CLA-2 RR:IA 562861 RFC
TARIFF NOS.: 7326.90.8587; 7419.99.5050; 7616.99.5090; 3926.90.9880; 8505.19.0080; 7319.20.20
Mr. Les Suzuki
Livingston International Consulting Group
1140 West Pender Street, Suite 720
Vancouver BC
Canada V6E 4115
RE: NAFTA; HTSUS General Note 12; Parts for Nametags
Dear Mr. Suzuki:
This is in reference to your June 13, 2003, request to the National Commodity Specialist Division for a binding ruling on the classification and eligibility for North American Free Trade Agreement (NAFTA) preferential tariff treatment under General Note 12 to the Harmonized Tariff Schedule of the United States (HTSUS) for parts for nametags. Your request has been forwarded to this office for a response.
FACTS:
The facts as presented in the ruling request are as follows: Parts for use in making metal nametags are exported in bulk form from Canada to the United States. The parts consist of metal plates manufactured in Canada by stamping and cutting coiled or plate steel, brass or aluminum; plastic covers manufactured in Canada; and magnets and safety pins manufactured in China. No information was submitted with respect to whether the materials used to manufacture the parts in Canada are originating or non-originating.
The parts used to make the nametags are shipped together in the same carton but in separate packages. The individual parts are normally shipped in quantities sufficient to assemble a pre-determined number of nametags.
In the ruling request, it is contended that the numerous parts shipped in bulk form should be classified together as complete or finished articles pursuant to General Rule of Interpretation 2(a), HTSUS.
ISSUES:
What is the proper classification of the parts under the HTSUS?
Whether the parts shipped and presented in bulk form are classified together as complete or finished articles pursuant to General Rule of Interpretation 2(a).
Whether the goods satisfy the applicable rule of origin under General Note 12 to the HTSUS, and thus are eligible for NAFTA preferential tariff treatment.
LAW AND ANALYSIS:
Classification of the Merchandise
Merchandise imported into the United States is classified under the HTSUS. The tariff classification of merchandise under the HTSUS is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which otherwise requires, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUS and are to be considered statutory provisions of law for all purposes. See Sections 1204(a) and 1204(c) of the Omnibus Trade and Competitiveness Act of 1988 (19 U.S.C. § 1204(a), 1204(c)).
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule (i.e., (1) merchandise is to be classified under the 4-digit heading that most specifically describes the merchandise; (2) only 4-digit headings are comparable; and (3) merchandise must first satisfy the provisions of a 4-digit heading before consideration is given to classification under a subheading within this 4-digit heading) and any relative section or chapter notes and, provided such headings or notes do not otherwise require, then according to the other GRIs.
GRI 6 prescribes that, for legal purposes, GRIs 1 to 5 shall govern, mutatis mutandis, classification at subheading levels within the same heading. Therefore, merchandise is to be classified at equal subheading levels (i.e., at the same digit level) within the same 4-digit heading under the subheading that most specifically describes or identifies the merchandise.
The Explanatory Notes to the Harmonized Commodity Description and Coding System (hereinafter "Harmonized System") represent the official interpretation of the Customs Cooperation Council (also known by the informal working name “World Customs Organization”) on the scope of each heading. See H.R. Conf. Rep. No. 100-576, 100th Cong., 2d Sess. 549 (1988); 23 Customs Bulletin No. 36, 3 (T.D. 89-90, September 6, 1989), 59 F.R. 35127 (August 23, 1989). Although not binding on the contracting parties to the Harmonized System Convention or considered to be dispositive in the interpretation of the Harmonized System, the Explanatory Notes should be consulted on the proper scope of the Harmonized System. Id.
In the ruling request, it is contended that the numerous parts shipped in bulk should be classified as finished articles pursuant to GRI 2(a). With respect to this contention, GRI 2(a) provides, in pertinent part, as follows:
(a) any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), presented unassembled or disassembled.
GRI 2 (a) to the HTSUS.
The Harmonized System Explanatory Notes to GRI 2(a) provide, in pertinent part, as follows:
RULE 2 (a)
(Articles presented unassembled or disassembled)
(V) The second part of Rule 2 (a) provides that complete or finished articles presented unassembled or disassembled are to be classified in the same heading as the assembled article. When goods are so presented, it is usually for reasons such as requirements or convenience of packing, handling or transport.
(VI) This Rule also applies to incomplete or unfinished articles presented unassembled or disassembled provided that they are to be treated as complete or finished articles by virtue of the first part of this Rule.
(VII) For the purposes of this Rule, "articles presented unassembled or disassembled" means articles the components of which are to be assembled either by means of fixing devices (screws, nuts, bolts, etc.) or by riveting or welding, for example, provided only assembly operations are involved.
No account is to be taken in that regard of the complexity of the assembly method. However, the components shall not be subjected to any further working operation for completion into the finished state.
Unassembled components of an article which are in excess of the number required for that article when complete are to be classified separately.
(VIII) Cases covered by this Rule are cited in the General Explanatory Notes to Sections or Chapters (e.g., Section XVI, and Chapters 44, 86, 87 and 89).
(IX) In view of the scope of the headings of Sections I to VI, this part of the Rule does not normally apply to goods of these Sections.
In the instant case, the numerous parts are not packaged in any manner to indicate that they constitute an identifiable article or have the nature of an article that will be shipped in an unassembled condition “for reasons such as requirements or convenience of packing, handling or transport” (e.g., a bicycle shipped unassembled with all the parts constituting a single bicycle contained in a single box because it is easier to transport in this condition than in an assembled condition). Rather, the parts when shipped and imported in bulk appear to be packaged and shipped to accommodate the needs of a nametag production operation rather than articles recognized and identifiable as unassembled goods. Therefore, the importation of the bulk parts, even if consisting of all the parts to assemble a set number of nametags, are not goods “unassembled” within the meaning of GRI 2(a). Accordingly, each of the parts will be separately classified when imported into the United States in bulk under the applicable HTSUS provisions.
This decision is consistent with the past classification and treatment of parts shipped and presented in bulk form. See HQ 081999 (December 10, 1990)(components for golf carts shipped in bulk do not constitute unassembled articles or golf carts for purposes of GRI 2(a), and therefore the components are classified separately); see also, HQ 951065 (February 21, 1992)(parts for stun guns shipped in bulk do not constitute unassembled articles or stun guns for purposes of GRI 2(a), and therefore the parts are classified separately).
Upon review, the parts are classified as follows: the steel plates in heading 7326 as other articles of iron or steel (and specifically in subheading 7326.90.8587); the brass plates are classified in heading 7419 as other articles of copper (and specifically in subheading 7419.99.5050); the aluminum plates are classified in heading 7616 as other articles of aluminum (and specifically in subheading 7616.99.5090); the plastic covers are classified in heading 3926 as other articles of plastics and articles of other materials of heading 3901 to 3914 (and specifically in subheading 3926.90.9880); the magnets are classified in heading 8505 as permanent magnets (and specifically in subheading 8505.19.0080); and the safety pins are classified in heading 7319 as safety pins (and specifically in subheading 7319.20.20).
Preferential Treatment Under General Note 12
In order to be eligible for NAFTA preferential tariff treatment under General Note 12 to the HTSUS, goods must satisfy certain requirements in that note. General Note 12(a)(i) provides in, pertinent part, as follows:
(i) Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether 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 “CA” in parentheses, are eligible for such duty rate, in accordance with section 201 of the NAFTA Implementation Act.
General Note 12(a)(i) to the HTSUS (2003).
Accordingly, the nametag parts will be eligible for the “Special” “CA” rate of duty provided they are NAFTA “originating” goods under General Note 12(b), HTSUS, and qualify to be marked as a product of Canada under the above-referenced marking rules (as found in 19 CFR § 102). General Note 12(b), HTSUS, provides as follows:
(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 (2003).
In the instant case, the steel, brass and aluminum plates are stated to be manufactured in Canada by stamping and cutting coiled and plate steel, brass and aluminum; and the plastic covers are stated to be manufactured in Canada. No information was submitted as to whether the materials used to manufacture each part are NAFTA originating or non-originating. Assuming the materials are non-originating, however, we note that pursuant to General Note 12(b)(ii), HTSUS, the applicable tariff-shift rule set forth in General Note 12(e), HTSUS, for the steel nameplates classified in subheading 7326.90.8587, HTSUS, is as follows:
A change to headings 7325 through 7326 from any heading outside that group.
You state that the steel coil from which the steel nameplates are made is classified in heading 7212, HTSUS. Assuming the correctness of this classification, the steel nameplates would satisfy the tariff-shift rule and would qualify as NAFTA originating goods when imported into the U.S.
The applicable tariff-shift rule for the brass nameplates classified in subheading 7419.99.5050, HTSUS, is as follows:
A change to subheadings 7419.91 through 7419.99 from any other
heading.
You state that the brass coil from which the brass nameplates are made is classified in heading 7409, HTSUS. Assuming the correctness of this classification, the brass plates would satisfy the tariff shift rule and would qualify as NAFTA originating goods when imported into the U.S.
The applicable tariff-shift rule for the aluminum nameplates classified in subheading 7616.99.5090, HTSUS, is as follows:
A change to headings 7615 through 7616 from any other heading,
including another heading within that group.
You state that the aluminum coil from which the aluminum plates are made is classified in heading 7606, HTSUS. Assuming the correctness of this classification, the aluminum plates would satisfy the tariff-shift rule and would qualify as NAFTA originating goods when imported into the U.S.
Furthermore, pursuant to 19 CFR §§102.11(a)(3) and 102.20(n), Section XV: Chapters 72 through 83, the steel plates, brass plates and aluminum plates qualify to be marked as goods of Canada.
The applicable tariff-shift rule for the plastic covers classified in subheading 3926.90.9880, HTSUS, is as follows:
A change to headings 3924 through 3926 from any other heading, including another heading within that group, provided there is a regional value content of not less than:
(A) 60 percent where the transaction value method is used, or
(B) 50 percent where the net cost method is used.
We are unable to determine from the limited information you have provided whether the plastic covers satisfy the above tariff-shift rule. Therefore, we are unable to ascertain whether the plastic covers qualify as NAFTA originating goods under General Note 12 to the HTSUS, or to ascertain whether they qualify to be marked as goods of Canada under 19 CFR § 102.
The magnets and safety pins are stated to be manufactured in China. Accordingly, they would not be eligible for preferential tariff treatment because they do not satisfy the requirements under General Note 12. Therefore, they will be subject to the rates of duty found in the general subcolumn of column one to the HTSUS.
For purposes of country of origin marking, each carton in which the nametag parts are shipped to the United States must be marked “Product of Canada and China (and the country of origin of the plastic covers if a country other than Canada or China). The marking “Product of Canada—Components from Canada and China” will not be acceptable.
HOLDING:
Classification of the Merchandise
The parts are classified as follows: the steel plates in heading 7326 as other articles of iron or steel (and specifically in subheading 7326.90.8587); the brass plates are classified in heading 7419 as other articles of copper (and specifically in subheading 7419.99.5050); the aluminum plates are classified in heading 7616 as other articles of aluminum (and specifically in subheading 7616.99.5090); the plastic covers are classified in heading 3926 as other articles of plastics and articles of other materials of heading 3901 to 3914 (and specifically in subheading 3926.90.9880); the magnets are classified in heading 8505 as permanent magnets (and specifically in subheading 8505.19.0080); and the safety pins are classified in heading 7319 as safety pins (and specifically in subheading 7319.20.20).
NAFTA Preferential Treatment Under General Note 12
The above-mentioned steel plates, brass plates and aluminum plates are eligible for NAFTA preferential tariff treatment under General Note 12 (1) if the materials used to make the plates are originating or (2) if any of the materials used to make the plates are non-originating and the materials are correctly classified as stated above, and therefore satisfy the applicable tariff-shift rule.
Insufficient information was provided to determine if the plastic covers are eligible for NAFTA preferential tariff treatment under General Note 12.
The magnets and safety pins are not eligible for preferential tariff treatment. Therefore, they will be subject to the rates of duty found in the general subcolumn of column one to the HTSUS.
For purposes of country of origin marking, each carton in which the nametag parts are shipped to the United States must be marked “Product of Canada and China (and the country of origin of the plastic covers if a country other than Canada or China).
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 and Border Protection officer handling the transaction.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division