CLA-2 R:C:S 559027 MLR
Robert E. Burke, Esq.
Jesse M. Gerson, Esq.
Barnes, Richardson & Colburn
200 East Randolph Drive
Suite 7920
Chicago, IL 60601
RE: Carbon Monoxide Alarm Units; Transformers; Functional
Unit; GRI 1; Country of origin marking; NAFTA; Article
509; General Note 12(b)(i) and (ii)(A), and
12(t)/85.107(A)
Dear Mr. Burke and Mr. Gerson:
This is in reference to your letter of February 6, 1995,
requesting a ruling on behalf of your client, on whether
carbon monoxide alarm units qualify for preferential duty
treatment under the North American Free Trade Agreement
(NAFTA), and the applicable country of origin marking
requirements. A sample of a unit was submitted with your
request.
FACTS:
The good at issue is a carbon monoxide alarm unit ("C.O.
unit") which consists of a carbon monoxide alarm ("alarm")
and a transformer. The purpose of the C.O. unit is to sense
a certain level of carbon monoxide and sound the alarm to
alert persons in the immediate area. You state that the
alarm and transformer are packaged together for importation
and sale in the U.S. You also state that in their condition
as imported they are considered a functional unit pursuant
to Note 4, Section XVI, Harmonized Tariff Schedule of the
United States (HTSUS), and, therefore, classifiable under
subheading 8531.80.80, HTSUS.
You have submitted an exhibit listing the components of
the alarms which are assembled in Mexico. The assembly
involves the automated and manual insertion of numerous
components such as sensors (classifiable under subheading
9027.10.20, HTSUS), connectors (classifiable under
subheading 8536.90.00, HTSUS), capacitors (classifiable
under subheading 8532.22.00, HTSUS), diodes (classifiable
under subheadings 8541.10.00, HTSUS), resistors
(classifiable under subheadings 8533.10.00 and 8533.20.00,
HTSUS), transistors (classifiable under subheading
8541.10.00, HTSUS), LED (classifiable under subheading
8541.40.20, HTSUS), and various other parts (classifiable
under subheadings 8542.80.00, 8542.11.80, 8541.90.00,
8541.60.00, and 8536.50.80, HTSUS) onto a PCB board (itself
classifiable under subheading 8534.00.00, HTSUS). Next, the
horn top and bottom (classifiable under subheading
8531.90.80, HTSUS, and stated to be originating goods under
NAFTA because they are of U.S.-origin), and horn
(classifiable under subheading 8541.60.00, HTSUS), are
inserted onto the PCB board, and the cover and base of the
unit (classifiable under subheading 8531.90.80, HTSUS, and
stated to be originating goods under NAFTA because they are
of U.S.-origin) are assembled together to complete the
alarm. The finished alarm is classifiable under subheading
8531.80.80, HTSUS, and you contend that it is an originating
good.
After the assembly of the alarm, it is placed in retail
packaging with a Chinese-origin transformer (classifiable
under subheading 8504.31.40, HTSUS), and a screw and anchor
kit (classifiable under heading 3923, 3925, and 7318,
HTSUS). Both the alarm and the transformer have protruding,
unfinished wiring. The directions accompanying the C.O.
unit indicate that the transformer may be placed at any
remote location away from the alarm. Furthermore, it is
stated that only the transformer supplied may be used with
the alarm, and the alarm may not be connected to any other
device or directly to an electrical circuit, and one
transformer may not be used with more than one alarm.
Accordingly, you contend that the alarms cannot operate
without the accompanying transformers, and the transformers
are specially dedicated to meet the specification of the
alarms.
The sample of the box in which the C.O. unit is packaged
is labeled "Transformer made in China, Carbon monoxide alarm
assembled in Mexico." The box also contains the marking
"Assembled in Mexico. Printed in U.S.A." The transformer is
also individually marked "Made in China," the screw and
anchor kit is not marked, and the inside of the alarm
contains the marking "Mfg'd & Svc'd by ... IL, USA ...
Assembled in Mexico."
ISSUES:
I. Whether the imported carbon monoxide alarm unit
qualifies for preferential duty treatment under NAFTA.
II. How must the carbon monoxide alarm unit be marked?
LAW AND ANALYSIS:
I. NAFTA Originating Goods
To be eligible for tariff preferences under NAFTA, goods
must be "originating goods" within the rules of origin in
General Note 12(b), HTSUS. In this case, the method by
which the C.O. unit imported into the U.S. may be "goods
originating in the territory of a NAFTA party" is General
Note 12(b)(ii), HTSUS. General Note 12(b)(ii), HTSUS,
states that to be "goods originating in the territory of a
NAFTA party":
(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
subdivisions (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
(iii) they are goods produced entirely in the
territory of Canada, Mexico and/or the United
States exclusively from originating
materials....
Since the C.O. unit is classified pursuant to Note 4,
Section XVI, HTSUS, as a functional unit under subheading
8531.80, HTSUS, a transformation is authorized by General
note 12(t)/85.107, HTSUS, which states:
(A) A change to subheading 8531.80 from any other
heading; or
(B) A change to subheading 8531.80 from subheading
8531.90, whether or not there is also a change from
any other heading, provided there is a regional
value content of not less than:
(1) 60 percent where the transaction value method
is used, or
(2) 50 percent where the net cost method is used.
First, in regard to the alarms assembled in Mexico and
classifiable under subheading 8531.80, HTSUS, you contend
that they are originating goods. Therefore, the non-originating components of the alarm must come from a heading
other than heading 8531, or satisfy the regional value
content. You state that plastic horn top and bottom, and
cover and base, classifiable under heading 8531, which do
not satisfy the tariff shift (i.e., from any other heading)
are all themselves NAFTA originating goods because they are
made in the U.S. As to the other non-originating materials
comprising the alarm, it appears that the requisite tariff
shift from any other heading is satisfied because all of the
components are classifiable under HTSUS tariff provisions
other than heading 8531. Therefore, provided the alarm
components are classified in a heading other than heading
8531, HTSUS, and the plastic horn top and bottom, and cover
and base are produced exclusively from originating
materials, the alarms will be considered originating goods
under NAFTA.
Second, in regard to the C.O. unit, if the alarm is an
originating good, the only non-originating goods are the
transformer and the screw and anchor kit packaged with the
alarm. Since both the transformer and screw and anchor kit
are classifiable under HTSUS tariff provisions other than
heading 8531, we find that the C.O. unit is also considered
an originating good pursuant to General Note 12(b)(ii)(A),
HTSUS, and, therefore, is eligible for preferential duty
treatment under NAFTA.
II. Country of Origin Marking
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), interim regulations, defines "country
of origin" as:
The country of manufacture, production, or growth
of any article of foreign origin entering the
United States. 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 the
meaning of 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), 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), interim regulations, defines a "good of a
NAFTA country" as an article for which the country of origin
is Canada, Mexico, or the U.S. as determined under the NAFTA
Marking Rules set out at 19 CFR Part 102, interim
regulations.
Section 102.11, interim regulations, sets forth the
required hierarchy for determining whether a good is a good
of NAFTA country for marking purposes. Section 102.11(a),
interim regulations, states that the 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 applicable
requirements of these rules are satisfied.
In this case, the applicable rule is section 102.11(a)(3),
interim regulations. "Foreign material" is defined in
section 102.1(e), 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."
Therefore, in order to determine whether Mexico is the
country of origin, we must look at those materials whose
country of origin is other than Mexico.
As the C.O. unit is classifiable pursuant to Note 4,
Section XVI, HTSUS, as a functional unit under subheading
8531.80.80, HTSUS, the applicable change in tariff
classification set out in section 102.20(p), Section XVI,
Chapters 84 through 85, 8531.10-8531.80 of the interim
regulations provides:
8531.10-8531.80 ... A change to subheading 8531.10
through 8531.80 from any other
subheading, including another
subheading within that group,
except when resulting from a
simple assembly.
Section 102.1(o), interim regulations, states that a
"[s]imple assembly" means the fitting together of five or
fewer parts all of which are foreign (excluding fasteners
such as screws, bolts, etc.) by bolting, gluing, soldering,
sewing or by other means without more than minor
processing." In this case, there is no simple assembly
operations because the alarm, transformer, and screw and
anchor kit are only packaged together in Mexico. The alarm,
classifiable under subheading 8531.80, HTSUS, does not meet
the tariff shift. Furthermore, although the transformer and
screw and anchor kit appear to meet the requisite tariff
shift since they are classifiable in a subheading other than
subheading 8531.80, HTSUS, section 102.17, interim
regulations, states that "[a] foreign material shall not be
considered to have undergone the applicable change in tariff
classification set out in 102.20, or satisfy the other
applicable requirements of that section by reason of ...
(c) Simple packing, repacking or retail packaging
without more than minor processing....
Accordingly, section 102.11(b) of the hierarchial rules
must be applied to determine the country of origin. Section
102.11(b), interim regulations, provides that:
Except for a good that is specifically described in the
Harmonized System as a set, or is classified as a set
pursuant to General Rule of Interpretation 3, where the
country of origin cannot be determined under paragraph
(a), the country of origin of the good:
(1) Is the country or countries of origin of
the single material that imparts the
essential character of the good ...
When determining the essential character of a good under
section 102.11, interim regulations, section 102.18(b)
provides that only domestic and foreign materials that are
classified in a tariff provision from which a change is not
allowed shall be taken into consideration and that in
deciding among these materials consideration is given to
various factors, including the nature of the material or
component, bulk, quantity, weight, value, and the role of a
constituent material in relation to the use of the goods.
In this case, a change is not allowed for the alarm
because it is classifiable under subheading 8531.80, HTSUS,
and does not change from any other subheading, including
another subheading within subheadings 8531.10 through
8531.80, HTSUS. Furthermore, a change is not allowed for
the transformer and kit pursuant to section 102.17 because
they only undergo packaging operations. Accordingly, among
these three materials, we are of the opinion that the single
material which imparts the essential character of the C.O.
unit is the alarm. Accordingly, the country of origin of
the C.O. unit is the country of origin of the alarm.
Returning to section 102.20(p), Section XVI, Chapters 84
through 85, 8531.10-8531.80 of the interim regulations, in
order to determine whether Mexico is the country of origin
of the alarm, we must look at those materials whose country
of origin is other than Mexico. In this case, all of the
materials used to assemble the alarm are classifiable under
a subheading other than 8531.80, HTSUS. Accordingly, the
requisite tariff shift has been met, and the country of
origin of the alarm is Mexico. As the alarm constitutes the
essential character of the C.O. unit, the country of origin
of the C.O. unit also is Mexico.
In regard to the marking of the retail box, "Transformer
made in China, Carbon monoxide alarm assembled in Mexico,"
or "Assembled in Mexico. Printed in U.S.A." will not be
appropriate. Rather, since the country of origin of the
C.O. unit is Mexico, it is acceptable to mark only the
container "Made in Mexico," "Product of Mexico," or words of
similar meaning if the ultimate purchaser will receive the
C.O. unit in its retail container. The components of the
C.O. unit do not require any marking, but they also may be
marked "Made in Mexico," "Product of Mexico," or words of
similar meaning. If the individual components of the C.O.
unit are marked with a country other than Mexico, the retail
package container must clearly indicate the country of
origin of the C.O. unit and must make reference to the
countries indicated on the components so that the ultimate
purchaser is not misled as to the actual origin of the
imported C.O. unit. Accordingly, since the transformer is
marked "Made in China," either this marking must be removed,
or the container should be marked "C.O. unit Made in Mexico
with components from China."
HOLDING:
Provided the alarm components are classified in a
heading other than heading 8531, HTSUS, and the plastic horn
top and bottom, and cover and base are produced exclusively
from originating materials, the alarm will be considered an
originating good under NAFTA. Therefore, if the alarm is an
originating good, we find that the carbon monoxide alarm
unit is an originating good pursuant to General Note
12(b)(ii)(a). Therefore, the carbon monoxide alarm unit
will be eligible for preferential duty treatment under
NAFTA. In addition, pursuant to 102.11(a)(3), interim
regulations, the country of origin of the alarm of the
carbon monoxide alarm unit is Mexico. Furthermore, pursuant
to 102.11(b), interim regulations, the country of origin of
the carbon monoxide unit is Mexico for purposes of country
of origin marking. Marking the container in which the
ultimate purchaser receives the carbon monoxide alarm unit
"Made in Mexico," "Product of Mexico," or words of similar
meaning will be appropriate.
A copy of this ruling letter should be attached to the
entry documents filed at the time the goods are 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