HQ H274096
CLA-2 OT:RR:CTF:TCM H274096 TSM
TARIFF NO: 9021.19.8500; 9802.00.50
Mr. David M. Murphy
Grunfeld, Desideiro, Lebowitz & Silverman LLP
399 Park Avenue 25th Floor New York, NY 10022–4877
RE: Modification of NY B89079; Tariff classification, country of origin marking and status under the NAFTA of orthodontic brackets from Mexico; Article 509; NAFTA Marking Rules (Final).
Dear Mr. Murphy:
In NY B89079, dated September 26, 1997, the National Commodity Specialist Division of U.S. Customs and Border Protection (“CBP”) responded to your ruling request on behalf of Ormco Corporation, on the status of orthodontic brackets from Mexico under the North American Free Trade Agreement (“NAFTA”). We have reexamined NY B89079 and have determined that it needs to be modified with respect to the country of origin marking determination. The classification of the orthodontic brackets is not at issue. For the reasons set forth below we hereby modify NY B89079.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625 (c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057), a notice was published in the Customs Bulletin, Volume 50, No. 20, on May 18, 2016, proposing to modify NY B89079 and revoke any treatment accorded to substantially identical transactions. One comment supporting the proposed action was received on June 17, 2016.
FACTS:
NY B89079, issued to Ormco Corporation on September 26, 1997, describes the subject merchandise as follows:
The articles to be imported are orthodontic brackets for use as parts of orthodontic braces. You state that the brackets are produced by a process in which acrylic is poured over the wire base and that each bracket is designed for a specific tooth. The brackets are manufactured in the U.S. and sent to Mexico to be color coded with a variety of colors. Each color designates a specific tooth for which the bracket is designed. The color coded brackets are returned to the U.S. in unmarked tubular containers and repacked in small plastic boxes for sale to the ultimate purchaser.
With respect to the country of origin marking, NY B89079 concludes as follows:
We agree that the country of origin marking of the finished brackets is controlled by 19 C.F.R. Section 102.19(b) which states the following:
If, under any other provision of this part, the country of origin of a good which is originating within the meaning of Section 181.1(q) of this chapter is determined to be the United States and that good has been exported from, and returned to, the United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin of such good for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the United States.
For marking purposes therefore the country of origin of the color coded brackets is Mexico. Since your client plans to repackage the brackets after importation, the certification procedure of 19 C.F.R. Section 134.26 will have to be followed. You did not furnish a sample of the repackaged brackets destined for sale in the U.S., we therefore cannot state if the marking your client intends to use will be in compliance with the Regulations.
We believe that the country of origin marking determination is incorrect.
ISSUE:
What is the country of origin for marking purposes of the orthodontic brackets under consideration?
LAW AND ANALYSIS:
Article 401 of the NAFTA, is incorporated into General Note 12, HTSUS. General Note 12(b)(iii) provides in pertinent part that:
12. North American Free Trade Agreement.
(b) 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--
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials;
In NY B89079, CBP concluded:
The orthodontic brackets, being made entirely in the territory of the United States and Mexico using materials which themselves were originating, will satisfy the requirements of HTSUSA General Note 12(b)(iii). The merchandise will therefore be entitled to a free rate of duty under the NAFTA upon compliance with all applicable laws, regulations and agreements.
NY B89079 found that the country of origin marking of the finished brackets was controlled by 19 CFR 102.19(b), and applied the NAFTA preference override set forth therein, as required by General Note 12(a)(ii), HTSUS, which requires an origin determination to be made under the NAFTA marking rules of Mexico for a good to be eligible for NAFTA duty preference:
(ii) Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules .... and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "MX" in parentheses, are eligible for such duty rate....
We agree that the NAFTA Preference Override set forth in 19 CFR 102.19 is applicable to the subject merchandise. Specifically, 19 CFR 102.19(b) states:
(b) If, under any other provision of this part, the country of origin of a good which is originating ..... is determined to be the United States and that good has been exported from, and returned to, the United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin of such good for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the United States.
Therefore, we find that the orthodontic brackets are an originating good under NAFTA and because they were returned to the U.S. after having been advanced in value or improved in condition in Mexico, the country of origin of the orthodontic brackets for CBP duty purposes is Mexico, pursuant to 19 CFR 102.19(b) (emphasis added). Accordingly, the "MX" NAFTA rate will be applicable to the orthodontic brackets. However, the country of origin for CBP marking purposes is the U.S. (emphasis added) and the brackets are not subject to the repackaging certification procedures of 19 C.F.R. § 134.26.
HOLDING:
For country of origin marking purposes, the country of origin of the orthodontic brackets manufactured in the U.S. and exported to Mexico for color coding operations prior to importation into the United States is the U.S. Therefore, the imported orthodontic brackets are not subject to the marking requirements of 19 U.S.C. 1304.
The orthodontic brackets of U.S. origin which undergo additional processing in Mexico prior to importation into the U.S. will be considered of Mexican origin for purposes of CBP duty pursuant to 19 CFR 102.19(b), inasmuch as the orthodontic brackets qualify as an originating good pursuant to General Note 12, HTSUS, and may be assessed duties at the "MX" NAFTA rate.
EFFECT ON OTHER RULINGS:
NY B89079, dated September 26, 1997, is MODIFIED.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial Trade & Facilitation Division