tariff table.
Part 2 of Schedule 2 sets out the Schedule 2 tariff table.
Schedule 2 is based on Annex 4-A to the Agreement.