CLA-2 OT:RR:CTF:TCM H026740 TNA
Port Director, El Paso Service Port
U.S. Customs and Border Protection
3600 East Paisano El Paso, TX 79905
RE: Protest and Application for Further Review No: 2402-07-100038; NAFTA eligibility of television receivers
Dear Port Director:
The following is our decision regarding Protest and Application for Further Review No. 2402-07-100038, timely filed on February 20, 2008, on behalf of TTE Electronics, Inc. (“Protestant” or “TTE”), regarding the NAFTA eligibility of color television receivers.
FACTS:
The subject merchandise consists of color television receivers that are imported into the United States from Mexico. The receivers are 27-inch cathode-ray tube TV receivers. They are assembled in Mexico from components originating in multiple countries, including the United States, Mexico, China, and France, among others. These components include items such as resistors, capacitators, diodes, integrated circuits, switches, and connectors, among others. Final assembly takes place in Mexico, and the merchandise is shipped from there to a distribution center and then to final customers.
The subject merchandise was entered through the Port of El Paso on February 9, 2007, classified under subheading 8528.72.32, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus: Reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus: Other, color: Non-high definition, having a single picture tube intended for direct viewing (non-projection type), with a video display diagonal exceeding 35.56 cm: Other.” It was liquidated as entered on December 21, 2007.
ISSUE:
Whether TV receivers assembled in Mexico from parts originating in both NAFTA countries and non-NAFTA countries are eligible for preferential tariff treatment under the NAFTA?
LAW AND ANALYSIS:
I. Classification
Initially, we note that the matter protested is protestable under 19 U.S.C. §1514(a)(2) as a decision on classification. The protest was timely filed, within 180 days of liquidation of the first entry. See 19 U.S.C. §1514(c)(3).
Further Review of Protest No. 2402-07-100038 is properly accorded to Protestant pursuant to 19 C.F.R. § 174.24 because Protestant alleges that: the denial of NAFTA preference is inconsistent with a ruling of the Commissioner of CBP or his designee, or with a decision made at any port with respect to the same or substantially similar merchandise; this protest involves question of law or fact that have not been ruled on of the Commissioner of CBP or his designee or by the customs courts; and, while this protest involves matters previously ruled upon by the Commissioner of CBP or his designee or by the customs courts, new facts are alleged or legal arguments presented that were not considered at the time of the original ruling. Specifically, in accordance with 19 CFR §174.24(a), Protestant argues that CBP has approved TTE’s past NAFTA claims on substantially similar merchandise. Furthermore, in accordance with 19 CFR §174.24(b) and (c), Protestant argues that at the time CBP denied Protestant’s NAFTA claim, the agency was operating under the mistaken impression that the subject television receivers included printed circuit board assemblies (“PCBAs”) manufactured in China.
Merchandise imported into the United States is classified under the HTSUS. Tariff classification under the HTSUS is governed by the principles set forth in the General Rules of Interpretation (GRI’s) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRI’s 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.
GRI 1 requires that classification be determined first according to the terms of the headings of the tariff schedule and any relative section or chapter notes and, unless otherwise required, according to the remaining GRI’s taken in their appropriate order.
The HTSUS headings under consideration are the following:
8528 Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus:
Reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus:
8528.72 Other, color:
Non-high definition, having a single picture tube intended for direct viewing (non-projection type), with a video display diagonal exceeding 35.56 cm:
8528.72.32 Other
In understanding the language of the HTSUS, the Explanatory Notes (ENs) of the Harmonized Commodity Description and Coding System, which constitute the official interpretation of the HTSUS at the international level, may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127 (August 23, 1989).
The EN for heading 8528 states, in pertinent part, the following:
This heading includes: …
(2) Television reception apparatus, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus, for the display of signals (television sets).
Monitors, projectors and television sets utilize different technologies, such as CRT (cathode-ray tube), LCD (liquid crystal display), DMD (digital micromirror device), OLED (organic light emitting diodes) and plasma, to display images….
(D) RECEPTION APPARATUS FOR TELEVISION
This group includes apparatus whether or not designed to incorporate a video display or screen, such as:
(1) Receivers of television broadcasts (terrestrial, cable or satellite) which do not include a display device (CRT, LCD, etc.). These apparatus receive signals and convert them into a signal suitable for display. They may also incorporate a modem for connection to the Internet.
These receivers are intended to be used with video recording or reproducing apparatus, monitors, projectors or televisions. However, devices which simply isolate high-frequency television signals (sometimes called video tuners) are to be classified as parts in heading 85.29…
(3) Television receivers of all kinds (LCD, plasma, CRT, etc.) used in the home (television sets), whether or not incorporating a radio-broadcast receiver, video cassette recorder, DVD player, DVD recorder, satellite receiver, etc.
The subject merchandise consists of cathode-ray tube color television receivers that are imported as completed items for use in homes. As such, it is covered by the terms of heading 8528, HTSUS. The ENs also support classification in this heading. See EN 85.28. Furthermore, the port liquidated the subject merchandise under subheading 8528.72.32, HTSUS, and there is no dispute over classification. As a result, the television receivers are classified under subheading 8528.72.32, HTSUS, which provides for “Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus: Reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus: Other, color: Non-high definition, having a single picture tube intended for direct viewing (non-projection type), with a video display diagonal exceeding 35.56 cm: Other.”
It is noted that, prior to February 3, 2007, the corresponding tariff provision to subheading 8528.72.32, HTSUS, was subheading 8528.12.32, HTSUS.
II. Eligibility for Preferential Treatment Under NAFTA
As an initial matter, the following is noted on page 2 of the General Notes (GN) of the HTSUS (2007) (Rev. 1):
COMPILER’S NOTE: The rules of origin provisions for United States free trade agreements, other than those for the United States-Australia Free Trade Agreement, the United States-Singapore Free Trade Agreement and the United States-Chile Free Trade Agreement, have NOT been updated to reflect changes to the tariff schedule resulting from Presidential Proclamation 8097, which modified the HTS to reflect World Customs Organization changes to the Harmonized Commodity Description and Coding System. You will therefore see tariff heading/subheading numbers in the pertinent general notes which do not correspond to numbers in chapters 1 through 97 or to other portions of the same general notes.
Accordingly, because the NAFTA rules of origin have not been updated to reflect the 2007 changes to the Harmonized System, the pre-2007 classifications for the goods at issue must be used in order to ascertain their correct rule of origin under NAFTA.
General Note 12 of the HTSUS incorporates Article 401, North American Free Trade Agreement, as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993), into the HTSUS. General Note 12(a)(ii) provides that:
(a) Goods originating in the territory of a party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note--
* * * * *
(ii) 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 Mexico 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), and goods enumerated in subdivision (u) of this note, 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 "MX" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act. (emphasis added)
General Note 12(b) provides, in relevant part, that:
(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—
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
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;
General Note 12(t) provides, in relevant part, that:
Change in Tariff Classification Rules. [NOT UPDATED FOR HS 2007 OR PRES. PROCLAMATION 8097]
85. A change to tariff items 8528.12.28 or 8528.12.32 from any other heading, except from tariff items 8529.90.43, 8529.90.46, 8529.90.49 or 8540.11.10 or more than one of the following:
(A) tariff item 7011.20.10,
(B) tariff item 8540.91.15.
The subject merchandise is classified in subheading 8528.72.32, HTSUS, previously subheading 8528.12.32, HTSUS. As a result, under General Note 12(t), if the merchandise’s components originate from non-NAFTA countries and are not classified in subheadings 8529.90.43, 8529.90.46, 8529.90.49 or 8540.11.10, 7011.20.10, or 8540.91.15, HTSUS, then the merchandise will qualify for NAFTA preference.
Protestant argues that the port erroneously denied the merchandise’s NAFTA eligibility on the mistaken belief that the TV receivers included PCBAs that were manufactured in China. The original Bill of Materials (“BOM”) that Protestant submitted appeared to indicate that the PCBAs were of Chinese origin. Protestant argues that the PCBAs were not in fact imported assembled but that the components were imported into Mexico separately and assembled there. In support of its claim, Protestant submitted a new BOM for the television receivers as a whole and a BOM for each of the PCBAs.
In examining these new BOMs, we note that they do list various components that are used to produce PCBAs, such as resistors, capacitators, diodes and integrated circuits. Furthermore, other than the apparent fully-assembled PCBAs, it does not appear that any of the components listed on these BOMs fall into a subheading that would preclude a tariff shift. Even assuming, arguendo, that these parts are imported individually for assembly in Mexico and undergo the type of processing that would justify an assembly operation for CBP purposes, the BOMs for the PCBAs are inconsistent with respect to the parts they list and the corresponding countries of origin that they list. For example, they list unidentified “Parts of TVs,” and one BOM lists their country of origin as Mexico, while another BOM lists no country of origin. Furthermore, the BOM for the TV receiver also lists unidentified “TV parts” that also list either Mexico as their county of origin or do not list a country of original at all. This list appears to cover parts from the other BOMs, as well as additional unidentified parts. As a result, there is not enough information to determine whether all of the components of the subject merchandise, not all of which are identified, originate in a non-NAFTA country such that they would be eligible for the proper tariff shift.
Furthermore, we note that Protestant claims classification of the PCBAs in subheading 8529.90.43, HTSUS, a classification which in itself would preclude a tariff shift that would make the merchandise eligible for NAFTA preference. Even if CBP disagreed with this classification, and looked to determine a different classification, the “unidentified TV parts” listed in the BOMs makes classification difficult. These “unidentified TV parts” also do not preclude classification in a subheading such as subheading 8529.90.49, HTSUS, which, for components of a non-originating country, would preclude a tariff shift. Even if CBP were to classify these components in a subheading that did not preclude a tariff shift, the lack of complete information on all of the components’ country of origin precludes a definite determination as to the subject merchandise’s NAFTA eligibility.
HOLDING:
By application of GRI 1, the subject color television receivers are classified in heading 8528, HTSUS. The receivers are specifically provided for in subheading 8528.72.32, HTSUS, which provides for: “Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus: Reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus: Other, color: Non-high definition, having a single picture tube intended for direct viewing (non-projection type), with a video display diagonal exceeding 35.56 cm: Other.”
In accordance with General Note 12(t), the receivers DO NOT originate from Mexico under NAFTA.
You are instructed to DENY the protest.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to Protestant no later than 60 days from the date of this letter. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing the decision.
Sixty days from the date of the decision, the Office International Trade, Regulations and Rulings, will make the decision available to CBP personnel, and to the public, on the CBP website, located at www.CBP.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division