CLA-2 CO:R:C:M 956751 KCC
Scott E. Rosenow, Esq.
Stein Shostak Shostak & O'Hara
1620 L Street, N.W.
Suite 807
Washington, D.C. 20036-5605
RE: NY 895684 modified; Solution Administration Sets; "Accuset";
"Gemini"; NAFTA; Article 509; originating good; General Note
12(b)(ii), 12(b)(iv)(B) and 12(p); change in tariff
classification; non-originating materials; General Note
12(t)/90.46; Section 2(1), 2(3)(c), and 4(4)(b), NAFTA Rules
of Origin Regulations; parts; subheading; production
Dear Mr. Rosenow:
This is in regards to your letter dated July 19, 1994, on
behalf of Cal Pacifico and Imed Corporation, requesting
reconsideration of New York (NY) 895684 dated April 15, 1994, in
which the Area Director of Customs, New York Seaport, held that
the "Accuset" and "Gemini" solution administration sets were not
eligible for preferential tariff treatment under the North
American Free Trade Agreement (NAFTA). Pursuant to section
625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625(c)(1)), as amended
by section 623 of Title VI (Customs Modernization) of the NAFTA
Implementation Act (Pub. L. 103-182, 107 Stat. 2057)(hereinafter
section 625), notice of the proposed modification of NY 895684
was published on October 26, 1994, in the Customs Bulletin,
Volume 28, Number 43.
FACTS:
The articles under consideration in NY 895684 are the
"Accuset" and "Gemini" solution administration sets which are
used in the medical industry for infusions. Both solution
administration sets are composed of a drip chamber, Y site, slide
clamp, roller clamp, luer adapter and protection cap. The
"Accuset" has an additional component, a cassette which will fit
into an electronic infusion pump. The solution administration
sets are assembled in Mexico from the above components which are
made in the U.S. and other foreign countries.
In NY 895684 the Area Director of Customs, New York Seaport,
classified the "Accuset" solution administration set as other
electro-medical instruments and appliances and parts and
accessories, used in medical, surgical, dental or veterinary
sciences under subheading 9018.90.75, Harmonized Tariff Schedule
of the United States (HTSUS), and the "Gemini" solution
administration set as other instruments and appliances and parts
and accessories thereof, used in medical, surgical, dental or
veterinary sciences under subheading 9018.90.80, HTSUS.
The subheadings at issue are:
9018 Instruments and appliances used in medical, surgical, dental
or veterinary sciences, including scintigraphic apparatus,
other electro-medical apparatus and sight-testing
instruments; parts and accessories thereof...
9018.90 Other instruments and appliances and parts and
accessories thereof...
9018.90.75 Other...Electro-medical instruments and appliances
and parts and accessories
thereof...Other...Other....
9018.90.80 Other...Other.
Additionally, in NY 895684 the solution administration sets
were held not to be eligible for preferential tariff treatment
under the NAFTA pursuant to General Note 12(b)(iv)(B), HTSUS. In
essence, NY 895684 stated that the foreign components (non-originating NAFTA components), other than the cassette, were
classified as parts under subheading 9018.90.80, HTSUS.
Therefore, the non-originating components, other than the
cassette, did not undergo the change in tariff classification
required by General Note 12(t)/90.46, HTSUS. NY 895684 stated
that the "Gemini" solution administration set did not meet the
"originating good" rules of origin requirement in General Note
12(b)(iv)(B), HTSUS, because "[t]he Gemini set and the parts are
provided for in a basket provision that does not specifically
describe the goods themselves and the parts." NY 895684 stated
that the "Accuset" solution administration set did not meet the
"originating good" rules of origin requirement in General Note
12(b)(iv)(B), HTSUS, because "...the set and some of the non-originating materials are classified in two different subheadings
of the same heading."
ISSUE:
Are the "Accuset" and "Gemini" solution administration sets
eligible for preferential tariff treatment under the NAFTA
pursuant to General Note 12(b)(iv)(B), HTSUS?
