OT:RR:CTF:VS H221935 YAG
Mr. David R. Ostheimer
Lamb & Lerch
233 Broadway, Suite 2702
New York, NY 10279
RE: United States-Korea Free Trade Agreement (“UKFTA”); Merchandise Processing Fee (“MPF”); Automobiles; Originating Goods
Dear Mr. Ostheimer:
This is in response to your letter, dated June 13, 2012, requesting a ruling, on behalf of your client, KIA Motors America, Inc. (“KIA”), concerning the impact of the United States-Korea Free Trade Agreement (“UKFTA”) and its implementing legislation on the collection of the Merchandise Processing Fee (“MPF”) on originating motor vehicles entered by KIA into the customs territory of the United States.
FACTS:
KIA imports motor vehicles from the Republic of Korea (“Korea”). These motor vehicles are entered into the customs territory of the United States through the following ports of entry: Tacoma, WA; Port Hueneme, CA; Dallas, TX; Brunswick, CA; and, Philadelphia, PA. Additionally, the imported motor vehicles are classified under one of the following subheadings: 8703.10.10, 8703.10.50, 8703.21.00, 8703.22.00, 8703.23.00, 8703.24.00, 8703.31.00, 8703.32.00, or 8703.33.00 of the Harmonized Tariff Schedule of the United States (“HTSUS”). You have asked about the application of the MPF to these goods.
ISSUE:
Whether motor vehicles, originating in Korea and entered into the customs territory of the United States between March 15, 2012 and December 31, 2015, are exempt from the MPF pursuant to the UKFTA and the United States-Korea Free Trade Agreement Implementation Act.
LAW AND ANALYSIS:
On June 30, 2007, the United States and Korea signed the UKFTA. On December 3, 2010, the United States and Korea concluded new agreements, reflected in letters signed on February 10, 2011 that provided new market access and leveled the playing field for U.S. auto manufacturers and workers.
On October 21, 2011, Congress approved the UKFTA in section 101(a) of the UKFTA Implementation Act, Public Law 112–41, 125 Stat. 428 (19 U.S.C. §3805, note). On March 6, 2012, the President signed Proclamation 8783 to implement the provisions of the UKFTA for the United States. The Proclamation, which was published in the Federal Register on March 9, 2012 (77 FR 14265), modified the HTSUS as set forth in Annexes I and II of Publication No. 4308 of the U.S. International Trade Commission entitled “Modifications to the Harmonized Tariff Schedule of the United States to Implement the United States-Korea Free Trade Agreement.” The modifications to the HTSUS included the addition of new General Note 33, incorporating the relevant UKFTA rules of origin as set forth in the Act, and the insertion throughout the HTSUS of the preferential duty rates applicable to individual products under the UKFTA where the special program indicator “KR” appears in parenthesis in the “Special” rate of duty subcolumn. The Proclamation implemented the UKFTA for good entered, or withdrawn from warehouse for consumption, on or after March 15, 2012. Therefore, imported goods that are Korea originating are entitled to the benefits of the UKFTA as of March 15, 2012 and in accordance with the Act and General Note 33 of the HTSUS.
An originating good is one that meets the general and/or product specific rules of origin, set forth in section 202 of the Act and incorporated in General Note 33, HTSUS, and all other requirements of the UKFTA. For goods classified under subheadings 8703.10.10, 8703.10.50, 8703.21.00, 8703.22.00, 8703.23.00, 8703.24.00, 8703.31.00, 8703.32.00, or 8703.33.00, HTSUS, General Note 33 contains the general rules of origin, which provide in part, as follows:
For the purposes of this note, subject to the provisions of subdivisions (c), (d), (n) and (o) thereof, a good imported into the customs territory of the United States is eligible for treatment as an originating good of a UKFTA country under the terms of this note if:
(i) the good is wholly obtained or produced entirely in the territory of Korea or of the United States, or both;
(ii) the good is produced entirely in the territory of Korea or of the United States, or both, and
(A) each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification specified in subdivision (o) of this note; or
(B) the good otherwise satisfies any applicable regional value-content or other requirements set forth in such subdivision (o); and satisfies all other applicable requirements of this note and of applicable regulations; or
(iii) the good is produced entirely in the territory of Korea or of the United States, or both, exclusively from materials described in subdivisions (i) or (ii), above.
For the purposes of General Note 33, the term “UKFTA country” refers only to Korea or to the United States.
Additionally, for the purposes of the calculation of the regional value content, the applicable rule for the heading 8703, HTSUS, specified in General Note 33, states as follows:
No change in tariff classification to a good of headings 8701 through 8706 is required, provided that there is a regional value content of not less than: (A) 35 percent under the build-up method; or (B) 55 percent under the build-down method; or (C) 35 percent under the net cost method.
You argue that pursuant to section 201(d)(1) of the Act, motor vehicles entered into the customs territory of the United States after the entry into force of the UKFTA on March 15, 2012, are eligible for originating status and, thus, exempt from the MPF.
Section 201(d)(1) states as follows:
(d) TARIFF TREATMENT OF MOTOR VEHICLES.—The President may proclaim the following tariff treatment with respect to the following motor vehicles of Korea: (1) CERTAIN PASSENGER CARS.—In the case of originating goods of Korea classifiable under subheading 8703.10.10, 8703.10.50, 8703.21.00, 8703.22.00, 8703.23.00, 8703.24.00, 8703.31.00, 8703.32.00, or 8703.33.00 of the HTS that are entered, or withdrawn from warehouse for consumption— (A) the rate of duty for such goods shall be 2.5 percent for year 1 of the Agreement through year 4 of the Agreement; and (B) such goods shall be free of duty for each year thereafter.
Section 203 of the Act exempts Korean originating goods from the collection of MPF. Specifically, section 203 states:
Section 13031(b) of the Consolidated Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. §58c(b)) is amended by adding after paragraph (18) the following:
“(19) No fee may be charged under subsection (a)(9) or (10) with respect to goods that qualify as originating goods under section 202 of the United States-Korea Free Trade Agreement Implementation Act. Any service for which an exemption from such fee is provided by reason of this paragraph may not be funded with money contained in the Customs User Fee Account.
Section 201(d)(1) of the Act provides for a reduced rate of duty for the subject goods, until January 1, 2016, after which the goods will be duty free, provided they qualify as originating goods. Therefore, in order for KIA to claim preferential treatment under section 201(d)(1) of the Act at any time after March 15, 2012, the motor vehicles imported into the United States must be originating and satisfy the requirements of section 202 of the Act, as incorporated in General Note 33 of the HTSUS. Thus, if the goods at issue are originating, they remain originating goods for the purposes of the UKFTA, regardless of the applicable tariff rate. Although section 203 of the Act only refers to section 202 of the Act, in order to receive the reduced 2.5 percent duty rate under section 201(d)(1), by its terms the goods must be originating under the UKFTA, as referred to in section 202 of the Act.
Accordingly, we find that provided the imported motor vehicles satisfy the UKFTA rules of origin, specified in section 202 of the Act and incorporated in General Note 33 of the HTSUS, the merchandise, classified under subheadings 8703.10.10, 8703.10.50, 8703.21.00, 8703.22.00, 8703.23.00, 8703.24.00, 8703.31.00, 8703.32.00, or 8703.33.00, HTSUS, is exempt from the MPF when entered into the customs territory of the United States.
HOLDING:
Based on our review of the facts presented, we find that the imported motor vehicles qualify for the UKFTA exemption for MPF, provided that these motor vehicles are originating goods under the applicable provisions of the UKFTA and General Note 33 of the HTSUS.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents are filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch