OT-RR:CTF:VS H028880 GOB
Richard C. Katz, Esq.
Snell & Wilner
One South Church Avenue
Suite 1500
Tucson, AZ 85701-1630
RE: NAFTA Certificate of Origin; Producer; Shelter Program; Mexico; Revocation of H024567
Dear Mr. Katz:
This is in response to your correspondence of May 14, 2008 on behalf of Offshore International, Inc. (“Offshore”) concerning who is considered to be the “producer” for the purpose of completing the NAFTA Certificate of Origin. In response to our request, you submitted additional information on June 4, 2008 and June 9, 2008. Our ruling follows.
FACTS:
You request reconsideration of HQ H024567, dated April 18, 2008, in which U.S. Customs and Border Protection (“CBP”) determined that two Mexican entities (Maquilas Teta Kawi S.A. de C.V. and Manufacturas Zapaliname S.A. de C.V. (hereinafter jointly referred to as “the Mexican companies”)) are considered “producers” as they are engaged in the assembly, processing, and/or manufacture of the goods exported from Mexico.
You state that HQ H024567 is in error for the following reasons: the facts do not support CBP’s determination that Maquilas Teta Kawi and Manufacturas Zapaliname are the producers of the pertinent goods; and the essential purpose
of the NAFTA Certificate of Origin in undermined by listing the Mexican companies as “producers” on the Certificate of Origin. You have now submitted a “Shelter Plan Service Agreement” (the “Agreement”) which Offshore and its U.S. clients enter into.
You describe the pertinent facts as follows. Offshore’s two U.S. companies contract with approximately 63 U.S. clients (“U.S. clients” or “clients”) to transfer some portion of their manufacturing operations to one of two industrial parks in Mexico. Offshore bills the U.S. manufacturers for the following services: 1. A facilities fee that is essentially rent for the manufacturing space in Mexico; 2. A payroll fee for outsourcing Mexican labor to work for the manufacturers; 3. A fee for use of consumable items purchased in Mexico, including utilities, skids, packaging and office supplies; and 4. Fees for Mexican import and export management.
The Agreement provides in pertinent part as follows. The U.S. clients’ equipment is used in the manufacturing process. The clients retain title to all of their materials, products, and equipment used in connection with the manufacturing operations. Offshore provides an office for the client’s on-site manager in the Mexico facilities. Offshore provides repairs and maintenance for the Mexico facilities except for damage caused by the clients. The cleaning of the production area is the responsibility of the clients. The workers at the manufacturing facilities are the employees of the Mexican companies, but the U.S. clients have direct supervisory control and management responsibility for all workers allocated to the clients’ operations at these facilities. The U.S. clients have the right to select the workers from the pool of workers provided by the Mexican companies and/or Offshore. The workers are paid by Offshore but Offshore is reimbursed by the U.S. clients for labor charges (including overtime), as well as utilities costs, transportation costs for the workers, and all costs incurred by Offshore in connection with services which are provided at the U.S. clients’ written request. The U.S. clients pay the workers’ severance costs. The U.S. clients pay the facilities fee, the shelter plan fee, and the park maintenance fee. The U.S. clients are responsible for supplying to CBP all information, including cost submissions, required by CBP in connection with the importation of the clients’ foreign products into the U.S. The U.S. clients are also responsible for supplying Offshore with all information necessary for the preparation of commercial invoices and other documents prepared by Offshore for the clients in the importation process. This includes complete descriptions, makes, models and serial numbers, weights, costs, country of origin and certificates of origin of all inputs and other property imported or exported into or out of Mexico for the clients.
The Agreement further provides that the Mexican companies are the importer and exporter of record in Mexico. If Offshore takes possession of any materials, products, machinery, tools, or equipment in connection with the manufacturing process, it does so as bailee on behalf of the U.S. clients. Offshore will provide the U.S. clients with Mexican Customs compliance and U.S. Customs support, which consists of assisting the clients in understanding the CBP Regulations.
ISSUE:
Under the above-described facts, who is considered the “producer” for purposes of completing the NAFTA Certificate of Origin?
LAW AND ANALYSIS:
The requirements governing the execution and validity of NAFTA Certificates of Origin are set out in Article 501 of the NAFTA and §181.21 et seq., CBP Regulations (19 CFR § 181.21 et seq.).
Article 501 of the NAFTA provides that each party shall require an exporter in its territory to complete and sign a Certificate of Origin for any exportation of a good for which an importer may claim preferential tariff treatment in another NAFTA country.
With respect to Certificates of Origin submitted for goods imported into the United States, §181.22(b)(2) CBP Regulations (19 CFR §181.22(b)(2)) states that the Certificate of Origin “shall be signed by the exporter or by the exporter’s authorized agent having knowledge of the relevant facts.” Pursuant to section 181.1(f), CBP Regulations (19 CFR § 181.1(f)), “exporter means an exporter located and required under this part to maintain records regarding exportations of a good, in the United States, Canada or Mexico.”
The Certificate of Origin is used by the exporter to certify that a good qualifies as an originating good for purposes of preferential tariff treatment under the NAFTA. The form includes fields for, among other things: the name and address of the producer, importer and exporter; the shipment or blanket period for which preferential treatment is claimed; a description of goods; the preference criterion; the Harmonized System tariff classification number; the country of origin; the authorized signature; and the date of signature. The instructions for the CF 434 also call for the exporter, if he is not the producer, to provide in Field 8 the basis for his knowledge or reliance that the good qualifies as originating.
You state: “The Offshore Group provides factory space, labor recruitment and payroll management, supply and janitorial services and Mexican customs and freight support. However, the Offshore Group’s Mexican affiliate industrial park operators do not, in any real sense, manufacture or produce any of the goods listed on the NAFTA certificates. It is clearly the 63 different manufacturer-clients of the Offshore Group that are the ‘producers’ of the goods being imported into the United States under the NAFTA.”
Section 181.1(t), CBP Regulations (19 CFR § 181.1(t)) provides that “producer means a producer as defined in the appendix to this part.” Section 2 of Part I, Appendix to Part 181, CBP Regulations (19 CFR Part 181, Appendix (cited as the “NAFTA Rules of Origin Regulations”)) provides in pertinent part as follows: “ ‘producer’ means a person who grows, mines, harvests, fishes, traps, hunts, manufactures, processes or assembles a good.”
The essential question here is which party is engaged in the assembly, processing and/or manufacture of the goods which are exported from Mexico to the United States. The pertinent facts include the following. While the workers at the manufacturing facilities are technically the employees of the Mexican companies, the U.S. clients have direct supervisory control and management responsibility for these workers. The U.S. clients have the right to select the workers. Offshore pays the workers, but Offshore is reimbursed by the U.S. clients for labor charges, including overtime, severance costs and transportation costs of the workers. The U.S. clients pay utilities costs, the facilities fee, the shelter plan fee, and the park maintenance fee. The U.S. clients’ equipment is used in the manufacturing process and they retain title to all of their materials, products, and equipment used in the manufacturing operations. Offshore provides an office in the Mexican facilities for the U.S. clients managers. The U.S. clients are responsible for supplying CBP with all information, including cost submissions, required by CBP in connection with the importation of the goods. The U.S. clients are also responsible for supplying Offshore with information necessary for the preparation of commercial invoices and other documents prepared by Offshore.
Based upon these facts, we conclude that the U.S. clients control the manufacturing process in Mexico. This control of the manufacturing process by the U.S. clients leads us to find that the U.S. clients are engaged in the assembly, processing and/or manufacture of the goods exported from Mexico. Therefore, we determine that the U.S. clients are the “producers” of the goods exported from Mexico within the meaning of the NAFTA Rules of Origin Regulations.
HOLDING:
Based upon the facts now presented, as described above, the U.S. clients are engaged in the assembly, processing, and/or manufacture of the goods. Therefore, pursuant to the NAFTA Rules of Origin Regulations, the U.S. clients are the “producers” of the goods exported from Mexico.
A copy of this ruling letter should be attached to the entry documents filed at the time the subject goods are entered. If the documents have been filed without a copy, this ruling letter should be brought to the attention of CBP.
EFFECT ON OTHER RULINGS:
HQ H024567 is revoked.
Sincerely,
Myles B. Harmon
Director
Commercial & Trade Facilitation Division