Headnote 3 (a)

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General Facts About Headnote 3 (a)

The following information explains the entry of products into the United States from insular possessions under Headnote 3 (a) of the Tariff schedules of the United States (TSUS).

Entry under Headnote 3 (a) is compared to other U.S. Tariff preferences currently in effect:

• The Generalized System of Preferences (GSP)
• The Caribbean Basin Initiative (CBI)
• The TSUS item 807 (for off-shore assembly operations).

Headnote 3 (a) entries provide significant commercial opportunities for businesses that manufacture in United States insular possessions.

What is Headnote 3 (a) ?

General Headnote 3 (a) extends duty-free treatment to certain products of U.S. In­sular Possessions. Eligible U.S. Insular Possessions are the U.S. Virgin Islands, Guam, Saipan, Midway Island, Kingman Reef, and Johnston Island. The Northern Mariana Islands are included by means of a covenant with the United States.

All products are eligible for entry under Headnote 3 (a).

Product Qualifications?

Eligible products must satisfy cer­tain foreign content criteria in order to qualified for duty-free treatment.

No product may contain foreign materials in excess of 70% of its total appraised value.

Certain products which are ex­cluded from preferential treatment under the CBI, i.e., textile and apparel articles, foot­wear and petroleum products, may not contain foreign materi­als in excess of 50% of their to­tal appraised value.

What is the Criteria for Products?

All products must satisfy certain rules of origin in order to qual­ify for duty-free treatment.

What’s the Process?

All products must be imported directly into Customs territory of the United States.

Presently, U.S. insular possessions are not subject to the U.S. textiles quota program.

Manufacturing in American Samoa Under Headnote 3 (a)

American Samoa presents significant opportunities for export-oriented manufacturing. We have preferred access to the U.S. through Headnote 3 (a). Most items with at least 30 percent of their value created here enter U.S. duty free. Headnote 3 (a) of the U.S. Customs Code provides for duty and quota free access to the U.S. market for products manufac­tured, processed or assembled in American Samoa that has no more than 70 percent (50% if article is CBI ineligible such as textile and ap­parel articles; certain footwear, hand­bags, luggage flat goods, work gloves and leather wearing apparel; tuna; and, certain watches or watch parts.) of their total appraised value in foreign materials. Eligible prod­ucts must be manufactured or pro­duced either wholly from local mate­rials or from imported materials, which are substantially transformed in American Samoa (Substantial transformation occurs when a new and different product is pro­duced, having a distinctive name, char­acter, or use). The cost of the transpor­tation of the materials from source to American Samoa is included in the computation of foreign value, while the cost of transportation of product to the U.S. is excluded from its value for pur­pose of the calculation.

U. S. Insular Possessions Under General Headnote 3 (a)

Tariff Schedules of the U.S. (19 U.S.C. 1202), permits products of the insular possessions of the US to be imported into the US free of duty if certain quali­fications are met.

The purpose of General Headnote 3 (a) is to promote the economic development of the insular possessions. Regulations concerning insular possessions are set forth in Customs Regulations (19 CFR Part 7).

Duty-free entry is provided for products of the insular possessions if they do not contain foreign materials to the value of more than 70 percent of their total value and if the articles are ineligible for duty­free entry under CBI.

Under CBI Tariff Preference on Duty-free entry, all products except: textile and apparel articles; certain footwear, handbags, luggage flat goods, work gloves and leather wearing apparel; tuna, and , certain watches and watch parts.

Under current law, in order for a product to be entered duty-free, the proportion of value must be as follows:

Headnote 3 (a)

• 30% local content
• 70% foreign material

If article is CBI ineligible, then:

• 50% local content
• 50% foreign material

All products are eligible for duty-free status if they meet the above standards under General Headnote 3 (a)