CLA-2 RR:TC:SM 560521 KSG
Gerald M. Duffy
Vice President/ General Manager
Talon
Two LakePointe Plaza
4135 South Stream Blvd.
Charlotte, NC 28217
RE: Applicability of partial duty exemption under HTSUS
subheading 9802.00.80 to zipper chain; NAFTA country of
origin marking; Article 509
Dear Mr. Duffy:
This is in response to your letter of June 17, 1997,
requesting a ruling regarding the applicability of
subheading 9802.00.80 of the Harmonized Tariff Schedule of
the United States (HTSUS), and the North American Free Trade
Agreement ("NAFTA") to imported zipper chain. A sample was
submitted with your request.
FACTS:
Talon, Inc. is entering into a contract to manufacture
or assemble zipper chain in Mexico from raw materials made
in the U.S. You state that the process being done in Mexico
involves forming wire from round diameter brass wire of U.S.
origin and then cutting and attaching this formed wire onto
woven textile tape of U.S. origin. The wire is formed by a
wire mill machine that puts a groove into the wire. Final
finishing, including heat setting, marking, and reeling of
the metal zipper chain will be done in the U.S. The product
will then be shipped as chain or will be manufactured into
finished cut-to-length zippers in the U.S.
ISSUES:
I. Whether the zipper chain will qualify for the partial
duty exemption available under subheading 9802.00.80,
HTSUS, when returned to the U.S.
II. What is the country of origin for marking of the zipper
chain?
III. Whether the zipper chain will qualify for
preferential tariff treatment under the North American
Free Trade Agreement.
LAW AND ANALYSIS:
I. Subheading 9802.00.80, HTSUS
Subheading 9802.00.80, HTSUS, provides a partial duty
exemption for:
articles...assembled abroad in whole or in part of
fabricated components, the product of the United
States, which (a) were exported in condition ready for
assembly without further fabrication, (b)have not lost
their physical identity in such articles by change in form, shape or otherwise, and (c) have not been
advanced in value or improved in condition abroad
except by being assembled and except by operations
incidental to the assembly process such as
cleaning, lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUS,
must be satisfied before a component may receive a duty
allowance. An article entered under this tariff provision
is subject to duty upon the full value of the imported
article, less the cost or value of the U.S. components, upon
compliance with the documentary requirements of 19 CFR
10.24.
The applicable regulations for this exemption are set
forth in 19 CFR 10.11 through 19 CFR 10.26. The provisions
of 19 CFR 10.14(a) state in part that the components must be
in condition ready for assembly without further fabrication
at the time of their exportation from the United States to
qualify for the exemption. Components will not lose their
entitlement to the exemption by being subjected to
operations incidental to the assembly either before, during,
or after their assembly with other components.
Qualifying assembly abroad is described in 19 CFR
10.16. The assembly operations performed abroad may consist
of any method used to join or fit together solid components,
such as welding, soldering, riveting, force fitting, gluing,
laminating, sewing, or the use of fasteners, and may be
preceded, accompanied, or followed by operations incidental
to the assembly. Operations incidental to the assembly
process are not considered further fabrication operations,
as they are of a minor nature and cannot always be provided
for in advance of the assembly operations. However, any
significant process, operation, or treatment whose primary
purpose is the fabrication, completion, physical, or
chemical improvement of a component precludes the
application of the exemption under subheading 9802.00.80,
HTSUS, to that component.
In the instant case, attaching the formed wire onto
woven textile tape is considered an acceptable assembly
operation pursuant to 10 CFR 10.16(a) because solid
components are being joined together.
However, forming the wire from round diameter brass
wire so that it can be attached to the textile tape is not
an acceptable assembly operation or operation incidental to
the assembly, but is a further fabrication of the wire.
This conclusion is based on prior Customs rulings. In HRL
553732, dated December 20, 1990, Customs held that
stainless steel strip which was unrolled through a wheel
housing that put a slight bend in the strip, constitutes a
further fabrication and therefore, the stainless steel strip
is not entitled to the duty allowance under subheading
9802.00.80, HTSUS. In HRL 557513, dated January 21, 1994,
Customs determined that wire that passes over a preforming
roller head in a machine process which shapes the wire into
its final form before passing into a finished strand was
considered to be a further fabrication of the wire
independent of the assembly.
Consequently, the zipper chain may enter the U.S. under
subheading 9802.00.80, HTSUS, with allowances in duty for
the cost or value of the woven textile tape, provided the
documentary requirements of 19 CFR 10.24 are satisfied. No
duty allowance may be made for the cost or value of the
wire.
