MAR-2:OT:RR:NC:N2:206
Leslie A. Glick
1909 K Street, NW
Suite 500
Washington, DC 20006
RE: The classification, trade preference and the country of origin of an Absorber Crashbox.
Dear Mr. Glick:
In your letter dated May 27, 2022, you requested a tariff classification ruling, the eligibility of duty-free treatment, and the country of origin of an Absorber Crashbox from Mexico under the United States-Mexico-Canada Agreement (USMCA), which you filed on behalf of your client Waldasschaff Automotive Mexico S de R.L. de C.V. (WAM). Pictures and other descriptive literature were submitted with your request.
The item under consideration is an Absorber Crashbox (Crashbox, crash box), which is designed to be used with passenger vehicles. The crash box is an important component designed exclusively to absorb energy in the event of a collision. It prevents the spread of kinetic energy, generating less damage to the vehicle structure. It is placed between the bumper and side rails before the chassis points.
You state in your letter that the Crashboxes are manufactured and assembled in Mexico with certain imported components from China. These imported parts are referred to as "profiles", Part Number V1570 and Part Number V1571. There are two model profiles, each consisting of two pieces. One pair is for the left hand Crashbox and one set for the right hand Crashbox. The Crashboxes are manufactured in Mexico using these profiles imported from China with Mexican labor. The imported profiles are considered a raw material and are subject to various processes in WAM's plant in Mexico including sawing, stamping, washing and heat treatment until the good is finished.
Classification:
The applicable subheading for the Absorber Crashbox will be 8708.10.6050, Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Parts and accessories of the motor vehicles of headings 8701 to 8705: Bumpers and parts thereof: Parts of bumpers: Other." The general rate of duty will be 2.5% 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.
Trade Preference:
The United States-Mexico-Canada Agreement 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) provides that:
Goods originating in the territory of a country named herein, pursuant to the United States-Mexico-Canada Agreement (USMCA), are subject to duty as provided herein, including any treatment set forth in subchapter XXIII of chapter 98 and subchapter XXII of chapter 99 of the tariff schedule. For the purposes of this note, as provided in the tariff schedule-
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 territoryof [sic] 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));
Here, the merchandise will be produced in Mexico using nonoriginating materials. Therefore, the merchandise will not qualify as originating pursuant to GN 11(b)(i) or (ii). We must therefore consider whether the merchandise qualifies as originating pursuant to GN 11(b)(iii).
As noted above, the Absorber Crashbox is classified in subheading 8708.10.6050, HTSUS. The applicable product-specific rule of origin in GN 11(o)/87.08 is underscored and requires:
20. For a good of subheading 8708.10 for use in a passenger vehicle, light truck, or heavy truck:
(A) A change to subheading 8708.10 from any other heading; or
(B) A change to subheading 8708.10 from subheading 8708.99, whether or not there is also a change from any other heading, provided there is a regional value content of not less than 70 percent under the net cost method.
You asserted that both components of the Crashbox from China are classified in heading 7604, HTSUS, as aluminum profiles. Although this office agrees with you regarding Part Number V1570, after further review we determined that Part Number V1571 is advanced beyond a profile because of the holes and will be correctly classified in heading 7616, HTSUS, as other article of aluminum.
Subheading rule: The underscoring of the designations in subdivisions 20 through 21 pertain to goods provided for in heading 8708.10. If the good is for use in a passenger vehicle or light truck, Article 3.4 of the automotive appendix applies.
GN 11(k) provides special rules for automotive goods. GN 11(k)(i) provides that:
An automotive good and other motor vehicles and parts described herein shall be subject to applicable requirements set forth in this paragraph, including, with respect to a passenger vehicle or light truck that has been authorized to use the alternative staging regime described under subparagraph (viii), applicable requirements for the duration of the alternative staging period specified in the approval.
GN 11(k)(ii)(E)(2) includes in the definition of an "automotive good" any "part, component or material listed in table A.1, A.2, B, C, D, or E of the automotive appendix, subject to any provisions that may be included in regulations issued by the Secretary of the Treasury." GN 11(k)(ii)(D) defines "automotive appendix" as ". . . the Appendix to Annex 4-B of the USMCA (relating to the product-specific rules of origin for automotive goods, as reflected in subdivision (o) of this note)."
Examining Table B of the automotive appendix, entitled "Principal Parts for Passenger Vehicles and Light-Trucks," the subject merchandise is listed (8708.10 Bumpers and parts thereof) and is for use in a passenger vehicle. The Note to Table B in the automotive appendix provides that "[t]he Regional Value Content requirements set out in Article 3 of this Appendix apply to a good for use in a passenger vehicle or light truck."
Article 3.4 of the automotive appendix states that:
Notwithstanding Article 2 (Product-Specific Rules of Origin for Vehicles) and the Product-Specific Rules of Origin in Annex 4-B, each Party shall provide that the regional value content requirement for a part listed in Table B of this Appendix that is for use in a passenger vehicle or light truck is:
(a) 62.5 percent under the net cost method or 72.5 percent under the transaction value method, if the corresponding rule includes a transaction value method, beginning on January 1, 2020 or the date of entry into force of this Agreement, whichever is later;
(b) 65 percent under the net cost method or 75 percent under the transaction value method, if the corresponding rule includes a transaction value method, beginning on January 1, 2021 or one year after the date of entry into force of this Agreement, whichever is later;
(c) 67.5 percent under the net cost method or 77.5 percent under the transaction value method, if the corresponding rule includes a transaction value method, beginning on January 1, 2022 or two years after the date of entry into force of this Agreement, whichever is later; or
(d) 70 percent under the net cost method or 80 percent under the transaction value method, if the corresponding rule includes a transaction value method, beginning on January 1, 2023 or three years after the date of entry into force of this Agreement.
In addition to the provisions of the automotive appendix and GN 11, as indicated in GN 11(a)(i), the trilaterally agreed USMCA Uniform Regulations in Appendix A of 19 C.F.R. Part 182 provide further guidance on the interpretation and application of the USMCA rules of origin. The Note to Table B in the Uniform Regulations clarifies that:
The Regional Value Content requirements set out in sections 13 or 15 or Schedule I (PSRO Annex) apply to a good for use as original equipment in the production of a passenger vehicle. For an aftermarket part, the applicable product-specific rule of origin set out in section 13 or Schedule I (PSRO Annex) is the alternative that includes the phrase "for any other good."
Accordingly, the Uniform Regulations draw a distinction between aftermarket parts and automotive parts that are used as original equipment in the production of a vehicle. See Section 12(1) ("aftermarket part means a good that is not for use as original equipment in the production of passenger vehicles, light trucks or heavy trucks as defined in these Regulations."). Here, the passenger vehicle Absorber Crashbox will be used either as original equipment or as aftermarket parts.
In accordance with the Note to Table B, when the merchandise is used as aftermarket parts, the applicable product-specific rule of origin is the rule in section 13 or Schedule I (PSRO Annex) of the Uniform Regulations that includes the phrase "for any other good." Schedule I provides that "[t]his schedule is deemed to be the contents of Sections A, B and C of Annex 4-B of the Agreement, as implemented in General Note 11 of the Harmonized Tariff Schedule of the United States..."
Here, Section 13 of the Uniform Regulations contains the following product-specific rules of origin for goods of 8708.10.60, HTSUS.
8708.10 For a good of subheading 8708.10 for use as original equipment in a passenger vehicle or light truck:
(1) A change to subheading 8708.10 from any other heading; or
(2) A change to subheading 8708.10 from subheading 8708.99, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:
(a) 62.5 percent under the net cost method, beginning on July 1, 2020 until June 30, 2021;
(b) 65 percent under the net cost method, beginning on July 1, 2021 until June 30, 2022;
(c) 67.5 percent under the net cost method, beginning on July 1, 2022 until June 30, 2023;
(d) 70 percent under the net cost method, beginning on July 1, 2023, and thereafter.
For a good of subheading 8708.10 for use as original equipment in a heavy truck:
(3) A change to subheading 8708.10 from any other heading; or
(4) A change to subheading 8708.10 from subheading 8708.99, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:
(a) 60 percent under the net cost method, beginning on July 1, 2020 until June 30, 2024;
(b) 64 percent under the net cost method, beginning on July 1, 2024 until June 30, 2027;
(c) 70 percent under the net cost method, beginning on July 1, 2027, and thereafter.
For any other good of subheading 8708.10 for use as original equipment in any other vehicle or as an aftermarket part:
(5) A change to subheading 8708.10 from any other heading; or
(6) A change to subheading 8708.10 from subheading 8708.99, whether or not there is also a change from any other heading, provided there is a regional value content of not less than 50 percent under the net cost method.
You have provided the information necessary to determine whether the above tariff shift rule has been met. Section 13 of the Uniform Regulations, rules (1) for use as original equipment in a passenger vehicle and (5) for use as an aftermarket part require "A change to subheading 8708.10 from any other heading." Based on the information provided, no non-originating materials are classified in the same subheading as the Absorber Crashbox (8708). Accordingly, provided that all other requirements are met, the passenger vehicles Absorber Crashbox will be eligible for preferential tariff treatment under the USMCA when used as original equipment or aftermarket parts.
Country of origin for marking purposes:
The "country of origin" is defined in 19 CFR 134.1(b) 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 this part; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin."
19 CFR Part 102.11(a) provides that the country of origin of a good is the country in which:
The good is wholly obtained or produced;
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 Part 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
The Crashbox is neither "wholly obtained or produced" nor "produced exclusively from domestic materials." Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the brake shoe, and paragraph (a)(3) must be applied next to determine the origin of the finished article. The tariff shift requirement in Part 102.20 for the Crashbox at issue states:
A change to subheading 8708.10 from any other subheading.
As we have established earlier, the "foreign" components are classified in headings 7604 and 7616, HTSUS. Therefore, the tariff shift is met and the country of origin of the Absorber Crashbox will be Mexico for marking purposes.
Country of origin for purposes of applying trade remedies under Section 301 of the Trade Act of 1974:
"The United States Trade Representative ("USTR") has determined that an additional ad valorem duty of 25% will be imposed on certain Chinese imports pursuant to its authority under Section 301(b) of the Trade Act of 1974 ("Section 301 measures"). When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982)."
However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983) (Uniroyal). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987). In Uniroyal case, the court held that an upper was not substantially transformed when attached to an outsole to form a shoe and that the upper was "the very essence of the completed shoe".
Further, in Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (2016), the Court of International Trade ("CIT") interpreted the meaning of "substantial transformation" as used in the Trade Agreements Act of 1979 ("TAA") for purposes of government procurement. In Energizer, the court reviewed the "name, character and use" test in determining whether a substantial transformation had occurred in determining the origin of a flashlight, and reviewed various court decisions involving substantial transformation determinations. The court noted, citing Uniroyal, Inc. v. United States, 3 C.I.T. 220, 226, 542 F. Supp. 1026, 1031, aff'd, 702 F.2d 1022 (Fed. Cir. 1983), that when "the post-importation processing consists of assembly, courts have been reluctant to find a change in character, particularly when the imported articles do not undergo a physical change." Energizer at 1318. In addition, the court noted, "...when the end-use was pre-determined at the time of importation, courts have generally not found a change in use." Energizer at 1319, citing as an example, National Hand Tool Corp. v. United States, 16 C.I.T. 308, 310, aff'd 989 F.2d 1201 (Fed. Cir. 1993). Furthermore, courts have considered the nature of the assembly, i.e., whether it is a simple assembly or more complex, such that individual parts lose their separate identities and become integral parts of a new article.
According to the information supplied, none of the components from China undergo any substantial processing. The end-use of all components from China is pre-determined at the time of importation to Mexico. The assembly of the components into the Absorber Crashbox appears to be a minor one, and therefore, does not meet the substantial transformation requirements.
As a result, it is the opinion of this office that no substantial transformation occurs in Mexico. Therefore, the country of origin of the Absorber Crashbox will be China for purposes of applying trade remedies under Section 301, of the Trade Act of 1974, as amended.
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 a Customs and Border Protection 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."
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection 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, please contact National Import Specialist Liana Alvarez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division