CLA-2 RR:CR:SM 563030 DCC
Port Director
U.S. Customs and Border Protection
100 Los Indios Boulevard
Los Indios, TX 78567
RE: Request for Internal Advice
Dear Port Director:
This is in response to your request for internal advice in which you forwarded a NAFTA ruling request, dated February 24, 2004, from Meeks & Sheppard, counsel to Corning Life Sciences (“Corning”). Counsel seeks clarification of the originating status of certain laboratory glassware produced in Mexico for purposes of preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”). In addition to counsel’s submission, we received a memorandum from the Customs and Border Protection (“CBP”) National Commodity Specialist Division.
FACTS:
Corning imports two laboratory glassware products from Mexico into the United States. These products are produced by Corning’s affiliated company, Corning Science Mexico SA de CV, in Monterrey, Mexico. In addition to the narrative description, counsel provided the bill of materials for both models, and schematic drawings of the components and finished articles. Counsel states that both models are classified under subheading 7017.90.50, Harmonized Tariff Schedule of the United States (“HTSUS”). Furthermore, counsel claims that the regional value content for both articles exceeds 60% of the transaction value.
Laboratory Distilling Flask
The first article is a laboratory distilling flask. It consists of three parts: 1) a flask blank produced in Germany; 2) a 24 mm diameter glass tube produce in the United States; and 3) a 9 mm glass tube produced in the United States. After these parts are imported into Mexico, they are further processed and assembled to form finished laboratory distilling flasks. The specific processes performed in Mexico are as follows:
The flask blank is marked with product information, including size and product code, by silk screening.
The flask blank is cut at 70 mm from the bottom of the blank.
The 24 mm glass tube is cut to length.
One end of the 24 mm glass tube is tooled to allow insertion of a rubber stopper.
The second end of the 24 mm glass tube is flared and heat sealed to the flask blank with a Lehr annealing furnace to form a neck.
The 9 mm glass tube is cut to length.
A hole is formed in the neck and the 9 mm glass tube is inserted into this hole.
The combined parts are then heat sealed in the Lehr furnace.
Laboratory Solution Bottle
The second article is a laboratory solution bottle. This article consists of two parts: 1) a bottle blank produced in England; and 2) a glass tubulation produced in Mexico. In Mexico, these two parts are further processed and joined to form the finished article. The specific processes performed in Mexico are as follows:
The neck of the bottle blank is tooled to the size and shape of the finished article.
The glass tubulation is heat sealed to the bottle with the Lehr machine.
The bottle is marked with product information by silk screening.
The bottle and tubulation are heat sealed with the Lehr machine.
ISSUE:
Whether the distilling flasks and unfinished solution bottles qualify for preferential tariff treatment under.
LAW AND ANALYSIS:
In order to be eligible for preferential tariff treatment under General Note (“GN”) 12 to the HTSUS, a good must satisfy one of the following rules:
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
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
they have been transformed in the territory of Canada, Mexico and/or the United States so that
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, or
the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; or
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
the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a), or
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, in order for the laboratory glassware to be eligible for preferential tariff treatment under GN 12 by application of the tariff-shift rule for subheading 7017, HTSUS, each of the non-originating materials used in the production of the good must undergo the required change in tariff classification. The tariff shift rule for subheading 7017, HTSUS, provides as follows:
A change to headings 7010 through 7020 from any other heading, except from headings 7007 through 7020.
GN 12(t)/70, HTSUS.
The non-originating materials (i.e., the distilling flask blanks and solution bottle blanks) are classified in heading 7017, HTSUS, when imported into Mexico. Therefore, these materials do not satisfy the tariff-shift requirement of the rule for subheading 7017, HTSUS.
Relating to GN 12(b)(iv)(B), Part I, Section 4, NAFTA Rules of Origin (Appendix to Part 181 of the CBP Regulations, codified at 19 C.F.R. § 181) provides as follows:
PART I
SECTION 4. ORIGINATING GOODS
EXCEPTIONS TO THE CHANGE IN TARIFF CLASSIFICATION REQUIREMENT
(4) 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,
the good is produced entirely in the territory of one or more of the NAFTA countries,
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
those materials are provided for under the Harmonized System as parts of the good, and
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, (emphasis added)
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 sub-heading referred to in subparagraph (ii)(B),
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,
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
the good satisfies all other applicable requirements of this appendix, including any applicable, higher regional value-content requirement pro-vided for in section 13 or Schedule I.
INTERPRETATION: HEADING OR SUBHEADING WHICH PROVIDES
FOR BOTH A GOOD AND PARTS OF THE GOOD
(5) For purposes of subsection (4)(b),
the determination of whether a heading or subheading provides for a good and its parts shall be made on the basis of the nomenclature of the heading or subheading and the relevant Section or Chapter Notes, in accordance with the General Rules for the Interpretation of the Harmonized System; and
where, in accordance with the Harmonized System, a heading includes parts of goods by application of a Section Note or Chapter Note of the Harmonized System and the subheadings under that heading do not include a subheading designated “Parts”, a sub-heading designated “Other” under that heading shall be considered to cover only the goods and parts of the goods that are themselves classified under that subheading.
