CLA-2 CO:R:C:M 957424 LTO
Mr. Philip Freeman
Cain Customs Brokers
Progreso International Bridge
P.O. Box 10
Progreso, Texas 78579
RE: Spring retractor assemblies; HQs 087588, 223491, 224283, 225368; subheading 9813.00.05; EN 73.20; heading 7211; Chapter 98, subchapter XIII, U.S. note 1(c); NAFTA; Article
509; General notes 12(b)(ii)(A), 12(b)(iii) and 12(t)/73.16;
Change in Tariff Classification; 19 U.S.C. 1313(a), 1313(b),
1313(j), 1677h, 3333(a), 3333(e); 19 CFR 10.31(f), 10.39(a), 113.55(a), 181.42(a), 181.45(b)(1)(iv); 60 FR 15845
Dear Mr. Freeman:
This is in response to your letter, on behalf of Kern-
Liebers USA, Inc., of December 7, 1994, requesting information
relating to the importation of spring retractor assemblies,
including the classification of these assemblies under the
Harmonized Tariff Schedule of the United States (HTSUS) and their
eligibility for preferential tariff treatment under the North
American Free Trade Agreement (NAFTA).
FACTS:
Flat-rolled steel from the U.S., Great Britain, Germany, and
possibly other countries, which are subject to the assessment of
antidumping duties, will be slit in the U.S. Kern-Liebers
intends to enter the imported flat-rolled steel under a temporary
importation bond for the purpose of slitting the steel into
strips under subheading 9813.00.05, HTSUS. The resulting slit
steel will be exported to Mexico; the scrap steel will be
entered, or accounted for, and the temporary importation bond
canceled. In Mexico, these steel strips are to be coiled into
springs, heat-treated, and assembled into the retractor housings.
The resulting retractor assemblies will be imported into the - 2 -
U.S., and will be used as recoil springs for lawn mowers and
vacuum cleaner cord retractors.
ISSUE:
1. Whether the spring retractor assemblies are classifiable as
springs and leaves for springs, of iron or steel, under
heading 7320, HTSUS.
2. Whether the spring retractor assemblies containing non-
originating, flat-rolled steel, are eligible for preferential
tariff treatment under the NAFTA.
3. Whether the slitting of foreign steel is an allowable
operation under subheading 9813.00.05, HTSUS.
4. Whether the provisions of Subchapter XIII, U.S. Note 1(c),
HTSUS, would effect the temporary importation of this steel after
January 1, 2001, with regard to antidumping duties on non-U.S.
steel.
LAW AND ANALYSIS:
I. CLASSIFICATION
The General Rules of Interpretation (GRI's) to the HTSUS
govern the classification of goods in the tariff schedule. GRI 1
states, in pertinent part, that "for legal purposes,
classification shall be determined according to the terms of the
headings and any relative section or chapter notes . . . ."
The Harmonized Commodity Description and Coding System
Explanatory Notes (ENs) constitute the Customs Co-operation
Council's official interpretation of the Harmonized System.
While not legally binding, and therefore not dispositive, the ENs
provide a commentary on the scope of each heading of the
Harmonized System, and are generally indicative of the proper
interpretation of these headings. See T.D. 89-80, 54 Fed. Reg.
35127, 35128 (Aug. 23, 1989).
EN 73.20, pg. 1031-2, states that heading 7320, HTSUS,
"covers iron or steel springs of all types, irrespective of their
use . . . ." The note further states that "[s]prings may be
equipped with U-bolts (e.g., for leaf-springs) or other fittings
for assembly or attachment." The assemblies in question consist
of steel springs in a plastic fitting. The fitting allows for
the attachment of the assembly to the primary article, a lawn
mower or vacuum cleaner. That the fitting provides a housing for
the assembly is merely incidental to this function. Accordingly,
- 3 -
the spring retractor assemblies are classifiable under heading
7320, HTSUS, specifically under subheading 7320.90.50, HTSUS,
which provides for other springs and leaves for springs, of iron
or steel. See HQ 087588, dated April 16, 1991 (wherein
automotive seat belt retractor assemblies were classified under
subheading 7320.90.50, HTSUS).
II. NAFTA APPLICABILITY
The spring retractor assemblies imported into the U.S. will
consist of non-originating (Great Britain, Germany, etc.) flat-
rolled steel, or flat-rolled steel of U.S. origin. To be
eligible for tariff preferences under the NAFTA, goods must be
"originating goods" within the rules of origin in general note
12(b), HTSUS. General note 12(b)(ii)(A) and 12(b)(iii), HTSUS,
provide as follows:
[f]or 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 --
(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 . . .
(iii) they are goods produced entirely in the territory
of Canada, Mexico and/or the United States
exclusively from originating materials . . .
With regard to the assembles containing steel from the U.S.,
they are "originating goods" within the rules of origin in
general note 12(b)(iii), HTSUS. They are, therefore, eligible
for tariff preferences under the NAFTA.
With regard to the assemblies containing steel from
countries other than Mexico, Canada and/or the U.S., general note
12(b)(ii)(A), HTSUS, requires that the non-originating steel
undergo the appropriate change in tariff classification.
Because the subject assemblies are provided for under
subheading 7320.90.50, HTSUS, a transformation is evident when a - 4 -
change in tariff classification occurs which is authorized by
general note 12(t)/73.16, HTSUS, which states: "[a] change to
headings 7319 through 7320 from any heading outside that group."
Thus, any non-originating materials in the assemblies must come
from a heading other than heading 7319 or 7320, HTSUS.
The non-originating flat-rolled steel is classifiable under
heading 7211, HTSUS, which provides for "[f]lat-rolled products
of iron or nonalloy steel, of a width of less than 600 mm, not
clad, plated or coated." Consequently, a change in tariff
classification does occur, and the spring retractor assemblies,
containing non-originating, flat-rolled steel, are eligible for
preferential tariff treatment under the NAFTA.
III. ENTRY
Subheading 9813.00.05, HTSUS, provides for temporary duty-
free entry, under bond, for merchandise imported into the United
States for the purpose of repair, alteration or processing. Over
the years, Customs has liberally interpreted this provision to
include processes which would not otherwise qualify as a
manufacture or production for drawback under 19 U.S.C. 1313(a) or
(b).
U.S. Note 1(c), Chapter 98, Subchapter XIII, HTSUS (as
amended by Presidential Proclamation 6780 of March 23, 1995
(published in the Federal Register on March 27, 1995
(60 FR 15845, 15853)), provides:
For purposes of this subchapter, if an article imported
into the United States under heading 9813.00.05 is
withdrawn for exportation to the territory of Canada or
of Mexico, the duty assessed shall be waived or reduced
in an amount that does not exceed the lesser of the
total amount of duty payable on the article that would
have been payable on importation under chapters 1
through 97, inclusive, of the Harmonized Tariff
Schedule of the United States or the total amount of
customs duties paid to Canada or Mexico on the exported
article, unless such article is covered by section
203(a)(1) through 203(a)(8), inclusive, of the NAFTA
Implementation Act. The amount of duties or refunds
calculated on such articles pursuant to this note shall
be adjusted to take into account any subsequent claim
for preferential tariff treatment made to another NAFTA
country. This note shall apply to shipments to Canada
on or after January 1, 1996, and to Mexico on or after
January 1, 2001. (Emphasis added).
- 5 -
Section 203(a)(2) of the NAFTA Implementation Act exempts
from the general duty drawback (that is, the NAFTA "lesser of"
rule) and duty deferral rules of article 303 of NAFTA,
merchandise which is exported to another NAFTA party in the same
condition as when it was imported. See Article 303.6(b) of
NAFTA, which permits full drawback of U.S. duties upon
exportation to other countries, including Canada and Mexico; 19
U.S.C. 3333(a)(2). However, antidumping and countervailing
duties are not subject to drawback under NAFTA. See 19 U.S.C.
3333(e); 19 CFR 181.42(a). The Customs Regulations defining
"same condition" under NAFTA specifically include slitting as one
of the permissible operations. See 19 CFR 181.45(b)(1)(iv); see
also 19 U.S.C. 1313(j)(3).
Customs has recently held that it is possible for a process
such as slitting to be considered "processing" for TIB purposes
and, at the same time, be considered in the "same condition" for
drawback purposes under section 203(a)(2) of the NAFTA
Implementation Act (codified at 19 U.S.C. 3333(a)(2)) because it
does not materially alter the characteristics of the good. See
HQ 225368, dated February 1, 1995 (copy enclosed); HQ 224283,
dated March 17, 1993 (copy also enclosed), which held that the
slitting operation which trimmed the width of the flat-rolled
steel coils from 40 inches to 10 or 12 inches, and which also cut
the edges to certain tolerances constituted a "processing" within
the meaning of subheading 9813.00.05, HTSUS.
In this case, it appears that the processing of the steel
involves only slitting, which does not alter the characteristics
or otherwise rise to the level of a manufacture. The steel
strips after undergoing this operation would be exported in
essentially the same condition as imported, with only its
dimensions having undergone a change. The processing by Kern-
Liebers of imported flat-rolled steel into steel strips in the
United States, which will then be exported to Mexico to be
coiled, heat-treated, and assembled into spring retractor
assemblies, is an allowable operation under subheading
9813.00.05, HTSUS, as well as for unused merchandise drawback
under 19 U.S.C. 1313(j)(1) (previously "same condition"
drawback). Thus, the non-NAFTA temporary importation under bond
regulations (see 19 CFR 10.39(a) and 113.55(a)) would apply to
the imported steel which was slit, and the exportation to Canada
and Mexico qualifies for cancellation of the bond. See U.S. Note
1(c), Subchapter XII, Chapter 98, HTSUS.
The provisions of U.S. Note 1(c) of Subchapter XIII, Chapter
98, HTSUS, would have no effect on the temporary importation of
non-U.S. steel with regard to antidumping duties after January 1,
- 6 -
2001. Under 19 CFR 10.31(f), unless otherwise provided, a bond
is required for a TIB entry in an amount equal to double the
duties which it is estimated would accrue ". . . had all the
articles covered by the entry been entered under an ordinary
consumption entry." The temporary importation bond may be set in
an amount to take into account antidumping or countervailing
duties in order to protect the revenue and to prevent the
circumvention of the anti-dumping or countervailing duty laws.
See HQ 223491, dated March 30, 1992 (copy also enclosed); see
also 19 U.S.C. 1677h, 19 CFR 181.42(a).
HOLDING:
The spring retractor assemblies are classifiable under
subheading 7320.90.50, HTSUS, which provides for other springs
and leaves, of iron or steel.
The assemblies, manufactured with U.S. or non-originating
steel, are eligible for preferential tariff treatment under the
NAFTA. The Column 1 (Special) (MX) rate of duty for articles of
subheading 7320.90.50, HTSUS, is free.
The slitting of the imported flat-rolled steel is a
permissible operation under subheading 9813.00.05, HTSUS. The
NAFTA duty deferral rules do not apply to the slitted steel
strips.
The treatment of antidumping duties on TIB entries remains
the same after January 1, 2001, for this steel which is covered
under section 203(a)(2) of the NAFTA Implementation Act.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosures