CLA-2 CO:R:C:M 957425 LTO
Mr. Philip Freeman
Cain Customs Brokers
Progreso International Bridge
P.O. Box 10
Progreso, Texas 78579
RE: Automotive seat belt retractor assemblies; HQs 087588,
223491, 224283, 225368; NY 828235; headings 7211, 8708;
subheading 9813.00.05; EN 73.20; Section XV, note 2; Section
XVII, note 2(b); 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 6, 1994, requesting information
relating to the importation of automotive seat belt 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 for 30 minutes at 230 degrees Celsius, and
assembled into automotive seat belt housings (plastic spring cup
of U.S. origin) and lubricated. The resulting automotive seat - 2 -
belt retractor assemblies will be imported into the U.S.
ISSUE:
1. Whether the automotive seat belt assemblies are classifiable
as springs and leaves for springs, of iron or steel, under
heading 7320, HTSUS, or as motor vehicle parts or accessories
under heading 8708, HTSUS.
2. Whether the automotive seat belt 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 chapter 98, 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).
In NY 828235, issued to you on March 17, 1988, the
automotive seat belt retractor assemblies were held to be
classifiable under item 692.32, Tariff Schedules of the United
States (TSUS), which provides for other motor vehicles parts.
You were also advised that, although the HTSUS had not yet been
implemented, the assemblies were classified under subheading
8708.21.00, HTSUS, which provides for motor vehicle safety seat
belts.
NY 828235 stated that, with regard to the classification of
the assemblies under the HTSUS, "[t]his classification represents - 3 -
the present position of the Customs Service regarding the
dutiable status of the merchandise under the HTS. If there are
changes before enactment this advice may not continue to be
applicable." NY 828235, which was prepared before T.D. 89-90 was
issued, was an advisory ruling which does not reflect the current
position of the Customs Service concerning the classification of
the automotive seat belt retractor assemblies in question.
In HQ 087588, dated April 16, 1991, similar automotive seat
belt retractor assemblies were classified under subheading
7320.90.50, HTSUS, which provides for other springs and leaves
for springs, of iron or steel. Note 2(b) to section XVII, HTSUS,
provides that the term "parts and accessories" does not apply to
"[p]arts of general use, as defined in note 2 to section XV, of
base metal . . . ." Note 2 to section XV, HTSUS, provides that
"parts of general use" include "[s]prings and leaves for springs,
of base metal . . . ." Accordingly, as the seat belt retractor
assemblies were classifiable under heading 7320, HTSUS, they
could not be classified, as parts or accessories, under heading
8708, HTSUS. See EN 73.20, pg. 1031-2 ("[t]he heading covers
iron or steel springs of all types, irrespective of their use
. . .," and that "[s]prings may be equipped with U-bolts (e.g.,
for leaf-springs) or other fittings for assembly or attachment").
Similarly, the assemblies in question are classifiable under
subheading 7320.90.50, HTSUS.
II. NAFTA APPLICABILITY
The automotive seat belt 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 . . . - 4 -
(iii) they are goods produced entirely in the territory
of Canada, Mexico and/or the United States
exclusively from originating materials . . .
The assemblies containing steel from the U.S. are
"originating goods" within the rules of origin in general note
12(b)(iii), HTSUS, and 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
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 automotive seat belt 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 - 5 -
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).
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 seat belt housings, is
an allowable operation under subheading 9813.00.05, HTSUS, as
well as for unused merchandise drawback under 19 U.S.C. - 6 -
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),
Chapter 98, Subchapter XIII, 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,
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 automotive seat belt 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