A Partnership Including
`Professional Corporations
`1850 K Street, N.W.
`Washington, DC 20006-2296
`202-887-8000
`Facsimile 202-778-8087
`
`David J. Levine
`Attorney at Law
`dlevine@mwe.com
`202-778-8153
`
`Boston
`Chicago
`Los Angeles
`Miami
`Newport Beach
`New York
`St. Petersburg (Russia)
`Vilnius (Lithuania)
`Washington, D.C.
`
`MCDERMOTT, WILL & EMERY
`
`Office of the Secretary
`U . S . International Trade Commission
`5 0 0 E Street, SW
`Washington, DC 20436
`
`August 1, 1997
`
`D
`
`Attn :
`
`Mr. Eugene A. Rosengarden
`Director, Office of Tariff Affairs and Trade
`Agreements
`
`(4
`
`L i
`1
`.-.
`
`Re: International Harmonization of Customs Rules of
`Oriqin; ITC Inv. No. 332-360
`
`1
`
`-
`
`
`
`*
`
`_ I
`
`Dear Mr. Rosengarden:
`Attached hereto are comments of the Electronic Industries
`Association of Japan ("EIAJ") in response to the Commission's
`notice regarding the U . S . rules of origin proposal for goods
`covered by Harmonized Tariff Schedule ("HTS") chapter 8 5 .
`62 Fed. Reg. 35834 (July 2, 1997).
`EIAJ appreciates the opportunity to file these comments.
`Please contact the undersigned if you have any questions.
`Sincerely yours,
`
`L
`
`David J. Levine
`Counsel to EIAJ
`
`Attachment
`
`

`

`Comments of the Electronic Industries Association of Japarl
`On Draft U.S. Proposed Country of Origin Rules for HTS Chapter 85
`
`ITC Investigation No. 332-360
`
`These comments are subtnitted on behalf of the Electronic Industries Association of
`Japan (''EIAJ'') in response to the Notice of the International Trade Commission (YTC")
`inviting comments on its rules of origin proposal for goods covered by Harmonized Tariff
`Schedule ("HTS") chapter 85. 62 Fed. Reg. 35834 (July 2, 1997). The ITC's Notice
`corresponds to the Draft Proposal By the United States that eventually will be tabled as the
`U S . position in the World Customs Organization (IIWCOI') as part of the international
`harmonization efforts being conducted under the World Trade Organization ("WTO")
`Agreement on Rules of Origin (I'ARO").
`
`Founded in 1948, EIAJ now has approximately 570 full and associate members,
`including manufacturers in the consumer electronics, industrial electronics and electronic
`components and devices sectors. In addition to all of the major Japanese electronics
`producers, EIAJ counts among its full and associate members some 60 affiliates of foreign-
`based electronics manufacturers in Japan. EIAJ member companies export to and import into
`the United States a wide range of electronic products that are manufactured, and whose parts
`are manufactured, in various countries. EIAJ members therefore have a direct interest in the
`harmonization of country of origin rules.
`
`EIAJ supports the general U.S. policy indicated in the ITC's Notice and in the Draft
`U.S. Proposal that the United States intends for harmonized rules of origin to rely largely on
`a change in tariff heading as the basis for determining origin. EIAJ considers that a value-
`added basis for determining origin would be inconsistent with the ARO. EIAJ objects to the
`adoption of such a standard.
`
`While EIAJ supports the tariff shift approach, EIAJ believes that there are certain
`goods, and operations corresponding to the manufacture and/or assembly thereof, for which a
`substantial transformation occurs -- and, thus, for which origin is conferred -- even when no
`official change in tariff heading or in subheading occurs. As described below, for such
`goods, EIAJ urges the United States to "split" the relevant tariff subheading(s) and to
`recognize that a qualifying tariff shift has occurred when there is a change from one "split"
`subheading to another.
`
`The U.S. proposal would disallow the application of the standard tariff shift approach
`for determining origin for certain products; Le., the origin of these products would not be
`deemed to be conferred in the country where a tariff subheading change occurred. EIAJ
`opposes this exception from the tariff shift approach for these products and requests that the
`U.S. proposal be revised to reflect the application of the tariff shift approach for all goods,
`as further specified below.
`
`EIAJ respectfully requests that the U.S. draft proposal be revised in accordance with
`the following comments relating to specified categories of goods covered by HTS chapter 85.
`
`

`

`1.
`
`HS 8501: Electronic motors and generat 01's (excluding generating sets)
`
`The U.S. draft proposal would not recognize a change in tariff classification from
`heading HS 8503 to HS 8501 as conferring origin for a good of heading HS 8501. The
`stated rationale is based on the notion that rotors and stators are the principal components of
`electric motors. The ITC should recognize, however, that the relative importance of rotors
`and stators in electric motors has declined as a result of recent technological developments.
`New technology renders the function of encoders, which control the rotating speed, direction
`and time of the motor, more important than the function of rotors and stators. Thus, EIAJ
`considers that it would not be appropriate to conclude rotors to be the principal component of
`motors. Given the fact that technological developments could change the importance of a
`component, as clearly has been the case respecting rotors and stators, the U.S. proposal
`should not carve out an exception from the tariff shift approach relating to these specific
`components. Instead, the U.S. draft proposal should be revised to allow the application of
`the tariff shift approach relating to goods of HS heading 8501 from all other headings,
`including from goods covered in HS heading 8503.
`
`EIA J proposes the following revision:
`
`HS Code
`Number
`
`850 1
`
`Description of Goods
`
`Electric motor and generators
`(excluding generating sets)
`
`- ~ - _ - -
`Substantial Transformation is
`Considered to take place in the
`Country in Which:
`- - -
`Change to this heading from any other
`heading
`
`~ I I _I
`
`2.
`
`HS 8518.21 - HS 8518.50: Micro~hoiies and stands therefor: loudspeakers
`whether or not mounted in their enclosures: headphones, earphones and
`combined microDhone/speaker sets: audio-freauencv electric amDlifiers: e k e . &
`sound amplifier sets; parts thereof
`
`The U.S. proposal would not recognize a subheading change for speakers (HS
`8518.12 and HS 8521.22) as conferring origin where an unmounted single or multiple
`speaker is transformed to a finished single or multiple speaker mounted in their enclosures.
`However, EIAJ considers that such a process -- i.e., production of mounted, enclosed
`speakers froin unmounted speaker Components -- does constitute a substantial transformation
`because the process greatly affects the sound quality of the finished product. The U.S.
`proposal also fails to recognize that an origin-conferring substantial transformation occurs
`when sets are combined with more than one item classified in HS 8518.21 - HS 8518.50.
`EIAJ objects to this exception from the tariff shift rule also; the assembly process of
`components of these subheadings constitutes a substantial transformation.
`
`2
`
`

`

`EIAJ proposes the following revision:
`
`HS Code
`Number
`
`8518
`85 18.2 1 -
`8518.50
`
`Description of Goods
`
`Microphones and stands therefor;
`loudspeakers, whether or not
`mounted in their enclosures;
`headphones, earphones, and
`combined microphone/speaker sets;
`audio-frequency electric amplifiers;
`electric sound amplifier sets; parts
`thereof
`
`Substantial Transformation is
`Considered to take place in the
`Country in Which:
`Change to this subheading from any
`other subheading (including other
`subheadings within this heading, Le.,
`8518.21 - 8518.50)
`
`3.
`
`HS 8522.90: Parts and accessories suitable for use solely or principally with the
`pwaratus of headinps 8519 to 8521
`
`HS subheading 8522.90 applies to various parts solely or principally used to produce
`goods classified in HS headings 8519 to 8521. HS subheading 8522.90 also applies to
`certain subcomponents and materials used in the covered parts. The U.S. proposal would
`recognize that origin is conferred when there is a tariff shift from HS 8522.90 to HS 8519 or
`to HS 8521. However, there is no provision in the U.S. proposal for recognizing an origin-
`conferring shift from a subcomponent or material classifiable in HS 8522.90 to a further
`processed part also classifiable in HS 8522.90. EIAJ believes that for certain subparts, the
`U.S. proposal should recognize such a shift. Accordingly, EIAJ proposes that the ITC
`"split" the subheading for purposes of recognizing relevant origin-conferring operations. The
`specific subparts for which EIAJ proposes a subheading split include: (a) head units;
`(b) cylinders; (c) mechanical units, whether or not including cylinders; and (d) other parts.
`
`3
`
`

