MAR-02-05: RR:CR:SM 561149 MFC
Mr. Frank J. Desiderio
Grunfeld, Desiderio, Lebowitz & Silverman LLP
245 Park Avenue
33rd Floor
New York, New York 10167-3397
RE: Request for NAFTA Marking Ruling; gold rings; gem set gold
rings; country of origin marking; Article 509
Dear Mr. Desiderio:
This is in reference to your letter dated September 15, 1998
requesting a ruling confirming preferential tariff treatment
under the North American Free Trade Agreement (NAFTA) for gold
rings, some of which are set with gemstones of foreign origin,
assembled or finished in Mexico with U.S. castings or strikings.
You also seek a ruling that the rings are exempt from country of
origin marking requirements.
FACTS:
The rings at issue are produced from unwrought gold which is
imported into the U.S. from a non-NAFTA country. The gold is
alloyed and manufactured into castings or strikings ("rough
forms") in the U.S. The gemstones, which are later set into some
of the rings, are imported from other non-NAFTA countries. The
rough forms and gemstones are exported from the U.S. to Mexico
for assembly and finishing. The rings without gemstones are
finished in Mexico by polishing or engraving. You state that the
imported rings, with or without gemstones, are classifiable in
heading 7113, Harmonized Tariff Schedule of the United States
(HTSUS), the diamond gemstones are classifiable in heading 7102,
and the non-diamond gemstones are classifiable in heading 7103.
For purposes of this ruling, we are assuming that these
classifications are correct.
ISSUES:
1) Whether the imported rings are eligible for preferential
duty treatment under the NAFTA.
2) Whether the rings are exempt from country of origin
marking requirements.
LAW AND ANALYSIS:
A. NAFTA Preference
Article 401 of the NAFTA is incorporated into General Note
("GN") 12 of the Harmonized Tariff Schedule of the United States
("HTSUS") which provides, in pertinent part, as follows:
(a)(ii) Goods that originate in the territory of a NAFTA
party under subdivision (b) of this note and that qualifiy
to be marked as goods of Mexico under the terms of the
marking rules set forth in regulations issued by the
Secretary of the Treasury (whether or not the goods are
marked), when such goods are imported into the customs
territory of the United States 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, in accordance with section 201
of the North American Free Trade Implementation Act.
(b) 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 [de
minimis provision], 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....
(iii) they are goods produced entirely in the
territory of Canada, Mexico and/or the United
States exclusively from originating materials....
Thus, by operation of GN 12, the eligibility of an article
for NAFTA preferential treatment is predicated upon a finding
that the goods are originating in the territory of a NAFTA party
under GN12(b) and that they are goods of Canada or Mexico under
the NAFTA Marking Rules.
Rings without gemstones
With respect to the rings imported from Mexico without
gemstones, as the rings are made from unwrought gold from a non-NAFTA country, they are not "wholly obtained or produced entirely
in" a NAFTA country pursuant to GN 12(b)(ii)(A), HTSUS, as those
words are defined in GN 12(n). Thus, we must examine whether the
production of the "rough forms" from the non-NAFTA unwrought gold
in the U.S. results in the requisite change in tariff
classification pursuant to GN 12(b)(ii)(A), HTSUS. As the rough
forms of jewelry are classifiable under subheading 7113.19,
HTSUS, the applicable tariff shift rule as set forth in GN 12(t)
71.2, HTSUS, is "a change to headings 7113 through 7118 from any
heading outside that group, except from tariff items 7101.10.30
or 7101.22.30." The non-originating unwrought gold is classified
under heading 7108, HTSUS. Thus, the requisite change in tariff
classification occurs in the U.S. when the unwrought gold is
manufactured into rough forms. As a result, when the rough forms
are shipped to Mexico, they qualify as NAFTA originating
materials and, when returned from Mexico after polishing or
engraving operations, the finished rings qualify as originating
goods pursuant to GN 12(b)(iii), HTSUS.
Rings with gemstones
While the rough forms enter Mexico as NAFTA originating
materials, the gemstones do not, as they are sourced from non-NAFTA countries. The rings with gemstones imported from Mexico
do not qualify as NAFTA originating goods under GN 12(b)(i),
HTSUS, because they clearly are not "wholly obtained or produced
entirely in" a NAFTA country as those words are defined in GN
12(n), HTSUS. Once again, we look to GN 12(b)(ii)(A), HTSUS, to
determine whether the rings with gemstones are NAFTA originating.
The imported rings with diamond or non-diamond gemstones are
classifiable in heading 7113.19, HTSUS. The diamond gemstones
are classifiable in heading 7102, HTSUS, while the non-diamond
gemstones are classifiable under heading 7103, HTSUS. The
applicable tariff shift rule set forth in GN 12(t)/71.2, HTSUS,
is "a change to headings 7113 through 7118 from any heading
outside that group, except from tariff items 7101.10.30 or
7101.22.30." Thus, as the gemstones undergo the requisite tariff
shift when they are assembled with the rings in Mexico, the
imported rings with gemstones qualify as NAFTA originating goods.
B. Country of Origin Marking
The marking statute, section 304 of the 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 United States shall be marked in a conspicuous place as
legibly, indelibly, and permanently as the nature of the article
will permit, in such a manner as to indicate to the ultimate
purchaser in the United States 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.
The country of origin marking requirements for a "good of a
NAFTA country" are determined in accordance with Annex 311 of the
NAFTA, as implemented by section 207 of the North American Free
Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat.
2057) (December 8, 1993) and the regulations set forth in 19 CFR
Parts 102 and 134.
Section 134.1(b) (19 CFR 134.1(b)) of the regulations
defines "country of origin" as the country of manufacture,
production, or growth. In order to change the country of origin,
further work or material added to the article in another country
must effect a substantial transformation. However, for a good of
a NAFTA country, the NAFTA Marking Rules will determine the
country of origin. 19 CFR 134.4(b). A "good of a NAFTA
country" is an article for which the country of origin is Canada,
Mexico or the United States as determined under the NAFTA Marking
Rules. 19 CFR 134.1(g).
Part 102 of the regulations (19 CFR Part 102), contains the
"NAFTA Marking Rules" for purposes of determining whether a good
is a good of a NAFTA country. Section 102.11 of the regulations
(19 CFR 102.11) sets forth the required hierarchy for
determining country of origin for marking purposes. Section
102.11(a) provides that:
"[t]he 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 requirements of these
rules are satisfied."
"Foreign Material" is defined in section 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."
Neither style of ring is wholly obtained or produced, or
produced exclusively from domestic materials. Accordingly, we
must attempt to determine the country of origin pursuant to
section 102.11(a)(3). We look at the foreign materials to
determine if such materials have undergone the required tariff
shift pursuant to this rule. Both the rough forms and the
gemstones are of foreign (non-Mexican) origin.
We are now directed to 19 CFR 102.20 to determine whether
the required tariff shift has occurred. As discussed above, the
gold rings (with or without gemstones) are classified under
subheading 7113.19. Section 102.20(m) states that the rule for a
good classifiable under 7113.19 is a change to subheading 7113.11
through 7115.90 from any other subheading, including a subheading
in that group. The rough forms of jewelry are classifiable in
subheading 7113.19. The gemstones are classified under heading
7102 or 7103. While the gemstones make the required tariff
change, the rough forms do not. Therefore, the country of origin
of the rings imported with and without gemstones cannot be
determined under 19 CFR 102.11(a).
Section 102.11(b) provides a country of origin determination
for goods that cannot be classified under paragraph (a), and
states that the country of origin of the good is the country or
countries of origin of the single material that imparts the
essential character of the good. 19 CFR 102.11(b)(1).
The general rules of interpretation in section 102.18(b)(1)
(19 CFR 102.18(b)(1)) state that:
(b) (1) For purposes of identifying the material that
imparts the essential character to a good under 102.11, the
only materials that shall be taken into consideration are
those domestic or foreign materials that are classified in a
tariff provision from which a change in tariff
classification is not allowed under the 102.20 specific
rule or other requirements applicable to the good. For
purposes of this paragraph (b)(1):
. . .
(iii) If there is only one material that is
classified in a tariff provision from which a
change in tariff classification is not allowed
under the 102.20 specific rule or other
requirements applicable to the good, then that
material will represent the single material that
imparts the essential character to the good under
102.11.
Applying section 102.18(b)(1)(iii) to the facts of this
case, we find that the single material that imparts the essential
character of both styles of rings are the rough forms.
Therefore, pursuant to section 102.11(b)(1), the country of
origin of both styles of rings is the U.S. The marking statute
only requires articles of foreign origin to be marked with their
country of origin (19 U.S.C. 1304). Since the country of origin
for marking purposes of both styles of rings imported into the
U.S. will be the U.S., it will be excepted from country of origin
marking requirements.
However, for duty purposes, 19 CFR 102.19(b) of the NAFTA
Marking Rules provides that both styles of rings will be treated
as products of Mexico. Section 102.19(b) states that:
If, under any other provision of this part, the country of
origin of a good which is originating within the meaning of
181.1(q) of this chapter is determined to be the United
States and that good has been exported from, and returned
to, the United States after having been advanced in value or
improved in condition in another NAFTA country, the country
of origin of such good for Customs duty purposes is the last
NAFTA country in which that good was advanced in value or
improved in condition before its return to the United
States.
While both styles of rings will be considered products of
the U.S. for country of origin marking purposes upon their return
to the U.S. (see country of origin discussion above), these will
be subject to the NAFTA "MX" preferential duty rate since they
were last advanced in value or improved in condition in Mexico
before their return to the U.S. Section 102.19(b) "is intended
to facilitate the application of the appropriate NAFTA
preferential duty rate under General Note 12(a), HTSUS, in the
case of originating goods the origin of which is determined to be
the United States under the Part 102 provisions." 60 Fed. Reg.
22312, 22318 (May 5, 1995) (Notice of Proposed Rulemaking, Final
Rule published 61 Fed. Reg. 28932 (June 6, 1996)).
HOLDING:
Based on the information submitted, the imported rings (with
and without gemstones) are eligible for the NAFTA "MX" rate.
The subject imported rings are excepted from country of
origin marking requirements as they are considered to be of U.S.
origin under the NAFTA Marking Rules.
A copy of this ruling 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
Commercial Rulings Division