CBP Issues its U.S.- Panama TPA Instructions

CBP issued its instructions for the U.S.-Panama Trade Promotion Agreement (PATPA), which takes effect for qualifying goods entered or withdrawn from warehouse for consumption on or after Oct. 31, 2012. The notice gives an overview of the PATPA rules of origin, as well as instructions for handling WCO tariff number discrepancies. CBP also provides information on its process for verifying importer claims, the SPI "PA", post-importation claims and protests, etc.

Highlights of these instructions include the following (see notice for full details):

Origination. An originating good eligible for PATPA duty rates must meet the general and/or product specific rules of origin set out in General Note (GN) 35 and all other requirements of PATPA.

Making a preference claim. A claim for PATPA preference may be made at time of entry summary by prefacing the HTS number of the applicable good on CBP Form 7501 with the Special Program Indicator (SPI "PA"). Post importation claims may also be made within one year of importation.

Transit and transshipment. Goods that undergo further production outside the territory of Panama or the U.S., other than unloading, reloading or other processes to preserve the condition of the good or to transport the good to the territory of Panama or the U.S., or goods that do not stay under customs control in the territory of a non-Party, will not be considered originating

RVC calculation methods. The TPA provides for two calculation methods: (1) the build-up method based on the value of originating materials; and (2) the build-down method, based on the value of non-originating materials. For certain automotive goods, the net cost method, based on the production costs, may be used.

De minimis (non-textile). The PATPA has a 10 percent de minimis provision for most goods [GN 35(e)], with separate provisions for textiles in GN 35(d)(ii) and non-textiles in GN 35(e)(ii). Under the non-textile de minimis rule, a good containing a non-originating material that does not undergo the tariff classification change specified in GN 35(o) may still originate if the value of all such non-originating materials does not exceed 10 percent of the adjusted value of the good. When performing an RVC computation, the value of de minimis materials is included in the total value of the non-originating materials..

Fiber or yarn forward for yarn, fabric, apparel. For yarn, the fiber must originate in Panama or the U.S. to qualify for preferential tariff treatment. For fabric, the yarn must originate in either the U.S. or Panama. For apparel, generally yarn must originate in Panama or the U.S. for apparel to qualify for tariff benefits.

De minimis (textiles). The PATPA has a 10 percent (by weight) de minimis provision for textile or apparel goods that are not originating (when certain fibers or yarns used in the production of the component that determines the classification do not undergo an applicable tariff change as set out in Annex I or GN 35(o). Elastomeric yarn is required to be originating regardless of this rule.

Visible linings. Fabric used for visible linings in certain apparel, such as suits, coats and skirts, must be wholly formed and finished in the U.S. or Panama.

Short supply. Fibers, yarns or fabrics not available in commercial quantities in a timely manner among the Parties are listed in Chapter 98, subchapter XXII, U.S. Note 40. Importers making a short supply claim must use HTS number 9822.09.62 for textile and apparel goods in Chapters 42, 50 through 63 and 94

Ag quotas. For PATPA agricultural products subject to quantitative limits, the applicable tariff numbers are 9822.09.17, 9822.09.18, 9822.09.20, 9822.09.22, 99.19.02.01, 9919.02.02, 9919.04.10, 9919.04.11, 9919.04.12, 9919.04.40, 9919.04.41, 9919.04.50, 9919.04.51-58, 9919.21.10, and 9919.21.11. The application of tariff rate quotas (TRQs) are addressed in separate CBP instructions.

Treatment of sets. Goods put up in sets for retail sale shall not be regarded as originating unless each good is originating or the total value of non-originating goods does not exceed 10% (textile) or 15% (non-textile) of the adjusted value.

MPF exemption. Originating goods are exempt from the Merchandise Processing Fee. Preference may be claimed on unconditionally free tariff lines to obtain the MPF exemption, even though “PA” will not be listed in the Special column of the HTS.

Correcting/unsupported claims. An importer making a false or unsupported preference claim must submit a correction within 30 days of discovery and pay all duties and fees due.

Certification. The importer may make a claim for preferential tariff treatment based on a written or electronic certification issued by the exporter or producer, or based on the importer's knowledge, including a reasonable reliance on information in his possession. The certification need not be in a prescribed format, may be submitted electronically, and may cover a single importation or multiple importations of identical goods within a maximum 12-month period. The certification must include the data elements specified in Attachment A (here). This information must be provided to CBP upon request. Certifications must be maintained for five years from the date of importation.

TCRs based on 2002 HTS. Until revised tariff change rules (TCRs) are published (that take into account the World Customs Organization's 2007 and 2012 recommended HTS changes), manufacturers of affected goods should classify both the good and its materials in accordance with the 2002 HTS when performing TCR analysis. In addition, the certification should indicate both the current and 2002 HTS numbers used to perform the TCR analysis. ITC's online 2002 HTS available (here).

Verification by CBP. Under the PATPA, the importer is responsible for substantiating the validity of a preference claim, which may be based on a certification, other documentation, or the importer's knowledge. CBP will initiate a verification via a CBP Form 28, Request for information, to the importer. (See notice for list of information CBP requires in such a verification check, including, flow charts on manufacturing process, bill of materials, purchase orders, etc.). CBP notes that the producer may elect to provide this information directly to CBP to protect its confidentiality, and that verification visits to the producer may occur. CBP's verification determinations (either positive or negative) will be issued on the CBP Form 29, Notice of Determination. Negative determinations are protestable.

(See ITT's Online Archives 12103121 for summary of issuance of PATPA Proclamation and Annexes, which were effective Oct. 31, 2012.)