CLA-2 OT:RR:CTF:VS H236189 HkP
Port Director
Port of Laredo
U.S. Customs and Border Protection
Lincoln/Juarez Bridge, Administrative Bldg. #2 Laredo, TX 78040
RE: Request for Internal Advice; NAFTA; Ripple Springs; Country of Origin
Dear Port Director:
This is in response to your memorandum dated November 14, 2012, forwarding a Request for Internal Advice, submitted on August 23, 2012, on behalf of National Electric Coil Co. L.P. (“NEC”).
FACTS:
NEC imports two types of ripple springs, side ripple springs and top ripple springs, from its maquiladora facility in Mexico for use in high-voltage generators. Ripple springs reduce vibration and movement between generator coils and allow for more efficient operation of generators. The side ripple spring conducts electricity. When inserted into the side slots of a generator coil, it has an electrical interaction with the coil that secures or closes the coil. The top ripple spring acts as an insulator. It is also inserted into the slots of the generator coil but is used to mechanically secure or close the slots. Both types of ripple springs are manufactured from a fiberglass reinforced plastic polymer material that is specially designed with the thickness, spring direction, and wave cycle of the ripples for each particular generator.
The fiberglass material used to make the springs is manufactured in Germany, imported into the U.S. by the manufacturer’s distributor and sold to NEC in large sheets. As imported, the sheets are classified in heading 3921, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for, among other things, other sheets of plastics.
NEC ships the imported sheets to their facility in Mexico, where they are cut to size based on detailed specifications. The size and shape of each spring is unique to the end-user’s specific generator. The springs made in Mexico have no other uses other than as parts of generator coils. When imported into the U.S., the springs cut from the imported sheets are classified in heading 8503, HTSUS, as parts of the machines of heading 8501 or 8502.
ISSUES:
Whether NEC’s ripple springs qualify for preferential duty treatment under NAFTA.
What is the country of origin of the ripple springs imported from Mexico for marking purposes?
LAW AND ANALYSIS:
NAFTA Duty Preference
Article 401 of NAFTA is incorporated into General Note (GN) 12 of the HTSUS. GN 12(b) provides in relevant part:
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 –
* * *
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 subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note[.]
Originating good status is conferred on parts suitable for use solely or principally with the machines of heading 8501 or 8502, which are classified under heading 8503, HTSUS, by GN 12(t)/Chapter 85(3), which allows:
A change to heading 8503 from any other heading.
The fiberglass sheets imported from Germany and sent to Mexico are classified in heading 3921, HTSUS. The ripple springs that are cut from the German sheets in Mexico are classified in heading 8503, HTSUS. Based on this change in classification as a result of the Mexican operations, we find that the fiberglass sheets make the requisite tariff shift under GN 12(t)/Chapter 85(3). Consequently, the ripple springs are eligible for preferential tariff treatment under NAFTA. In addition, pursuant to GN 12(a)(i), in order to receive preferential tariff treatment under NAFTA, the goods must qualify to be marked as goods of Mexico.
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 (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. Congressional intent in enacting 19 U.S.C. § 1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender& Co., 27 CCPA 297, 302, C.A.D. 104 (1940). Part 134, U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. §134) implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304.
Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines "country of origin" as:
[T]he country of manufacture, production, or growth of any article of foreign origin entering the United States. 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” within the meaning of [the marking laws and regulations]; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Part 102 of the CBP Regulations (19 C.F.R. § 102.0) sets forth the NAFTA Rules of Origin for country of origin marking purposes. As the ripple springs are made from German fiberglass sheets, Section 102.11(a)(1) and(2) do not apply. Section 102.11(a)(3) provides:
The country of origin of a good is the country in which … each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Foreign material means a material whose country of origin as determined under these rules is not the same as the country in which the good is produced.” 19 C.F.R. § 102.1(e).
Under the provisions of 19 C.F.R. § 102.20, the tariff shift rule for heading 8503 is:
A change to heading 8503 from any other heading.
When the German fiberglass sheets are cut into ripple springs in Mexico, their classification changes from heading 3921 to heading 8503, HSTUS. According, they meet the requirements of the tariff shift rule. As such, the ripple springs may be marked as products of Mexico.
HOLDING:
The top and side ripple springs imported from Mexico qualify for preferential tariff treatment pursuant to GN 12, provided all other applicable requirements are met. They meet the requirements of the tariff shift rule. The ripple springs may be marked as products of Mexico.
This decision should be mailed by your office to the party requesting Internal Advice no later than 60 days from the date of this letter. On that date, Regulations and Rulings, Office of International Trade, will make the decision available to CBP personnel and the public on the CBP Home Page at www.cbp.gov, by means of the Freedom of Information Act and other methods of public distribution.
Sincerely,
Monika R. Brenner, Chief,
Valuation & Special Programs Branch