Businesses located in the Commonwealth of the Northern Mariana Islands (CNMI) qualify for preferential treatment when exporting their products to the U.S. under Section 603(a) of the Covenant. The CNMI is not included within the customs territory of the United States. General Headnote 3(a) of the Revised Tariff Schedules of the U.S. permits articles grown, manufactured, or produced in the Northern Mariana Islands to be imported into the customs territory of the United States free of duty if 70 percent or less of the value of the product is derived from foreign materials. For certain articles, notably textiles and apparel, only 50 percent or less of the value may be derived from foreign material in order to qualify for duty free treatment.

General Headnote 3 (a) addresses only the issue of whether a product of the Northern Mariana Islands may be imported into the customs territory of the United States free of duty; it does not address the circumstances under which products of the Commonwealth may be admitted into the customs territory of the United States free of quota restrictions or other non-tariff barriers. Quotas affecting imports from the Commonwealth into the customs territory of the United States have been imposed thus far only with respect to sweaters of third country manufacturers assembled in the Commonwealth for export to the U.S.

Generally, imports into the customs territory of the U.S, under Headnote 3 (a) are not subject to quota limitations. The U.S. federal government can impose a tariff or quota at any time [or withdraw the benefits provided by Headnote 3 (a)], when a particular product is restricted from the U.S. market by quotas. It may be economical to assemble such products in the Northern Marianas using material from the Pacific region.

In order for a product manufactured in the Commonwealth to qualify for duty free treatment under the GSP it must meet certain requirements:

1. The product must be included on the GSP list.
2. The product must be from a designated beneficiary country or area.
3. The beneficiary area must be eligible for GSP treatment with respect to a particular product.
4. The value added requirements must be satisfied.
5. The article must be imported directly into the United States from the beneficiary area.
6. A certificate of origin form (#3229) must be provided and the importer must have requested GSP treatment.

The sum of the cost or value of materials produced in the Commonwealth plus the direct cost of the processing must equal at least the minimum percentage requirement of the appraised value of the article at the time of entry into the United States. All those costs, whether directly incurred in, or which can be reasonably allocated to: the growth, production, manufacture or assembly of labor costs, fringe benefits, on-the-job-training, cost of engineering, supervisory, quality control and similar personnel, etc. and other items not directly attributable to the merchandise under consideration or are not "costs" of manufacturing, including profit and general expenses and business overhead (such as administrative salaries, insurance, advertising, etc.), are not allowable costs in meeting the required percentage.

The foreign value limitation test to determine the 50 or 70 percent foreign value limitation for articles manufactured in the Commonwealth compares the actual purchase price of the foreign materials imported into the Northern Marianas (plus transportation costs) and the final appraised value in the United States determined in accordance with the value provisions of U.S. tariff laws.

Direct shipment provisions also apply under Headnote 3 (a). Generally, in order for assembled articles to be considered manufactured or produced in the Commonwealth, the component parts of foreign origin used in the assembly must be shipped from the foreign country in separate shipments. The constituent parts must arrive in at least two different shipments and by separate carriers.

It is essential that interested parties first obtain a ruling on the application of General Headnote 3 (a) provisions for a particular product. Requests should be directed to:

A detailed description of the rules may be examined in Customs Regulations 19 CFR, Part 177