OT:RR:CTF:VS H242070 GaK
Assistant Port Director
U.S. Customs and Border Protection
240 N. Freeport Drive
Nogales, AZ 85621
RE: Internal Advice Request; Classification; NAFTA Eligibility; Country of origin marking; 9801.00.10 & 9802.00.80
Dear Assistant Port Director:
This is in response to your memorandum dated April 29, 2013, requesting internal advice concerning importations of plastic kits and components used in the plumbing industry. DBHL, Inc. (“DBHL”) requested internal advice from your port regarding classification, North America Free Trade Agreement (“NAFTA”) eligibility, country of origin marking, and applicability of provisions of Chapter 98, Harmonized Tariff Schedule of the United States (“HTSUS”). Your office forwarded DBHL’s request which discussed five products, categorized A through E. We also considered a spreadsheet of components submitted by DBHL. We regret the delay in responding.
Per DBHL’s letter dated April 9, 2013, we have reviewed their request for confidentiality pursuant to 19 C.F.R. § 177.2(b)(7) with respect to the information submitted. As that information constitutes privileged or confidential matters, it has been bracketed and will be deleted from any published versions.
FACTS:
Category A
Category A concerns the No. P9700 – P-Trap (“P-Trap”) kit, which is also known as a clean-out trap in the plumbing industry. The P-Trap is a curved pipe located underneath a plumbing fixture that creates a water block to prevent sewer gases from coming up the drain line and into the building. The P-Trap’s second essential function is catching items that may cause clogs or blockages if allowed to travel further into the drainage system. The P-Trap kit is comprised of a rigid slip nut-fitting (U.S./Mexico), plastic washer (U.S./Mexico), rigid J-bend tube (U.S.), rigid quarter bend tube (U.S.), individual retail carton (U.S.), shipping carton label (U.S.), and shipping carton (Mexico).
The U.S. components are exported to Mexico and processed under two different scenarios. In the first scenario, the rigid slip nut-fitting and the plastic washer are screwed to the J-bend tube. The assembled component and the rigid quarter bend tube are packed in individual retail cartons and in a shipping carton. The shipping label is printed in Mexico to include the part number, description, origin, quantity, and bar code. The shipping carton label is affixed to the shipping carton. In the second scenario, no assembly occurs and each component is packaged in individual retail cartons and packed in a shipping carton.
Category B
Category B concerns the No. P9701BG – P-Trap (“P-Trap”), which is the same product as the P-Trap in Category A, except that all of the components are of U.S.-origin. Similarly, the shipping label and plastic bag are made in the U.S. and the cardboard carton is made in Mexico. The U.S. components are sent to Mexico without the benefit of drawback. Each component is packaged in a plastic bag, and then packed in a shipping carton. The label is printed in Mexico to include the part number, description, origin, quantity, and bar code, then affixed to the shipping carton.
Category C
Category C concerns the No. P9722BG – S-Trap with Adapter (“S-Trap”) kit, which is also known as a clean-out trap in the plumbing industry. The S-Trap is a curved pipe located under sinks, bathtubs and toilets and designed to capture objects that are inadvertently dropped into the sink. The S-Trap kit is comprised of a rigid slip nut-fitting (U.S./Mexico), plastic washer (U.S./Mexico), rigid plastic tube (China), rigid threaded adapter-fitting (U.S.), rigid J-bend tube (U.S.), rigid J-bend tube with fitting (U.S.), individual retail bag (U.S.), shipping carton label (U.S.), and shipping carton (Mexico).
The U.S. components are exported to Mexico for packaging operations. The rigid slip nut-fitting and plastic washer are screwed to the J-bend tube only per customer requests. Then each component is packed in individual retail bags and in a shipping carton. The shipping label is printed in Mexico to include the part number description, origin, quantity, and barcode, then affixed to the shipping carton.
Category D
Category D concerns the No. HD2690B – Tubular Waste Arm (“Waste Arm”) kit, which is designed to be used in tubular drain applications. The Waste Arm is used to install a clean out trap under residential or commercial sinks, bathtubs and toilets. The Waste Arm kit is comprised of a rigid slip nut-fitting (U.S./Mexico), plastic washer (U.S./Mexico), rigid waste arm (U.S.), nipple (U.S.), individual retail bags (U.S.), shipping carton label (U.S.), and shipping carton (Mexico).
The U.S. components are exported to Mexico and processed under two different scenarios. In the first scenario, the rigid slip nut-fitting and plastic washer are screwed to the rigid waste arm and along with the other components, are packed in individual retail cartons and a shipping carton. The shipping label is printed in Mexico to include the part number, description, origin, quantity, and bar code. The shipping carton label is affixed to the shipping carton. In the second scenario, no assembly occurs and each component is packaged in individual retail cartons and shipping cartons.
Category E
Category E concerns the No. P9100 Disposer drain (“Disposer”) kit, which is an end outlet disposer drain kit used in kitchen sinks. The disposer drain connects two different flows of water into a single trap located to one-side under the sink. The Disposer kit is comprised of a 12-inch rigid tailpipe (Mexico), 6-inch rigid flange tailpipe (U.S.), rigid polypropylene tee (U.S.), slip nut-fitting (U.S./Mexico), plastic washer (U.S./Mexico), rubber gasket (Taiwan), individual retail carton (U.S.), shipping carton label (U.S.), and shipping carton (Mexico).
The U.S. components are exported to Mexico and processed under two different scenarios. In the first scenario, the rigid slip nut-fitting and plastic washer are screwed to the rigid polypropylene tee and along with the other components, are packaged in individual retail cartons and in a shipping carton. The shipping label is printed in Mexico to include the part number, description, origin, quantity, and bar code. The shipping carton label is affixed to the shipping carton. In the second scenario, each component is packaged in individual retail cartons and shipping cartons.
ISSUES:
What is the proper classification of the P-Trap kit, S-Trap kit, Waste Arm kit, and Disposer kit?
Whether the goods are eligible for preferential treatment under NAFTA.
Whether the U.S.-origin components are eligible for entry under subheadings 9801.00.10 and/or 9802.00.80, HTSUS.
LAW AND ANALYSIS:
Classification
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (“GRI”). GRI 1 provides that the classification of goods shall be “determined according to the terms of the headings and any relative section or chapter notes.” In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI 2 through 6 may be applied in order.
Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the good. When no single heading provides for all of the articles in the kit, we must proceed to GRI 2. GRI 2 provides for unfinished articles as well as mixtures and combinations. GRI 3(a) states that when merchandise is classifiable under more than one heading, the merchandise should be classified in the most specific heading. However, GRI 3(a) further states that “when two or more headings each refer to . . . part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods.”
GRI 3(b) states, in relevant part, that goods put up in sets for retail sale shall be classified as if consisting of the material or component which gives them their essential character, insofar as this criterion is applicable. Explanatory Note (X) to GRI 3(b) states that for purposes of Rule 3(b) the term "goods put up in sets for retail sale" means goods which: (a) consist of at least two different articles which are, prima facie, classifiable in different headings; (b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and, (c) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards). Under GRI 3(b), a retail set shall be classified according to the component which gives the kit its essential character. See Estee Lauder, Inc. v. United States, 46 Cust. B. & Dec. 4, 13 - 28 (Ct. Int'l Trade 2012). Explanatory Note (VIII) to GRI 3(b) states that "essential character will vary as between different kinds of goods . . . it may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods."
There have been several court decisions on "essential character" for purposes of classification under GRI 3(b). See, Conair Corp. v. United States, 29 C.I.T. 888 (2005); Structural Industries v. United States, 360 F. Supp. 2d 1330, 1337-1338 (Ct. Int'l Trade 2005); and Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278, 1295-1356 (Ct. Int'l Trade 2006), aff'd 491 F.3d 1334 (Fed. Cir. 2007). "[E]ssential character is that which is indispensable to the structure, core or condition of the article, i.e., what it is." Home Depot USA, Inc. v. United States, 427 F. Supp. 2d at 1293 quoting A.N. Deringer, Inc. v. United States, 66 Cust. Ct. 378, 383 (1971). In particular in Home Depot USA, Inc. v. United States, the court stated "[a]n essential character inquiry requires a fact intensive analysis." 427 F. Supp. 2d 1278, 1284 (Ct. Int'l Trade 2006).
Category A & Category B
Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the good. The P-Trap components are made of polypropylene and low density polyethylene. The articles within the kit are classified under separate headings. The J-bend tube, rigid slip nut-fitting, and quarter bend tubes are classified under subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings...” and the plastic washers are classified under subheading 3926.90.4590 as “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914.” Since no single heading provides for all of the articles in the kit, we must proceed to GRI 2. GRI 2 provides for unfinished articles as well as mixtures and combinations. None of these terms describe the P-Trap kit, so we must proceed to GRI 3.
The P-Trap kit satisfies the aforementioned GRI 3(b) criteria for a retail set. The kit consists of several components which are prima facie classifiable under different HTSUS headings. Moreover, all of the articles are components of a clean-out trap. The P-Trap components are packed in individual retail cartons. Under GRI 3(b), the P-Trap kit is a retail set and shall be classified according to the component which gives the kit its essential character.
The J-bend and quarter bend tubes made of polypropylene are the largest components in the kit and form the curved shape of the P-Trap for the sink. The remaining components are minor accessory pieces that support the P-Trap function. The curved shape prevents sewer gases from coming up the drain line and into the house, and catches items that may cause major clogs or blockages. DBHL provided an excerpt from the U.S. Army Plumbing Manual, which shows how the J-bend tube traps the liquid content from flowing into the quarter bend tube. As such, we find the J-bend tube provides the kit’s essential character and the kit must be classified according to the J-bend tube. The P-Trap kit is classified under subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings....”
Category C
Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the S-Trap kit. The S-Trap kit components are made of polypropylene, low density polyethylene, and PVC. The articles within the kit are classified under separate headings: the rigid plastic tube is classified under subheading 3917.22.0000, HTSUS, as “[t]ubes, pipes and hoses and fittings therefore…: [t]ubes, pipes and hoses, rigid: [o]f polymers of propylene”; the rigid slip nut-fitting, rigid threaded adapter-fitting, and rigid J-bend tubes are classified under subheading 3917.40.0090 as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings...”; and the plastic washers are classified under subheading 3926.90.4590 as “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914.” Since no single heading provides for all of the articles in the kit and GRI 2 applies to unfinished articles and mixtures, we must proceed to GRI 3.
The S-Trap kit satisfies the aforementioned criteria for a retail set under GRI 3(b). The kit consists of several components which are prima facie classifiable under different HTSUS headings. Moreover, all of the components are used in a clean-out trap. The S-Trap components are packed in individual retail cartons. Under GRI 3(b), the P-Trap kit is a retail set and shall be classified according to the component which gives the kit its essential character. The shape of the S-Trap traps objects dropped into the sink which is achieved by combining the two rigid J-bend tubes (one with a fitting). Since the two components that impart the essential character are classified under subheading 3917.40.0090, HTSUS, the S-Trap will be classified under subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings....”
Category D
Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the Waste Arm kit. The Waste Arm kit components are also made of polypropylene and low density polyethylene. The articles within the kit are classified under separate headings: the rigid slip nut-fitting and nipple are classified under subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings...”; the rigid waste arm is classified under subheading 3917.22.0000 as “[t]ubes, pipes and hoses and fittings therefore…: [t]ubes, pipes and hoses, rigid: [o]f polymers of propylene”; and the plastic washers are classified under subheading 3926.90.4590 “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914” HTSUS. Since no single heading provides for all of the articles in the kit, we must proceed to GRI 2. GRI 2 provides for unfinished articles as well as mixtures and combinations. None of these terms describe the Waste Arm kit, so we must proceed to GRI 3.
The Waste Arm kit satisfies the aforementioned criteria for a retail set under GRI 3(b). The kit consists of several components which are prima facie classifiable under different HTSUS headings. Moreover, all of the components are used in a Waste Arm. The Waste Arm components are packed in individual retail cartons. Under GRI 3(b), the Waste Arm kit is a retail set and shall be classified according to the component which gives the kit its essential character.
The rigid waste arm made of polypropylene is the largest component in the kit and it changes the direction of the flow of fluid. The remaining components are minor accessory pieces that support the waste arm function. As such, the rigid waste arm provides the kit’s essential character and the kit must be classified according to the rigid waste arm. Since it is made of plastics, it would be fully described by the text of the heading as plastic fittings as set forth in subheading 3917.22.0000, HTSUS, as “[t]ubes, pipes and hoses and fittings therefore…: [t]ubes, pipes and hoses, rigid: [o]f polymers of propylene.”
Category E
Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the Disposer kit. The Disposer kit components are also made of polypropylene and low density polyethylene. The components within the kit are classified under separate headings: the rubber gasket is classified under subheading 4016.93.5010, HTSUS, as “[g]askets, washers and other seals . . .O-Rings”; the slip nut-fitting, 6-inch rigid flange tailpipe polypropylene, 12-inch rigid tail pipe, and 6-inch rigid polypropylene tee are classified under subheading 3917.40.0090 as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings...”; and the plastic washer is classified under subheading 3926.90.4590 as “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914.” Since no single heading provides for all of the articles in the kit, we must proceed to GRI 2. GRI 2 provides for unfinished articles as well as mixtures and combinations. None of these terms describe the Disposer kit, so we must proceed to GRI 3.
The Disposer kit satisfies the aforementioned criteria for a retail set under GRI 3(b). The kit consists of several components which are prima facie classifiable under different HTSUS headings. Moreover, all of the components are used in an end outlet disposer drain. The Disposer components are packed in individual retail cartons. Under GRI 3(b), the Disposer kit is a retail set and shall be classified according to the component which gives the kit its essential character.
The rigid polypropylene tee is the component in the kit to which the two rigid tailpipes are connected so that the liquid flow is re-directed to a single trap under the sink. The remaining components are minor accessory pieces that support the disposer drain function. As such, the rigid propylene tee provides the kit’s essential character and the kit must be classified according to the rigid polypropylene tee. Since it is made of plastics, it would be fully described by the text of the heading as plastic fittings set forth in subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings....”
2) NAFTA Eligibility
General Note (“GN”) 12, HTSUS, incorporates Article 401 of North American Free Trade Agreement (“NAFTA”) into the HTSUS. GN 12(a)(ii) 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 Mexico 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 "MX" in parentheses, are eligible for such duty rate, in accordance with section 201 of the NAFTA Implementation Act.
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
Category A
DBHL states that all of the components of the P-Trap kit are produced in the U.S. and Mexico exclusively from originating materials. Based on the information provided, pursuant to GN 12(b)(iii), the Category A P-Trap kit is eligible for NAFTA preferential treatment under either scenario, provided the kit qualifies to be marked as a product of Mexico.
Category C & Category E
To qualify under GN 12(b)(ii)(A), the non-originating material must undergo the change in tariff classification set forth in GN 12(t). The S-Trap kit (Category C) and Disposer kit (Category E) are both classifiable in subheading 3917.40.00, HTSUS. The NAFTA rule of origin for heading 3917.40 states:
A change to heading 3901 through 3920 from any other subheading, including another heading within that group, provided there is a regional value content of not less than:
(A) 60 percent where the transaction value method is used, or
(B) 50 percent where the net cost method is used.
For Category C, the rigid plastic tube from China is classifiable under subheading 3917.22.00 as “[t]ubes, pipes and hoses and fittings therefore…: [t]ubes, pipes and hoses, rigid: [o]f polymers of propylene.” Under the NAFTA rules of origin, the rigid plastic tube does not undergo the requisite change in tariff classification when included in the S-Trap kit. Accordingly, the S-Trap kit is not eligible for preferential treatment under NAFTA.
For Category E, the rubber gasket from Taiwan is classifiable under subheading 4016.93.5010 as “[g]askets, washers and other seals . . .O-Rings.” Under the NAFTA rules of origin, the rubber gasket undergoes the requisite change in tariff classification when included in the Disposer kit provided that the regional value content is met. GN 12(c) provides the methods of calculating regional value content for purposes of NAFTA. Under 19 C.F.R. Part 181, Appendix, Part III, Sec. 6(6), the regional value content calculation using the net cost method shall only be used when there is no transaction value. DBHL states that the transaction value is unavailable since the good is produced in its facility in Mexico and is not bought or sold. The formula set forth in GN 12(c)(ii) for the net cost method is as follows:
RVC = (NC – VNM) / NC] x 100
where RVC is the regional value content, expressed as a percentage; NC is the net cost of the good; and VNM is the value of non-originating materials used by the producer in the production of the good. See also 19 C.F.R. Part 181, Appendix, Part III, Sec. 6(3).
DBHL states that the net cost of the Disposer kit is [****] and the value of the non-originating materials is [****]. Therefore the RVC calculation under the net cost method is [***********]. The non-originating material undergoes the change in tariff rule under heading 3917.40 and the RVC requirement is met. Accordingly, the Disposer kit is eligible for NAFTA preferential treatment under either scenario, provided the kit qualifies to be marked as a product of Mexico.
Category D
DBHL states that all of the components of the Waste Arm kit are produced in the U.S. and Mexico exclusively from originating materials. Based on the information provided, pursuant to GN 12(b)(iii), the Waste Arm kit is considered an originating good under the NAFTA under either scenario, provided the kit qualifies to be marked as a product of Mexico.
3) Marking
In addition, in order to receive preferential treatment under NAFTA, the goods must qualify to be marked as goods of Mexico. We look to the NAFTA Marking Rules contained in 19 C.F.R. § 102 in determining the country of origin of the imported merchandise for the purposes specified in paragraph 1 of Annex 311 of NAFTA. 19 C.F.R. § 102.11(a) provides that “[t]he country of origin 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.”
When the country of origin cannot be determined under § 102.21(a), we look to § 102.11(b), which applies to goods that are not classified as a set pursuant to GRI 3, in which case § 102.11(c) applies. Section 102.11(c) provides that when the good is classified as a set or mixture pursuant to GRI 3, the country of origin of the good is the country or countries of origin of all materials that merit equal consideration for determining the essential character.
In the event a good is found to be originating and the origin is not a single NAFTA country pursuant to § 102.11(a) or (b), § 102.19(a) and (b) may be applicable, which provides:
. . .if a good is originating within the meaning of § 181.1(q) of this chapter is not determined under § 102.11(a) or (b) or § 102.21 to be a good of a single NAFTA country, the country of origin of such good 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.
If . . . the country of origin of a good which is originating within the meaning of § 181.1(q) of this chapter is determined to be the U.S. and that good has been exported from, and returned to, the U.S. after having been advanced in value or improved in condition in another NAFTA country, the country of origin of such good for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the U.S.
“Production” is defined as “growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good.” 19 C.F.R. § 102.1(n). Section 102.1(m) defines “minor processing” under nine different processes and § 102.1(m)(6) states “[p]utting up in measured doses, packing, repacking, repackaging, repacking.”
