VAL RR:IT:VA 546079 CRS
Madeline B. Kuflik, Esq.
Assistant General Counsel
Matsushita Electric Corporation of America
One Panasonic Way
Panazip: 3B-6
Secaucus, NJ 07094
RE: Article 509, NAFTA; exception to change in tariff shift rule
not satisfied; parts; RVC
Dear Ms. Kuflik:
This is in reply to your letter of July 28, 1995, filed on
behalf of Kyushu Matsushita Corporation of America ("AKME"), in
which you requested an advance ruling as to whether a regional
value content test may be used to qualify deflection yokes as
originating goods under the North American Free Trade Agreement
("NAFTA").
FACTS:
AKME imports deflection yokes produced in Mexico by a related
party producer. The deflection yokes are classified in subheading
8540.91.20, Harmonized Tariff Schedule of the United States
(HTSUS). A major component of the deflection yokes is a ferrite
core classified in subheading 8540.91.50, HTSUS.
The applicable rule of origin in this instance provides that
a good classified in subheading 8540.91 originates in the territory
of a NAFTA country where there is a change to subheading 8540.91
from any other heading. However, since the ferrite core and
deflection yoke are classified in the same subheading, the
deflection yoke does not qualify as an originating good because the
ferrite core does not undergo a change in classification.
ISSUE:
The issue presented is whether the deflection yoke qualifies
as an originating good under one of the exceptions to the change in
tariff classification requirement such that the NAFTA origin
determination may be based on a regional value-content test.
LAW AND ANALYSIS:
The Appendix to the NAFTA Rules of Origin Regulations ("ROR";
19 C.F.R. pt. 181 app.; NAFTA Rules of Origin Regulations, as
amended by T.D. 95-68, 60 Fed. Reg, 46334 (1995), 29:38 Cust. B. &
Dec. 1 (1995)), sets forth, at section 4(4), certain exceptions to
the change in classification requirement of section 4(2). In
particular, section 4(4) provides in pertinent part that a good
originates in the territory of a NAFTA country where:
b) except in the case of a good provided for in any of
Chapters 61 through 63,
(i) the good is produced entirely in the territory
of one or more of the NAFTA countries,
(ii) one or more of the non-originating materials
used in the production of the good do not undergo
an applicable change in tariff classification
because
(A) those materials are provided for under
the Harmonized System as parts of the good,
and
(B) the heading for the good provides for
both the good and its parts and is not further
subdivided into subheadings, or the subheading
for the good provides for both the good and
its parts,
(iii) the non-originating materials that do not
undergo a change in tariff classification in the
circumstances described in subparagraph (ii) and
the good are not both classified as parts of goods
under the heading or subheading referred to in
subparagraph (ii)(B),
(iv) each of the non-originating materials that is
used in the production of the good and is not
referred to in subparagraph (iii) undergoes an
applicable change in tariff classification or
satisfies any other applicable requirement set out
in Schedule I,
(v) the regional value content of the good,
calculated in accordance with section 6, is not
less than 60 percent where the transaction value
method is used, or is not less than 50 percent
where the net cost method is used, and
(vi) the good satisfies all other applicable
requirements of this Appendix, including any
applicable, higher regional value-content
requirement provided for in section 13 or Schedule
I.
60 Fed. Reg. 46395, ROR, section 4(4)(b).
In the instant case, the good, i.e., the deflection yoke, is
produced entirely in Mexico and one of the non-originating
materials, i.e., the ferrite core, is provided for under a parts
provision, and the subheading for the good (8540.91) provides for
both the good and its parts. Thus, the requirements of sections
4(4)(b)(i)-(ii) are satisfied. However, section 4(4)(b)(iii) of
the ROR contains a further requirement that, in order for the good
to originate, the non-originating material that does not undergo a
change in tariff classification and the good in which that material
is used must not be classified as parts of goods under a heading or
subheading that provides for both the good and its parts. Here,
this requirement is not met because the ferrite core that does not
undergo a change in classification and is classified with the
deflection yoke in a subheading that provides for the good and its
parts. Since the deflection yokes do not meet all the requirements
of section 4(4)(b) of the ROR the exception to the change in
classification requirement does not apply. Consequently, the
question of a regional value-content test does not arise.
HOLDING:
The deflection yokes do not qualify as originating goods under
the exception to the change in tariff classification requirement
set forth in section 4(4)(b) of the ROR. A regional value-content
test may not be used to determine the origin of the deflection
yokes.
This holding applies only to the specific factual situation
and merchandise identified in the ruling request. This position is
clearly set forth in section 181.100(a)(2), Customs Regulations,
which states that a NAFTA ruling letter is issued on the assumption
that all the information furnished in connection with the ruling
request and incorporated therein, directly, by reference, or by
implication, is accurate and complete in every respect. Should it
subsequently be determined that the information furnished is not
complete and/or does not comply with 19 C.F.R. 181.100(a)(2),
this ruling will be subject to modification or revocation. In
addition, any change in the facts furnished in connection with this
ruling may affect the outcome of the regional value content
determination. In such a case, it is recommended that a new ruling
request be submitted in accordance with 19 C.F.R. 181.93.
Sincerely,
Acting Director
International Trade Compliance Division