J.4-Panama TariffsPanama Tariffs

• What is a Wholly Obtained or Produced Good (Product) under U.S.-Panama TPA?
• A Change in Tariff Classification (Tariff-Shift) Rule
• Definition of “Indirect Material” under the U.S.-Colombia TPA

What is a Wholly Obtained or Produced Good (Product) under U.S.-Panama TPA?

Goods wholly obtained or produced entirely in the territory of one or more of the Parties means:

1. plants and plant products harvested or gathered in the territory of one or both of the Parties;
2. live animals born and raised in the territory of one or both of the Parties;
3. goods obtained in the territory of one or both of the Parties from live animals;
4. goods obtained from hunting, trapping, fishing, or aquaculture conducted in the territory of one or both of the Parties;
5. minerals and other natural resource not included in subparagraphs (a) through (d) extracted or taken from the territory of one or both of the Parties;
6. fish, shellfish, and other marine life taken from the sea, seabed, or subsoil outside the territory of one or both of the Parties by vessels registered or recorded with a Party and flying its flag;
7. goods produced on board factory ships from the goods referred to in subparagraph
8. provided such factory ships are registered or recorded with that Party and fly its flag;
9. goods taken by a Party or a person of a Party from the seabed or subsoil outside territorial waters, provided that a Party has rights to exploit such seabed or subsoil;
10. goods taken from outer space, provided they are obtained by a Party or a person of a Party and not processed in the territory of a non-Party;
11. waste and scrap derived from manufacturing or processing operations in the territory of one or both of the Parties, or
12. used goods collected in the territory of one or both of the Parties, provided such goods are fit only for the recovery of raw materials;
13. recovered goods derived in the territory of one or both of the Parties from used goods, and utilized in the territory of one or both of the Parties in the production of remanufactured goods; and
14. goods produced in the territory of one or both of the Parties exclusively from goods referred to in subparagraphs (a) through (j), or from their derivatives, at any stage of production;

Source: U.S.-Panama Trade Promotion Agreement, Article 4.23.

A Change in Tariff Classification (Tariff-Shift) Rule

A Tariff-Shift rule is one type of rule of origin used in Annex 4.1 of Chapter 4 of the U.S.- Panama TPA. If the product specific rule in Annex 4.1 for your product is a tariff shift rule, then to qualify for the FTA-negotiated preferential tariff rate, the non-originating inputs of the product must be substantially transformed in Panama or the United States.

This transformation is defined by the tariff-shift rule in terms of a change in the HS Code of the input to the HS code of the final product (e.g., processing wood into furniture). This type of tariff shift test shows that non-originating inputs have been sufficiently changed in either the United States or Panama to allow them to qualify for a preferential tariff.

The relevant rule for your product may indicate that the change in HS code must be from another chapter, from another heading or from another sub-heading. A chapter is indicated by the first two digits of the HS Code, the heading by the next two digits, and the sub-heading by the third pair of digits.

For example, the HS code for an electric shaver is 8510.10 where 85 is the chapter; 8510 is the heading; and 8510.10 is the subheading. The rule for this product shows a simple tariff shift: "A change to subheading HS 8510.10 through 8510.30 from any other subheading.”

Tip: If only a tariff-shift rule applies to your product, you cannot use a regional value content rule.

Definition of “Indirect Material” under the U.S.-Colombia TPA

Each Party shall provide that an indirect material shall be considered to be an originating material without regard to where it is produced.

Indirect material means a good used in the production, testing, or inspection of a good but not physically incorporated into the good, or a good used in the maintenance of buildings or the operation of equipment associated with the production of a good, including:

1. fuel and energy;
2. tools, dies, and molds;
3. spare parts and materials used in the maintenance of equipment and buildings;
4. lubricants, greases, compounding materials, and other materials used in production or used to operate equipment and buildings;
5. gloves, glasses, footwear, clothing, safety equipment, and supplies;
6. equipment, devices, and supplies used for testing or inspecting the good;
7. catalysts and solvents; and
8. any other goods that are not incorporated into the good but whose use in the production of the good can reasonably be demonstrated to be a part of that production.

Source: Articles 4.11 and 4.23: U.S.-Panama Trade Promotion Agreement