CLA-2 CO:R:CV:G: 084856 JLV
TARIFF NO.:
Mr. William J. LeClair
Trans-Border Customs Services
One Trans-Border Drive, P.O. Box 800
Champlain, New York 12919
RE: U.S.-Canada FTA origin status of motherboard assembled in
Canada with power supply and cabinet
Dear Mr. LeClair:
In a letter of May 8, 1989, on behalf of your client
Philips Electronics Ltd. of Montreal, Quebec, Canada, you
request a ruling on the origin status of certain motherboards
exported to Canada from the United States and assembled with a
power supply and cabinet of Canadian origin. Your client
intends to export the assembly to the United States.
FACTS:
The facts submitted and forwarded for consideration
require that certain statements be accepted as presented.
First, the article assembled in the United States and exported
to Canada is described as a "motherboard" that consists of
third country components and U.S. components. At the time of
entry into Canada, the importer states that it would be
classified in Canadian tariff item 8471.91.00, pursuant to
Canadian Customs Notice of October 28, 1988.
The motherboard will be assembled with a power supply and
a cabinet in Canada. Both of these components are said to be
of Canadian origin. No facts were submitted to document or
support this statement. The completed assembly would then be
exported to the United States.
Although the completed assembly consists of components
that are stated to be originating materials for purposes of
the U.S.-Canada Free-Trade Agreement (FTA), it is not "wholly
obtained or produced" as defined in the FTA.
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ISSUE:
Does the completed assembly qualify for the benefits of
the FTA as an originating good, and what rule under the FTA
applies to such goods that consist solely of originating
materials but are not wholly obtained or produced in the
territory of Canada and/or the United States?
LAW AND ANALYSIS:
The FTA rules for determining whether goods, when
imported into the United States, are originating in the
territory of Canada are set forth in General Note 3(c)(vii),
Harmonized Tariff Schedule of the United States Annotated
(HTSUSA). Because the completed assembly includes a
motherboard that contains both U.S. and third country
components, it is not a good that is wholly obtained or
produced in the territory of Canada and/or the United States
within General Notes 3(c)(vii)(B)(1) and 3(c)(vii)(L).
General Note 3(c)(vii)(B)(2) provides for the only other
means by which goods may be considered "originating" under the
FTA: the goods must be transformed so as to be subject to a
change in tariff classification described in 3(c)(vii)(R) or,
if no change in classification, the goods must meet certain
conditions set out in various other specific rules. None of
the specific rules (for situations in which no change in
tariff classification occurs) apply in this case.
The sole question, therefore, is whether the good
assembled in Canada has undergone a change in tariff
classification. For the reasons that follow, we conclude that
the assembled good does not satisfy the rule that requires an
originating good to be transformed in the territory of Canada
within the meaning of General Note 3(c)(vii)(B)(2)(I).
Although the proposed operation, which only involves
components that are "originating materials," appears to
satisfy the intent of the FTA, we interpret the requirement of
a change in tariff classification as a requirement that
applies only to third country materials and is satisfied only
with reference to such materials. This interpretation is
necessary for two reasons. First, it gives the intended
tariff preference to the broadest range of goods which might
otherwise be denied the benefits of the FTA simply by virtue
of the fact that an originating material did not change
classification during the manufacturing process. Second, it
is consistent in its treatment of originating materials.
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To be selective at this point and say that a change in
tariff classification of one or two originating materials will
satisfy the requirement, and at the same time to ignore the
fact that one of the originating materials does not undergo a
change in tariff classification would be arbitrary and
capricious. To be consistent with our interpretation that a
change in tariff classification of originating materials is
not relevant to the requirement of General Note
3(c)(vii)(B)(I), we must conclude that certain originating
materials, such as the power supply and cabinet in this case,
cannot be arbitrarily selected to justify the requirement of
change in tariff classification when, at the same time, a
third originating material, the motherboard, does not change
tariff classification and is arbitrarily precluded from
consideration.
HOLDING:
The assembled article, consisting solely of originating
materials as described in the FACTS, is not an originating
good for purposes of the FTA.
Sincerely,
John Durant, Director
Commercial Rulings Division
6cc: AD NY Seaport
1cc: Bylle Patterson (RM 1114)
1cc: Durant
1cc: AC, CO
1cc: Reading File