OT:RR:CTF:VS H340062 AM
Annelori Roder
Littelfuse, Inc.
8755 West Higgins Road
Suite 500
Chicago, Illinois 60631
RE: Automatic Transfer Switches; United States-Mexico-Canada Agreement; Regional Value Content
Dear Ms. Roder:
This is in response to your request, dated June 21, 2024, filed on behalf of Littelfuse, Inc. ("Littelfuse") in which you request a binding ruling regarding the eligibility of certain Automatic Transfer Switches for preferential tariff treatment under the United States-Mexico-Canada Agreement ("USMCA"). Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division ("NCSD") for response. Our ruling is set forth below.
FACTS:
The following facts are based on your June 21, 2024, ruling request as well as follow-up information submitted to this office on August 23, 2024. The product under consideration is an Automatic Transfer Switch (ATS) (hereinafter, "switch").
According to your request, and confirmed by the NCSD, the subject switch is classified under subheading 8537.10.91, Harmonized Tariff Schedule of the United States ("HTSUS"), which provides for: "Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517: For a voltage not exceeding 1,000 V: Other:" The subject switch is assembled in Mexico. The switch is comprised of various originating as well as non-originating materials purchased from manufacturers in China. A costed bill of materials ("BOM") provided in your request includes the following materials in the finished switch:
|Item |Description |Littelfuse's HTSUS |CBP's HTSUS |Country of Origin |Cost per Unit |
|1 |Lower motor pivot |3926.90.9985 |8538.90.6000 |CN |$[XXXX] |
|2 |Armature bar |8503.00.3500 |8538.90.8180 |CN |$[XXXX] |
|3 |Metallic spiral pin |8538.10.0000 |8538.10.0000 |CN |$[XXXX] |
|4 |Upper motor pivot |3926.90.9985 |8538.90.6000 |CN |$[XXXX] |
|5 |Extension spring |7320.20.5060 |X |CN |$[XXXX] |
|6 |Electric motor (coil assembly) |8505.90.8000 |X |CN |$[XXXX] |
|7 |Screws for motor assembly (coil |7318.14.1060 |X |CN |$[XXXX] |
| |assembly) | | | | |
|8 |Motor housing kit |8538.90.6000 |X |CN |$[XXXX] |
|9 |Slide cover |3926.90.9985 |8538.90.6000 |CN |$[XXXX] |
|10 |Position label |8538.10.0000 |X |US |$[XXXX] |
|11 |Motor side label (coil assembly) |4821.90.2000 |X |US |$[XXXX] |
|12 |Pole assembly kit |8538.10.0000 |8536.90 |CN |$[XXXX] |
|13 |QC Terminal |8538.10.0000 |8536.90 |CN |$[XXXX] |
|14 |Lug |7210.12.0000 |8536.90 |US |$[XXXX] |
|15 |Mount plate |7326.90.8688 |X |CN |$[XXXX] |
|16 |Dual pole slide cover |3926.90.9985 |X |CN |$[XXXX] |
|17 |Pole side label |4821.90.2000 |X |US |$[XXXX] |
|18 |Wire harness |8544.42.9090 |X |CN |$[XXXX] |
|19 |Master box |4819.10.0040 |X |US |$[XXXX] |
|20 |Divider (5 slots) |4819.40.5060 |X |US |$[XXXX] |
|21 |Divider (6 slots) |4819.40.5060 |X |US |$[XXXX] |
|22 |Flat filler |4819.40.5060 |X |US |$[XXXX] |
|23 |Flat filler pad |4819.40.5060 |X |US |$[XXXX] |
|24 |Short circuit label |4821.90.2000 |X |US |$[XXXX] |
| |Labor & Overhead | | |MX |$[XXXX] |
The NCSD advised that the BOM that was initially provided by Littelfuse contained incorrect classification numbers for certain parts, which if properly classified, would impact the outcome of the analysis. The NCSD provided corrections for item numbers #1, 2, 4, 9, 12-14, and 16, and Littelfuse concurs. As a result, the BOM excerpted above contains the complete list of materials with their correct classification numbers.
ISSUE:
Whether the Automatic Transfer Switch is eligible for preferential tariff treatment under the USMCA when imported from Mexico into the United States.
LAW & ANALYSIS:
The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. 4511(a)). General Note ("GN") 11 of the HTSUS implements the USMCA.
GN 11(a)(i) provides:
Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as "USMCA country" or "USMCA countries" as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) 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 "S" in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and . . .
GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if-
i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
iii) the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
...
Here, the subject switches contain non-originating materials. As such, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i), nor are they goods produced exclusively from originating materials per GN 11(b)(ii). Thus, we must determine whether the goods qualify under GN 11(b)(iii).
As noted above, the NCSD has determined that the applicable subheading for the switches is 8537.10.91, HTSUS. The applicable rule of origin for goods classified under subheadings 8537.10.91, HTSUS, is in GN 11(o)/85.89, HTSUS, which provides, in relevant part:
89. (A) A change to heading 8537 from any other heading, except from printed circuit assemblies of subheading 8538.90 or moulded parts of subheading 8538.90; or
(B) A change to heading 8537 from printed circuit assemblies of subheading 8538.90 or moulded parts of subheading 8538.90 or, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:
(1) 50 percent where the transaction value method is used; or
(2) 40 percent where the net cost method is used.
According to the costed BOM, since the switches contain five materials classified as plastic molded parts under subheading 8538.90.60, HTSUS, GN 11(o)/ 85.89(A) is inapplicable. Therefore, we apply GN 11(o)/ 87.89 (B).
You have provided information pertaining to the cost of the materials, and you utilize the transaction value method to calculate the regional value content ("RVC") of the good. Under GN 11(c)(ii), the transaction value method is set forth as follows:
Transaction value method: An importer, exporter, or producer of a good may calculate the regional value content of a good on the basis of the following transaction value method:
RVC = ((TV - VNM)/TV) x 100
where RVC means the regional value content of the good, expressed as a percentage; TV means the transaction value of the good adjusted to exclude any costs incurred in the international shipment of the good; and VNM means the value of nonoriginating materials, including materials of undetermined origin, used by the producer in the production of the good.
The BOM includes the total costs of the originating and non-originating materials, as well as the production costs. Based on the provided BOM, the transaction value of the switches is $39.79. The costed bill of materials indicates that the value of the nonoriginating materials is $29.82. As such, the RVC is (($39.79 - $29.82) /$39.69) * 100] = 25.06%. This is not above the 50% minimum required by GN 11(o)/ 87.89 (B)(1). Accordingly, the Automatic Transfer Switch does not qualify as a USMCA originating good and will not be eligible for preferential tariff treatment under the USMCA when imported into the United States from Canada.
HOLDING:
Based on the information provided, the Automatic Transfer Switch is not eligible for preferential tariff treatment under USMCA.
Please note that 19 CFR 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 [CBP] 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."
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch