CLA-2-71:OT:RR:NC:N4:433
Catherine Zadeh, President
Zadeh New York
535 Fifth Avenue, Suite 603
New York, NY 10017
RE: The tariff classification of a bracelet; eligibility of the North American Free Trade Agreement (NAFTA) of that bracelet; and the country of origin of that bracelet.
Dear Ms. Zadeh:
In your letter dated August 15, 2017, you requested a tariff classification ruling. Illustrative literature, a bill of materials, and a Lao People’s Democratic Republic “Certificate of Origin” for the Asian Water Buffalo (Bubalus Bubalis) were presented. Additional product line information was viewed on the website of www.zadehny.com, with further research conducted on the Asian Water Buffalo (Bubalus Bubalis) at the websites of www.cabi.org and www.iucnredlist.org.
CABI is “The Centre for Agriculture and Bioscience International” and is a not-for-profit inter-governmental development and information organization based in the United Kingdom. CABI focuses primarily on agricultural and environmental issues in the developing world. IUCN is the “International Union for Conservation of Nature” and is a membership union composed of both government and civil society organizations. IUCN provides public, private and non-governmental organizations with the knowledge and tools that allows for human progress, economic development and nature conservation to take place together.
Asian Water Buffalo (Bubalus Bubalis) horns originating from Laos are sold to a Canadian supplier, who in turn sells those horns to the Canadian producer of the “Dylan” bracelets. Gold bars of .9999 purity are purchased from a Canadian supplier and processed by the Canadian producer; the Canadian producer melts those bars into 18 karat, yellow, white and rose color functional and decorative clasps and decorative accent pieces for the “Dylan” bracelets. You indicate that the Asian Water Buffalo (Bubalus Bubalis) horns are derived from sustainably farm raised stock. This appears to be supported in an article written on cabi.org stating that the Laos, Asian Water Buffalo (Bubalus Bubalis) is present only in “captivity/cultivation,” and is a domesticated animal.
For purposes of this ruling, if the .9999 purity gold bars purchased from a Canadian supplier are in “semimanufactured” form, they are classified in subheading 7108.13 of the Harmonized Tariff Schedule of the United States (HTSUS) and if the .9999 purity gold bars are in “finished” form they are classified in subheading 7115.90, HTSUS. Scenario 1: Gold Bars in Semimanufactured Form and Scenario 2: Gold Bars in Finished Form.
The merchandise concerned is identified as the “Dylan” bracelet. The Canadian producer of the “Dylan” bracelet hand slices the Asian Water Buffalo (Bubalus Bubalis) horn, pieces those slices together, and then molds them into the shape of a wrist, followed by the adding of a functional and decorative (hybrid) jewelry finding, the 18 karate gold clasp and decorative jewelry findings, the 18 karate gold accent bands, thereby completing the “Dylan” bracelet. During the production process there is an oil applied giving the bracelet a rich black luster, which will fade over time to the original gray patina of the natural horn.
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
Legal Note 2 (a) to Chapter 71 of the HTSUS states that “Headings 7113, 7114 and 7115 do not cover articles in which precious metal or metal clad with precious metal is present as minor constituents only, such as minor fittings or minor ornamentation (for example, monograms, ferrules and rims), and paragraph (b) of the foregoing note does not apply to such articles.” Legal Note 2 (b) to Chapter 71, HTSUS, states that “Heading 7116 does not cover articles containing precious metal or metal clad with precious metal (other than as minor constituents).”
Further at Legal Note 11 to Chapter 71 of the HTSUS, “for the purposes of heading 7117, the expression “imitation jewelry” means articles of jewelry within the meaning of paragraph (a) of note 9 above (but not including buttons or other articles of heading 9606, or dress combs, hair slides or the like, or hairpins, of heading 9615), not incorporating natural or cultured pearls, precious or semiprecious stones (natural, synthetic or reconstructed) nor (except as plating or as minor constituents) precious metal or metal clad with precious metal.” See Legal Note 9 (a) to Chapter 71, HTSUS, for a list of exemplars of articles of jewelry.
To reiterate, exemplars of the term “minor constituents” can be found in Legal Note 2 (a) to Chapter 71, HTSUS, which lists monograms, ferrules and rims being of minor constituents, and by means of the Explanatory Notes (ENs) to heading 7116, HTSUS),” in which a pearl necklace with a gold fastener remained classified in heading 7116, the provision for “Articles of natural or cultured pearls, precious and semi-precious stones (natural, synthetic or reconstructed).” In the case of the pearl necklace with a gold fastener, the gold fastener was considered a minor fitting in that the clasp did not form part of ornamentation of the pearl necklace.
We distinguish the pearl necklace with a gold fastener from the “Dylan” bracelet, as the gold fastener was merely a clasp hidden behind one’s neck, while the pearls provided the visible beautification of the necklace. By observation of the illustrative literature, the “Dylan” bracelet contains both a hybrid gold clasp and accent gold bands which embellishes the buffalo horn bracelet beyond a minor fitting or minor ornamentation when taken together. In accordance with Legal Note 2 (a) to Chapter 71, the “Dylan” bracelet is classifiable in heading 7113, HTSUS.
The applicable subheading for the “Dylan” bracelet will be 7113.19.5085, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Articles of jewelry and parts thereof, of precious metal or of metal clad with precious metal: Of precious metal, whether or not plated or clad with precious metal: Of other precious metal, whether or not plated or clad with precious metal: Other: Other: Other: Other.” The rate of duty will be 5.5% ad valorem.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at https://hts.usitc.gov/current.
The rules for determining whether the “Dylan” bracelet is an “originating good” of Canada and thus eligible for preferential tariff treatment under the provisions of the NAFTA Act are provided for in General Note 12 of the HTSUS, which provides, in relevant part, as follows:
(a) Goods in the territory of a party to the NAFTA are subject to duty as provided therein. For the purposes of this note –
(a) (i) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (whether or not the goods are marked) …, 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 “CA” in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Implementation Act.
(b) For 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:
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(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 [de minimis provision], 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....
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials....
Thus, by operation of GN 12, HTSUS, the eligibility of articles for NAFTA preferential treatment is predicated upon a finding that the goods are originating in the territory of a NAFTA party under GN 12 (b), and that they are goods of Canada or Mexico under the NAFTA Marking Rules.
With regard to the NAFTA Marking Rules, 19 CFR 102.11, sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for the purposes of country of origin marking and determining the rate of duty. We first turn to paragraph (a) of 19 CFR 102.11 which states that the country of origin of a good is the country where:
The good is wholly obtained or produced;
The good is produced exclusively from domestic materials; or
Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
When paragraph (a) of 19 CFR 102.11 cannot be met, we then proceed down the hierarchy examining 102.11 (b) – Essential Character, 102.11 (c) and 102.11 (d). 102.11 (c) is not applicable to the “Dylan” bracelet, because the merchandise concerned is not specifically described as a set or mixture, or classified as a set or mixture or composite good pursuant to GRI 3 (b), HTSUS. 102.11 (d) – Default Provision, when 102.11 (b) and (c) cannot be met.
In both scenarios, Gold Bars in Semimanufactured Form and Gold Bars in Finished Form, 19 CFR 102.11 (a) (1) and (a) (2) do not apply to the facts presented in this case, because the Asian Water Buffalo horn processed in Canada is neither wholly obtained or produced, nor produced exclusively from domestic materials.
Scenario 1: Gold Bars in Semimanufactured Form
Because the “Dylan” bracelet is classified in subheading 7113.19, HTSUS, we apply the “Change in Tariff Classification Rule” for that subheading. General Note 12(t)/71.2 states “A change to heading 7113 through 7118 from any heading outside that group.” Due to the fact that the Asian Water Buffalo horn and other non-originating materials are outside the excluded headings for the rule, and the gold clasp and gold accent bands are produced from a [semimanufactured] gold bar classified in subheading 7108.13, HTSUS, which is also outside the excluded headings for the rule, the tariff shift rule for subheading 7113.19 is satisfied, and as such, the “Dylan” bracelet [qualifies] as a NAFTA originating good in accordance with General Note 12(t)/71.2.
As indicated above, to receive the NAFTA preferential duty rate from Canada, the “Dylan” bracelet must not only be an originating good, but also be considered a good of Canada under the NAFTA Marking Rules of 19 CFR, Part 102 – “Rules of Origin.” The “Dylan” bracelet classified in subheading 7113.19, HTSUS, is subject to the “Specific Rule by Tariff Classification” as set forth in 19 CFR 102.20 – 7113.11-7115.90: “A change to subheading 7113.11 through 7115.90 from any other subheading, including another subheading within that group.”
Applying the “Specific Rule by Tariff Classification,” the “Dylan” bracelet, satisfies the rule of origin in that the Asian Water Buffalo horn of Laos origin and other non-originating materials, and the gold clasp and gold accent bands made from a [semimanufactured] gold bar, are all from outside the tariff shift rule of origin, including another subheading within that group. Specific to this scenario, it makes no difference whether the gold clasp and gold accent bands used in the production of the bracelet are self produced materials made from a semimanufactured gold bar, because the semimanufactured gold bar is classified outside of the range of the “Specific Rule by Tariff Classification,” thereby meeting the applicable rule of origin; this is regardless of whether the semimanufactured gold bar is produced from the NAFTA parties or elsewhere produced. Due to the fact that the “Dylan” bracelet is a NAFTA originating good in accordance with General Note 12(t)/71.2 and satisfies the “Specific Rule by Tariff Classification” in accordance with 19 CFR 102.11 (a) (3), the country of origin of the bracelet is Canada, and the bracelet is eligible for duty-free treatment.
