CLA-2 RR:IA 561791 RFC
Port Director
Port of Nogales
U.S. Customs Service
200 N. Mariosa
Nogales, AZ 85621
RE: Internal Advice; NAFTA; HTUSU General Note 12
Dear Sir or Madam:
This is in reference to your June 13, 2000, memorandum seeking internal advice concerning whether certain automotive assemblies are eligible for preferential tariff treatment under General Note 12 to the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The importer (EDS Manufacturing) operates an assembly plant in Nogales, Sonora, Mexico. The Mexican subsidiary assembles electrical goods from various components and imports them into the United States from Mexico. As imported, the assemblies are classified in the HTSUS under 8501.10.4040.
All the components used to make the assemblies are of U.S. origin with the exception of three metal screws and two twelve-volt motors. As imported into Mexico, the screws are classified in heading 7318 and the motors are classified in heading 8501.
ISSUE:
Whether the goods satisfy the applicable rule of origin under General Note 12 to the HTSUS.
LAW AND ANALYSIS:
In order to be eligible for preferential tariff treatment under General Note 12 to the HTSUS, a good must satisfy one of the following rules:
(b) For the 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 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 subdivisions (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; or
(iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the non-originating materials falling under provisions for "parts" and used in the production of such goods does not undergo a change in tariff classification because
(A) the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a),
or
(B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the goods themselves and their parts,
provided that such goods do not fall under chapters 61 through 63, inclusive, of the tariff schedule, and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note. For purposes of this note, the term "material" means a good that is used in the production of another good, and includes a part or an ingredient.
General Note 12(b) to the HTSUS.
In the instant case, in order for the automotive power pack assemblies to be eligible for preferential tariff treatment under General Note 12 by application of the tariff-shift rule for heading 8501, each of the non-originating materials used in the production of the good must undergo the required change in tariff classification. See HTSUS General Note 12 (b)(I)(A), The rule for heading 8501 provides as follows:
(A) A change to heading 8501 from any other heading, except from tariff items 8503.00.35, 8503.00.45 or 8503.00.65; or
(B) A change to heading 8501 from tariff items 8503.00.35, 8503.00.45 or 8503.00.65, 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.
GN 12(t)85 to the HTSUS.
Screws: The screws are classified in heading 7318 when imported into Mexico but when incorporated into the automotive power pack assemblies their classification shifts to heading 8501. Therefore, the screws satisfy the tariff-shift requirements of item (A) of the rule for heading 8501.
Twelve-Volt Motors: The motors are classified in heading 8501 when imported into Mexico and remain classified in that heading when incorporated into the automotive power pack assemblies. Therefore, the motors do not satisfy the tariff-shift requirements of item (A) of the rule for heading 8501. Moreover, as they do not come from heading 8503, the motors also do not satisfy the tariff-shift requirements of item (B) of the rule for heading 8501; and therefore the regional value content requirement in item (B) is not applicable.
In light of the above, the automotive power pack assemblies are not eligible for preferential tariff treatment under HTSUS General Note 12 insofar as they do not satisfy either of the tariff-shift rules for heading 8501.
In a submission on behalf of the importer, HQ 958954 is cited as support for finding that the automotive power pack assemblies are eligible for preferential tariff treatment despite the fact that the twelve-volt motors do not satisfy the applicable tariff-shift rules. That ruling deals with goods and
facts different from that in the instant case. Therefore, HQ 958954 does not serve as authority in the instant case for finding that the automotive power pack assemblies are eligible for preferential tariff treatment under HTSUS General Note 12.
HOLDING:
The above-mentioned automotive power pack assemblies are not eligible to receive preferential tariff treatment under HTSUS General Note 12.
Sincerely,
Myles Harmon, Acting Director
Commercial Rulings Division
1
2