Production Sharing: Use of U.S. Components in Foreign Assembly Operations, 1995-98

AGENCY:

United States International Trade Commission.

ACTION:

Termination of the report series and extended informal reporting of developments through existing publications.

EFFECTIVE DATE:

January 14, 2000.

SUMMARY:

The Commission is changing the method of providing continued reporting on production sharing and related topics, and has published the last in a formal series of annual reports on production sharing under Inv. No. 332-237, covering the period 1995-98, in December 1999. The report series has been discontinued because official U.S. statistics increasingly understate the magnitude of production-sharing activity. As a growing share of global trade becomes duty free, incentives are reduced for entering U.S. imports under the production-sharing tariff provisions. The Commission will continue to report informally on cross-border integration of manufacturing and related topics in other publications, as appropriate, and plans to report annual statistics on trade under the production-sharing provisions in its quarterly publication Industry Trade and Technology Review (ITTR), as well as provide expanded coverage for these data on the Commission's “Interactive Tariff and Trade DataWeb” (http://dataweb.usitc.gov).

BACKGROUND:

The Commission has prepared and published annual reports on production-sharing operations since 1986 under this series; notice of initial institution was published in the Federal Register of September 4, 1986 (51 FR 31729). In this report series, the Commission has used data on imports under Harmonized Tariff Schedule (HTS) provisions 9802.00.60-.90 as a tool to assess the use of foreign assembly plants as a strategy by U.S. companies to reduce production costs and improve global competitiveness. Because tariffs on many of the products entered under these provisions have been either significantly reduced or eliminated under trade agreements and trade preference programs, many importers no longer enter goods assembled from U.S.-made components under the duty-reducing provisions of HTS chapter 98. Consequently, data on imports entered under these provisions now significantly understate the use of U.S. components in foreign assembly operations. These reporting limitations will become more pronounced for 1999 data since most apparel from Mexico became duty and quota free under NAFTA on January 1, 1999, and the customs user fee applicable to imports from Mexico under NAFTA was eliminated on July 1, 1999. These developments have led the Commission to discontinue the report series in subsequent years, while maintaining continued informal monitoring and reporting through other publications as appropriate.

Data reported under HTS provision 9802.00.60-.90 will continue to provide a meaningful measure of the use of U.S.-made components in imported articles that remain dutiable. For example, such data are an important tool in monitoring the use of U.S.-formed-and-cut fabric in Caribbean garment factories. The Commission plans to report annual data on imports under these production-sharing tariff provisions in its quarterly ITTR publication. Articles assessing developments in the cross-border integration of manufacturing and related topics will be published separately as staff issue papers or as articles for the ITTR report. Parties that are currently on the Commission's mailing list for the Production Sharing report will receive copies of ITTR publications and staff issue papers that cover production-sharing topics, such as cross-border integration of manufacturing, international manufacturing networks, the use of foreign assembly plants and foreign trade zones, and foreign direct investment in manufacturing sectors.

Information on imports under production-sharing provisions (HTS 9802.00.60-.90) is accessible to the public on the Commission's “Interactive Tariff and Trade DataWeb” (http://dataweb.usitc.gov). The “DataWeb” currently enables parties to access U.S. imports under these tariff provisions, providing total imports by country of origin and the top 20 products from each supplier. The DataWeb will be expanded by late spring to include more timely access for annual production-sharing data by HS Chapter, country, and region, as well as by commodity groups which correspond to appendix B statistical tables contained in the former annual report. Parties also can access a table (updated monthly) from the Commission's Web site (http://www.usitc.gov/miscell.htm) showing U.S.-Mexico trade from 1994 to year-to-date, including imports under NAFTA and HTS 9802.00.60-.90.

The final report in the Production Sharing series assesses (1) the use of foreign assembly operations as a means that companies use to reduce costs and gain improved access to foreign markets; (2) the integration of such operations in North America into international manufacturing networks in the apparel, motor vehicles and parts, and television receiver sectors; and (3) the implications of these developments for the competitiveness of these U.S. industries. The latest report covering 1998 data (USITC Publication 3265, December 1999) may be obtained at the ITC Web site (http://www.usitc.gov/332s/332index.htm). A printed report may be requested by contacting the Office of the Secretary at 202-205-2000 or by fax at 202-205-2104.

FOR FURTHER INFORMATION CONTACT:

Ralph Watkins (202) 205-3492; Minerals, Metals, Machinery, and Miscellaneous Manufactures Division; Office of Industries; U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436.

Hearing-impaired individuals are advised that information on this matter can be obtained by contacting our TDD terminal on (202) 205-1810. General information concerning the Commission may also be obtained by accessing its Internet server (http://www.usitc.gov).