Under the exception to the change in tariff classification requirement found in paragraph (4)(b)(ii) of section 4 of the NAFTA Rules of Origin Regulations, two conditions must be met. First, the non-originating materials used to make the good that failed to meet the applicable tariff-shift rule must be classified in the Harmonized System as parts for the goods. Second, the heading in which the good is classified must also be the heading in which the parts for the good are classified, and the heading must not be further subdivided or the subheading in which the good is classified must also be the subheading in which the parts for the good are classified. In addition, under the exception, the regional value content requirement for the good must include the value of all the non-originating materials and not just those materials classified under the relevant HTSUS subheading.
Counsel claims that the glass flask and bottle blanks should be treated as parts for purposes of paragraph (4)(b)(ii) of section 4 of the NAFTA Rules of Origin. Counsel notes that the Explanatory Note (“EN”) for General Rule of Interpretation (“GRI”) 2(a) states:
(II) The provisions of this Rule also apply to blanks unless these are specified in a particular heading. The term “blank” means an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into the finished article or part (e.g., bottle preforms of plastics being intermediate products having tubular shape, with one closed end and one open end threaded to secure a screw type closure, the portion below the threaded end being intended to be expanded to a desired size and shape).
Semi-manufactures not yet having the essential shape of the finished articles (such as is generally the case with bars, discs, tubes, etc.) are not regarded as “blanks”.
Counsel argues that the Explanatory Note for GRI 2(a) supports the claim that the unfinished flask and bottle blanks are parts. Counsel notes that although unfinished flasks and bottles have the approximate shape of the finished article or part, they are not ready for direct use. Consequently, Counsel claims that the unfinished distilling flask and solution bottles as imported into Mexico are properly classified as blanks under heading 7017, HTSUS, which provides for laboratory, hygienic or pharmaceutical glassware, whether or not graduated or calibrated.
In addition, Counsel relies on HRL 963163, dated February 7, 2000. That ruling involved the classification of carbon steel shield shells. At the time of entry, the importer entered the shells under a provision of heading 7309, HTSUS, for reservoirs, tanks, and similar containers for any material. Because the imported shells were incomplete or unfinished articles, and heading 7309, HTSUS, does not provide for parts, the port entry liquidated the shells under a provision of heading 7304, HTSUS, for tubes, pipes and hollow profiles, of iron or steel. On review, CBP determined in HRL 963163 that the shells should be treated as “blanks” and therefore classified as incomplete or unfinished containers of heading 7309, HTSUS, pursuant to the Explanatory Note to GRI 2(a).
In the instant case, the non-originating parts (i.e., the flask and bottle blanks) are classified in heading 7017.90.50, HTSUS, when imported into Mexico and remain classified in that heading when formed into finished distilling flasks and laboratory solution bottles. Therefore, these articles do not undergo a change in tariff classification and do not satisfy the tariff-shift requirement of the rule for subheading 7017, HTSUS.
Furthermore, we find that the unfinished flasks and bottles do not qualify as originating materials under the exception to the change in tariff classification requirement in paragraph (4)(b)(ii) of section 4 of the NAFTA Rules of Origin Regulations. As noted above, under this exception a part from a non-NAFTA country converted into a complete article in a NAFTA country (when the same HTSUS provision covers both the part and the complete article) may be eligible for NAFTA if the regional value content is not less than 60 percent determined under the transaction value method.
Contrary to counsel’s assertion, a blank for an article is not merely a part of the article. Rather, a blank is essentially the article itself in an unfinished state. Blanks have the shape and form of finished articles and simply require some additional working, such as cutting or shaping, to form the finished article. Furthermore, parts of laboratory glassware are not covered by tariff heading 7017, HTSUS. This heading provides for laboratory glassware—not laboratory glassware and parts therefore. A genuine part of an article of laboratory glassware would be classified in tariff heading 7020, HTSUS, as other articles of glass, not in heading 7017, HTSUS.
Therefore, the distilling flask blanks from Germany and the solution bottle blanks from England do not satisfy either the applicable tariff shift under GN 12(t), HTSUS, or the requirements of paragraph (4)(b)(ii) of section 4 of the NAFTA Rules of Origin Regulations. In light of the above, the finished distilling flasks and solution bottles are not eligible for preferential tariff treatment under NAFTA.
HOLDING:
Based on the facts presented, the distilling flask blanks from Germany and the solution bottle blanks from England do not undergo a change in tariff classification when used to produce finished distilling flasks and solution bottles. Furthermore, the distilling flask blanks and solution bottle blanks are not parts of finished laboratory glassware articles under tariff heading 7017, HTSUS. Therefore, the finished glassware articles do not meet the tariff shift requirement of GN 12(t)/70, HTSUS, or the exception to that provision under paragraph (4)(b)(ii) of section 4 of the NAFTA Rules of Origin Regulations.
This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other public methods of distribution.
Sincerely,
Myles B. Harmon, Director
Commercial Rulings Division