Mr. Brian Kavanaugh
Deringer Logistics Consulting Group
1 Lincoln Boulevard, Suite 225
Rouses Point, NY 129789
RE: Country of origin and NAFTA eligibility of a dermabrasion machine manufactured in Canada; Article 509; General Note 12; Essential character; Tariff shift; NY I82719
Dear Mr. Kavanaugh:
This is in response to your letter dated July 11, 2002 (and subsequent submissions dated November 20, 2002, December 3, 2002 and December 11, 2002), on behalf of Dectro International, which requests a binding ruling regarding the country of origin and NAFTA eligibility of a dermabrasion machine manufactured in Canada from domestic and foreign components. No sample was submitted for our examination.
FACTS:
We are informed that Dectro International will be importing dermabrasion machines into the U.S. from Canada that have been manufactured from Canadian and foreign components in the manner described below.
In Italy, the following components of Italian origin will be assembled together:
Component Qty HTSUS
Sheet metal plate 1 9018.90.90
Vacuum pump 2 8414.10.99
Selenoid 1 8536.49.90
Pressure regulator 1 8481.10.00
Filters 2 8421.31.90
Power PCB 1 9018.90.90
You state that the resulting sheet metal subassembly, classifiable in subheading 8479.89, Harmonized Tariff Schedule of the United States (HTSUS), is subsequently exported to Canada where it is further assembled together with the following components to form a completed dermabrasion machine:
Component Qty HTSUS Origin
Vacuum tubing
and connectors 1 9018.90.90 France
Relay 1 8536.49.90 Japan
Logic PCB 1 9018.90.90 Italy
Transistors 7 8541.29.00 Morocco
Pressure sensor 1 9032.89.90 USA
Display driver and timer 7 9018.90.90 Malaysia
LED display 3 9018.90.90 USA
Power supply 1 8504.40.90 USA
Metal enclosure power
supply 1 8504.90.10 Canada
Intel connector 1 8536.90.99 USA
Remote switch connector 1 8536.90.99 Leichtenstein
Switch 1 8536.50.99 USA
Outlet cable 12 8544.51.90 USA
Xir outlet connector 1 8536.90.99 USA
Foot switch 1 8536.50.99 USA
Molded plastic cabinet 1 9018.90.90 Canada
Keyboard face 1 9018.90.90 Canada
Once assembly operations are completed, the finished dermabrasion machine will be packaged in Canada together with the following components and exported to the United States:
Waste crystal bottle 1 7017.10.10 Italy
New crystal bottle 1 7017.10.10 Italy
Hand piece with tubing 1 9018.90.90 Italy
Beauty mask 25 3304.99.90 Italy
Disposable plastic cap 1 6506.99.90 Italy
Aluminum oxide micro-
crystals 1 2818.20 USA
Silica bottle 1 7017.10.00 Italy
Silica pearl 1 2505.10.10 Italy
Instruction manual 1 4911 Canada
No sample of the components or completed machine was received for our examination. For purposes of this ruling, we assume that all tariff classifications provided are correct. Upon completion, the finished dermabrasion machine will be imported into the U.S. In accordance with New York Ruling NYI8719, dated June 21, 2002, previously issued in connection with the subject merchandise, the assembled machine is classfiable in subheading 8479.89.9897, HTSUS.
ISSUE:
What is the country of origin and NAFTA eligibility of the assembled dermabrasion machine?
LAW AND ANALYSIS:
Article 401 of NAFTA is incorporated into General Note 12, HTSUS. General Note 12(a) provides, in pertinent part, that:
(i) 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 Canada 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 “CA” 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.
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:
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.” Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the dermabrasion machine is assembled in Canada of Canadian and other materials and therefore are neither 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...” As per New York ruling NY I82719, supra, the finished dermabrasion machine is classified in subheading 8479.89.97, HTSUS. The applicable tariff shift rule found in section 102.20(o) provides as follows:
8479.10-8479.89 A change to subheading 8479.10 through 8479.89 from any other subheading, including another subheading in that group.
You indicate that, with the exception of the molded plastic cabinet, keyboard face, metal enclusure power supply and instruction manual, all other materials utilized are of non-Canadian origin, thus qualifying as “foreign materials” subject to the rule set forth above.
Under the facts provided, the sheet metal subassembly, which is classifable in subheading 8479.89 when imported into Canada from Italy, does not undergo the requisite tariff shift when processed into a completed dermabrasion machine. Therefore, the country of origin cannot be determined in accordance with 19 CFR 102.11(a)(3).