II. NAFTA country of origin marking
The second issue presented is whether the zipper chain
will be considered to be a good of Mexico for country of
origin marking purposes. A good of a NAFTA country is
defined in 19 CFR 134.1(g) as an article for which the
country of origin is Canada, Mexico, or the United States as
determined under the NAFTA Marking Rules. The NAFTA Marking
Rules are defined in 19 CFR 134.1(j) as the rules
promulgated for purposes of determining whether a good is a
good of a NAFTA country.
Section 102.11, Customs Regulations (19 CFR 102.11),
sets forth the required hierarchy for determining whether a
good is a good of a NAFTA country for the purposes of
country of origin marking and determining the rate of duty
and staging category applicable to an originating good as
set out in Annex 302.2. Paragraph (a) of this section
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.
"Foreign material" is defined in 19 CFR 102.1(e) 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."
Sections102.11(a)(1) and 102.11(a)(2) do not apply to the
facts presented in this case because the zippers are
processed in Mexico of U.S. material and therefore are not
wholly obtained or produced, nor produced exclusively from
domestic materials. Since an analysis of sections
102.11(a)(1) and 102.11(a)(2) will not yield a country of
origin determination, we look to section 102.11(a)(3).
Section 102.11(a)(3) provides that the country of
origin is the country in which "each foreign material
incorporated in that good undergoes an applicable change in
tariff classification as set forth in 19 CFR 102.20...."
The zipper is classified at 9607.11.00, HTSUS. The
applicable tariff shift rule found in section 102.20(s)
provides as follows:
HTSUS Tariff Shift and/or other requirements
9607.11-9607.19.....A change to subheading 9607.11 through
9607.19
from any other subheading, except from subheading 9607.20 when that change is
pursuant to General Rule of Interpretation 2(a).
In the instant case, the foreign materials are textile
tape, which is classified in subheading 5806, HTSUS and
brass wire, which is classified at subheading 7408.21,
HTSUS. Therefore, both foreign materials undergo the
applicable tariff shift. Pursuant to 19 CFR 102.11(a)(3),
the country of origin of the zipper is the country where the
foreign materials undergo the applicable tariff shift, which
is Mexico.
III. NAFTA preferential tariff treatment
The third issue concerns whether the imported zipper
chain is entitled to preferential tariff treatment under
NAFTA. Article 401 of NAFTA is incorporated into General
Note 12, HTSUS. General Note 12(a) provides, in pertinent
part, that:
(ii) Goods that originate in the territory of a
NAFTA party under subdivision (b) of this note and
that qualify to be marked as goods of Mexico under
the terms of the marking rules ....and are entered
under a subheading for which a rate of duty appears
in the "Special" subcolumn followed by the symbol "MX" in parentheses, are eligible for such duty
rate....
Thus by operation of General Note 12, the eligibility of a
particular article for NAFTA duty preference is predicated,
in part, upon an origin determination under the NAFTA
Marking Rules of either Canada or Mexico. As discussed
above, in the instant case, we find that under the NAFTA
Marking Rules the zipper chain is a good of Mexico.
General Note 12(b) provides, in pertinent part, the
following:
For 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:
(i)they are goods wholly obtained or produced entirely
in the territory of Canada, Mexico and/or the
United States; or
(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 material 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.
We have insufficient information to determine whether
the zipper chain is considered "originating" under General
Note 12(b)(i) or (iii). However, with respect to General
Note 12(b)(ii)(A), the applicable tariff shift rule under
General Note 12(t)/96.5(a) provides for a change in tariff
classification to subheadings 9607.11 through 9607.19 from
any other chapter. Since the materials imported into Mexico
undergo the applicable tariff shift, the zipper chain is
eligible for preferential tariff treatment under the NAFTA.
The special MX rate of duty under subheading 9607.11.00,
HTSUS, is free.
HOLDING:
The zipper chain may enter the U.S. under subheading
9802.00.80, HTSUS, with allowances in duty for the cost or
value of the woven textile tape, provided the documentary
requirements of 19 CFR 10.24 are satisfied. No duty
allowance may be made for the cost or value of the wire
under subheading 9802.00.80, HTSUS.
Pursuant to the NAFTA Marking Rules of origin set
forth at 19 CFR 102.11, the country of origin of the zipper
chain is Mexico. In accordance with 19 U.S.C. 1304, the
good must be marked to indicate that Mexico is the country
of origin. The zipper chain, an originating good under
General Note 12(b)(ii)(A), is eligible for preferential
tariff treatment under the NAFTA at the "MX" rate.
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 the transaction.
Sincerely,
John Durant
Director
Tariff Classification Appeals
Division