CLA-2 CO:R:C:G 085894 MBR

Mr. William J. LeClair
Trans-Border Customs Services, Inc.
One Trans-Border Drive, P.O. Box 800
Champlain, New York 12919

RE: Reconsideration of HQ 084856, dated August 31, 1989, regarding the U.S.-Canada FTA origin status of U.S./third country motherboards completed in Canada with power supply and cabinet

Dear Mr. LeClair:

This is in reply to your letter of October 16, 1989 requesting reconsideration of the origin status of certain motherboards, of third country components, exported to Canada from the United States, assembled with a power supply and cabinet of Canadian origin and imported back to the United States.

FACTS:

A "motherboard" is the main interconnecting circuit board in an electronic device, to which the various subassemblies, as printed circuit boards, are plugged or wired. See Webster's New World Dictionary, Third College Edition (1988), page 886.

The instant assembly import/export practice is as follows: 1) the motherboard is assembled in the U.S. with U.S. and third country components, 2) the motherboard is exported to Canada where it is assembled with a power supply and a cabinet of Canadian origin, and lastly, 3) the completed assembly is imported into the U.S.

Thus, although the completed assembly consists of components that are stated to be originating materials for purposes of the U.S.-Canada Free Trade Agreement (FTA), it is not "wholly obtained or produced" as defined in the FTA.

ISSUE:

Does the completed assembly qualify for the benefits of the FTA as an originating good?

LAW AND ANALYSIS:

The FTA rules for determining whether goods, when imported into the United States, are originating in the territory of Canada are set forth in General Note 3(c)(vii), Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

General Note 3(c)(vii)(B) states:

(B) For the purposes of subdivision (c)(vii) of this note, goods imported into the customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" only if--

(1) they are goods wholly obtained or produced in the territory of Canada and/or United States, or

(2) they have been transformed in the territory of Canada and/or United States, so as to be subject--

(I) to a change in tariff classification in Canada as described in the rules of subdivision (c)(vii)(R) of this note, or

(II) to such other requirements subdivision (c)(vii)(R) of this note may provide when no change in tariff classification occurs, and they meet the other conditions set out in subdivisions (c)(vii)(F), (G), (H), (I), (J), and (R) of this note.

The motherboards at issue are not "goods wholly obtained or produced in the territory of Canada and/or United States," as required by General Note 3(c)(vii)(B)(1), because of the use of third country components. The definition of goods "wholly obtained or produced" is enumerated in General Note 3(c)(vii)(L), which states:

(L) As used in subdivision (c)(vii)(B) of this note, the phrase "goods wholly obtained or produced in the territory of Canada and/or the United States" means-- (1) mineral goods extracted in the territory of Canada and/or the United States, (2) goods harvested..., (3) live animals..., (4) fish..., (5) goods produced on factory ships..., (6) goods taken...from seabed..., (7) goods taken from space..., (8) waste and scrap derived from manufacturing..., (9) goods produced in the territory of Canada and/or the United States exclusively from goods referred to in subparagraphs (1) to (8), inclusive, or from their derivatives, at any stage of production.

Therefore, the question arises whether there has been a change in tariff classification, as required by General Note 3(c)(vii)(B)(2)(I). "Motherboards" are classifiable under subheading 8471.91.00, HTSUSA, which provides for digital processing units. The addition of a power supply and cabinet in Canada would result in absolutely no change in tariff classification in Canada, of the motherboards, as is required for the FTA to apply. Therefore, the rules of General Note 3(c)(vii)(B) and subdivision (c)(vii)(R) are not met since there is no change in tariff classification in Canada, of the motherboards.

We agree with Item 41 of "Memorandum D11-4-12" which you have submitted for our reconsideration. However, this issue is never reached. Although the motherboard is a "U.S. product" it still is not wholly obtained or produced in the U.S., nor does it change classification in Canada, as required by the U.S.-Canada FTA.

HOLDING:

Motherboards produced in the U.S., containing components of third country origin, that do not change classification in Canada, are not an originating good of Canada, for purposes of the U.S.-Canada FTA.

Sincerely,

John Durant, Director
Commercial Rulings Division