CLA-2 RR:TC:SM 559399 KR
Deborah Rosenwald
John V. Carr & Son, Inc.
560 Delaware Avenue
Buffalo, NY 14202
RE: Eligibility of ice skates assembled in
Canada for tariff preference under the NAFTA.
Dear Ms. Rosenwald:
This is in reference to your letter dated August 17, 1995,
concerning the eligibility for a tariff preference under the
North American Free Trade Agreement ("NAFTA"), of ice skates
assembled in Canada. Please excuse the delay in responding.
FACTS:
You state that you intend to purchase U. S.-made ice skate
boots and export them into Canada. You also intend to purchase
blades which are manufactured in the United Kingdom, and export
them to Canada where they will be assembled with the ice skate
boots into finished ice skates. You state that the blades, prior
to being attached are classified under subheading 9506.70.6080,
Harmonized Tariff Schedule of the United States ("HTSUS"), while
the finished ice skates are classified under subheading
9506.70.4000, HTSUS. You believe that after the assembly
operation in Canada, the ice skates become "originating goods",
pursuant to General Note 12(b)(iv)(B), HTSUS, and are therefore
entitled to NAFTA tariff preference. You also state that the
regional value content of the ice skate is over 60 percent.
ISSUES:
1. Whether the returned finished ice skates are entitled to
tariff preference under the NAFTA.
2. Whether the returned finished ice skates are entitled to
the partial duty exemption under subheading 9802.00.80, HTSUS.
LAW AND ANALYSIS:
1. NAFTA
To be eligible for tariff preferences under the NAFTA, goods
must be "originating goods" within the rules of origin in General
Note 12(b), HTSUS. In this case, there are two methods by which
goods imported into the United States may be "goods originating
in the territory of a NAFTA party." General Note 12(b), HTSUS,
sets forth the two methods as follows:
(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 subdivision (r), (s) and
(t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable
requirements
of subdivision (r), (s) and (t) where no change in
tariff classification is required, and the goods
satisfy all other requirements of this note; or...
Pursuant to General Note 12(t)/95.9, HTSUS, the good must
undergo a "change to subheading 9506.40 through 9506.99 from any
other chapter." In this instance the ice skate and the blade
remain within the same chapter prior to, and after assembly.
Therefore, the appropriate tariff shift does not occur.
However, because the subheading for ice skates includes both
the goods and their parts, General Note 12(b)(iv)(B), HTSUS, is
applicable. This states:
(iv) they are produced entirely in the territory
of Canada, Mexico and/or the United States
but one or more of the
non-originating materials falling under provisions
for "parts" and used in the
production of such goods does not
undergo a change in tariff classification
because--
* * *
(B) the tariff headings for such goods provide for and
specifically describe both the goods themselves and
their parts and is not further divided into
subheadings, or the subheadings for such goods provide
for and specifically describe both the goods themselves
and their parts, provided that such goods do not fall
under chapters 61 through 63, inclusive, of the tariff
schedule, and provided further that the regional value
content of such goods, determined in accordance with
subdivision (c) of this note, 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 such goods satisfy all other applicable
provisions of this note. For purposes of this Note,
the term "material" means a good that is used in the
production of another good, and includes a part or an
ingredient.
In the instant case, both the finished skate and the blades
are classified under subheading 9506.70, HTSUS, which provides
for "ice skates, ... parts and accessories thereof". Since the
classification of both the "goods" and the "parts" are within the
same subheading 9506.70, HTSUS, we find that General Note
12(b)(iv)(B) is applicable to the finished skates. Therefore,
if Customs at the port of entry determines that the regional
value content of the skates sets is not less than 60% where the
transaction value method is used, or is not less than 50% where
the net cost method is used, the skates will be eligible for
duty-free treatment under the NAFTA. See HQ 956751 (December 6,
1994).
2. 9802.00.80.
If the regional value content requirement of General Note
12(b)(iv)(B), HTSUS, is not met and, therefore, the skates are
ineligible for the NAFTA tariff preference, subheading
9802.00.80, HTSUS, may be applicable. Subheading 9802.00.80,
HTSUS, provides for a partial duty allowance for:
[a]rticles assembled abroad in whole or in part of
fabricated components, the product of the United
States, which (a) were exported in condition ready
for assembly without further fabrication, (b) have
not lost their physical identity in such articles
by change in form, shape or otherwise, and (c)
have not been advanced in value or improved in
condition abroad except by being assembled and
except by operations incidental to the assembly
process such as cleaning, lubricating and
painting.
All three requirements of subheading 9802.00.80, HTSUS, must
be satisfied before a component may receive a duty allowance. An
article entered under subheading 9802.00.80, HTSUS, is subject to
duty upon the full value of the imported assembled article less
the cost or value of the U.S. components, upon compliance with
the documentary requirements of section 10.24, Customs
Regulations (19 CFR 10.24).
Section 10.14(a), Customs Regulations (19 CFR 10.14(a)),
states, in part, that:
The components must be in condition ready for
assembly without further fabrication at the time
of their exportation from the United States to
qualify for the exemption. Components will not
lose their entitlement to the exemption by being
subjected to operations incidental to the assembly
either before, during, or after their assembly
with other components.
Assembly operations for purposes of HTSUS subheading
9802.00.80 are interpreted at section 10.16(a), Customs
Regulations (19 CFR 10.16(a)), which specifically enumerates
sewing, welding, soldering, and riveting as acceptable means of
assembly. Further, this section provides that assembly
operations may be preceded, accompanied, or followed by
operations incidental to the assembly.
Operations incidental to the assembly process are not
considered further fabrication operations, as they are of a minor
nature and cannot always be provided for in advance of the
assembly operations. However, any significant process, operation
or treatment whose primary purpose is the fabrication,
completion, physical or chemical improvement of a component
precludes the application of the exemption under subheading
9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).
In the instant case, the description of the Canadian
operations shows that the finished skates to be imported will be
eligible for the partial duty exemption available under HTSUS
subheading 9802.00.80. The U.S.-made boot is sent to Canada
where it is attached to the blade. This is an acceptable
assembly operation pursuant to 19 CFR 10.16(a).
Therefore, assuming the skate boot is of U.S. origin, we
find that the skates imported by Tournament Sports Marketing,
Inc., are entitled to an allowance in duty under HTSUS
9802.00.80, for the value of the U.S. component - the skate boot,
provided that the documentary requirements are met.
HOLDING:
The finished skate will be entitled to NAFTA tariff
preference, assuming that they meet the regional value content
requirement in General Note 12(b)(iv)(B), HTSUS, and all other
applicable requirements.
On the basis of the described foreign operations, when the
finished skates are imported into the U.S. they will be eligible
for an allowance in duty under HTSUS subheading 9802.00.80, for
the value of the U.S. skate boot, upon compliance with the
documentation requirements of 19 CFR 10.24.
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 Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Tariff Classification Appeals Division