Scenario 2: Gold Bars in Finished Form
In the event that the .9999 purity gold bar is a finished gold bar and is not of the NAFTA parties of the United States, Canada or Mexico, the “Dylan” bracelet fails to meet the “Change in Tariff Classification Rule” in accordance with General Note 12(t)/71.2, “A change to headings 7113 through 7118 from any other heading outside that group,” because the Non-NAFTA origin gold bar is classified in subheading 7115.90, HTSUS, and is within the range of excluded headings. Even if the Canadian producer of the “Dylan” bracelet processes the Non-NAFTA gold bar into a gold clasp and gold accent bands (self produced materials used in the production of the bracelet), the bracelet still fails to meet the “Change in Tariff Classification Rule” of General Note 12(t)/71.2. The self produced gold clasp and gold accent bands are classified in subheading 7113.20, the subheading for “Clasps and parts thereof.” Because the self produced clasp and accent bands are classified in subheading 7113.20, HTSUS, the same “Change in Tariff Classification Rule” applies resulting in the Non-NAFTA gold bar falling within the range of excluded headings of General Note 12(t)/71.2. Under these circumstances, the “Dylan” bracelet [does not] qualify as a NAFTA originating good in accordance with General Note 12(t)/71.2.
Even though the Dylan” bracelet is not originating and is not entitled to the NAFTA preferential duty-free rate, the merchandise concerned satisfies the “Specific Rules by Tariff Classification” as set forth in 19 CFR 102.20 – 7113.11-7115.90: “A change to subheading 7113.11 through 7115.90 from any other subheading, including another subheading within that group.” The Non-NAFTA finished gold bar which is classified in subheading 7115.90 is from another subheading within the same group when compared to the “Dylan” bracelet which is classified in subheading 7113.19. With case in point, the “Dylan” bracelet is country of origin Canada, not eligible for duty-free treatment.
In the event that the .9999 purity gold bar is a finished gold bar and is an originating good produced in the NAFTA parties of the United States, Canada or Mexico, the “Dylan” bracelet meets the “Change in Tariff Classification Rule” in accordance with General Note 12(t)/71.2, “A change to headings 7113 through 7118 from any other heading outside that group,” because under General Note 12 (r) “Interpretation of Rules of Origin” designation (iii) originating materials need not meet the change in tariff classification rule. Under this circumstance, the “Dylan” bracelet [qualifies] as a NAFTA originating good in accordance with General Note 12(t)/71.2.
As indicated above, to receive the NAFTA preferential duty rate from Canada, the “Dylan” bracelet must not only be an originating good, but also be considered a good of Canada under the NAFTA Marking Rules of 19 CFR, Part 102 – “Rules of Origin.” The “Dylan” bracelet classified in subheading 7113.19, HTSUS, is subject to the “Specific Rules by Tariff Classification” as set forth in 19 CFR 102.20 – 7113.11-7115.90: “A change to subheading 7113.11 through 7115.90 from any other subheading, including another subheading within that group.”
If the gold bar sold by a Canadian supplier is country of origin United States or Mexico, then the required “Specific Rule by Tariff Classification” is met, because the United States or Mexico gold bar is considered a foreign material satisfying the “Specific Rules by Tariff Classification” as set forth in 19 CFR 102.20 – 7113.11-7115.90: “A change to subheading 7113.11 through 7115.90 from any other subheading, including another subheading within that group” – see 19 CFR 102.1 (e) – definition of “foreign material” in conjunction with 19 CFR 102.11 (a) (3). Due to the fact that the “Dylan” bracelet is a NAFTA originating good in accordance with General Note 12(t)/71.2 and satisfies the “Specific Rules by Tariff Classification” in accordance with 19 CFR 102.11 (a) (3), the country of origin of the bracelet is Canada and the bracelet is eligible for duty-free treatment.
If the gold bar sold by a Canadian supplier is country of origin Canada, then the required “Specific Rule by Tariff Classification” is not met, because the Canadian gold bar is considered a domestic material, and does not satisfying 19 CFR 102.11 (a) (3), requiring a change of tariff classification of each of the {foreign} materials – see 19 CFR 102.1 (d) – definition of “domestic material” in conjunction with 19 CFR 102.11 (a) (3). Because 19 CFR 102.11 (a) (3) is not applicable, there is no need to examine the 102.20 – “Specific Rule by Tariff Classification” for the “Dylan” bracelet.
Consequently, we must move down the “Rules of Origin” hierarchy of 19 CFR 102.11 (a) (3) into 19 CFR 102.11 (b) – Essential Character. The “Rule of Interpretation” of 19 CFR 102.18 (b) (1) states that for purposes of identifying the material that imparts the essential character to a good under 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed. See also 19 CFR 102.18 (b) (1) (i) and (b) (1) (ii) and (b) (1) (iii). The only material not meeting the change in tariff classification is the domestic gold bar of Canadian origin, resulting in the gold bar imparting the essential character to the bracelet. Due to the fact that the “Dylan” bracelet is a NAFTA originating good in accordance with General Note 12(t)/71.2 and that the gold bar imparts the essential character to the “Dylan” bracelet, the country of origin of the bracelet is Canada and the bracelet is eligible for duty-free treatment.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Neil H. Levy at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division