CLA-2-90:OT:RR:NC:1:405
Mr. Robert G. Gaydo
Deringer Logistics Consulting Group
6930 Metroplex Drive
Romulus, MI 48174
RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA), of the FTB-200 platform and the FTB-7300E from Canada; Article 509
Dear Mr. Gaydo:
In your letter dated July 15, 2014, you requested a ruling on the tariff classification, NAFTA eligibility and country of origin of the FTB-200 Compact Modular Platform (hereafter referred to as the FTB-200) and the FTB-7300E-PON FTTx/MDI OTDR (hereafter referred to as the FTB-7300E) on behalf of EXFO, Inc. In NY N244795 dated August 28, 2013 issued to you on behalf of EXFO, Inc., determinations on the tariff classification, NAFTA eligibility and country of origin of the FTB-200 and the FTB-7300E, when shipped separately, were provided. Additional shipping scenarios regarding the same merchandise are now being presented for consideration.
The FTB-200 platform and the FTB-7300E are used in the testing of fiber optic systems. According to the information submitted with your letters of June 12, 2013 and July 31, 2013, the FTB-200 and the FTB-7300E are assembled in EXFO’s plant in China and are not tested or programmed prior to shipping to Canada. In Canada, the units undergo extensive testing to assure that the units will function as intended. Once tested, software is installed, the units are set up and calibrated, and optional programming and/or equipment is added. The units are tested again prior to being imported into the United States. The units as imported into Canada from China are said to have a very low value, as opposed to the finished units exported from Canada.
The FTB-200 is a platform that by itself is incapable of performing any function. It interfaces with 30 different optical test modules and has a processor which, when connected, allows the modules to function for their intended testing functions. The results of these tests are displayed on the FTB-200 platform. The FTB-200 platform, without a module, cannot do any type of test. The FTB-200 is not used with any type of electrical test equipment.
The FTB-7300E is used for testing the integrity of fiber optic cables. It can detect and locate connections, splices, losses, macro bends, measure length, etc. The unit is used to create a “picture,” which is called a trace, of the fiber optic cable when it is newly installed. The trace can be stored for later reference to check against a blueprint when network problems arise. The FTB-7300E has to be connected to the FTB-200 platform to perform a test.
In scenario A, the buyer places an order for one or more platforms and one or more modules on the same purchase order. Units are not packaged together. Each unit is packaged in its own customary commercial packaging but shipped in the same master container. The commercial invoice lists each part number with a quantity and individual serial numbers. In this scenario, you state that you have no knowledge if the units are intended to be used together as certain buyers may also sell to retailers.
In scenario B, the buyer requests EXFO, Inc. to create a kit specifically to meet the buyer’s needs, i.e., one platform and one or more modules.
In scenario C, EXFO, Inc. itself creates “retail kits” with a platform and at least one module designed and sold to work together as a complete kit. In scenario C, EXFO, Inc. assigns a single part number/single price for the created kit. You state that the units would “likely” be packaged together in a single hard cover carrying case with the module installed in the platform.
Scenario C further describes two separate configurations, herein referred to as C (1) and C (2). Due to the platform’s capability, C (1) two modules can be installed in a platform, thus allowing all three units to be shipped in the hard case but C (2) if more than two modules are included, the extra modules not fitting in the case are packaged in their own boxes.
You state that the hard cover carry case is foam lined and features specific cut outs for the platform to fit into plus a place for the disks, manual and other paperwork. Each platform is said to be capable of holding up to two modules.
HQ 950218 dated April 17, 1992 reads, in pertinent part, "The Harmonized Commodity Description and Coding System Explanatory Notes were drafted subsequent to the preparation of the Harmonized System Nomenclature itself. The Conference Report on H.R. 3, the Omnibus Trade and Competitiveness Act of 1988, part 3, explained that the Explanatory Notes, while not legally binding, are generally indicative of proper interpretation of the various provisions of the Convention and that they should be consulted for guidance. H.R. Rep. No. 134, 100th Cong., 2nd Sess., at 1863 (1988)."
Explanatory Note X to General Rule of Interpretation 3(b) provides that for the purpose of this rule, the term “goods put up in sets for retail sale” shall be taken to mean goods which: (a) consist of at least two different articles, which are, prima facie, classifiable in different headings. (b) consist of products or articles put up together to meet a specific activity; and (c) are put up in a manner suitable for sale directly to users without repackaging (e.g. in boxes or cases or on boards).
In Dell Products LP, the court distinguished between “kits” (1) where the contents of a customized order is determined by an individual customer as opposed to (2) where the seller determines the contents of a set of goods for retail sale. Example (1) was determined not to be a kit as the goods were not “put up” together before the buyer purchased the goods. As described above, in scenario B, the buyer requests EXFO, Inc. to create a kit specifically to meet the buyer’s needs. Thus, the goods shipped in accordance with scenario B would not be considered a set.
The configuration described in scenario C (1) meets the requirement “put up together” while that in C (2) does not meet the requirement. Thus, only the goods shipped in scenario C (1) would be considered a kit.
The applicable tariff provision for the FTB-200 Compact Modular Platform and the FTB-7300E-PON FTTx/MDI OTDR, imported as described in scenario C (1), will be 9027.50.4060, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Instruments and apparatus for physical or chemical analysis (for example, polarimeters, refractometers, spectrometers, gas or smoke analysis apparatus); instruments and apparatus for measuring or checking viscosity, porosity, expansion, surface tension or the like; instruments and apparatus for measuring or checking quantities of heat, sound or light (including exposure meters); microtomes; parts and accessories thereof: Other instruments and apparatus using optical radiations (ultraviolet, visible, infrared): Other: Electrical … Other. The general rate of duty will be free.
The applicable tariff provision for the FTB-200 Compact Modular Platform and the FTB-7300E-PON FTTx/MDI OTDR, imported as described in scenarios A, B and C (2) will be 9027.90.6400, TSUS, which provides for Instruments and apparatus for physical or chemical analysis … parts and accessories thereof: Parts and accessories: Other: Of optical instruments and apparatus: Of instruments and apparatus of subheading 9027.20, 9027.30, 9027.50 or 9027.80. The general rate of duty will be free.
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 http://www.usitc.gov/tata/hts/.
General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that
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; or
(iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the nonoriginating materials falling under provisions for “parts” and used in the production of such goods does not undergo a change in tariff classification because--
(A) the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a), or
(B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the goods themselves and their parts,
provided that such goods do not fall under chapters 61 through 63, inclusive, of the tariff schedule, and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note.
Based on the facts provided, the FTB-200 and the FTB-7300E are classified under subheading 9027.90.64, HTSUS, in scenarios A, B and C(2) and under subheading 9027.50.5060, HTSUS, in scenario C(1). With respect to General Note 12(b)(ii)(A), the applicable tariff shift rule under General Note 12(t)/61 states that 9027.10 provides for a change to subheading 9027.10 from any other heading; or, no required change in tariff classification to subheading 9027.10, provided there is a regional value content of not less than 60 percent where the transaction value method is used, or 50 percent where the net cost method is used. With respect to General Note 12(b)(ii)(A), the applicable tariff shift rule under General Note 12(t)/64 states that 9027.90 provides for a change to subheading 9027.90 from any other heading; or, no required change in tariff classification to subheading 9027.90, provided there is a regional value content of not less than 60 percent where the transaction value method is used, or 50 percent where the net cost method is used. Your letter states that the regional value content added in Canada is over 100 percent of the value of the FTB-200 and the FTB-7300E. Based on the information you provided, the FTB-200 and the FTB-7300E, in scenarios A, B, C(1) and C(2) are eligible for NAFTA preferential treatment upon compliance with all applicable laws, regulations, and agreements, including Regional Value Content requirements specified in General Note 12(t)/61 and General Note 12(t)/64.
This ruling letter has not addressed the actual Regional Value Content of the subject goods. If you desire a ruling regarding the RVC of your goods, provide the information noted in Section 181.93(b) of the Customs Regulations (19 CFR 181.93(b)), to U.S. Customs and Border Protection, Regulations and Rulings, 799 9th Street N.W.-7th Floor, Washington, DC 20229-1177, along with a copy of this letter.
You have also requested a ruling on the country of origin marking of the FTB-200 and the FTB-7300E in scenarios A, B, C (1) and C (2). The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. 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 U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.
The country of origin marking requirements for a “good of a NAFTA country” are also determined in accordance with Annex 311 of the North American Free Trade Agreement (“NAFTA”), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat 2057) (December 8, 1993) and the appropriate Customs Regulations. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Part 102, Customs Regulations. The marking requirements of these goods are set forth in Part 134, Customs Regulations.
Section 134.1(b) of the regulations defines “country of origin” as the country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Section 134.1(j) of the regulations provides that the “NAFTA Marking Rules” are the rules promulgated for the purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the regulations, defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules. Section 134.45(a)(2) of the regulations, provides that “a good of a NAFTA country” may be marked with the name of the country of origin in English, French or Spanish.”
The FTB-200 and the FTB-7300E are processed in Canada prior to being imported into the United States. Since Canada is defined under 19 CFR 134.1(g) as a NAFTA country, we must apply the NAFTA Marking Rules in order to determine if the goods are subject to the NAFTA marking requirements.
Part 102 of the regulations sets forth the NAFTA Marking Rules. Section 102.11 of the regulations sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) states that 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 as set out in section 102.20 and satisfies any other applicable requirements of that section.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the FTB-200 or the FTB-7300E. Section 102.20 for 9027.10-9027.90 requires a change to any other good of subheading 9027.10 through 9027.90 from any other subheading, including another subheading within that group. Since the FTB-200 and the FTB-7300E do not undergo the appropriate tariff shift, section 102.11(a)(3) does not apply.
Section 102.11(b) states that except for a good that is specifically described in the Harmonized System as a set, or classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of section 102.11, then 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. This section does not apply to the FTB-200 and the FTB-7300E.
Section 102.19 states that except in the case of a good of paragraph (b), if a good which is originating within the meaning of 181.1(q) of this chapter is not determined under section 102.11(a) or (b) to be a good of a single NAFTA country, the country of origin of the good is the last NAFTA country in which the good underwent processing other than minor processing. Under Section 102.19, the NAFTA Preference Override, the country of origin of the FTB-200 and the FTB-7300E in scenarios A, B and C (2) is Canada for marking purposes.
Section 102.11(c) states that where the country of origin cannot be determined under paragraph (a) or (b) of section 102.11 and the good is specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture or composite good pursuant to General Rule of Interpretation 3, then the country of origin of the good is the country or countries of origin of all materials that merit equal consideration for determining the essential character of the good. This section does not apply to the goods under consideration.
Section 102.11(d) states that where the country of origin of a good cannot be determined under paragraph (a), (b) or (c) of section 102.11, the country of origin of the good shall be determined as follows:
(1) If the good was produced only as a result of minor processing, the country of origin of the good is the country or countries of origin of each material that merits equal consideration for determining the essential character of the good;
(2) If the good was produced by simple assembly and the assembled parts that merit equal consideration for determining the essential character of the good are from the same country, the country of origin of the good is the country of origin of those parts; or
(3) If the country of origin of the good cannot be determined under paragraph (d)(1) or (d)(2) of this section, the country of origin of the good is the last country in which the good underwent production.
In this case, section 102.11(d)(1) and (2) do not apply to the goods under consideration. Under Section 102.11(d)(3), the country of origin of the FTB-200 and the FTB-7300E in scenario C(1) is Canada for marking purposes.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 CFR Part 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 Patricia O’Donnell at [email protected].
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, Regulations & Rulings, 90 K Street N.E. – 10th floor, Washington, DC 20229-1177.
Sincerely,
Gwenn Klein Kirschner
Director
National Commodity Specialist Division