CLA-2 RR:CR:GC 962627 JAS
Port Director of Customs
720 E. San Ysidro Blvd.
San Ysidro, CA 92073
RE: NAFTA Eligibility of Printed Circuit Board Cutting Tool Produced in Mexico From Non-Originating Tungsten Carbide Rods
Dear Port Director:
In a letter, dated February 4, 1999, Tycom Corporation requested a ruling with respect to the tariff status as origination goods under the North American Free Trade Agreement (NAFTA) of printed circuit board cutting tools produced in Mexico from non-originating tungsten carbide rods.
Tycom has informed us that this NAFTA issue involves a transaction that is currently before your office, and that the company contemplates future importations. For this reason, we are directing this response to you in accordance with section 181.92(b)(2) of the Customs Regulations. Also, we are enclosing a letter, dated April 15, 1999, in which we address the inquirer’s request for confidentiality under the Freedom of Information Act.
The inquirer made factual and legal arguments in its February 4, 1999, letter. In addition, Tycom’s counsel made additional arguments at a meeting in our office on August 25, 1999, confirmed by a written submission of the same date.
FACTS:
Tungsten carbide rods of Japanese origin, 1 1/2 or more inches in length, composed of 92% tungsten carbide and 8% cobalt, are imported into the U.S. After importation, the diameters of
rods are reduced by grinding from 0.12850 inch to a prefinished diameter of 0.1250 inch, then finish ground to a final diameter
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of 0.12480 inch. These rods, now referred to in the printed circuit board manufacturing industry as cemented carbide endmill blanks, are ground on one end to achieve a uniform overall length of 1.505 inch, and a linear chamfer is ground onto the other end. The rod blanks are then exported to Mexico and completed there into routers and small-to-large diameter miniature drills for printed circuit boards by forming necks and 0.070-0.440 inch fluted drill ends on the rod blanks’ nonchamfered ends and, finally, press fitting a plastic ring at the base of the neck, presumably to facilitate handling.
Counsel makes two arguments, (1) that the Japanese-origin tungsten carbide rods are processed in the U.S. into incomplete or unfinished cutting tools so that, when exported to Mexico, they are classified under a provision that describes cutting tools and their parts, and (2) when returned to the U.S. from Mexico, the cutting tools qualify as originating goods under the NAFTA because, as provided by General Note 12(b)(iv)(B), HTSUS, they are classified in a subheading which provides for and specifically describes both the goods themselves, and their parts, and the goods satisfy one of the two permissible regional value content tests.
ISSUE:
Whether the goods returned to the U.S. from Mexico fall under a provision for “parts” because they are classified in a subheading that describes cutting tools and parts thereof.
LAW AND ANALYSIS:
Under General Rule of Interpretation (GRI) 1, Harmonized Tariff Schedule of the United States (HTSUS), goods are to be classified according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6.
With respect to issue (1), counsel makes extensive arguments, supported by appropriate authorities, that the processing of the Japanese-origin tungsten carbide blanks in the U.S. creates “blanks” which, under GRI 2(a), HTSUS, are incomplete or unfinished cutting tools of heading 8207 when they enter Mexico. Counsel’s argument is not that the rod blanks exported from the U.S. to Mexico and then used in the production of the finished tools are classified as parts under subheading
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8207.50.20, HTSUS, but rather, the terms of that subheading describe both the goods and their parts, and that both the rod blanks and the finished tools are classified in the same subheading. Assuming, without deciding, that counsel prevails on this issue, we move to a discussion of issue (2). General Note 12(b)(iv)(B), in part, requires that the non-originating material (i.e., the rod blank exported from the U.S. to Mexico), used to produce the good for which the NAFTA preference is claimed, fall under a provision for “parts” and fail to undergo a qualifying change in tariff classification because the subheading for the good provides for and specifically describes both the good and its parts. Counsel’s claim is that upon its return to the U.S. from Mexico the cutting tools are classifiable in subheading 8207.50.20, HTSUS. Once again, the claim is not that the non-originating material (the rod blanks) are parts for tariff purposes, merely that subheading 8207.50.20 provides for and specifically describes both the tool and the non-originating material used to produce the tool and, thereby, the requirements of General Note 12(b)(iv)(B) are met.
We do not agree that counsel’s interpretation of General Note 12(b)(iv)(B) confers originating goods status on the cutting tools. In this regard, Title 19, Code of Federal Regulations, Appendix to Part 181 - Rules of Origin Regulations under the NAFTA (19 CFR Appendix to Part 181), Part II, (4)(b) clarifies General Note 12(b)(iv)(B) (see also 19 U.S.C. 3332(a)(1)(D)), by stating that originating goods status is conferred where a good is produced entirely in the territory of one or more of the NAFTA countries, one or more of the non-originating materials used in the production of the good do not undergo a change in tariff classification because the materials are provided for under the Harmonized System as parts of the good and the subheading for the good provides for both the good and its parts. In this case, the non-originating material (the rod blanks) used to produce the cutting tool, for which originating goods status is sought, is not provided for under the Harmonized System as parts of the good, but rather is provided for in subheading 8207.50.20 as the good itself, assuming acceptance of counsel’s claim that the rod blanks are incomplete or unfinished cutting tools of heading 8207.
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HOLDING:
Under the authority of GRI 1, the printed circuit board cutting tools in issue are provided for in heading 8207. They are classifiable in subheading 8207.50.20, HTSUS. These tools imported into the U.S. from Mexico do not qualify as “goods originating in the territory of a NAFTA party,” and are not eligible for preferential tariff treatment under the NAFTA.
You are to mail this decision to the internal advice applicant, through its representative, no later than 60 days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to
Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosure