OT:RR:CTF:VS H090176 EE

Michael Cantlay
Twa Panel Systems, Inc.
1201 4th Street
Nisku, Alberta T9E 7L3
Canada

RE: NAFTA preference and country of origin marking requirements for radiant cooling & heating system

Dear Mr. Cantlay:

This is in response to your letter, dated December 23, 2009, concerning the eligibility of a certain radiant cooling & heading system for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”).

FACTS:

According to the submission, Twa Panel Systems, Inc. (“Twa”) makes a radiant ceiling and wall system utilizing either hot or cold water in order to heat or cool spaces by either circulating heated or cooled water through copper tubing. They may be of either a linear or modular design. They are made from extruded aluminum heating planks that transfer heat to the attached copper tubing. Radiant panels are mainly used in ceilings or mounted to walls in public buildings, including hospitals, office buildings, libraries, museums, schools, nursing homes and other facilities.

You state that the merchandise at issue, the Twa radiant cooling & heating system consists of multiple aluminum radiant heat panels, 16 mm O.D. copper tubing, aluminum cross-bracing (which allows the panels to be surface mounted on the ceiling or supported by wire hangers on a t-bar grid), a minimum of two clips per panel, clips that hold down the copper tubing, a non-hardening heat paste, and thick foil-backed batt insulation on the inactive side of the panel. The panels are finished with a white electrostatic polyester powder cured coating. The panels are available in virtually any width in multiples of 150 mm and in lengths of up to 4885 mm.

You state that the following operations will take place in Canada:

Radiant Panels: Aluminum extruded planks are fastened together in a tongue and groove assembly to form the required panel width and configuration with the specific number of tube passes. The planks also incorporate a continuous integral tube saddle and channel-shaped grooves to receive clips to connect with the cross brace.

Bracing: The number of cross braces used is based on the length of the assembled panel. Cross brace clips are manually fitted into the channel-shaped grooves in the assembled panel where the planks are joined. The bracing securely holds the connected planks together and helps to align and level the panel assembly.

Cutting: The radiant panels are cut with a circular saw normally after assembly. The tubing is cut from a continuous copper coil. The number of bends in the copper tubing is based on job requirements.

Welding: In some instances panels may require welding, for example when the panels are hung from the ceiling and there is an expansion gap between the panels. Painting: The exposed surface of the panel is finished with a standard white electrostatic polyester powder cured paint coating.

Pipe work: Each panel has its own serpentine pipe coil of 16 mm O.D. tubing. The middle cross brace and clips are removed in order to allow a non-hardening heat paste and the copper tubing to be put into place. The paste is highly conductive and improves the heat transfer characteristics. The copper tubing is cut to size and bent to fit inside the panel. The copper tubing is then secured to the panel. Next, the removed cross braces are placed on top of the cross brace clips and secured into place with screws.

Insulation: As specified, usually a minimum of 25 mm thick foil-backed batt insulation is cut to size and placed on the coil or inactive side to increase the radiant heat transfer.

Packing & Crating: Last, the completed panel is packed for shipping.

You submitted drawings and a breakdown of the component materials and costs for a typical heating system being built for a school.

You state that the following components are non-originating and are classified as follows:

Item Origin HTSUS Classification  Crossbrace India 8302.91  Aluminum extrusions China 7604.29  Aluminum sheet India 7606.12  Copper alloy tubing China 7411.21  Crossbrace clip China 8302.41  Interconnectors China 7411.20  T-bar clip China 8302.41   ISSUES:

Whether the radiant cooling & heating system qualifies for preferential tariff treatment under NAFTA. What is the country of origin of the radiant cooling & heating system for purposes of country of origin marking?

LAW AND ANALYSIS:

NAFTA

General Note (“GN”) 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS. GN 12(a)(i), HTSUS, provides:

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 Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "CA" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.

Accordingly, the radiant cooling & heating system will be eligible for the “Special” “CA” rate of duty provided that it is NAFTA originating under GN 12(b), HTSUS, and qualifies to be marked as a product of Canada under the NAFTA Marking Rules that are set forth in 19 C.F.R. Part 102. GN 12(b), HTSUS, provides, in pertinent part:

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

(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 subdivisions (r), (s) and (t) of this note or the rules set forth therein, or

(B) 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…

In this case, since the radiant cooling & heating system is comprised, in part, of non-originating materials, GN 12(b)(i), HTSUS, does not apply. Therefore, we must determine whether the non-originating materials undergo the tariff shift and other applicable requirement provided for under GN 12(b)(ii), HTSUS. You state that in New York Ruling Letter (“NY”) 817148, dated December 29, 1995, U.S. Customs and Border Protection (“CBP”) determined that the radiant cooling & heating system is classified in subheading 7616.99.50, HTSUS. The applicable rule set forth in GN 12(t)/76.7, HTSUS, provides “a change to headings 7615 through 7616 from any other heading, including another heading within that group.”

Since the non-originating components are classified in different headings (as noted above, subheading 8302.91, HTSUS; subheading 7604.29, HTSUS; subheading 7606.12, HTSUS; subheading 7411.21, HTSUS; subheading 8302.41, HTSUS; and subheading 7411.20, HTSUS) than the radiant cooling & heating system (subheading 7616.99.50, HTSUS), the tariff shift rule set forth in GN 12(t)/76.7, HTSUS, is met.

Country of Origin Marking

GN 12(a)(i), HTSUS, provides that NAFTA-originating goods must also qualify to be marked as products of Canada under the NAFTA Marking Rules to be eligible for preferential treatment. In this regard, 19 C.F.R. § 134.1(j) provides that “[t]he ‘NAFTA Marking Rules’ are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country.” 19 C.F.R. § 134.1(j) defines a “good of a NAFTA country” as “an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.”

19 C.F.R. § 102.11 sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. 19 C.F.R. § 102.11(a) provides that the country of a good is the country in which: The good is wholly obtained or produced;

The good is produced exclusively from domestic materials; or

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.

As previously noted, because the radiant cooling & heating system is processed in Canada from originating and non-originating components, it is neither wholly obtained or produced (19 C.F.R. § 102.11(a)(1)), nor produced exclusively from domestic materials (19 C.F.R. § 102.11(a)(2)). Accordingly, 19 C.F.R. § 102.11(a)(3) is the applicable rule that must next be applied to determine the origin of the radiant cooling & heating system for marking purposes. “Foreign material” is defined in 19 C.F.R. § 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” In order to determine whether Canada is the country of origin, we must look at those materials whose country of origin is other than Canada. As previously noted, the radiant cooling & heating system is classified under subheading 7616.99.50, HTSUS. Pursuant to 19 C.F.R. § 102.20(n), the tariff shift rule for a good of subheading 7616.99.50, HTSUS, is as follows: “[a] change to subheading 7616.10 through 7616.99 from any other subheading, including another subheading within that group.” Since the foreign components are classified in different subheadings other than the radiant cooling & heating system (subheading 7616.99.50, HTSUS), the tariff shift rule is satisfied. Accordingly, the country of origin of the radiant cooling & heating system is Canada.

HOLDING: Based upon the facts presented, the radiant cooling & heating system is eligible for preferential tariff treatment under NAFTA and is considered a product of Canada under the NAFTA Marking Rules.

Reference to this ruling letter should be made in the entry documents filed at the time the subject goods are entered. See CBP Form 7501 - Instructions, Additional Data Elements (available online at: www.cbp.gov). If the entry summary has been filed without reference to this ruling letter, the ruling letter should be brought to the attention of the appraising officer at the port of entry.

Sincerely,

Monika R. Brenner
Chief
Valuation & Special Programs Branch