CLA-2 CO:R:C:M 955808 KCC
Mr. Jeff Cross
Dolphin Brokerage International
P.O. Box 52-7305
Miami, Florida 33152-7305
RE: Gold jewelry with gems; NAFTA; rules of origin; General Note
12(b)(ii)(A); non-originating materials; General Note 12(n);
General Note 12(t) 71.2; change in tariff classification; 19
CFR 134.1(b); country of origin; Marking Rules; 134.1(j), (g);
134.45(a)(2); 134.43(e); 102.11(a)(3); 102.20(n);
102.16(a)(2); production; substantial transformation; foreign
material; material; advanced in value; improved in condition;
minor processing; 102.1(a), (e), (i), (l), (m), (n), (p);
102.14; 102.11(b); essential character
Dear Mr. Cross:
This is in response to your recently received undated letter
written on behalf of Plainco, concerning the country of origin,
applicability of the North American Free Trade Agreement (NAFTA)
and tariff classification of gold jewelry under the Harmonized
Tariff Schedule of the United States (HTSUS).
FACTS:
In the United States, United States or foreign-origin twenty-
four karat gold is alloyed into eighteen, fourteen or ten karat
gold. After the gold is alloyed, it is cast into rough forms of
rings, earrings, etc. The rough forms are then assessed for purity
and sent to Mexico. Non-United States origin gems of limited value
(approximately 10% of the gold castings) are sent to Mexico for
incorporation into the gold jewelry. For purposes of this ruling,
we assume that the gems are not of Mexican origin either.
In Mexico, the rough forms are brought to a high polish and
the gems are set into the jewelry pieces. The gold jewelry with
gems is marked with hang tags stating "Made in Mexico." Thereafter,
the finished gold jewelry is shipped back to the United States.
ISSUE:
I. What is the tariff classification of the gold jewelry with
gems under the HTSUS?
II. Is the gold jewelry with gems eligible for preferential tariff
treatment under the NAFTA?
III. What are the country of origin and the proper marking
requirements applicable to the gold jewelry with gems?
LAW AND ANALYSIS:
I. Tariff Classification
The classification of merchandise under the HTSUS is governed
by the General Rules of Interpretation (GRI's). GRI 1, HTSUS,
states, in part, that "for legal purposes, classification shall be
determined according to terms of the headings and any relative
section or chapter notes...."
We are of the opinion that the gold jewelry with gems is
classified under subheading 7113.19, HTSUS, which provides for:
Articles of jewelry and parts thereof, of precious metal or
of metal clad with precious metal...Of precious metal whether
or not plated or clad with other precious metal...Of other
precious metal, whether or not plated or clad with precious
metal....
Classification to the eight digit level is dependant upon the exact
type of jewelry being imported, i.e., rings, earrings, necklaces,
bracelets, etc.
II. North American Free Trade Agreement
To be eligible for tariff preferences under the North American
Free Trade Agreement (NAFTA), goods must be "originating goods"
within the rules of origin in General Note 12(b), HTSUS. In this
case, to be an "originiting good" the gold jewelry with gems must
be "transformed in the territory of Canada, Mexico and/or the
United States" pursuant to General Note 12(b)(ii)(A), HTSUS, which
states:
except as provided in subdivision (f) of this note, each of
the non-originating materials used in the production os such
goods undergoes a change in tariff classification described
in subdivisions (r), (s) and (t) of this note or the rules
set forth therein....
First, we must examine whether the gold jewelry with gems is
"transformed in the territory of Canada, Mexico and/or the United
States" pursuant to General Note 12(b)(ii)(A), HTSUS. As the gold
jewelry with gems is classified under subheading 7113.19, HTSUS,
a transformation is evident when a change in tariff classification
occurs that is authorized by General Note 12(t) 71.2, HTSUS.
General Note 12(t) 71.2, HTSUS, states:
A change to headings 7113 through 7118 from any heading
outside that group.
Therefore, any non-originating materials must come from a
heading outside of headings 7113 through 7118, HTSUS. The non-
originating twenty-four karat gold is classified under heading
7108, HTSUS, and the non-originating gems are classified under
heading 7103, HTSUS. A change in tariff classification does occur.
Therefore, the gold jewelry with gems manufactured from non-
originating twenty-four karat gold and non-originating gems is
eligible for preferential tariff treatment under the NAFTA.
III. Country of Origin and 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 (or its
container) 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 exception of 19 U.S.C. 1304.
The country of origin marking requirements for a "good of a
NAFTA country" are also 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 interim amendments to the Customs
Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3,
1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and
T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim
amendments took effect on January 1, 1994, to coincide with the
effective date of the NAFTA. The Marking Rules used for
determining whether a good is a good of a NAFTA country are
contained in T.D. 94-4 (adding a new Part 102, Customs
Regulations). The marking requirements of these goods are set
forth in T.D. 94-1 (interim amendments to various provisions of
Part 134, Customs Regulations).
Section 134.1(b) of the interim regulations, defines "country
of origin" as:
the country of manufacture, production, or growth of any
article of foreign origin entering the U.S. Further work or
material added to an article in another country must effect
a substantial transformation in order to render such other
country the "country of origin"; however, for a good of a
NAFTA country, the NAFTA Marking Rules will determine the
country of origin (emphasis added).
Section 134.1(j) of the interim regulations, provides that
the "NAFTA Marking Rules" are the rules promulgated for purposes
of determining whether a good is a good of a NAFTA country. Section
134.1(g) of the interim regulations, defines a "good of a NAFTA
country" as an article for which the country of origin is Canada,
Mexico or the United States as determined under the NAFTA Marking
Rules. Section 134.45(a)(2) of the interim regulations, provides
that "a good of a NAFTA country may be marked with the name of the
country of origin in English, French, or Spanish."
Part 102 of the interim regulations, sets forth the "NAFTA
Marking Rules" for purposes of determining whether a good is a good
of a NAFTA country for marking purposes. Section 102.11 of the
interim regulations, sets forth the required hierarchy for
determining country of origin for marking purposes. Section
102.11(a) of the interim regulations states 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."
In this case, the applicable rule is section 102.11(a)(3) of
the interim regulations. "Foreign Material" is defined in section
102.1(e) of the interim regulations 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." In order to
determine whether Mexico is the country of origin, we must look at
those materials whose country of origin is other than Mexico. The
operations performed in the United States, i.e., alloy process, and
forging, establish the United States as the country of origin of
the gold jewelry rough forms. As indicated above, the gems are
assumed to be not of Mexican origin. Therefore, the foreign
material in the finished gold jewelry with gems is the gold jewelry
rough forms and the gems.
As the gold jewelry with is classified under subheading
7113.19, HTSUS, the change in tariff classification must be made
in accordance with section 102.20(n), Section XIV: Chapter 71,
7113-7115 of the interim regulations, which states that:
A change to subheading of heading 7113 through 7115 from any
other subheading, including to a subheading within that group.
Therefore, each foreign material incorporated in the gold
jewelry with gems must come from a subheading outside of subheading
7113.19, HTSUS. A change in the tariff classification does take
place for the foreign gems from heading 7103, HTSUS, to subheading
7113.19, HTSUS. However, the cast rough forms of jewelry, i.e.,
rings, earrings, etc., are classifiable under the same subheadings
as the completed gold jewelry with gems. In this case, a change
in tariff classification does not occur pursuant to section
102.20(n), Section XIV: Chapter 71, 7113-7115 of the interim
regulations.
However, section 102.16(a)(2) of the interim regulations
states that "[i]f a good is produced in one country but one or more
of the foreign materials incorporated into the good do not undergo
an applicable change in tariff classification provided in section
102.20 because:
(2) The heading for the good provides for both the good
itself and its parts and is not further subdivided into
subheadings, or the subheading for the good provides for
both the good itself and its parts, the country of origin
of a good is the country in which the good was produced
provided that the production of the good results in a
substantial transformation of those parts.
"Production" is defined in section 102.1(n) of the interim
regulations as "growing, mining, harvesting, fishing, trapping,
hunting, manufacturing, processing or assembling a good."
"Substantial Transformation" is defined in section 102.1(p) of the
interim regulations as "production which results in a new and
different article, with a new name, character, and use."
Although Mexico is the last country where the gold jewelry
was produced, the production operations in Mexico do not result in
a substantial transformation of the rough form gold jewelry. The
Mexican operations do not result in a new and different article
with a new name, character and use since both before and after the
Mexican processing, the goods are gold jewelry articles.