Category A
The P-trap kit is produced with materials from the U.S. and Mexico. The P-Trap kit will be assembled in two different scenarios. In the first scenario, the rigid slip nut-fitting and the plastic washer are screwed to the J-bend tube. However, the quarter-bend tube is only packaged. In the second scenario, each component is packaged into individual retail carton and shipping carton in Mexico. Since repackaging is considered to be a non-qualifying operation under 19 C.F.R. § 102.17, § 102.11(a) is not applicable. Since the P-Trap kit is classified as a set, § 102.11(b) is not applicable. As the P-Trap kit is eligible for preferential treatment under either scenario, we must, therefore, look to § 102.19(a). Although repackaging is considered to be minor processing, the assembly of the rigid slip nut-fitting, plastic washer, and J-bend tube in the first scenario in Mexico meets the requirement that the good underwent production other than minor processing. Accordingly, the country of origin of the P-Trap kit under the first scenario, pursuant to 19 C.F.R. § 102.19(a) is Mexico.
In the second scenario, the kit is packaged, but the rigid slip nut-fitting and plastic washer are also produced in Mexico, which is more than minor processing. Therefore, the P-Trap kit qualifies to be marked as a good of Mexico under 19 C.F.R. § 102.19(a). However, if only a U.S.-origin rigid slip nut-fitting and plastic washer are used, then the P-Trap kit will not qualify to be marked as a product of Mexico and the kit should be entered under subheading 9801.00.10, HTSUS, provided all the requirements are met.
Category D
The Waste Arm kit is produced with materials from the U.S. and Mexico. The Waste Arm kit will be assembled in two different scenarios. In the first scenario, the rigid slip nut-fitting and the plastic washer are screwed to the rigid waste arm. While the rigid waste arm is of U.S.-origin, the rigid slip nut-fitting and the plastic washer are either U.S. or Mexican-origin. The nipple is packed separately. In the second scenario, each component is packaged into a retail carton and shipping carton in Mexico. Since packaging is considered to be a non-qualifying operation under 19 C.F.R. § 102.17, § 102.11(a) is not applicable. As the Waste Arm kit is eligible for preferential treatment under either scenario, we must look to § 102.19(a). Although repackaging is considered to be minor processing, the assembly of the rigid slip nut-fitting, plastic washer, and rigid arm in the first scenario in Mexico meets the requirement that the good underwent production other than minor processing. Accordingly, the country of origin of the Waste Arm kit under the first scenario, pursuant to 19 C.F.R. § 102.19(a) is Mexico.
In the second scenario, the kit is packaged, but the rigid slip nut-fitting and plastic washer are also produced in Mexico, which is more than minor processing. Therefore, the Waste Arm kit qualifies to be marked as Mexico under 19 C.F.R. § 102.19(a). However, if only a U.S.-origin rigid slip nut-fitting and plastic washer are used, then the Waste Arm kit will not qualify to be marked as a product of Mexico and the kit should be entered under subheading 9801.00.10, HTSUS, provided all the requirements are met.
Category E
The Disposer kit is produced with materials from the U.S., Mexico, and Taiwan. The Disposer kit will be assembled in two different scenarios. In the first scenario, the rigid slip nut-fitting and the plastic washer are screwed to the rigid polypropylene tee. However, the rigid tailpipe and rigid flange tailpipe are only packaged. In the second scenario, each component is packaged into a retail carton and shipping carton in Mexico. Since packaging is considered to be a non-qualifying operation under 19 C.F.R. § 102.17, § 102.11(a) is not applicable. Since the Disposer kit is classified as a set, § 102.11(b) is not applicable. As the Disposer kit is eligible for preferential treatment under either scenario, we must look to § 102.19(a). Although repackaging is considered to be minor processing, the assembly of the rigid slip nut-fitting, plastic washer, and rigid polypropylene tee in the first scenario in Mexico meets the requirement that the good underwent production other than minor processing. Accordingly, the country of origin of the Disposer kit under the first scenario, pursuant to 19 C.F.R. § 102.19(a) is Mexico.
In the second scenario, the kit is packaged, but the rigid tailpipe is also produced in Mexico, which is more than minor processing. Therefore, the Disposer kit qualifies to be marked as Mexico under 19 C.F.R. § 102.19(a).