`

`EIAJ proposes the following revision:
`
`HS Code
`Number
`
`8522.90
`
`8522.90(a)
`
`Description of Goods
`
`Parts and accessories suitable for
`use solely or principally with the
`apparatus of headings 85 19-8521
`Head Unit
`
`8522.90(b)
`
`Cylinder
`
`8522.90(c)
`
`Mechanical Unit, whether or not
`incorporating a cylinder
`
`8522.90(d)
`
`Other Parts
`
`Substantial Transformation is
`Considered to take place in the
`Country in Which:
`- -__. -. - - -
`Change to this subheading from any
`other heading or any other "split"
`subheading of this subheading
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`- -.
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`--_-___
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`Change to this "split" subheading
`froin any other heading
`
`4.
`
`HS 8528.12 - HS 8528.30: Reception apparatus for television, whether or-
`incorporatin? radio broadcast receivers or sound or video recordin? or
`re~roducing apparatus: video monitors and video pro-iectors
`
`For goods classifiable in HS 8528.12 - HS 8528.30, the U.S. proposal would
`recognize an origin-conferring tariff shift to occur froin any subheading except subheadings
`HS 8540.11 - 8540.12. However, EIAJ considers that the process in manufacturing a
`finished product classifiable in HS 8528.12 - 8528.30 from a CRT and/or other parts does
`constitute a substantial transforination and, thus, qualifies as an origin-conferring change.
`Further, in the United States, incomplete sets classifiable together with finished sets in
`HS 8528. The U.S. proposal accordingly fails to recognize a change from an incomplete set
`to a finished set -- both of which are classifiable under HS 8528 -- as on origin-conferring
`change. EIAJ urges the ITC to revise the U.S. proposal to recognize such a process as
`origin-conferring, because an operation in which an incomplete set is further manufactured
`into a complete, finished set amounts to a substantial transformation. To accomplish this,
`EIAJ recommends a "split" subheading approach, as described in the following proposal.
`
`4
`
`

`

`EIAJ proposes the following revision:
`
`Description of Goods
`
`Reception apparatus for television,
`whether or not incorporating radio
`broadcast receivers or sound or
`video recording or reproducing
`apparatus; video inonitors and
`video projectors
`incomplete or unfinished goods of
`these subheadings, not
`incorporating a display device
`
`HS Code
`Number
`
`8528
`
`8528.12-
`8528.30
`
`8528.12-
`8528.30
`
`(a)
`
`Substantial Transforination is
`Considered to take place in the
`Country in Which:
`Change to this subheading from any
`other heading or "split" subheading of
`this subheading
`
`- -
`- -
`Change to this "split" subheading from
`any other heading
`
`I
`
`---
`
`5.
`
`JrS 8529.90: Parts suitable for use solelv or principallv with the mparatus of
`headings 8525 to 8528
`
`HS subheading 8529.90 applies to various parts solely or principally used to produce
`goods classified in HS headings 8525 to 8528. HS subheading 8529.90 also applies to
`certain subcomponents and materials used in the covered parts. The U.S. proposal would
`recognize that origin is conferred when there is a tariff shift from HS 8529.90 to HS 8525 or
`to HS 8528. However, there is no provision in the U.S. proposal for recognizing an origin-
`conferring shift from a subcoinponent or material classifiable in HS 8529.90 to a further
`processed part also classifiable in HS 8529.90. EIAJ believes that for certain subparts, the
`U.S. proposal should recognize such a shift. Accordingly, EIAJ proposes that the ITC
`"split" the subheading for purposes of recognizing relevant origin-conferring operations. The
`specific subparts for which EIAJ proposes a subheading split include: (a) degauging coils;
`(b) head units; (c) cylinders; (d) mechanical units; (e) display devices; and (f) other parts.
`
`5
`
`