Therefore, section 102.16(a)(2) of the interim regulations is not
applicable.
Since the country of origin is not determined by section
102.11(a) (incorporating section 102.20) of the interim
regulations, we must proceed to section 102.11(b) of the interim
regulations hierarchy to determine the country of origin. Section
102.11(b) of the interim regulations states that:
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 of origin cannot be determined under paragraph (a),
the country of origin of the good:
(1) Is the country or countries of origin of the single
material that imparts the essential character of the
good....
"Material" is defined in section 102.1(l) of the interim
regulations 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."
We are of the opinion that the "single material which imparts
the essential character" of the gold jewelry with gems is the gold
jewelry rough forms. As previously stated, we determined that the
country of origin of the gold jewelry rough forms is the United
States. Therefore, pursuant to section 102.11(b)(1) of the interim
regulations, the country of origin of the finished gold jewelry
with gems is the United States.
However, section 102.14 of the interim regulations states
that:
No good, last advanced in value or improved in condition
outside the United States has United States origin. If under
any other provision of this part such a good is determined to
be a good of the United States, that determination will be
disregarded and the country of origin of the good will be the
last foreign country in which the good was advanced in value
or improved in condition.
"Advanced in value" is defined in section 102.1(a) of the interim
regulations as "an increase in the value of a good as a result of
production with respect to that good, other than by means of those
"minor processing" operations described in paragraphs (m)(5),
(m)(6) and (m)(7) of this section." "Improved in Condition" is
defined in section 102.1(i) as "the enhancement of the physical
condition of a good as a result of production with respect to that
good, other than by means of those "minor processing" operations
described in paragraphs (m)(5), (m)(6) and (m)(7) of this section."
"Minor processing" operations described in sections 102.1(m)(5),
(m)(6) and (m)(7) of the interim regulations include unloading,
reloading or any other operation necessary to maintain the good in
good condition; putting up in measured doses, packing, repacking,
packaging, repackaging; testing, marking, sorting or grading.
We find that the gold jewelry with gems has been advanced in
value or improved in condition as a result of the polishing, and
in some cases assembly operation, in Mexico. Accordingly, pursuant
to section 102.14 of the interim regulations, the country of origin
of the imported gold jewelry with gems is Mexico, the last foreign
country in which the good was advanced in value or improved in
condition. Therefore, for purposes of the country of origin
marking requirements of 19 U.S.C. 1304, the imported gold jewelry
with gems must be marked to indicate that the country of origin of
the gold jewelry is "Mexico."
Section 134.43(e) of the interim regulations, provides in part
that "where the country of origin of an article is determined in
accordance with section 102.14, part 102 of this Chapter, such
article, at the choice of the importer, exporter or producer of the
good, may be marked, as appropriate, in a manner such as the
following:
(1) Assembled in (name of foreign country) from U.S.
components;
(2) Further processed in (name of foreign country) from U.S.
materials;
(3) Product of (name of foreign country) made from U.S.
components; or
(4) Product of (name of foreign country)."
Therefore, the hang tags on the gold jewelry with gems are to
be marked pursuant to section 134.43(e) of the interim regulations.
The proposed marking on the hang tag "Made in Mexico" is
acceptable. Hang tags are an acceptable method of marking provided
they are affixed in a manner which assures that unless deliberately
removed they will remain on the article until it reaches the
ultimate purchaser. See, 19 CFR 134.44.
HOLDING:
The gold jewelry with gems is classified under subheading
7113.19, HTSUS, as articles of jewelry of other precious metal,
whether or not plated or clad with precious metal. Classification
to the eight digit level is dependant upon the exact type of
jewelry being imported, i.e., rings, earrings, necklaces,
bracelets, etc.
The gold jewelry with is eligible for the NAFTA tariff
preference, upon compliance with all the applicable regulations.
Pursuant to section 102.14 of the interim regulations, the
gold jewelry with gems is considered to be a product of Mexico for
purposes of country of origin marking. Therefore, the gold jewelry
with gems must be marked according to section 134.43(e) of the
interim regulations.
Sincerely,
John Durant, Director
Commercial Rulings Division