Because 19 CFR 102.11(a) (incorporating section 102.20), is not determinative of origin, analysis continues to section 102.11(b), which states:
Except for a good that is specifically described in the Harmonized Tariff Schedule as a set, or is classified as a set pursuant to General Rule of Interpretation 2, where the country origin cannot be determined under paragraph (a), 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, or
If the material that imparts the essential character of the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method provided under the Appendix to part 181 of the Customs Regulations.
Here, because section 102.11(b)(2) is not relevant to the facts at hand, the applicable rule that must be applied to determine the country of origin of the dermabrasion machine is section 102.11(b)(1), which provides that the country of origin is the country of origin of the “single” material that imparts the essential character of the good.
“Material” is defined in 19 CFR 102.1(1) of the Customs Regulations (19 CFR 102.1(1) as “a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components.” When determining the essential character of a good under section 102.11, Customs regulations, section 102.18(b)(2), provides that, “for purposes of applying section 102.11, only domestic and foreign materials (including self-produced materials) that are classified in a tariff provision from which a change in tariff classification is not allowed in the rule for the good set out in section 102.20 shall be taken into consideration in determining the parts or materials that determine the essential character of a good.”
Based upon the facts provided, the sheet metal subassembly is the only material that is classified in a tariff provision from which a change is not allowed, as set forth by the appropriate rule in 19 CFR 102.20. Therefore, the Italian sheet metal subassembly is the single material that imparts the essential character of the good. Accordingly, under section 102.11(b)(1), the country of origin of the dermabrasion machine is Italy.
We note, however, that section 102.19(a) of the Customs Regulations (19 CFR 102.19(a)), which contains a NAFTA preference overide provision:
Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of 181.1(q) of this chapter is not determined under section 102.11(a) or (b) or section 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent processing other than minor processing…
Thus, to complete the determination of origin required by General Note 12(a), and to determine whether the article is entitled to tariff preferences under the NAFTA, we must determine whether the dermabrasion machine is an “originating good” pursuant to the rules of origin in General Note 12(b), which provides, in pertinent part:
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
they have been transformed in the territory of Canada, Mexico, and/or the United States so that-
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
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.
Inasmuch as the facts presented state that some of the components originate in non-NAFTA countries, General Note 12(b)(i) and (iii) are inapplicable. Therefore, to determine whether the dermabrasion machine is considered to be “originating” consideration must be given to General Note 12(b)(ii)(A) which provides, in pertinent part, that the goods are “transformed in the territory of Canada, Mexico and/or the United States” in such a manner that “…each of the non-originating materials undergoes a change in tariff classification described in subdivisions (r), (s) and (t)…or the rules set forth therein.”
As set forth in ruling NY I82719, supra, the dermabrasion machines are classifiable in subheading 8479.89.9897, HTSUS. With respect to General Note 12(b)(ii)(A), the applicable tariff shift rule under General Note 12(t)84.232 states:
(A) A change to subheading 8479.89 from any other heading; or
(B) A change to subheading 8479.89 from subheading 8479.90, whether or not there is also a change from any other subheading, provided that there is a regional value content of not less than:
60 percent where the transaction value method is used, or
50 percent where the net cost method is used.
Based upon the information provided, because the sheet metal subassembly that originates in Italy is classifiable in subheading 8479.89 upon importation into Canada, and does not undergo a change in subheading as a result of processing in Canada, it does not satisfy the tariff shift rule in General Note 12(t)/84.232(A). Moreover, because the sheet metal assembly is not classifiable in subheading 8479.90, General Note 12(t).84.232(B) is likewise inapplicable. Therefore, because this non-originating component does not undergo the necessary change in tariff classification required by subdivision (t), the criteria set forth in General Note 12 is not met. Accordingly, the dermabrasion machine is not an “originating good” for purposes of General Note 12 and 19 CFR Part 181.1(q).
Consequently, the completed dermabrasion machine is not entitled to NAFTA duty preference when imported into the U.S. from Canada. Moreover, in the absence of a finding that the merchandise is an “orginating good” within the meaning of 19 CFR 181.1(q), the NAFTA preference overide provision is inapplicable. Accordingly, the country of origin of the assembled dermabrasion machines is Italy, pursuant to 19 CFR 102.11(b)(1), and must be marked accordingly.
HOLDING:
Based on the information provided, the country of origin of the assembled dermabrasion machines is Italy.
Where non-originating component materials do not meet the requisite tariff shift rule set forth in General Note 12(t) to the HTSUS, the finished good does not qualify for preferential tariff treatment under the NAFTA.
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,
Myles B. Harmon
Acting Director
Commercial Rulings Division