OT:RR:CTF:VS H172315 KSG
John F. Mulvihill
UPS
One UPS Way
Champlain NY 12919
RE: Used refrigerant gas; modification of NY N161355; recovery of refrigerant gas; disassembly; NAFTA
Dear Mr. Mulvihill:
This is in response to your letter dated June 7, 2011, submitted on behalf of Pure Chem Separation, Inc., requesting that we modify New York Ruling Letter (NY) N161355 with respect to the issue of whether imported used refrigerant gas recovered from used equipment in Canada qualifies as an originating good under the North American Free Trade Act (“NAFTA”). Your additional submission dated October 24, 2011, was considered in this decision. Upon review of NY N161355, we have determined that the portion of the ruling related to the eligibility of the refrigerant gas for NAFTA preference is incorrect as is set forth below.
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, of the North American Free Trade Agreement implementation Act (Pub. L. 103-182, 107 Stat. 2057), notice of the proposed action was published on May 30, 2012, in Volume 46, Number 23, of the Customs Bulletin. No comments were received in response to this notice.
FACTS:
Pure Chem imports used refrigerant gas (“R-22”) from Canada. The R-22 is recovered from used refrigeration equipment undergoing service or dismantling in Canada. The country of origin of the used refrigerant gas and the used refrigeration equipment is unknown. The recovery in Canada requires specialized equipment (shown in the photographs that are part of your submission) operated by trained workers. Once the R-22 is recovered, it is pumped into 1000 lb. cylinders for importation into the U.S.
You state that the used refrigeration equipment is classified in subheadings 8415.10 through 8415.83, 8418.10 through 8418.69, or 8419.89, of the Harmonized Tariff Schedule of the United States (“HTSUS”). CBP ruled in NY N161355, dated May 20, 2011, that R-22 is classified in subheading 2903.49.9010, HTSUS. CBP also ruled in NY N161355 that used R-22 does not qualify for preferential treatment because the tariff shift rule is not satisfied. You are not contesting the classification of the R-22.
ISSUE:
Whether used R-22 recovered in Canada from used refrigeration equipment qualifies for preferential tariff treatment under the NAFTA.
LAW AND ANALYSIS:
General Note (“GN”) 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS. General Note 12(a)(i) provides, in pertinent part:
(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 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), 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 NAFTA Implementation Act.
Accordingly, the imported product will be eligible for the “Special” “CA” rate of duty provided it is a NAFTA “originating” good under GN 12(b), HTSUS, and qualifies to be marked as a product of Canada under the NAFTA Marking Rules. 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—
(i) 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; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials. (emphasis added)
The R-22 was not produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials. Therefore, we must consider whether the imported R-22 is a result of production and satisfies the tariff-shift rule set forth in GN 12 (t), HTSUS.
The tariff shift rule for goods of subheading 2903.49, HTSUS, under NAFTA is as follows:
A change to subheadings 2903.41 through 2903.51 from any other subheading, including another subheading within that group, except from headings 2901 through 2902….
The applicable rule set forth in GN 12(t), HTSUS, for goods of subheading 2903.49, HTSUS, requires a subheading change except from headings 2901 or 2902. Since refrigeration equipment is not classified in subheadings 2901, 2902, or 2903 (or chapter 29 at all), HTSUS, the tariff-shift rule would be satisfied
However, in order for imported used R-22 to be considered an originating good as provided in GN 12(t), HTSUS, it also must undergo production in Canada.
The disassembly provision set forth at 19 CFR 181.132 states that for purposes of implementing the rules of origin provisions of GN 12, HTSUS, and Chapter 4 of the NAFTA, except as provided in 181.132(b), disassembly is considered to be production and a component recovered from a used good disassembled in the territory of a party will be considered to be an originating good provided that the recovered component satisfies all applicable requirements of Annex 401 and Part 181.
In Headquarters Ruling Letter (“HRL”) 563321, dated November 22, 2005, CBP cited to 19 CFR 181.132 and held that used automobile alternators and starters recovered from vehicles in Mexico were eligible for preferential tariff treatment. In HRL H004446, dated April 11, 2007, CBP held that the disassembly in Canada of automotive parts from used vehicles qualified as production.
This case involves the recovery of used R-22 from used refrigerant equipment in Canada. We find that the recovery of refrigerant gas in Canada from used equipment is the result of disassembly similar to the disassembly of a vehicle in a NAFTA country, and pursuant to 19 CFR 181.132 would constitute production for the purposes of GN 12, HTSUS.
We next have to determine if the used R-22 would qualify to be marked as a product of Canada. The hierarchy set forth in 19 CFR 102.11 is applicable to determine the country of origin marking of goods produced in countries that are a party to the NAFTA. Pursuant to 19 CFR 102.11, the country of origin for non-textile goods is determined to be the country in which:
(a)(1) The good is wholly obtained or produced;
(a)(2) The good is produced exclusively from domestic materials:
Since the used R-22 is of unknown origin, 19 CFR 102.11(a)(1) and (2) are not satisfied.
The next rule is 102.11(a)(3) which provides as follows: Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied. However, 19 CFR 102.17(b) provides that a foreign material is not considered to have undergone an applicable change in tariff classification specified in 19 CFR 102.20 if it was disassembled.
The provision in 19 CFR 102.11(b) is inapplicable. The single material that imparts the essential character to the good, the R-22 is of unknown origin.
Therefore, this rule cannot be used to determine the country of origin of the imported R-22.
Since the country of origin of the R-22 cannot be determined pursuant to 19 CFR 102.11(a) or (b), the NAFTA preference override set forth in 19 CFR 102.19 is triggered. The provision set forth in 19 CFR 102.19(a) provides that if a good is originating under the NAFTA as in this case, and not determined under
19 CFR 102.11(a),102.11(b), or 19 CFR 102.21 to be a good of a single NAFTA country, the country of origin is the last NAFTA country in which that good underwent production other than minor processing, provided that a Certificate of Origin has been completed and signed for the good.
In HRL H004446, dated April 11, 2007, CBP applied 19 CFR 102.19(a) to used automobile parts disassembled from vehicles of unknown origin. CBP held that the origin of the disassembled part was Canada, the last country in which the good underwent production other than minor processing, provided that a Certificate of Origin had been completed and signed for the good.
Similarly in this case, 19 CFR 102.19(a) is applicable. Canada is the last country in which the good underwent processing and the processing involved was more than minor processing, so the country of origin for marking and duty purposes would be Canada.
HOLDING:
The imported used refrigerant gas is an originating good as provided in GN 12(t), HTSUS pursuant to 19 CFR 181.132. The country of origin of the recovered refrigerant gas for marking and duty purposes is Canada provided that a Certificate of Origin has been completed and signed for the good.
EFFECT ON OTHER RULINGS:
NY N161355, dated May 20, 2011, is hereby MODIFIED.
Pursuant to 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