CLA-2 RR:CR:SM 561326 BLS
Port Director
P.O. Box 1490
St. Albans, VT 05478
RE: Application for Further Review of Protest No. 0201-98-100034; subheading 3213.10; Eligibility for NAFTA preference of childrens’ washable paint set;
Article 509
Dear Sir:
This is in reference to an Application for Further Review of the above-captioned protest, timely filed on behalf of Maison Battat, concerning the eligibility for NAFTA preference of a childrens’ paint set.
FACTS:
The merchandise is a childrens’ paint set, consisting of 6 plastic bottles of washable paint, 6 plastic paint pots, 6 plastic funnels and 6 plastic lids, all of Canadian origin, and 6 artists’ brushes which are a product of Hong Kong.
The broker entered the merchandise under subheading 3213.10.0000, Harmonized Tariff Schedule of the United States (HTSUS), free of duty under the North American Free Trade Agreement Act (NAFTA). Subheading 3213.10.0000 provides for "Artists’, students’ or signboard painters’ colors, modifying tints, amusement colors and the like, in tablets, tubes, jars, bottles, pans or in similar forms or packings: Colors in sets." Although agreeing with this classification of the imported good, your office determined that the merchandise was not entitled to NAFTA preferential treatment.
ISSUE:
Whether the childrens’ paint set is eligible for preferential tariff treatment under the NAFTA.
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LAW AND ANALYSIS:
Article 401 of the NAFTA is incorporated into General Note 12 of the HTSUS.
General Note 12(b) provides in pertinent part:
For 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
(ii) 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 subdivision (r), (s) and (t)
of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision
(r), (s) and (t) where no change in tariff classification is required, and
the goods satisfy all other requirements of this note...
The only non-originating materials of the paint set are the paint brushes, which are of Hong Kong origin. Thus, we must determine whether these components of the imported good are transformed in Canada pursuant to General Note 12(b)(ii)(A), HTSUS. In this regard, we find that the paint brushes are classifiable as artists' brushes in headings 9603, HTSUS. We concur with your office that the paint set is classifiable under subheading 3213.10.0000, HTSUS. The rule applicable to goods of subheading 3213.10.0000, HTSUS, is provided for in General Note 12(t)/32.13, HTSUS, which provides the following:
13. A change to heading 3213 from any other heading.
Accordingly, under this rule, the paint brushes will undergo the requisite tariff shift. Therefore, pursuant to General Note 12(b), HTSUS, the imported paint set will be considered an originating good.
In support of the position that the good does not qualify for NAFTA preference, your office cites to Headquarters Ruling Letter (HRL) 086407 (March 22, 1990) and section 102.17 of the Customs Regulations (19 CFR 102.17).
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In HRL 086407, a case involving the United States-Canada Free-Trade Agreement (FTA), certain components which were not a product of Canada or the U.S. were packaged with Canadian and U.S. components creating "Arts, Crafts & Activities" and "String Art" craft kits. [The FTA was suspended as of the effective date of NAFTA, January 1, 1994.] The kits were classified as other toys put up in sets under
subheading 9503.70.80, HTSUS. It was determined that the kits were not considered “goods put up in sets for retail sale” under GRI 3(b), HTSUS. (GRI 3(b) defines a "set" as goods that: (1) consist of at least two different articles which are, prima facie, classifiable in different headings; (2) consist of products or articles put up together to meet a particular need or carry out a particular activity; and (3) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards).)
In HRL 086407, we held that simple packaging or combining in a set of a component not a product of the U.S. or Canada that results in a required classification change, will remove the set as a whole from the definition of "goods originating in the territory of Canada," for purposes of determining whether the set is eligible for preferential treatment under the FTA. That determination was based upon General Note 3(c)(vii)(C), HTSUS, (as it existed prior to 1994), which stated, in pertinent part, that goods shall not be considered to, originate in the territory of Canada for purposes of the FTA merely by virtue of having undergone "simple packaging or, except as expressly provided by the rules of subdivision (c)(viii)(R) of this note, combining operations."
There is no similar language in General Note 12, HTSUS, relating to NAFTA, which would disqualify a good from originating status by virtue of merely having undergone simple packaging or combining operations. Thus, for example, in HRL 560577 dated August 4, 1997, Customs held that as surgical gloves of Malaysian origin underwent the requisite tariff shift under General Note (t), HTSUS, when packaged in Mexico with NAFTA originating items to create a surgical kit, the kit qualified for NAFTA preferential treatment as an originating good when imported into the U.S. See also HRL 559421 dated September 16, 1996. Moreover, we note that the fact that the paint set in this case is classified pursuant to General Rule of Interpretation (GRI) 1, rather than GRI 3(b), is irrelevant to the determination of whether the good qualifies as an "originating good" under General Note 12, HTSUS.
With regard to 19 CFR 102.17, this section provides that a foreign material shall not be considered to have undergone the applicable change in tariff classification specified in 102.20 or 102.21 or to have met any other applicable requirements of those sections merely by reason of having undergone one or more of certain specified operations,
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which include "simple packing, repacking or retail packaging without more than minor processing." However, the non-qualifying operations listed in section 102.17 are applicable only in determining the country of origin of an imported good under Part 102. Section 102.17 is not applicable in determining whether an imported good is entitled to preferential treatment under NAFTA pursuant to General Note 12, HTSUS.
Accordingly, in the instant case, the fact that the paint brushes of Hong Kong origin are merely packaged with the NAFTA originating items in Canada to create the paint set will not preclude the imported set from being considered a "good originating in the territory of a NAFTA party."
HOLDING:
Paint brushes of Hong Kong origin imported into Canada are transformed in Canada pursuant to General Note 12(b)(ii)(A), HTSUS, when packaged with a childrens’ paint set. Therefore, the paint set is considered an originating good and is eligible for preferential tariff treatment under the NAFTA. The protest should be granted in accordance with the foregoing.
In accordance with Section 3A(11)(b) of Customs Directive 099 3550 065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed by your office, with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division