LAW AND ANALYSIS:
To be eligible for tariff preferences under the NAFTA, goods
must be "originating goods" within the rules of origin in General
Note 12(b), HTSUS. In this case, there are two methods by which
goods imported into the United States may be "goods originating
in the territory of a NAFTA party." General Note 12(b), HTSUS,
sets forth the two methods as follows:
(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; or...
(iv) they are produced entirely in the territory of Canada,
Mexico and/or the United States but one or more of the non-originating materials falling under provisions for "parts"
and used in the production of such goods does not undergo a
change in tariff classification because--
(A) the goods were imported into the territory of Canada,
Mexico and/or the United States in unassembled or
disassembled form but were classified as assembled
goods pursuant to general rule of interpretation 2(a),
or
(B) the tariff headings for such goods provide for and
specifically describe both the goods themselves and
their parts and is not further divided into
subheadings, or the subheadings for such goods provide
for and specifically describe both the goods themselves
and their parts, provided that such goods do not fall
under chapters 61 through 63, inclusive, of the tariff
schedule, and provided further that the regional value
content of such goods, determined in accordance with
subdivision (c) of this note, is not less than 60
percent where the transaction value method is used, or
is not less than 50 percent where the net cost method
is used, and such goods satisfy all other applicable
provisions of this note. For purposes of this Note,
the term "material" means a good that is used in the
production of another good, and includes a part or an
ingredient.
Where non-originating materials are used, i.e., drip
chamber, Y site, slide clamp, roller clamp, luer adapter,
protection cap and cassette, we must examine whether the solution
administration sets are "transformed in the territory of Canada,
Mexico and/or the United States" pursuant to General Note
12(b)(ii)(A), HTSUS. As the completed solution administration
sets are classified under subheading 9018.90.75, HTSUS, and
subheading 9018.90.80, HTSUS, a transformation is evident when a
change in tariff classification occurs that is authorized by
General Note 12(t)/90.46, HTSUS. General Note 12(t)/90.46,
HTSUS, states:
A change to subheading 9018.90 from any other heading.
Therefore, each non-originating material must come from a heading
other than heading 9018.
In this case, the non-originating materials, other than the
cassette, are classified as parts under subheading 9018.90.80,
HTSUS. A change in tariff classification does not occur pursuant
to General Note 12(t)/90.46, HTSUS. Therefore, the solution
administration sets manufactured from non-originating drip
chamber, Y site, slide clamp, roller clamp, luer adapter and
protection cap are not eligible for preferential tariff treatment
under the NAFTA pursuant to General Note 12(b)(ii), HTSUS.
An examination of General Note 12(b)(iv), HTSUS, is
necessary because the non-originating materials used in the
solution administration sets do not undergo a change in tariff
classification pursuant to General Note 12(b)(ii), HTSUS, and
they are classified under a tariff provision for parts. We note
that General Note 12(b)(iv)(A), HTSUS, is inapplicable because
the non-originating components imported into Mexico were not
imported in an unassembled or disassembled form and, as entered
into Mexico, were not classified as assembled pursuant to GRI
2(a).
Section 4(4) of the NAFTA Rules of Origin Regulations,
Appendix to Part 181, Customs Regulations (19 CFR Appendix to
Part 181), further sets forth the exceptions to the general
requirement of a change in tariff classification in order for a
good containing non-originating materials to be eligible for the
NAFTA preference. In this regard Section 4(4)(b), provides, in
pertinent part, that except for a good provided for in Chapters
61 through 63, HTSUS, a good will be considered to originate in
the territory of a NAFTA country where:
(i) the good is produced entirely in the territory of one or
more of the NAFTA countries,
(ii) one or more of the non-originating materials used in the
production of the good do not undergo an applicable change
in tariff classification because
(A) those materials are provided for under the Harmonized
System as parts of the good, and
(B) the heading for the good provides for both the good and
its parts and is not further subdivided into
subheadings, or the subheading for the good provides
for both the good and its parts,
(iii) the non-originating materials that do not undergo a
change in tariff classification in the circumstances
described in subparagraph (ii) and the goods are not
both classified as parts of goods under the heading or
subheading referred to in subparagraph (ii)(B),
(iv) each of the non-originating materials that is used in the
production of the goods and is not referred to in
subparagraph (iii) undergoes an applicable change in tariff
classification or satisfies any other applicable requirement
set out in Schedule I,
(v) the regional value content of the good, calculated in
accordance with section 6, is not less than 60 percent where
the transaction value method is used, or is not less than 50
percent where the net cost method is used, and
(vi) the good satisfies all other applicable requirements of the
Appendix, including any applicable, higher regional value-content requirement provided for in section 13 or Schedule
I.
"Production" is defined by General Note 12(p), as "growing,
mining, harvesting, fishing, trapping, hunting, manufacturing,
processing or assembling a good." See also, Section 2(1), NAFTA
Rules of Origin Regulations.
The solution administration sets meet the first two
requirements of Section 4(4)(b), NAFTA Rules of Origin
Regulations. Pursuant to the definition of "Production", the
solution administration sets with non-originating parts are
produced entirely in the NAFTA territory of Mexico.
Additionally, the non-originating parts, other than the cassette,
do not undergo an applicable change in tariff classification
because the subheading (subheading 9018.90, HTS), provides for
both the good (solution administration sets) and its parts (drip
chamber, Y site, slide clamp, roller clamp, luer adapter and
protection cap).
We note that Section 2(3), NAFTA Rules of Origin Regulations
state that:
For purposes of the Appendix:...
(c) "subheading" refers to any six-digit number, or the
first six digits of any number, set out in the column
"Heading/Subheading" in the Harmonized System;....
Therefore, with respect to Section 4(4)(b) and, therefore,
General Note 12(b)(iv), HTSUS, the term "subheading" refers to
any six-digit number, or the first six digits of any number, set
out in column "Heading/Subheading" of the Harmonized System. In
this case, the relevant subheading is subheading 9018.90, HTS.
Moreover, the solution administration sets do meet
requirement (iii). The non-originating materials, i.e., drip
chamber, Y site, slide clamp, roller clamp, luer adapter and
protection cap, which do not undergo a change in tariff
classification under (ii), and the good itself, i.e., solution
administration sets., are not both classified as parts of goods
under the heading or subheading referred to in (ii)(B). However,
given that subheading 9018.90 provides for both the good, i.e.,
solution administration sets, and the non-originating parts,
i.e., drip chamber, Y site, slide clamp, roller clamp, luer
adapter and protection cap, the solution administration sets do
meet this requirement.
Therefore, if the solution administration sets meet the
applicable value content requirement in General Note
12(b)(iv)(B), HTSUS, and all other applicable requirements, they
will qualify for the NAFTA tariff preference.
In disqualifying the Accuset and Gemini solution
administration sets from NAFTA preferential tariff treatment, NY
895684 held, in essence, that General Note 12(b)(iv)(B), HTSUS,
is applied at the 10 digit level. This determination is
incorrect. As stated above, General Note 12(b)(iv)(B), HTSUS,
concerning "parts", is applied at the six-digit level. See,
Section 2(3)(c), NAFTA Rules of Origin Regulations.
HOLDING:
The solution administration sets, "Accuset" and "Gemini",
will be considered "originating goods" pursuant to General Note
12(b)(iv)(B), HTSUS, upon meeting the applicable value content
requirement and all other applicable requirements.
NY 895684 is modified as directed above. In accordance with
section 625, this ruling will become effective 60 days after its
publication in the Customs Bulletin. Publication of rulings or
decisions pursuant to section 625 does not constitute a change of
practice or position in accordance with section 177.10(c)(1),
Customs Regulations (19 CFR 177.10(c)(1)).
Sincerely,
John Durant, Director
Commercial Rulings Division