CLA-2 OT:RR:CTF:VS CMR

Mr. Gustavo E. Cordova
Cordova Brokerage International, Inc.
1545 Goodyear Drive
El Paso, TX 79936

RE: Request for a Ruling on the Eligibility of Certain Automotive Wiring Harnesses for Preferential Tariff Treatment under the North American Free Trade Agreement

Dear Mr. Cordova:

This is in response to your request of January 15, 2010, and supplemental submission of February 22, 2010, requesting a binding ruling on the eligibility of certain automotive wiring harnesses for preferential tariff treatment under the North American Free Trade Agreement (NAFTA) on behalf of your client, Autokabel of North America, Inc. (hereinafter, Autokabel). Your request was forwarded to this office for a response.

FACTS:

Autokabel imports into the United States automotive wiring harnesses (battery cables) which are produced in a manufacturing facility operated by Autokabel in Mexico. At the time of importation, the wiring harnesses are classifiable in subheading 8544.30, Harmonized Tariff Schedule of the United States (HTSUS). Subheading 8544.30, HTSUS, provides specifically for “[i]gnition wiring sets and other wiring sets of a kind used in vehicles, aircraft or ships.” The imported wiring harnesses are used by Autokabel’s customers as original equipment in the production of a good provided for in tariff items 8702.10.60 or 8702.90.60, or subheadings 8703.21 through 8703.90, inclusive, 8704.21 or 8704.31.

To produce the wiring harnesses, Autokabel imports insulated cable classifiable under subheading 8544.49, HTSUS, into Mexico from Germany. You indicate that except for the insulated cable from Germany, all of the other components used in manufacturing the wiring harnesses in Mexico are either originating goods or goods which meet the tariff shift requirements of the applicable NAFTA provision contained in General Note (GN) 12 of the HTSUS. You state that the insulated cable exceeds the 7 percent value de minimis amount set forth in GN 12(f) of the HTSUS. Furthermore, some of the components used in producing the wiring harnesses are listed in Annex 403.1 as traceable components for purposes of determining if the value content requirement of GN 12 is met for a good to qualify as originating under the NAFTA. You indicate that the value of the traceable components combined does not exceed 40 percent of the total net cost of the finished wiring harnesses.

You have provided a list of the components indicating their country of origin, classification under the HTSUS, and value. The list also indicates which components are traceable.

ISSUE:

Do the wiring harnesses at issue, produced in Mexico utilizing German insulated cable and produced with traceable components the combined value of which does not exceed 40 percent of the total net cost of the finished wiring harnesses, qualify as originating goods under GN 12, HTSUS?

LAW AND ANALYSIS:

The provisions of the NAFTA are implemented in the HTSUS in GN 12. The wiring harnesses at issue will qualify for preferential tariff treatment under the NAFTA provided that they qualify as originating goods under the provisions of GN 12 and qualify to be marked as a good of Mexico. GN 12(b) sets forth the various methods by which a good may be determined to originate in the territory of a NAFTA party. As the wiring harnesses at issue are not wholly obtained or produced in the territories of the NAFTA parties, nor are they produced in the territories from originating goods, the wiring harnesses must be transformed in the territory of Mexico so that, except as provided for in GN 12(f) (de minimis), “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[.]” See GN 12(b)(ii)(A).

The wiring harnesses are classifiable in subheading 8544.30, HTSUS, at importation into the United States. The applicable rule under GN 12(t) is Rule 147, Chapter 85, which provides:

(A) A change to subheadings 8544.11 through 8544.60 from any subheading outside that group, except from headings 7408, 7413, 7605 or 7614; or

(B) A change to subheadings 8544.11 through 8544.60 from headings 7408, 7413, 7605 or 7614, whether or not there is also a change from any other subheading, including another subheading within subheadings 8544.11 through 8544.60, provided there is also a regional value content of not less than:

60 percent where the transaction value method is used, or 50 percent where the net cost method is used.

As some of the non-originating components do not make a change to subheading 8544.30, HTSUS, from outside the subheading 8544.11 through 8544.60 grouping, Rule 147(A) is inapplicable. With regard to application of Rule 147(B), we follow our decisions in Headquarters Ruling Letter (HQ) 957188, dated February 9, 1995, and HQ 546674, dated April 16, 1998. Based on these previous rulings, the wiring harnesses meet the applicable tariff shift requirement and we must determine whether the regional value content requirement has also been met.

Pursuant to GN 12(c)(iv), as the wiring harnesses are goods identified in Annex 403.1 to the NAFTA, the regional value content is calculated based on the net cost method. GN 12(c)(ii) sets forth the formula for calculating the regional value content using the net cost method and provides:

Net cost method. The regional value content of a good may be calculated on the basis of the following net cost method:

NC - VNM RVC = -------------------------- X 100 NC

where RVC is the regional value content, expressed as a percentage; NC is the net cost of the good; and VNM is the value of non-originating materials used by the producer in the production of the good.

For purposes of calculating the value of non-originating materials used by the producer in this case, we look to GN 12(d)(i). GN 12(d)(i) provides, in relevant part:

For purposes of calculating the regional value content under the net cost method set out in subdivision (c)(ii) of this note for—

* * *

(B) a good provided for in the tariff items listed in Annex 403.1 where the good is subject to a regional value content requirement and is for use as original equipment in the production of a good provided for in tariff items 8702.10.60 or 8702.90.60, or subheadings 8703.21 through 8703.90, inclusive, 8704.21 or 8704.31, the value of non-originating materials used by the producer in the production of the good shall be the sum of the values of non-originating materials, determined in accordance with subdivision (c)(vii) of this note at the time the non-originating materials are received by the first person in the territory of Canada, Mexico or the United States who takes title to them; that are imported from the (sic) outside the territories of Canada, Mexico and the United States under the tariff items listed in Annex 403.1 to the NAFTA and that are used in the production of the good or that are used in the production of any material used in the production of the good.

Furthermore, GN 12(d)(iv) provides:

Notwithstanding subdivisions (r), (s) and (t) of this note, and except as provided in subdivision (d)(v) of this note, the regional value-content requirement shall be--

(A) for a producer's fiscal year beginning on the day closest to January 1, 1998 and thereafter, 56 percent under the net cost method, and for a producer's fiscal year beginning on the day closest to January 1, 2002 and thereafter, 62.5 percent under the net cost method, for—

(1) a good that is a motor vehicle provided for in tariff items 8702.10.60 or 8702.90.60; subheadings 8703.21 through 8703.90, inclusive; or subheadings 8704.21 or 8704.31, and

(2) a good provided for in headings 8407 or 8408 or subheading 8708.40, that is for use in a motor vehicle identified in subdivision (d)(iv)(A)(1); and

(B) for a producer's fiscal year beginning on the day closest to January 1, 1998 and thereafter, 55 percent under the net cost method, and for a producer's fiscal year beginning on the day closest to January 1, 2002 and thereafter, 60 percent under the net cost method, for--

(1) a good that is a motor vehicle provided for in heading 8701, tariff items 8702.10.30 or 8702.90.30, subheadings 8704.10, 8704.22, 8704.23, 8704.32 or 8704.90, or headings 8705 or 8706;

(2) a good provided for in headings 8407 or 8408 or subheading 8708.40 that is for use in a motor vehicle identified in subdivision (d)(iv)(B)(1); and

(3) except for a good identified in subdivision (d)(iv)(A)(2) or provided for in subheadings 8482.10 through 8482.80, inclusive, 8483.20 or 8483.30, a good identified in Annex 403.1 to the NAFTA that is subject to a regional value-content requirement and that is for use in a motor vehicle identified in subdivision (d)(iv)(A)(1) or (d)(iv)(B)(1).

[Emphasis added.]

Therefore, applying the provisions of GN 12(d) to the wiring harnesses at issue, the wiring harnesses must meet a regional value content requirement of not less than 60 percent under the net cost method.

Based on the cost figures which you have provided, the wiring harnesses at issue meet the regional value content requirement of at least 60 percent under the net cost method.

In order for the wiring harnesses at issue to qualify for preferential treatment under the NAFTA, they must not only originate in the territory of Mexico under the provisions of GN 12, but they must also qualify to be marked as a good of Mexico. Therefore, we must apply the NAFTA Marking Rules contained in 19 CFR Part 102 of the Customs and Border Protection (CBP) Regulations.

Section 102.11 sets forth the General Rules for determining the country of origin of imported merchandise, with the exception of textile goods which are subject to the provisions of § 102.21. In this case, § 102.11(a)(3) is applicable and provides that the country of origin of a good is the country in which:

Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

The wiring harnesses at issue are classified in subheading 8544.30, HTSUS, and therefore, the applicable rule set forth in § 102.20 is:

A change to subheading 8544.11 through 8544.70 from any other subheading, including another subheading within that group, except when resulting from simple assembly.

“Simple assembly” is defined in § 102.1 as:

“Simple assembly” means the fitting together of five or fewer parts all of which are foreign (excluding fasteners such as screws, bolts, etc.) by bolting, gluing, soldering, sewing or by other means without more than minor processing.

In the case of the assembly of the wiring harnesses in Mexico, the numerous components involved in the assembly of the harnesses, including more than five components of foreign origin, clearly removes the assembly from the definition of “simple assembly” in § 102.1. Therefore, the assembly which occurs in Mexico to produce the wiring harnesses of subheading 8544.30, HTSUS, qualifies the harnesses to be marked as goods of Mexico.

HOLDING:

The wiring harnesses qualify to be marked as goods of Mexico and meet the terms for preferential treatment under GN 12(d) and GN 12(t). Based on the information you provided, the wiring harnesses at issue are eligible for preferential treatment as originating goods under the NAFTA.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents are filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,

Monika R. Brenner, Chief
Valuation and Special Programs Branch