`

`EIAJ proposes the following revision:
`
`HS Code
`Number
`
`8529
`8529.90
`
`Description of Goods
`
`Parts suitable for use solely or
`principally with the apparatus of
`headings 8525 to 8528; Other
`
`8529.90(a)
`
`Degauging coil
`
`8529.90@)
`
`Head Unit
`
`8529.90(c)
`
`Cylinder
`
`8529.90(d)
`
`Mechanical Unit
`
`8522.90(e)
`
`Display device
`
`8522.90(f)
`
`Other parts
`
`Substantial Transfonnation is
`Considered to take place in the
`Country in Which:
`Change to this subheading from any
`other heading or "split" subheading
`of this subheading
`
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`-----
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`-
`~
`-
`-
`-
`
`Change to this "split" subheading
`from any other heading or any other
`"split" subheading of this subheading
`
`6.
`
`HS 8541: Diodes, transistors and similar semiconductor devices: photosensitive
`semiconductor devices, including Dhot ovoltaic cells whether or not assembled in
`modules or made up into panels; light-emittine diodes: mounted Diezoelectric
`crvstals: parts thereof
`
`HS 8542: Electronic integrated circuits and microassemblies parts thereof
`
`EIAJ basically supports the U.S. proposed rule for these tariff headings. However,
`EIAJ requests that the ITC change the structure of the proposed rule for these headings to
`conform with the format proposed for HS 8471. EIAJ considers that the "split" subheading
`
`6
`
`

`

`method shown in the following proposal would be both more clear and more consistent with
`the structure of the HTS.
`
`The U.S. proposal generally recognizes a substantial transformation for goods
`classified in headings HS 8541 and HS 8542 only when a tariff shift occurs from another
`heading. For goods classified in subheadings HS 8542.12 - 8542.50, however, the U.S.
`proposal would recognize assembly as an origin-conferring operation. Under this approach,
`the U.S. would deem the origin of hybrid ICs to occur in the country of their assembly.
`EIAJ generally agrees with this proposed policy, but recoininends that it be reflected using a
`"split" subheading approach, as shown below.
`
`As for PROMs, EIAJ considers that programming itself does not constitute a
`substantial process and, therefore, should nor be adopted as the origin criteria. PROM
`products obtain their essential character when they b(.come programmable, not when they are
`programmed. PROMs obtain their essential features (e.#. , they become programmable)
`when they are assembled. Accordingly, assembly should be treated as the origin-conferring
`operation for PROMs.
`
`7
`
`

`

`EIAJ proposes the following revision:
`
`HS Code
`Yumber
`
`854 1
`
`8541.10-
`8541.40
`
`8542.12-
`8542.50
`
`8542
`
`8542.12-
`8542.50
`8542.12-
`8542.50
`
`Description of Goods
`
`Diodes, transistors and similar
`semiconductor devices;
`photosensitive semiconductor
`devices, including photovoltaic
`cells whether or not assembled in
`modules or made up into panels;
`light-emitting diodes; mounted
`piezoelectric crystals; parts thereof
`
`Uninounted chips
`
`Electronic integrated circuits and
`microassemblies; parts thereof
`
`I Unmounted chips
`
`Substantial Transformation is
`Considered to take place in the
`Country in Which:
`- ----
`- -
`Change to this subheading froin any
`other subheading or any other "split"
`subheading of this subheading
`
`I
`
`- -- - - - -
`Change to this "split" subheading
`from any other subheading
`
`- ---. - -
`Change to this subheading from any
`other subheading or any other "split"
`subheading of this subheading
`---
`Change to this "split" subheading
`from any other subheading
`
`- - -_c_
`
`8
`
`