OT:RR:CTF:VS H259474 GaK
Nelson Calzadilla
NCH Customs Brokers
8700 Castner Suite B
El Paso, TX 79907
RE: Eligibility for preferential tariff treatment under the North American Free Trade Agreement; General Note 12, HTSUS; Wire harnesses
Dear Mr. Calzadilla:
This is in response to your eRuling dated November 7, 2014, requesting a ruling on behalf of your client, Sumitomo Electrical Wire Systems (“Company”). Your request concerns the eligibility of wire harnesses exported from Mexico under the North American Free Trade Agreement (“NAFTA”). Your request was forwarded to us from the National Commodity Specialist Division on November 18, 2014.
FACTS:
According to your letter, the Company manufactures electrical wire harnesses in Mexico using originating and non-originating components. The non-originating components are from different countries, including Japan, Taiwan, and the Philippines. You state that the wire harnesses classified in subheading 8544.30, Harmonized Tariff Schedule of the United States (“HTSUS”) are imported into the U.S. from Mexico and sold to the Company’s customers, to be used as original equipment in the manufacture of motor vehicles classified under subheadings 8702.10.60, 8702.90.60, 8703.21 through 8703.90, 8704.21, or 8704.31, HTSUS.
You provided a costed bill of materials indicating the country of origin, classification, and value of the components used in the manufacturing process, which consists of assembling originating and non-originating materials in Mexico. The Company purchases various non-originating components including copper wires, classified in subheading 8544.49, HTSUS, wire subassemblies classified in 8544.30, HTSUS, and electric conductors, classified in subheading 7413.00, HTSUS, and imports them into Mexico. Some of the other components used to make the wire harnesses are stated to be originating.
ISSUE:
Whether the imported electrical wire harnesses produced in Mexico using non-originating components are eligible for NAFTA tariff preference?
LAW AND ANALYSIS:
Pursuant to General Note ("GN") 12, HTSUS, for an article to be eligible for NAFTA preference, two criteria must be satisfied. First, the article in question must be "originating" under the terms of GN 12 and second, the article must qualify to be marked as a good of a NAFTA country under the NAFTA Marking Rules set forth in 19 CFR 102.20.
With regard to the first criteria, GN 12(b) provides, in pertinent part, as follows:
For purposes of this note, goods imported into the customs territory of the U.S. 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 in the territory of Canada, Mexico and/or the U.S.; or they have been transformed in the territory of Canada, Mexico, and/or the U.S. so that each of the non-originating material 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 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; or they are goods produced entirely in the territory of Canada, Mexico and/or the U.S. exclusively from originating materials..
The electric wire harnesses are classifiable in subheading 8544.30, HTSUS. The applicable rule under GN 12(t) is Rule 147, Chapter 85, which provides:
(A) A change to subheadings 8544.11 through 8544.60 from any subheading outside that group, except from headings 7408, 7413, 7605 or 7614; or
(B) A change to subheadings 8544.11 through 8544.60 from headings 7408, 7413, 7605 or 7614, whether or not there is also a change from any other subheading, including another subheading within subheadings 8544.11 through 8544.60, provided there is also a regional value content of not less than:
(1) 60 percent where the transaction value method is used, or
(2) 50 percent where the net cost method is used.
As some of the non-originating components do not make a change to subheading 8544.30, HTSUS, from outside the subheading 8544.11 through 8544.60 grouping, Rule 147(A) is not satisfied. With regard to the application of Rule 147(B), in order to qualify for the NAFTA duty preference, the non-originating materials may change to a subheading in 8544.11 through 8544.60 from any other subheading within that group (or from headings 7408, 7413, 7605, or 7614), provided the regional value content is satisfied. As the wire subassemblies are classified in the same subheading as the final good, a change in tariff classification pursuant to Rule 147(B) does not occur.
GN 12(f) provides a de minimis rule for non-originating materials that do not undergo a required tariff change. GN 12(f)(i) provides that:
Except as provided in subdivisions (f)(iii) through (vi), inclusive, good shall be considered to be an originating good if the value of all non-originating materials used in the production of the good that do not undergo an applicable change in tariff classification set out in subdivision (t) of this note is not more than 7 percent of the transaction value of the good, adjusted to a F.O.B. basis, or, if the transaction value is unacceptable under section 402(b) of the Tariff Act of 1930, as amended, the value of all such non-originating materials is not more than 7 percent of the total cost of the good, provided that—
(A) if the good is subject to a regional value-content requirement, the value of such non-originating materials shall be taken into account in calculating the regional value content of the good; and
(B) the good satisfies all other applicable requirements of this note.
Based on the information you provided, the wire subassembly imported into Mexico from Japan constitutes more than 7 percent of the total cost of wire harness. Therefore, GN 12(f) is not applicable and the wire harnesses incorporating a wire subassembly from Japan are not considered “originating goods” pursuant to GN 12.
HOLDING:
Based on the information presented, the electric wire harnesses are not eligible for preferential treatment as originating goods under the NAFTA.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents are filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.
Please note that 19 C.F.R. § 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based."
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch