Country of Origin determination – Quiz 5 – Question 10

19 CFR §102.13 De Minimis.
(a) Except as otherwise provided in paragraphs (b) and (c) of this section, foreign materials that do not undergo the applicable change in tariff classification set out in § 102.20 or satisfy the other applicable requirements of that section when incorporated into a good shall be disregarded in determining the country of origin of the good if the value of those materials is no more than 7 percent of the value of the good or 10 percent of the value of a good of Chapter 22, Harmonized System.
(b) Paragraph (a) of this section does not apply to a foreign material incorporated in a good provided for in Chapter 1, 2, 3, 4, 7, 8, 11, 12, 15, 17, or 20 of the Harmonized System.
(c) Foreign components or materials that do not undergo the applicable change in tariff classification set out in § 102.21 or satisfy the other applicable requirements of that section when incorporated into a textile or apparel product covered by that section shall be disregarded in determining the country of origin of the good if the total weight of those components or materials is not more than 7 percent of the total weight of the good.

The question requires us to identify the circumstances in which foreign materials that do not undergo the required tariff shift when incorporated into a good shall be disregarded in determining the country of origin of the good.

In option A, the value of the smoked rubber sheets exceeds 7% of the value of the natural rubber sheets and so it cannot be disregarded.

Option C cannot be disregarded for similar reasons.

In Options D and E, the percentage of the sugar and milk is 7% or less but the finished products are maple sugar classifiable under subheading 1702.20 and milk classifiable under subheading 0402.99. The condition in 19 CFR §102.13(a) does not apply to a foreign material incorporated in a good provided for in Chapter 1, 2, 3, 4, 7, 8, 11, 12, 15, 17, or 20 of the Harmonized System. Therefore, foreign materials that do not undergo the applicable change in tariff classification set out in § 102.20 or satisfy the other applicable requirements of that section when incorporated into a good of Chapters 17 and 4 shall NOT be disregarded in determining the country of origin of the good if the value of those materials is no more than 7 percent of the value of the good. Therefore, answer choices D and E are also ruled out. We are then left with only answer choice B by a process of elimination.

In B, milk, produced in Brazil, which contains 55% by weight of milk solids, is used in the Canadian production of a chocolate-based milk drink (2202.90), which represents 8% of the value of the chocolate drink. Foreign materials that do not undergo the applicable change in tariff classification set out in § 102.20 or satisfy the other applicable requirements of that section when incorporated into a good shall be disregarded in determining the country of origin of the good if the value of those materials is no more than 10 percent of the value of a good of Chapter 22, Harmonized System. Here, the value of the milk produced in Brazil is only 8% which is less than 10% of the value of the finished product viz. Canadian production of a chocolate-based milk drink that is classified in Chapter 22. Since the value of the foreign material is below the de minimis limit of 10% allowed in this case, this foreign material can be disregarded in determining the country of origin of the Canadian milk drink.

Answer choice B is therefore correct.