CBP to Allow Continued Use of Part 102 NAFTA Marking Regs, Agency Official Says

CBP will allow importers to continue to use Part 102 NAFTA marking rules for goods imported from Canada and Mexico, even though they are no longer a requirement for USMCA preferences, said James Kim, a lawyer with CBP’s Office of Regulations and Rulings currently working at the agency’s USMCA center, during a Zoom call following a panel discussion March 9.

“[In] recognition of the fact that the trade has been relying on the Part 102 for a long period now, about 30 years, to mark goods for import from Canada and Mexico … [CBP] has allowed continued use of the Part 102 rules in order to determine country of origin marking for goods that are imported from Canada and Mexico,” Kim said at the virtual Georgetown Law International Trade Update. That’s despite the fact that while compliance with tariff-shift based 19 CFR 102 marking rules was required to qualify for NAFTA, it is no longer required for USMCA, he said.

In addition to the division of marking requirements from originating status in USMCA, another key difference is that goods marked as U.S.-origin can now qualify for USMCA. Previously they could not qualify for NAFTA. “So if a good turns out to be U.S.-origin based on those Part 102 rules, you can still claim USMCA preference when you’re importing that good,” Kim said.

That could open up new opportunities for importers that previously used special tariff classification provisions in heading 9801 for their U.S.-origin goods to save on duty but may now claim USMCA preferences, said Larry Friedman of Barnes Richardson, who had moderated the discussion. “There might be a compliance advantage to being able to make a USMCA claim under U.S. goods returned,” Friedman said.

Kim agreed. Chapter 98 provisions “have different compliance and documentation requirements,” he said. It’s up to each company to decide what's best, whether that may be to claim USMCA for duty preferences or to use the Chapter 98 provisions, Kim said.

The panel discussion had centered on new USMCA provisions that affect the auto industry. Much of it was focused on labor value content (LVC) and aluminum and steel regional purchasing requirements in the new agreement.

A major change that CBP is still grappling with is the requirement for producers to submit certifications to CBP on LVC and steel and aluminum requirements, Kim said. While the agency is accustomed to certificate of origin requirements in free trade agreements, which the agency does not need at the time of importation but instead on demand during verifications, the USMCA auto producer certifications must be filed upfront, Kim said.

“Because of this, a whole new process has had to be created to accommodate this requirement as well,” Kim said. While CBP has issued some implementing instructions on the filing of these auto producer certifications, the agency will be providing more detail and guidance to the trade in new regulations later in 2021, Kim said. CBP also continues to work very closely with the Labor Department on reviewing the certifications it has already received, and the two agencies are ironing out the details for that process as well, he said.