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Federal Register / Vol. 86, No. 126 / Tuesday, July 6, 2021 / Proposed Rules
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constitutes a new and different article or as to whether processing has resulted in a new name, character, and use. As a result, application of the substantial transformation rule has remained essentially non-systematic in that a judicial or administrative determination in one case more often than not has little or no bearing on another case involving a different factual pattern. Thus, while judicial and administrative decisions involving the substantial transformation rule may have some value as restatements or refinements of the basic rule, they are often of little assistance in resolving individual cases involving the myriad of issues or tests that have arisen, such as the distinction between producers goods and consumers goods, the significance of further manufacturing or finishing operations, and the issue of dedication to use. The very fact that the substantial transformation rule has been the subject of a large number of judicial and administrative determinations is testament to the basic problem: The case-bycase approach, involving application of the rule based on specific sets of facts, has led to varied case-specific interpretations of the basic rule, resulting in a lack of predictability which in turn has engendered a significant degree of uncertainty both within Customs and in the trade community as regards the effect that a particular type of processing should have on an origin determination.

Rules for Determining the Country of Origin of a Good for Purposes of Annex 311 of the North American Free Trade Agreement, 59 FR 110, 141 January 3, 1994.
Importers of goods from Canada and Mexico are well-versed in the part 102
rules, and the greater specificity and transparency those rules provide will facilitate the determination of eligibility for USMCA tariff preferences for certain agricultural goods, as noted above.
Accordingly, to make the transition from the NAFTA to the USMCA as smooth as possible for the importing community, CBP is amending 19 CFR
parts 102 and 134, in the IFR
concurrently published today, to continue application of the part 102
rules to determine the country of origin for marking purposes of a good imported from Canada or Mexico.
CBP has not previously applied the part 102 rules for non-preferential origin determinations involving goods imported from Canada and Mexico other than for textile products and for purposes of determining country of origin marking. CBP has, instead, used case-by-case adjudication for other nonpreferential origin determinations. CBP
makes such non-preferential origin determinations for purposes such as admissibility, quota, procurement by government agencies, and application of duties imposed under sections 301 to 307 of the Trade Act of 1974, as amended 19 U.S.C. 24112417, commonly referred to as Section 301.

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This means that importers of goods from Canada and Mexico are subject to two different non-preferential origin determinations for imported merchandise: One for marking; and, another for determining origin for other purposes. Consequently, these importers must also potentially comply with requirements to declare two different countries of origin for the same imported good e.g., Canada and China.
This burdens importers with unnecessary additional requirements, creates inconsistency, and reduces transparency.
To address these burdens, CBP is proposing to amend the scope section of part 102 of title 19 of the CFR so that the substantial transformation standard will be applied consistently across all non-preferential origin determinations that CBP makes for merchandise imported from Canada and Mexico. This purpose is accomplished by adding new language to the scope provision of the part 102 rules. The proposed regulatory change will obviate the need for importers of merchandise from Canada and Mexico wishing to comply with the various laws that require CBP origin determinations from having to request multiple non-preferential country of origin determinations from CBP for a particular good. The proposed regulatory change also means that CBP
will no longer need to issue rulings with multiple non-preferential origin determinations goods imported from Canada or Mexico, and there will no longer be rulings that conclude that a good imported from Canada or Mexico has two different origins under the USMCA i.e., one for marking and one for other, customs non-preferential purposes. CBPs application of the part 102 rules would not, however, affect similar determinations made by other agencies, such as the Department of Commerces scope determinations in antidumping or countervailing duty proceedings see 19 CFR 351.225, determinations by the Agricultural Marketing Service under the Country of Origin Labeling COOL law see 7
CFR part 65, or origin determinations made by other agencies for purposes of government procurement under the Federal Acquisition Regulation see 48
CFR chapter 1.
CBP is also proposing to make corresponding edits to part 177 of title 19 of the CFR, which sets forth the requirements for various types of administrative rulings. Specifically, subpart B of part 177 applies to the issuance of country of origin advisory rulings and final determinations relating to government procurement for purposes of granting waivers of certain
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Buy American restrictions in U.S. law and practice for products from eligible countries. As noted in 19 CFR 177.21, the subpart is intended to be applied consistent with the Federal Acquisition Regulation 48 CFR chapter 1 and the Defense Acquisition Regulations System 48 CFR chapter 2. It is also noted that Chapter 13 of the USMCA provides that the United States will apply the same rules of origin to Mexican imports for government procurement as it does for other trade. The United States has the same obligation to Canada under Article IV:5 of the WTO Agreement on Government Procurement. While the substantial transformation standard already applies by statute 19 U.S.C.
25184B, CBPs proposed application of the part 102 rules to make these substantial transformation determinations would ensure the consistency of CBP determinations for goods imported from Mexico and Canada. The proposed regulatory change will specifically provide that, when making country of origin determinations for purposes of subpart B of part 177, the part 102 rules will be applied by CBP to determine whether goods imported into the United States from Canada or Mexico previously underwent a substantial transformation in Canada or Mexico. The proposed regulatory change would not affect the origin determinations other agencies make related to procurement.
III. Discussion of Proposed Amendments Pursuant to 19 U.S.C. 4535a, the Secretary of the Treasury has the authority to prescribe such regulations as may be necessary to implement the USMCA. Section 103b1 of the USMCA Act 19 U.S.C. 4513b1
requires that initial regulations necessary or appropriate to carry out the actions required by or authorized under the USMCA Act or proposed in the Statement of Administrative Action approved under 19 U.S.C. 4511a2 to implement the USMCA shall, to the maximum extent feasible, be prescribed within one year after the date on which the USMCA enters into force. The Secretary also has general rulemaking authority, pursuant to 19 U.S.C. 1304
and 1624, to make such regulations as may be necessary to carry out the provisions of the Tariff Act of 1930, as amended, related to the country of origin requirements for imported articles of foreign origin. The Secretary also has authority under 19 U.S.C. 1502
to regulate the procedures for issuing binding rulings, and 19 U.S.C.
2515b1 requires the Secretary to make rulings and determinations as to
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