CLA-2 CO:R:I 004238 SK
Richard M. Belanger
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Avenue, N.W., 6th floor
Washington, D.C. 20004
RE: Advance NAFTA Ruling; 19 CFR 181.93; Non-Originating Tuner
Subassemblies; 8529.90.0100, HTSUS; Printed Circuit Assembly;
8529.90.2400, HTSUS;
Articles 302(2), 401(b) of the NAFTA; General Note 12(b), HTSUS;
General Note 12(t)/85.94, HTSUS.
Dear Mr. Belanger:
This is in response to your letter of February 20, 1997, on
behalf of SCI Systems, Inc. of Huntsville, Alabama ("SCI"), in
which you request an advance ruling, pursuant to Section 181.93
of the Customs Regulations (19 CFR 181.93), determining whether
certain printed circuit assemblies qualify as originating goods
for purposes of preferential tariff treatment under the North
American Free Trade Act (NAFTA).
FACTS:
In your submission you provide information regarding the
prospective transaction and proffer classification determinations
for the subject merchandise. Absent a sample of the goods at
issue, Customs is unable to issue a binding classification
determination for the merchandise. For the purposes of this
advance NAFTA ruling, however, Customs will presume the
classifications you have proffered are correct.
The product in question is a printed circuit assembly,
classifiable in subheading 8529.90.2400, Harmonized Tariff
Schedule of the United States (HTSUS). The printed circuit
assembly is manufactured in Mexico by SCI Systems de Mexico S.A.
from components of various origins. One of these components is a
Japanese-origin tuner subassembly, classifiable in subheading
8529.90.0100, HTSUS. The remaining non-originating components
are classifiable in tariff provisions other than 8529.90.01,
8529.90.03, 8529.90.06, 8529.90.09, 8529.90.13, 8529.90.16,
8529.90.19, 8529.90.22 and 8529.90.24. HTSUS.
It is anticipated that SCI will import the printed circuit
subassemblies into the United States through the ports at
Houston, Dallas and Dayton.
ISSUE:
Whether the printed circuit assemblies qualify as originating
goods so as to be eligible for preferential tariff treatment as
provided for under Article 302(2) and Annex 302.2 of the NAFTA?
LAW AND ANALYSIS:
The North American Free Trade Agreement (NAFTA)
Chapter 4 of the NAFTA sets forth the rules for determining
whether an imported good qualifies as an originating good of the
United States, Canada or Mexico (the "Parties") for purposes of
being eligible for preferential tariff treatment as provided for
under Article 302(2) and Annex 302.2 of the NAFTA.
Article 401 of the NAFTA, at paragraph (b), states that except as
otherwise provided in Chapter 4, a good shall originate in the
territory of a Party where:
"(b) each of the non-originating materials used in the production
of the good
undergoes an applicable change in tariff classification set
out in Annex 401 as a result of production occurring
entirely in the territory of one or more of the Parties, or
the good otherwise satisfies the applicable requirements of
that Annex where no change in tariff classification is
required and the good satisfies all other applicable
requirements of this Chapter."
The rules set forth in Chapter 4 and Annex 401 of the NAFTA have
been promulgated in the United States through General Note (GN)
12, HTSUS. For a good imported into the United States to be
eligible for preferential tariff treatment under the NAFTA, it
must be deemed as originating in the territory of a NAFTA Party
within the rules of origin set forth in GN 12(b), HTSUS.
Pursuant to GN 12(b)(ii)(A), imported goods will be deemed as
originating in the territory of a NAFTA Party where:
"(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, ... ."
In the instant case, the determinative issue is whether the
subject non-originating materials are transformed in Mexico
pursuant to the terms set forth in GN 12(b)(ii)(A). As the
printed circuit assemblies are classifiable under subheading
8529.90.24, HTSUS, a transformation will be deemed to have
occurred if there has been a change in tariff classification
authorized by GN 12(t)/85.94, HTSUS. GN 12(t)/85.94 provides:
"A change to tariff items 8529.90.01, 8529.90.03,
8529.90.06, 8529.90.09, 8529.90.13, 8529.90.16, 8529.90.22
or 8529.90.24 from any other tariff item."
[emphasis added]
Throughout GN 12(t) and Annex 401(B) to the NAFTA, certain rules
of origin at the tariff item level are constructed in the manner
of GN 12(t)/85.94, whereby they use the phrase "from any other
tariff item" and are silent as to whether they permit a tariff
change from within the designated tariff item group or whether
such shift must occur from outside the group. For example, as
set forth in Annex 401(B), the specific rule of origin for tariff
item 8529.90.aa reads:
"[A] change to Canadian tariff item 8529.90.11, 8529.12,
8529.90.13 or 8529.90.14, U.S. tariff item 8529.90.15A,
8529.90.20A, 8529.90.30A, 8520.90.35A, 8529.90.40A,
8529.90.40B, 8529.90.45A or 8529.90.50A or Mexican tariff item
8529.90.16 from any other tariff item."
In your submission to Customs, you state that the rule of origin
set forth in GN 12(t)/85.94 is satisfied in the instant case
inasmuch as none of the non-originating components are
classifiable under the same tariff item as the imported
merchandise, i.e., 8529.90.24, HTSUS. You interpret 12(t)/85.94
as requiring a shift to tariff item 8529.90.24, HTSUS, from any
other tariff item, including those from within the group
enumerated in the rule. You contend that this construction "is
consistent with the plain meaning of the provision, ..." and that
this "plain meaning should be regarded as conclusive absent a
clear expression of contrary legislative intent." Madison
Galleries v. United States, 870 F.2d, 627, 629-30 (Fed. Cir.
1989) cited.
The plain language of GN 12(t)/85.94 also suggests a contrary
interpretation; namely, that a shift to tariff item 8529.90.24,
HTSUS, must be made from a tariff item other than those
enumerated in the rule.
Where a specific rule of origin based on tariff item change is
ambiguous as to whether it permits a change to a designated
tariff item group from within that group or whether a shift to
the designated tariff item group must originate from outside that
group, the rule shall be interpreted in accordance with the
intent of the drafters of the NAFTA, i.e., the uniform
application of the specific rules of origin. To interpret those
rules of origin which are silent as to the scope of permissible
tariff shifts as permitting shifts from within the designated
tariff item group would result in their disparate application.
Importations into the territory of those NAFTA Parties with a
larger number of designated tariff items within a particular
group would have greater opportunity to satisfy the rule and thus
greater opportunity to qualify for preferential tariff treatment
under the NAFTA. Consequently, in the interest of ensuring the
uniform application of the NAFTA, specific rules of origin at the
tariff item level shall be understood as requiring that all
changes to the designated tariff item group be made from outside
that group.
Based on the foregoing, GN 12(t)/85.94 requires that all
non-originating materials be classifiable in tariff items other
than 8529.90.01, 8529.90.03, 8529.90.06, 8529.90.09, 8529.90.13,
8529.90.16, 8529.90.22 or 8529.90.24, HTSUS. In the instant
case, as one of the non-originating materials, i.e., the
Japanese-origin tuner, is classifiable in tariff item 8529.90.01,
HTSUS, no tariff shift is deemed to occur under GN 12(t)/85.94.
Accordingly, the printed circuit assemblies are not eligible for
preferential tariff treatment under the NAFTA pursuant to GN
12(b)(ii).
HOLDING:
The subject printed circuit assemblies do not originate in the
territory of a NAFTA Party in accordance with General Note 12(b),
HTSUS.
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 this
transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division