Mar-2-05 R:C:S 558765 AT
Mr. Philip Freeman
Cain Customs Brokers
Progreso International Bridge
P.O. Box 10
Progreso, TX 78579
RE: Classification and eligibility of NAFTA preferences for
printed circuit board assemblies imported from Mexico;
Applicability of subheading 9802.00.80, HTSUS, to printed
circuit boards assembled in Mexico; Country of origin
marking requirements for imported printed board assemblies;
Article 509; NAFTA Duty Preference Rules; General Note
12(b), HTSUS; NAFTA Marking Rules; "originating goods";
assembly; ultimate purchaser; 19 CFR 102.11; 19 CFR
134.35(b)
Dear Mr. Freeman:
This is in response to your letter dated September 13, 1994,
on behalf of Ericson Manufacturing Company ("Ericson") requesting
the status as an originating good under the North American Free
Trade Agreement ("NAFTA"), eligibility for a partial duty
exemption under subheading 9802.00.80, Harmonized Tariff Schedule
of the United States ("HTSUS"), and country of origin marking
requirements for printed circuit board ("PCB") assemblies
imported from Mexico. Samples were submitted with your letter.
We regret the delay in responding.
FACTS:
According to your submission, Ericson intends to import PCB
assemblies from Mexico. You state that the PCB assemblies will
be assembled in Mexico from U.S., Taiwanese, Japanese, Korean,
Malaysian and Chinese components consisting of transistors,
resistors, capacitors, diodes and integrated circuits. Assembly
of the PCB assemblies will consist of placement of parts and
soldering the individual parts onto the circuit boards (also referred to by the industry as "stuffing" the boards). Ericson
intends to use the imported PCB assemblies in the manufacture of
industrial plug ground fault circuit interrupters in the U.S.
An industrial plug ground fault circuit interrupter is a circuit
disconnecting device used to protect operators of electrical
equipment, such as hand tools, from electrical shock and to
prevent damage to the equipment from heat or fire.
You have requested the status as an originating good under
NAFTA, eligibility for a partial duty exemption under subheading
9802.00.80, HTSUS, and country of origin marking requirements for
the PCB assemblies that are to be imported from Mexico for use in
the manufacture of industrial plug ground fault circuit
interrupters in the U.S.
ISSUES:
1. Whether the PCB assemblies imported from Mexico qualify
as originating goods for purposes of the duty preference under
NAFTA.
2. Whether the PCB assemblies imported from Mexico are
eligible for a partial duty exemption under subheading
9802.00.80, HTSUS.
3. What are the country of origin marking requirements for
PCB assemblies imported from Mexico to be used in the manufacture
of industrial plug ground fault circuit interrupters in the U.S.?
LAW AND ANALYSIS:
NAFTA ELIGIBILITY:
Classification of merchandise under the HTSUS is in
accordance with the General Rules of Interpretation (GRI's). GRI
1 provides that classification shall be determined according to
the terms of the headings and any relative section or chapter
notes.
According to the information provided, the PCB assembly is a
part of an industrial plug ground fault circuit interrupter which
is a circuit disconnecting device used to protect operators of
electrical equipment, such as hand tools, from electrical shock
and to prevent damage to the equipment from heat or fire. In NY
899377, dated July 6, 1994, the Area Director of New York Seaport
determined that the ground fault circuit interrupter incorporated
an electronic circuitry which enabled it to sense small imbalances in the circuit caused by current leakage to ground,
and in a fraction of a second, shuts off the electrical circuit.
Because of this capability, the ground fault circuit interrupter
was classified under subheading 8536.30.80, HTSUS, which provides
for other electrical apparatus for protecting electrical
circuits, for a voltage not exceeding 1,000 Volts.
Because the PCB assembly is a part of the ground fault
circuit interrupter, we find that it is classifiable under
subheading 8538.90.20, which provides for: "[p]arts suitable for
use solely or principally with the apparatus of heading 8535,
8536 or 8537: [o]ther: [p]rinted circuit assemblies .... "If the
PCB assembly meets the eligibility requirements of NAFTA, it can
be entered under a free rate of duty.
To be eligible for tariff preferences under the North
American Free Trade Agreement (NAFTA), goods must be "originating
goods" within the rules of origin in General Note 12(b), HTSUS.
General Note 12(b), HTSUS, states in pertinent part:
[f]or the purposes of this note, goods imported into the
customs territory of the United States are eligible for
the tariff treatment and quantitative limitations set
forth in the tariff schedule as "goods originating in the
territory of a NAFTA party" only if--
(I) they are goods wholly obtained or produced entirely
in the territory of Canada, Mexico, and/or the
United States; or
(ii) that they have been transformed in the territory of
Canada, Mexico and/or the United States so that--
(A) except as provided in subdivision (f) of this
note, each of the non-originating materials
used in the production of such goods undergoes
a change in tariff classification described in
subdivisions (r), (s) and (t) of this note or
the rules set forth therein, or
(B) the goods otherwise satisfy the applicable
requirements of subdivisions (r), (s) and (t)
where no change in tariff classification is
required, and the goods satisfy all other
requirements of this note... Because the PCB assemblies contain parts from countries
other than Mexico, Canada, and/or the United States, General Note
12(b)(I), HTSUS, does not apply. Therefore, we must resort to
General Note 12(b)(ii)(A), HTSUS.
The change in tariff classification rules set forth in
General Note 12(t)/85.122, HTSUS, states as follows: "[a] change
to subheading 8538 from any other heading."
Therefore, any non-originating materials used in the
production of the PCB assemblies must be classified under a
tariff heading other than heading 8538, HTSUS. The non-originating PCB, transistors, resistors, capacitors, diodes and
integrated circuits are all provided for under headings other
than heading 8538, HTSUS. Because a change in tariff
classification does occur and meets the terms of General Note
12(t)/85.122, HTSUS, we find that the PCB assemblies are eligible
for preferential tariff treatment under the NAFTA.
Eligibility under subheading 9802.00.80, HTSUS
Subheading 9802.00.80, HTSUS, provides a partial duty
exemption for:
[a]rticles assembled abroad in whole or in part of
fabricated components, the product of the United States,
which (a) were exported in a condition ready for assembly
without further fabrication, (b) have not lost their
physical identity in such articles by change in form,
shape or otherwise, and (c) have not been advanced in
value or improved in condition abroad except by being
assembled and except by operations incidental to the
assembly process such as cleaning, lubricating, and
painting...
All three requirements of subheading 9802.00.80, HTSUS, must be
satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty
upon the full value of the imported assembled article, less the
cost or value of such U.S. components, upon compliance with the
documentary requirements of section 10.24, Customs Regulations
(19 CFR 10.24).
Section 10.14(a), Customs Regulations (19 CFR 10.14(a)),
states in part that:
[t]he components must be in condition ready for assembly
without further fabrication at the time of their
exportation from the United States to qualify for the exemption. Components will not lose their entitlement
to the exemption by being subjected to operations
incidental to the assembly either before, during, or
after their assembly with other components.
Section 10.16(a), Customs Regulations (19 CFR 10.16(a)),
provides that the assembly operation performed abroad may consist
of any method used to join or fit together solid components, such
as welding, soldering, riveting, force fitting, gluing,
laminating, sewing, or the use of fasteners.
In this case, the operation which results in securely
attaching the U.S. origin components to the printed circuit
boards by means of soldering is considered an acceptable assembly
operation. See, 19 CFR 10.16(a); HQ 555681 (September 7, 1990)
(attaching U.S. origin DS2 relays to printed circuit boards by
means of soldering constituted an acceptable assembly operation
pursuant to 19 CFR 10.16(a)). Accordingly, the imported PCB
assemblies from Mexico will be eligible for allowances in duty
for the cost or value of the U.S. origin components under
subheading 9802.00.80, HTSUS, upon compliance with the
documentary requirements of 19 CFR 10.24.
Country or Origin Marking Requirements
The marking statute, section 304, Tariff Act of 1930, as
amended (19 U.S.C. 1304), provides that, unless excepted, every
article of foreign origin (or its container) imported into the
U.S. shall be marked in a conspicuous place as legibly, indelibly
and permanently as the nature of the article (or its container)
will permit, in such a manner as to indicate to the ultimate
purchaser in the U.S. the English name of the country of origin
of the article. Part 134, Customs Regulations (19 CFR Part 134)
implements the country of origin marking requirements and
exceptions of 19 U.S.C. 1304.
Section 134.1(b) of the interim regulations, defines
"country of origin" as the country of manufacture, production, or
growth of any article of foreign origin entering the U.S.
Further work or material added to an article in another country
must effect a substantial transformation in order to render such
other country the "country of origin within this part; however,
for a good of a NAFTA country, the NAFTA Marking Rules will
determine the country of origin. (Emphasis added).
Section 134.1(j) of the interim regulations, provides that
the "NAFTA Marking Rules" are the rules promulgated for purposes
of determining whether a good is a good of a NAFTA country.
Section 134.1(g) of the interim regulations, defines a "good of a NAFTA country" as an article for which the country of origin is
Canada, Mexico or the United States as determined under the NAFTA
Marking Rules. Section 134.45(a)(2) of the interim regulations,
provides that a "good of a NAFTA country" may be marked with the
name of the country of origin in English, French or Spanish.
In this case, components consisting of printed circuit
boards and other electronic parts are imported into Mexico to be
assembled into PCB assemblies, and then exported to the U.S. to
be used by Ericson in the manufacture of ground fault circuit
interrupters. Thus, in order to determine the appropriate
marking requirements for the PCB assemblies, imported from
Mexico, we must apply the NAFTA Marking Rules.
Part 102 of the interim regulations sets forth the "NAFTA
Marking Rules" for purposes of determining whether a good is a
good of a NAFTA country for marking purposes. Section 102.11 of
the interim regulations, sets forth the required hierarchy for
determining country of origin for marking purposes. Section
102.11(a) of the interim regulations states that "[t]he country
of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) The good is produced exclusively from domestic
materials; or
(3) Each foreign material incorporated in that good
undergoes an applicable change in tariff
classification set out in section 102.20 and
satisfies any other applicable requirements of that
section, and all other requirements of these rules
are satisfied."
"Foreign Material" is defined in section 102.1(e) of the interim
regulations as "a material whose country of origin as determined
under these rules is not the same country as the country in which
the good is produced."
The printed circuit boards and the other electronic
components that are stuffed onto the boards to make the PCB
assemblies in Mexico are either of U.S., Taiwanese, Japanese or
Chinese origin (foreign as defined in section 102.1(e) of the
interim regulations) and are neither wholly obtained/produced nor
produced exclusively from domestic materials. Therefore,
paragraphs (a)(1) and (a)(2) of section 102.11 cannot be used to
determine the country of origin of the PCB assembly. Thus,
paragraph (a)(3) of section 102.11 is the applicable rule that
next must be applied to determine the origin of the finished
article. The PCB assemblies are classified under subheading
8538.90.20, HTSUS. The applicable change in tariff
classification set out in section 102.20(p), Section XVI,
Chapters 84 through 85, 8538 of the interim regulations provides:
8538 .... A change to heading 8538 from any other
heading,
The printed circuit boards and the other electronic
components (transistors, resistors, capacitors, diodes and
integrated circuits) that are stuffed onto the circuit boards are
all classified under headings other than heading 8538, HTSUS.
Thus, the printed circuit boards and the other electronic
components undergo the applicable change in tariff classification
set out in section 102.20(p). Accordingly, the country of
origin, for marking purposes, of the PCB assemblies imported into
the U.S., from Mexico, is Mexico. Section 134.35(b), Customs
Regulations (19 CFR 134.35(b)) provides as follows:
(b) Goods of a NAFTA Country. A good of a NAFTA country
which is to be processed in the United States in a
manner that would result in the good becoming a good
of the United States under the NAFTA Marking Rules is
excepted from marking. Unless the good is processed
by the importer or on its behalf, the outermost
container of the good shall be marked in accord with
this part.
In this case, imported PCB assemblies are used by Ericson to
manufacture ground fault circuit interrupters in the U.S. Thus,
pursuant to section 134.35(b), in order to determine the
appropriate marking requirements for the imported PCB assemblies,
section 102.11 must be applied to ascertain whether the PCB
assemblies become a good of the U.S. when used to make finished
ground fault interrupters. Since the PCB assemblies are of
Mexican origin (foreign as defined in section 102.1(e)), the
finished ground fault circuit interrupters are neither wholly
obtained/produced nor produced exclusively from domestic
materials. Therefore, paragraphs (a)(1) and (a)(2) of section
102.11 are not applicable. Thus, paragraph (a)(3) of section
102.11 is the applicable rule that next must be applied.
The finished ground fault circuit interrupters are
classified under subheading 8536.30.80, HTSUS. The applicable
change in tariff classification set out in section 102.20(p),
Section XVI, Chapters 84 through 85, 8536.10 - 8536.90 of the
interim regulations provides:
8536.10-8536.90 .... A change to subheading 8536.10
through 8536.90 from any other
subheading, including another
subheading within that group.
The PCB assemblies are classified under subheading,
8538.90.20, HTSUS. Thus, the PCB assemblies undergo the
applicable change in tariff classification set out in section
102.20(p). Thus, for marking purposes, the PCB assemblies become
goods of the U.S. as a result of the U.S. operations performed to
make the ground fault circuit interrupters. Accordingly,
pursuant to section 134.35(b), the PCB assemblies imported into
the U.S. are excepted from marking and the outermost containers
in which the PCB assemblies are imported are also excepted from
marking since Ericson (importer) is the processor of the imported
PCB assemblies.
HOLDING:
Pursuant to General Note 12(t)/85.122, HTSUS, PCB assemblies
which are manufactured in Mexico in the manner described above,
qualify as originating goods for purposes of the duty preference
under NAFTA.
The assembly operation performed in Mexico which results in
securely attaching U.S. components to printed circuit boards by
means of soldering, as described above, is considered an
acceptable assembly operation. Accordingly, the imported PCB
assemblies from Mexico will be eligible for allowances in duty
for the cost or value of the U.S. components under subheading
9802.00.80, HTSUS, upon compliance with the documentary
requirements of 19 CFR 10.24.
Pursuant to section 102.11(a)(3) of the interim regulations,
imported PCB assemblies of Mexican origin which are used to
manufactured ground fault circuit interrupters in the U.S., in
the manner described above, become goods of the U.S. as a result
of the U.S. operations. Accordingly, pursuant to section
134.35(b), the PCB assemblies imported from Mexico and their
outermost containers are excepted from country of origin marking
requirements.
A copy of this ruling letter should be attached to the entry
documents filed at the time this merchandise is entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division