OT:RR:CTF:VS H342509 EE
Maytee Pereira
PwC US
300 Madison Ave
New York, NY 10017
RE: USMCA Eligibility of Damaged Jewelry; Marking
Dear Ms. Pereira:
This is in response to your request, dated September 9, 2024, filed on behalf of Company A [X)] and its subsidiaries, in which you request a binding ruling regarding the eligibility of certain damaged jewelry for preferential tariff treatment under the United States-Mexico-Canada Agreement (“USMCA”) as well as the country of origin for marking purposes.
Your client requested that certain information submitted in connection with this request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information designated as confidential in your request and contained within brackets in the ruling will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
Company A [X] is a retailer of assorted precious metals jewelry, incorporated in Bermuda. Company A [X] operates retail stores in the United States, Canada, and the United Kingdom under various brands including [X], and others. In the United States, Company A [X] operates through its wholly owned subsidiary, Company B [X].
As part of its client service model, Company A [X] offers jewelry repair services to its clientele, regardless of whether the damaged items were purchased from its stores. Currently, Company A’s [X] Canadian stores primarily use various local unrelated jewelers in Canada to repair damaged merchandise brought into stores by customers. Company B [X] is contemplating a new repair process under which these repairs will be incorporated into a centralized repair operation in its U.S.-based facility. This process would involve the following steps:
Merchandise such as chains, diamonds, earrings, pendants, and rings will be gathered in store locations across Canada, where customers drop off their broken or damaged items.
All products collected within a prescribed timeframe (i.e., daily, biweekly, etc.) will be consolidated by each Canadian store into a combined shipment to the U.S. repair location.
The shipment will be sent from Canada and imported into the United States for repair services.
Upon completion of repair services in the United States, repaired items ready to be returned to their owners will be consolidated into shipments to be shipped back to Company A’s [X] corresponding Canadian stores.
The repaired items will be returned to Canada and shipped to the store for collection by the customer.
Your client states that a repair ticket is issued reflecting the Canadian store’s intake of the product to be repaired via Company A’s [X] repair tracking system, [X]. Repairs performed on jewelry purchased from Company C [X] may be covered under the product’s original or extended warranty. Repairs not covered under warranty or not originally purchased from Company C [X] are repaired on a fee basis, where revenue, if applicable, is collected at the Canadian store where the merchandise was previously dropped off. For repairs pursuant to warranty, the repair process is tracked via [X]. Through [X], Company C [X] can trace various data points allowing for an accurate track record of the merchandise under warranty. Namely, Company C [X] can capture the following data points, but not limited to: Stock Keeping Unit (“SKU”) number, warranty or insurance policy number, purchase price, item description, repair type, repair cost, and repair job number. Similarly, for repairs not pursuant to warranty, Company C [X] captures, via [X], the repair type, repair job number and the value of the item to facilitate proper tracking of the merchandise and documentation of non-warranty repairs. The company estimates non-warranty repairs account for about 25% of the total volume of the merchandise collected in Canada for repair in the United States.
You provided an extract of Company A’s [X] tracking system and an extract of Company A’s [X]. It is indicated that the origin of the jewelry is unknown.
ISSUES:
Whether the damaged jewelry items imported into the United States for repair qualify for preferential tariff treatment under the United States Mexico Canada Free Trade Agreement (“USMCA”).
What is the country of origin of the damaged jewelry items imported into the United States for marking purposes?
LAW & ANALYSIS:
USMCA
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—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
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
…
In the instant case, the origin of the damaged jewelry items is unknown. As such, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and GN 11(b)(ii). GN 11(b)(iii) is also not applicable since we are unable to determine whether the damaged jewelry items were produced entirely in the territory of a USMCA country. Accordingly, the damaged jewelry is not eligible for preferential tariff treatment under the USMCA.
Country of Origin for Marking Purposes
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 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. By enacting 19 U.S.C. § 1304, Congress intended to ensure that the ultimate purchaser would be able to know by inspecting the marking on the imported goods the country of which the goods are the product. “The evident purpose is to mark the goods so that at the time of purchaser 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.” See United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 C.A.D. 104 (1940).
Part 134 of the 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. Title 19, § 134.1(b) defines “country of origin” as “the 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].”
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a hierarchy for determining the country of origin of a good for marking purposes. See 19 C.F.R. § 102.11(a).
Applied in sequential order, the hierarchy establishes the 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 § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
As previously noted, since we do not have any information regarding the origin of the damaged jewelry items and the materials which comprise the jewelry items, section 102.11(a) is not applicable. Section 102.11(b)(1) provides as follows:
(b) 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 [(“GRI”)] 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 to the good….
Company A [X] states that due to the inherent nature of the jewelry in the present case as personal possessions of Canadian customers, the merchandise is in continuous use in Canada for an extended period prior to importation in the United States. Company A [X] claims that in accordance with Ashdown, U.S.A. v. United States, 12 C.I.T. 808, 696 F. Supp. 661 (1988) and prior CBP decisions, the damaged jewelry items with undiscernible origin which Company B [X] intends to ship to the United States for repair and eventual return to Canada is to be considered of Canadian origin. We disagree. In Ashdown, U.S.A., the Court of International Trade held that an East German-made printing press, which was continually used in West Germany for nine years and which was not intended at the time of original sale to be exported to the United States, became a bona fide part of the commerce of West Germany and was, therefore, not an import from a communist country. In the instant case, there is insufficient evidence to establish that the damaged jewelry items actually became a bona fide part of the commerce of Canada. Unlike Ashdown, there is no evidence as to the history of the specific jewelry items before they were purchased by the customer. Further, it is unclear when the jewelry was imported into Canada and how long it was used by the customer.
However, since Company A [X] claims they do not know the origin of the damaged jewelry items, they may be able to seek an “appraisement entry” which is provided for in 19 CFR § 143, Subpart B. As stated in HQ H266203, dated November 17, 2015:
. . . CBP previously held that appraisement entry procedures may also be used when the importer does not have sufficient information regarding country of origin for the purpose of making a formal entry. See Headquarters Ruling (“HQ”) 735230, dated Jan. 28, 1994 and HQ 735033, dated Jan. 28, 1994. In such cases, we have found that it may be appropriate to identify the country of origin with a generic description of “foreign.” Id. However, as we stated in HQ 732320, “there is no provision for a blanket approval of appraisement entry procedures.” 19 C.F.R. § 143.11 requires either the port director or headquarters to approve each application for appraisement entry. See 19 C.F.R. Part 143.11(a) and (b).
See also HQ H325232, dated June 27, 2022.
Accordingly, Company A [X] must apply each time before entering goods under an appraisement entry.
We note that Company A [X] may consider the applicability of subheading 9813.00.05, HTSUS. Under subheading 9813.00.05, HTSUS, articles to be repaired, altered or processed (including processes which result in articles manufactured or produced in the United States) may be entered temporarily free of duty under a Temporary Importation Under Bond (TIB) for exportation within one year from the date of importation. This one-year period may be extended for one or more additional periods, which when added to the initial period does not exceed three years. In order to qualify under this provision, the imported merchandise may not be imported for the purpose of a sale or sale on approval. U.S. Note 1(a) to Subchapter XIII, Chapter 98, HTSUS. The damaged jewelry items may be eligible for TIB treatment under subheading 9813.00.05, HTSUS, as articles to be processed into articles manufactured or produced in the United States if all regulatory requirements are met.
HOLDING:
The damaged jewelry items imported into the United States for repair are not eligible for preferential tariff treatment under the USMCA.
Company B [X] may apply for approval of an appraisement entry each time it imports the damaged jewelry items from Canada for which it cannot determine the country of origin.
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 [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