CLA-2 OT:RR:CTF:VS HO64378 KSG
Michael E. Murphy, Esq.
Baker & McKenzie LLP
815 Connecticut Avenue NW
Washington, D.C. 20006-4078
Re: Definition of “producer” for purposes of NAFTA; transaction value
Dear Mr. Murphy:
This is in response to a letter dated May 26, 2009, on behalf of Hubbell Lighting, requesting a ruling concerning the eligibility of certain lighting fixtures for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”). Hubbell Lighting had sent a previous letter dated December 9, 2008, to CBP concerning the same matter good. Because insufficient information was submitted in the initial letter, CBP had responded in an information letter, H048150, dated April 21, 2009. A conference was held on this matter at Headquarters. A subsequent submission dated September 16, 2009, is also considered as part of this file.
FACTS:
This case involves a three-light bath bracket lighting fixture to be used for commercial or residential homes. The product is manufactured in Mexico from metal, electrical, and glass parts produced in Mexico and China. You state that the imported lighting fixture is classified in subheading 9405.10.60 of the Harmonized Tariff Schedule of the United States (“HTSUS”). You also state that the non-originating materials from China, which consist of the socket ring, glass holder, glass shade, stem pipe, cross arm, reinforcing metal plate, finial cap, mounting screw, screw ground and ground wire with lug are classified in subheading 9405.99, HTSUS. Further, you state that the Mexican-origin electrical socket is classified in subheading 8536.69, HTSUS. We assume for the purposes of this ruling that the tariff classifications you have provided are correct.
The lighting fixture is assembled at a maquiladora in Mexico. You state that the maquiladora is related to Hubbell Lighting, a U.S. company and the importer in this case. You also state that the maquiladora does not own the equipment used to produce the lighting or the materials assembled into the finished lighting fixture. These items are owned by Hubbell Lighting. The maquiladora provides the labor to assemble the lighting fixtures. Hubbell pays the maquiladora a fee for the assembly of the lighting fixtures. There are three Hubbell employees, a Director of Manufacturing, the Materials Manager, and a Product Innovation Manager that provide direct supervisory control of the workers in Mexico. Hubbell also has an engineering manager on site. Hubbell Lighting pays the maquiladora for all utilities, facilities fees, and insurance costs incurred during the assembly process and any other expenses incurred in connection with running the assembly plant. Further, you state that Hubbell Lighting is responsible for supplying CBP with any information that is requested by CBP in connection with the importation of the goods into the U.S.
The imported lighting fixtures are sold by Hubbell Lighting to an unrelated U.S. customer/distributor.
For valuation purposes, the imported lighting fixtures are entered based on computed value.
ISSUE:
What is the proper method of calculation of the regional value content under the North American Free Trade Agreement (“NAFTA”) for the imported article.
LAW AND ANALYSIS:
The imported lighting fixtures will be eligible for the “Special” “MX” rate of duty provided they are NAFTA “originating” goods under General Note 12(b), HTSUS, and qualify to be marked as a product of Mexico under the marking rules. General Note 12(b), HTSUS, provides, in pertinent part:
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,
The lighting fixtures are classified in subheading 9405.10, HTSUS. Pursuant to the tariff shift rule set forth in GN 12(t), HTSUS, goods of subheading 9405.10 through 9405.60, require either a chapter change or a change from subheading 9405.91 through 9405.99 provided that there is a regional value content of not less than 60 percent where the transaction value is used or 50 percent where the net cost method is used for a good to be considered “originating.”
You state that there is no chapter change in this case. The various imported parts undergo the subheading change required for the second rule. In addition to the subheading change, the imported lighting fixtures would only be originating if the regional value content rule is satisfied. You propose to use transaction value to satisfy the regional value content and base the transaction value on the sale between Hubbell Lighting and a U.S. customer.
Pursuant to Section 6, Part III of the NAFTA Rules of Origin Regulations (“ROR”), 19 CFR Pt. 181, App., the exporter or producer could choose either transaction value or the net cost method for the purposes of calculating the regional value content.
You cited to Headquarters Ruling Letter (“HRL”) H028880, dated June 16, 2008, in support of your argument that Hubbell Lighting is the “producer” for the purposes of NAFTA.
Section II of the ROR states that the transaction value of a good “shall be the price actually paid or payable for the good, which is the total payment made or to be made by the buyer or for the benefit of the producer.” A buyer is defined in Schedule III, section 1, as “a person who purchases a good from the producer.” A producer is defined in Schedule III as “the producer of the good being valued.” A producer is defined in section 2 as “a person who grows, mines, harvests, fishes, traps, hunts, manufactures, processes or assembles a good.”
In HRL H028880, CBP ruled that in that case, U.S. clients of a maquila were the “producers” for the purposes of completing the NAFTA Certificate of Origin. Counsel in that case argued that because of the facts presented, the essential purposes of the NAFTA Certificate of Origin would be undermined by listing the maquila as producers on the Certificates of Origin. The information required in the Certificate of Origin would require the person completing it to have actual knowledge of factual information including the tariff classification of the finished good and information to demonstrate that the specific rule of origin is satisfied. This information includes facts that the maquiladora would not have, such as cost information.
We concur with counsel that Hubbell Lighting would be considered a “producer” as defined in the NAFTA regulations. The U.S. customer would be considered the buyer. The price “actually paid or payable” as defined in the NAFTA Rules of Origin regulations would be the price paid by the U.S. customer to Hubbell Lighting. Hubbell Lighting could choose to satisfy the regional value content by showing that it can satisfy the 60 percent of the transaction value standard set forth in the tariff shift rule for the imported fixtures. However, we note that the price used for the purposes of calculating the regional value content would not be utilized for the purposes of valuation of the imported lighting fixtures, because the definition of transaction value set forth in 19 U.S.C. 1401a differs from the NAFTA definition.
HOLDING:
Hubbell Lighting is considered the producer for the purposes of NAFTA. The price between the U.S. customer and Hubbell Lighting would be considered the transaction value for purposes of calculating the NAFTA regional value content of the imported light fixtures. However, we note that the price used for the purposes of calculating the regional value content would not be utilized for the purposes of valuation of the imported lighting fixtures, because the definition of transaction value set forth in 19 U.S.C. 1401a differs from the NAFTA definition.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP official handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch