CLA-2-94:OT:RR:NC:N5:433
Mireya Ruano
Veyer LLC
6600 N Military Trail Boca Raton, FL 33496
RE: The tariff classification, United States-Mexico-Canada Trade Agreement (USMCA), country of origin, and Section 301 trade remedy of a swivel seat.
Dear Ms. Ruano:
In your letter dated January 6, 2025, you requested a tariff classification, USMCA, and country of origin ruling. The request also seeks confirmation that the seat is not subject to China Section 301 duties. In lieu of samples, technical and illustrative literature, a product description, and manufacturing processes were provided.
The item subject of this ruling request is constructed of foreign and domestically sourced raw materials. A description of the item immediately follows.
The “WP1000 Mesh Chair,” SKU# 604924, is a manual gas lift, variable height adjustment, swivel seat that is constructed of a plastic and metal frame. The upholstered seat has a swivel mechanism, five wheeled casters, and armrests. The seat backrest mesh and fabric are constructed of 100% polyester and the seat foundation is constructed of 100% polyurethane foam encased in 100% polyester textile fabric. Seating is provided for a single individual. The seat approximates 28.54” in width, 27.76” in depth, and 38- 41.53” in height. The seat will be packaged unassembled for retail sale and will contain all hardware required for assembly.
The applicable subheading for the subject merchandise will be 9401.39.0010, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof: Swivel seats with variable height adjustment: Other: Household.” The rate of duty will be free.
Sourcing Scenario:
The ruling request outlines an operation wherein the seating components (textile mesh fabric, plastic foam, plastic armrests, plastic casters, metal seat foundation plate, metal gaslift, metal bolts, and metal assembly hardware) will be sourced in China. The seating components will be shipped and exported to Mexico. In Mexico, additional seating components (plastic backrest frame, plastic seat foundation frame, plastic swivel base) will be manufactured using injection molding machines. The Chinese textile mesh fabric will be cut to shape and sewn to form the seat backrest and seat foundation components using sewing machines and manufacturing fixtures. Additional seating components will be assembled using nail guns and hand tools. Labels and packing materials will be locally sourced. In Mexico, the incomplete, unassembled, and unfinished seating components will undergo additional manufacture, inspection, packaging, and then exportation to the United States.
Eligibility for preferential treatment under the 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. General Note (GN) 11 of the HTSUS implements the USMCA. 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 -
i. the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
ii. the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
iii. the good is a good produced entirely in the territory of one or more USMCA countries using non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or…
The subject merchandise contains non-originating materials; therefore, it is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the subject merchandise is not a good produced entirely in Mexico, exclusively from originating materials. Therefore, we must next determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o).
The applicable rule of origin for merchandise under subheading 9401.39.0010 HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
Chapter 94
…1. (A) A change to subheadings 9401.10 through 9401.80 from any other chapter; or
(B) A change to subheadings 9401.10 through 9401.80 from subheading 9401.90, whether or not there is also a change from any other chapter, provided there is a regional value content of not less than:
(1) 60 percent where the transaction value method is used; or
(2) 50 percent where the net cost method is used.
Under GN11(o), Rule 1 and criterion “A” to Chapter 94 HTSUS, the non-originating materials (Chinese textile mesh fabric, plastic foam, plastic casters, metal bolts, and metal assembly hardware) undergoes the permissible tariff shift. However, the non-originating materials (Chinese plastic armrests, metal seat foundation plate, and metal gas lift) does not undergo a permissible tariff shift, and therefore criterion “A” is not satisfied.
Under GN 11(o), Rule 1 and criterion “B” to Chapter 94 HTSUS, the regional value content (RVC) will be examined. Further, under GN 11(c)(i) the RVC shall be calculated at the choice of the importer, exporter or producer on the basis of transaction value or the net cost method. On January 22, 2025, this office requested additional information pertaining to the bill of materials (BOM) and whether the transaction value method or the net cost method will be used in order to determine the RVC. On January 27, 2025, an updated BOM was provided and the response states, “[W]e calculate the RVC base on the net cost method.”
Under GN11(c)(iii), the net cost method follows:
Net cost method: An importer, exporter, or producer of a good may calculate the regional value content of a good on the basis of the following net cost method:
RVC = ((NC-VNM)/NC) x 100
where NC means the net cost of the good; RVC means the regional value content, expressed as a percentage; and VNM is the value of non-originating materials, including materials of undetermined origin, used by the producer in the production of the good.
The BOM includes the total costs of the originating and non-originating materials, as well as the production costs. The net cost of the seat is $101.34. The value of non-originating materials is $32.67. The RVC is [(($101.34 - $32.67) /$101.34) * 100] = 67.76%. The RVC is above the 50% minimum required; the requisite tariff shift under GN 11(o), Rule 1 to Chapter 94 HTSUS, criterion (B)(2) is met. In view of these facts, the subject merchandise described above qualifies for USMCA preferential tariff treatment when imported into the United States from Mexico.
Country of Origin:
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. Congressional intent in enacting 19 U.S.C. 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase 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. Friedlander & Co., 27 C.C.P.A. 297, 302 (1940).
Section 134.1(b), CBP Regulations (19 CFR 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 sections 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 required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile and apparel goods which are subject to the provisions of 19 CFR 102.21. See 19 CFR 102.11.
Applied in sequential order, 19 CFR 102.11(a) provides 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 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.
As the subject merchandise is not wholly obtained or produced in a single country, Rule (1) of § 102.11(a)(1) is inapplicable. As the subject merchandise is not produced exclusively from domestic materials, Rule (2) of § 102.11(a)(2) is inapplicable. Accordingly, Rule (3) applies.
Section 102.20 sets forth specific rules by tariff classification. The pertinent tariff shift rule for subheading 9401.39, states:
A change to subheading 9401.10 through 9401.80 from any other subheading outside that group, except from subheading 9403.10 through 9403.89, and except from subheading 9401.91 through 9401.99 or 9403.91 through 9403.99, when that change is pursuant to General Rule of Interpretation 2(a).
General Rule of Interpretation 2(a) (“GRI 2(a)”) states:
Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.
In view of these facts, since the textile mesh fabric, plastic foam, plastic armrests, plastic casters, metal seat foundation plate, metal gaslift, and the metal assembly hardware of Chinese origin will only represent components of the finished swivel seat and additional raw materials and other seating components will be added in Mexico, GRI 2(a) does not apply. Further, since the change from 9401.91 through 9401.99 to 9401.39 HTS will occur as a result of the production in Mexico, the swivel seat will undergo the required change in tariff classification. Therefore, the tariff shift requirement of section 102.11(a)(3) is met. The country of origin of the “WP1000 Mesh Chair” for origin and marking purposes is Mexico.
Section 301 Trade Remedy:
When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. See, e.g., Headquarters Ruling Letter (“HQ”) H301619, dated November 6, 2018. 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, 681 F.2d 778 (C.C.P.A. 1982). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In the instant case, the Chinese components lose their identity in Mexico and undergo a substantial transformation, thereby, taking on a new name, character, and identity. The joining, pressing, cutting to shape, sewing, and assembly of individual components into more substantial subcomponents that are then integrated into a larger more complex subassembly is distinguishable from the individual components sourced from China. Only through the integration of the material components into a more substantial subassembly is the functional end product created. In view of these facts, the “WP1000 Mesh Chair” is not subject to the additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation into the United States.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
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 Dharmendra Lilia at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division