CLA-2-73:OT:RR:NC:N1:117
Mr. John M. Peterson
Neville Peterson LLP
17 State Street, 19th Floor
New York, New York 10004
RE: The tariff status under the North American Free Trade Agreement (NAFTA), of steel rails disassembled from railroad tracks in Canada.
Dear Mr. Peterson:
In your letter dated March 17, 2008 on behalf of A& K Railroad Materials, Inc., you requested a ruling on the originating status under the NAFTA for steel rails disassembled from existing Canadian railroad track systems.
A & K Railroad Materials plans to import used steel rail sections. These sections were disassembled from railway track laid decades ago. Although the components of this system are thought to be of Canadian origin by their markings, documented manufacturing information is no longer available. These rails will be used in the manufacture of new railroad tracks in the United States. You request that we determine the originating status under NAFTA for these disassembled rails.
Article 401 of the NAFTA provides, in relevant part, that a good shall originate in the territory of a Party where: (b) each of the non-originating goods used in the production of the good undergoes an applicable change in tariff classification set out in Annex 401 as a result of production occurring entirely in the territory of one or more of the Parties, or the good otherwise satisfies the requirements of that Annex where no change in tariff classification is required... General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS. General Note 12(a)(i) provides, in pertinent part: Goods that originate in the territory of a NAFTA party under the terms of 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 (without regard to whether 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 NAFTA Implementation Act. Accordingly, the disassembled rails will be eligible for the "Special" "CA" rate of duty provided they are NAFTA "originating" goods under General Note 12(b), HTSUS, and qualify to be marked as products of Canada under the marking rules. General Note 12(b), HTSUS, provides, in pertinent 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— (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, 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 (B) 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 (iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials. The recovered parts are not eligible for NAFTA originating treatment as goods wholly obtained or produced entirely in a NAFTA territory pursuant to GN 12(b) (i). Therefore production of the parts must satisfy tariff shift rules and meet other applicable requirements as prescribed in GN 12(b) (ii). The specific rules of origin of NAFTA Annex 401 are set forth at GN 12(t).
This office confirms that the classification of the assembled railway system from which the rails will be obtained is in Heading 8608, Harmonized Tariff System (HTS). Subheading 8608.00.00 provides for “railway or tramway track fixtures and fittings; mechanical (including electro-mechanical) signaling, safety or traffic control equipment for railways, tramways, roads, inland waterways, parking facilities, port installations or airfields; part of the foregoing. The steel rails are classifiable under HTS Heading 7302 which provides for “Railway or tramway track construction material or iron or steel, the following: rails, check-rails and rack rails…”.
For goods classified in Heading 7302, the specific rule of origin under GN 12(t)/Chapter 73 (1), requires: A change to headings 7301 through 7303 from any other chapter. In this specific case, a change to rails classified in Heading 7302 from assembled tracks classified in Heading 8608 satisfies the requirement of GN 12 (t) Chapter 73 (1). For the purposes of this ruling, assuming the origin of the assembled track is not a NAFTA country, then pursuant to 19 CFR Section 102.19 (a), the origin of the disassembled rails will be the last country in which the part underwent production, provided a NAFTA Certificate of Origin is completed and signed for the part upon importation into the United States.
Under both Article 401 and GN 12, qualifying changes in tariff classification must take place by reason of "production." 19 CFR 181.132 provides for disassembly and states, “ (a) Treated as production. For purposes of implementing the rules of origin provisions of General Note 12, HTSUS, and Chapter Four of the NAFTA, except as provided in paragraph (b) of this section, disassembly is considered to be production, and a component recovered from a good disassembled in the territory of a Party will be considered to be originating as the result of such disassembly provided that the recovered component satisfies all applicable requirements of Annex 401 and this part. (b) Exception; new goods. Disassembly, as provided in paragraph (a) of this section, will not be considered production in the case of components that are recovered from new goods. For purposes of this paragraph, a "new good" means a good which is in the same condition as it was when it was manufactured and which meets the commercial standards for new goods in the relevant industry.
A component recovered from a good (other than a new good) by disassembly is therefore eligible to be considered as a NAFTA originating good or material provided that the recovered component satisfies the applicable GN 12(t) rule of origin and satisfies other applicable requirements..
The importer has agreed that the assembled tracks for the purpose of this ruling are non-originating. Pursuant to 19 CFR 181.132, the recovery of the rails from non-originating track system by disassembly is considered “production” for the purposes of the NAFTA rules of origin. The change to rails classified in Heading 7302 from assembled track of Chapter 86 HTSUS, satisfies the applicable tariff shift rule of origin. Therefore assuming all other applicable requirements are met, the producer or exporter may consider the used rails recovered from the assembled track as originating materials. Pursuant to 19 CFR 102.19 (a), the country of origin of the disassembled rails will be Canada.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181)
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 Gloria Stingone at 646-733-3020.
Should you wish to request an administrative review of this ruling, submit a copy of this ruling and all relevant facts and arguments within 30 days of the date of this letter, to the Director, Commercial Rulings Division, Headquarters, U.S. Customs and Border Protection, 1300 Pennsylvania Ave. N.W., (Mint Annex), Washington, D.C. 20229.
Sincerely,
Robert B. Swierupski
Director,
National Commodity
Specialist Division