CLA-2 RR:CR:GC 962350 JAS
Paula M. Connelly, Esq.
Middleton & Shrull
44 Mall Road, Suite 208
Burlington, MA 01803-4530
RE: NY D82151 Affirmed; Tapered Roller Bearings Produced in Canada from Non-Originating Components
Dear Ms. Connelly:
In a letter, dated November 5, 1998, on behalf of UCF Canada, and under the authority of section 181.102(a), Customs Regulations (19 CFR 181.102(a)), you request administrative review of an advance ruling under the North American Free Trade Agreement (NAFTA), which the Director of Customs National Commodity Specialist Division, New York, issued on October 9, 1998. This ruling denied NAFTA originating-goods status to tapered roller bearings produced in Canada from non-originating components. You also inquire as to the proper country of origin marking requirements for these bearings.
FACTS:
The referenced ruling, NY D82151, held that tapered roller bearings from Canada were classifiable under subheading 8482.20.00, Harmonized Tariff Schedule of the United States (HTSUS). These bearings were produced in Canada from sets of tapered rollers and cages, imported into Canada as complete articles, and certain green forgings which, after importation into Canada, were ground and honed or polished into outer races, called cups, and inner races, called cones. All components were of Chinese origin. NY D82151 denied originating-goods status under the NAFTA to the complete bearing because the outer and inner race forgings failed the requisite change in tariff classification specified in General Note 12(t)/84.241(A), HTSUS.
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There is apparent agreement that the complete or finished bearing is classifiable in subheading 8482.20.00, HTSUS, the rollers in subheading 8482.91.00, HTSUS, as rollers that are parts of bearings, and the cages in subheading 8482.99.45, HTSUS, as other parts of tapered roller bearings. However, NY D82151 held that the green forgings were in fact unfinished cups and cones, classifiable in subheading 8482.99.15, HTSUS, as inner and outer rings and races for tapered roller bearings. You cite National Customs Ruling M-187929, dated December 2, 1997, in which Canadian Customs classified inner and outer rings, among other bearing components, as other articles of iron or steel, under tariff number 7326.19.00.29. This classification, you contend, would permit the complete tapered roller bearing to meet the tariff shift requirement of General Note 12(t)/84.241(A). Alternatively, you cite two country of origin marking rulings for the proposition that the green forgings are processed in Canada so as to impart the necessary inside and outside surface tolerances required of antifriction bearings. You conclude that the forgings are substantially transformed in Canada and become products of that country for purposes of determining originating goods status under the NAFTA.
ISSUE:
Whether green forgings for inner and outer rings of tapered roller bearings are incomplete or unfinished parts of heading 8482; whether the bearings qualify as “originating goods” under the NAFTA; what is the country of origin of the bearings.
LAW AND ANALYSIS:
Under General Rule of Interpretation (GRI) 1, Harmonized Tariff Schedule of the United States (HTSUS), goods are to be classified according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6.
The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While not legally binding, the ENs provide a commentary on the scope of each heading of the Harmonized System and are thus useful in ascertaining the classification of merchandise under the System. Customs believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).
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CLASSIFICATION
GRI 2(a), HTSUS, states in part that any reference in a heading to an article includes that article incomplete or unfinished, provided it has the essential character of the complete or finished article. Relevant ENs at p. 2 under RULE 2(a) (II), state that the Rule applies to blanks unless these are specified in a particular heading. The term “blank” means, an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into the finished article or part. Goods that qualify as blanks are unfinished articles for tariff purposes. NY D82151 described the forgings entering Canada as “net shape blanks which approximate the outline of the finished article they will form.” Your letter to Customs, dated June 24, 1998, in part states that an inner and outer ring are forged together in China and simultaneously separated, after which they are deburred and rough turned. In Canada, the faces and inside and outside of the diameters are ground, and the inside diameter honed or polished with a very fine sandpaper. The letter describes this as the most critical process as it enables the finished cup to be as smooth as possible in order to reduce friction. The available evidence indicates that the forgings entering Canada have the actual shape and outline of inner and outer rings or races for tapered roller bearings. The grinding, honing or polishing in Canada are mere finishing operations designed to impart the requisite smoothness to maximize the friction-reducing capability of the bearing. The green forgings for inner and outer rings or races for tapered roller bearings are “blanks” for tariff purposes. They are incomplete or unfinished inner and outer rings or races for tapered roller bearings. As such, they are classifiable in subheading 8482.99.15, HTSUS. We recognize that Canadian Customs Ruling M-187929, dated December 2, 1997, classified the same merchandise as other articles of iron or steel. That ruling, however, is merely instructive of how the Canadian Customs Administration classifies components of tapered roller bearings. We are not bound to abide by the rulings of another country. The only issue is the classification of the non-originating green forgings as imported into Canada, which we have determined under the HTSUS, to be in subheading 8482.99.15.
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ORIGINATING GOODS STATUS UNDER NAFTA
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), HTSUS, states, in relevant part that 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 they have been transformed in the territory of Canada so that 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.
One such authorized change in tariff classification is to subheadings 8482.10 through 8482.80 from any subheading outside that group, except from tariff items 8482.99.05, 8482.99.15 or 8482.99.25 See General Note 12(t)84.241(A), HTSUS. Each of the
components in this case must meet the cited tariff shift requirement. Tapered roller bearings are classified in subheading 8482.20.00. The rollers are classified in subheading 8482.91.00 and the cages in subheading 8482.99.45. Both meet the requisite tariff shift. However, as previously stated, the green forgings for the inner and outer races are classifiable in subheading 8482.99.15, and do not meet the requisite tariff shift. The two rulings you cite, HQ 731968 and HQ 731969, both dated March 19, 1990, are country of origin marking determinations issued in the context of 19 USC 1304. However, because the tariff shift requirements necessary to confer originating good status under the NAFTA are found in General Note 12(t)84.241(A), HTSUS, the cited rulings, are not legally relevant.
COUNTRY OF ORIGIN MARKING
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported into the U.S. 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 U.S. 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 exceptions of 19 U.S.C. 1304.
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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). The rules used for determining whether a good is a good of a NAFTA country are set forth in 19 CFR Part 102. The marking requirements for these goods are set forth as amendments to various provisions of 19 CFR Part 134.
Section 134.1(j), Customs Regulations (19 CFR 134.1(j)), 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) defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the U.S. as determined under the NAFTA Marking Rules.
The NAFTA Marking Rules are set forth in 19 CFR Part 102. Section 102.11, Customs Regulations (19 CFR 102.11), sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) provides 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.
“Foreign Material” is defined in section 102.1(e) of the 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.”
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As the tapered roller bearings are neither wholly obtained or produced, nor produced exclusively from domestic (Canadian) materials, section 102.11(a)(3) is the applicable rule which must first be applied. The tapered roller bearings are classified in subheading 8482.20.00, HTSUS. Thus, the applicable change in tariff classification set out in section 102.20(o), Section XVI: Chapters 84 though 85, is:
8482.10-8482.80....A change to subheading 8482.10 through 8482.80 from any other heading; or a change to subheading 8482.10 through 8482.80 from any other subheading, including another subheading within that group, except from inner or outer races or rings classifiable in subheading 8482.99.05, 8482.99.15, or 8482.99.25.
As imported into Canada, the various Chinese components are classified as follows: the cage in subheading 8482.99.45, HTSUS; the tapered rollers in subheading 8482.91.00, HTSUS; and (pursuant to the classification analysis set forth above) the green forgings, which are incomplete or unfinished races, in
subheading 8482.99.15, HTSUS. Therefore, while the cage and tapered rollers meet the applicable tariff shift rule, the forgings do not. Thus, the origin of the tapered roller bearings cannot be determined under section 102.11(a)(3), and we must proceed to the next rule in the hierarchy, 19 CFR 102.11(b).
Section 102.11(b) provides, in pertinent part, as follows:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section:
(1) 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....
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Section 102.18(b)(1), Customs Regulations (19 CFR 102.18(b)(1)), provides, in pertinent part, as follows:
For purposes of identifying the material that imparts the essential character to a good under section 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the section 102.20 specific rule or other requirements applicable to the good.
* * * * *
(iii) If there is only one material that is classified in a tariff provision from which a change in tariff classification is not allowed under the section 102.20 specific rule or other requirements applicable to the good, then that material will represent the single material that imparts the essential character to the good under section 102.11.
Therefore, in this case, as the forgings constitute the only material that is classified in a tariff provision from which a change in classification is not allowed under the applicable rule, the forgings represent the essential character of the tapered roller bearings. The origin of the forgings is China and, thus, the country of origin of the imported tapered roller bearings also is China.
HOLDING:
Under the authority of GRI 1, the tapered roller bearings in issue are provided for in heading 8482. They are classifiable in subheading 8482.20.00, HTSUS. These bearings imported directly into the Customs territory of the United States from Canada do not qualify as “goods originating in the territory of a NAFTA party,” and are not eligible for preferential tariff treatment under the NAFTA. Applying the NAFTA Marking Rules, the country of origin of the imported tapered roller bearings for country of origin marking purposes is China.
NY D82151, dated October 9, 1998, is affirmed.
Sincerely,
John Durant, Director
Commercial Rulings Division