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Ref: EIC 111/2/11 
EIC 111/10/1/31

30 June 2003

Dear Sirs,

Commercial Information Circular No. 176/2003

Notice to Exporters: Series 1 (USA) No. 45/2003

USA: Clarification of the Origin Rules for Knitted Shawls, Scarves and Mufflers, etc
and Corresponding Changes to the Licensing Arrangements of These Products

In June 2000, the Department informed the trade via Commercial Information Circulars Nos. 75 & 86/00 cum Notices to Exporters: Series 1 (USA) Nos. 27 & 33/00 that the US had introduced certain statutory amendments to the rules of origin stipulated in Section 334 of the Uruguay Round Agreement Act (URAA) for non-wool fabrics and certain made-up articles (excluding products of cotton, of cotton blends containing 16% or more by weight of cotton, or of wool). As a result of the amendment, printing and dyeing plus two or more specified finishing processes (hereafter refers to "finishing rule") confer origin for imports of the relevant products into the US. If the finishing rule is not met in a single place or where no finishing operation has been carried out, the origin is where the fabric is formed. Subsequently, the US Government has started amending its Customs Regulations to align the existing rules of origin with the statutory amendments to Section 334 of the URAA. Only until recently, the US Government has completed the process and has promulgated in a Federal Register (FR) notice a final rule implementing such amendments. Relevant FR notice can be obtained from <http://a257.g.akamaitech.net/7/257/2422/14mar20010800/edocket.access.gpo.gov/2003/pdf/03-4317.pdf>.

2. In the FR notice, the US has clarified for the first time how the origin rules should be applied to knitted shawls, scarves and mufflers, etc classified under HTS 6117.10 (excluding products of cotton, of cotton blends containing 16% or more by weight of cotton, or of wool). In gist, their origin will first be determined by the finishing rule, failing which the panel knitting or assembling or fabric forming as appropriate will determine the place of origin (please refer to paragraph 3 below for details).

The Latest US' Origin Rules for Knitted Shawls, Scarves and Mufflers, etc

3. In accordance with the final rule amending the Customs Regulations, the latest US' origin rules for knitted shawls, scarves and mufflers, etc (excluding products of cotton, of cotton blends containing 16% or more by weight of cotton, or of wool) apply in the following manner -

1. The country of origin is where the fabric comprising the goods has undergone both printing and dyeing plus at least two of the following finishing operations: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing. If these finishing operations are not performed in a single place, the origin of goods is determined as sub-paragraph 3(b) below.

2. (i) For goods that are knit-to-shape, knitting of the knit-to-shape panels is regarded as the origin conferring process.

(ii) For goods that are not knit-to-shape and consist of two or more component parts, wholly assembly is regarded as the origin conferring process.

(iii) For goods that are not knit-to-shape and with single component part, fabric forming is regarded as the origin conferring process.

Traders are requested to note the hierarchy in the application of the above US origin rules. For knitted shawls, scarves and mufflers, etc which are of cotton, of cotton blends containing 16% or more by weight of cotton, or of wool, the finishing rule in sub-paragraph 3(a) does not apply. The place of origin for these products is determined in the way as detailed in sub-paragraph 3(b) above.

Revised Licensing Arrangements for Knitted Shawls, Scarves and Mufflers, etc

4. To tie in with the latest US origin rules, with immediate effect exports of knitted shawls, scarves and mufflers, etc should also satisfy the following revised licensing condition in order to be regarded by the importing end as of Hong Kong origin -

1. The fabric used in making knitted shawls, scarves and mufflers, etc (excluding products of cotton, of cotton blends containing 16% or more by weight of cotton, or of wool) must be printed and dyed and have undergone at least two of the following finishing operations in Hong Kong: bleaching, shrinking, fulling, napping, decating, permanent stiffening, weighting, permanent embossing, or moireing.

2. For knitted shawls, scarves and mufflers, etc (excluding products of cotton, of cotton blends containing 16% or more by weight of cotton, or of wool), in the event that (a) above is not met in Hong Kong or in a single place outside Hong Kong; as well as for knitted shawls, scarves and mufflers, etc of cotton, of cotton blends containing 16% or more by weight of cotton, or of wool, the following processes must be performed in Hong Kong:

1. for goods that are knit-to-shape, knitting of the knit-to-shape panels must be performed in Hong Kong;

2. for goods that are not knit-to-shape and consist of two or more component parts, they must be wholly assembled in Hong Kong; or

3. for goods that are not knit-to-shape and with single component part, the fabric must be formed in Hong Kong.

5. As shawls, scarves and mufflers, etc are products integrated under Stage 3 of the Integration Programme of the World Trade Organization Agreement on Textiles and Clothing, their exports to the USA should be covered by Export License (Textiles) Form 4. Traders who purport to have fulfilled the licensing condition in paragraph 4 above should make the following Special Declaration(s) on the original and duplicate copies of the license application as appropriate -

1. If sub-paragraph 4(a) is satisfied:

"The required finishing operations under the US origin rules as stated in Notice to Exporters: Series 1 (USA) No. 45/2003 for the fabric(s) making up the goods described herein are performed in Hong Kong." in the "Full Description of Goods" column.

2. If sub-paragraph 4(b)(i) is satisfied:

"I further declare that the knitted panels of the piece-knitted garments are knitted in Hong Kong." in both the "Exporter's Declaration" and "Manufacturer's Declaration" boxes.

3. If sub-paragraph 4(b)(ii) is satisfied:

"The goods described herein are wholly assembled in Hong Kong." in the "Full Description of Goods" column.

4. If sub-paragraph 4(b)(iii) is satisfied:

"The fabric(s) making up the goods described herein is/are formed in Hong Kong." in the "Full Description of Goods" column.

For products that have undergone in Hong Kong both printing and dyeing plus two or more of the required finishing operations, as well as panel knitting or assembling or fabric forming as appropriate, the two relevant Special Declarations above should both be made on the license application.

6. For piece-knitted shawls, scarves and mufflers, etc, traders are reminded to satisfy conditions under the special licensing arrangement and labelling requirement as set out in paragraphs 8-10 of Notice to Exporters: Series 1 (USA) No. 64/01 dated 20 December 2001 and paragraphs 107-108 of Notice to Exporters: Series 1 (USA) No. 59/02 dated 14 December 2002.

7. In addition, parties to a license covering shawls, scarves and mufflers, etc should note the relevant licensing arrangements for integrated products set out in Notice to Exporters: Series 1 (USA) No. 64/01 dated 20 December 2001.

Enquiries

8. Should you require further information on the content of this circular, please contact the Customer Service Centre of the Textiles Controls Branch on 2398 5288 or the following officers:

Yours faithfully,

(Lewis TSOI)

for Director-General of Trade and Industry