4) 9801.00.10 and 9802.00.80 HTSUS duty exemption
Subheading 9801.00.10 HTSUS, provides that products of the United States when returned after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad can be entered duty free provided the documentary requirements of 19 C.F.R. § 10.1 are satisfied.
In Headquarters Ruling Letter (“HRL”) 557685, dated March 28, 1994, Customs held that U.S.-origin labels sent abroad with U.S.-origin ink to be printed were not advanced in value or improved in condition. Printing with a bar code, content information, style designation, size and the country of assembly information did not advance the value of the product. See also HRL 560775, dated February 20, 1998, involving U.S. origin ribbons sent abroad for printing; HRL 557071, dated April 2, 1993, involving U.S.-origin bottles sent abroad for silk screening with the company name, identifying data, instructions and the bottle’s capacity; and HRL 562158, dated November 7, 2001, involving U.S.-origin rolls of adhesive stickers sent abroad for printing product information.
Category B
Accordingly, we conclude that packaging the U.S.-origin components into a set does not result in a good advanced or improved in condition. Since the foreign packaging of the U.S. materials does not create a good advanced in value or improved in condition, the U.S. components of the P-Trap kit are eligible for duty-free treatment under subheading 9801.00.10 HTSUS, assuming the documentary standards set forth in 19 C.F.R. § 10.1 are met. Similarly, in those categories where only U.S.-origin goods are used and they are only packaged in Mexico, subheading 9801.00.10, HTSUS should be used (See Category A and D above).
Category C
Where only packaging occurs in Category C, the U.S.-origin components will not be advanced or improved in condition and the U.S. components of the S-Trap kit are eligible for duty-free treatment under subheading 9801.00.10, HTSUS, assuming the documentary standards set forth in 19 C.F.R. § 10.1 are met.
Subheading 9802.00.80 HTSUS, provides a partial duty exemption 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 this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of 19 C.F.R. § 10.24.
19 C.F.R. § 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.
19 C.F.R. § 10.16(a) provides that the assembly operations performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, laminating, sewing or the use of fasteners, and 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. See 19 C.F.R. § 10.16(a). 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. Id.
Customs stated in HRL 557685, that affixing U.S.-origin printed labels to U.S.-origin plastic bags or J-boards was considered an acceptable assembly operation pursuant to 19 C.F.R. § 10.16(a), and the labels which were printed and affixed to bags abroad would be entitled to subheading 9802.00.80, HTSUS treatment. In HRL 562158, U.S. origin stickers are cut into strips and re-rolled and affixed to U.S.-origin plastic bags abroad. As the stickers are cut once into strips and affixed to plastic bags, Customs held that they are eligible for subheading 9802.00.80, HTSUS treatment as they are only subjected to acceptable assembly operations and operations incidental to assembly. Furthermore, in HRL 560519, Customs held that pressing connectors into the side of the housing, screwing and soldering the isolator to the printed circuit board, and screwing the cover to the housing are considered acceptable forms of assembly for purposes of subheading 9802.00.80, HTSUS.
Category C
In those instances where the customers request that the rigid slip nut-fitting and plastic washer are screwed to the J-bend tube, the U.S. components are sent to Mexico and assembled. The assembled component, rigid plastic tube, rigid threaded adapter-fitting, and rigid J-bend tube with fitting are packed in individual retail bags and a shipping carton. Applying the rules and Customs rulings, we find that screwing the components together is an assembly process. Therefore, the S-Trap kit will qualify for entry under subheading 9802.00.80, HTSUS, with a duty exemption on the cost or value of the U.S. components.
HOLDING:
As set forth above, we find that the Category A P-Trap kit is classified under subheading 3917.40.0090, HTSUS, which provides for “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings....” Based on the information provided, the P-Trap kit qualifies for preferential treatment under NAFTA under the first scenario and the second scenario if Mexican origin components are used. The P-Trap kit is eligible for duty-free entry under subheading 9801.00.10, HTSUS, if only U.S.-origin components are used.
The Category B P-Trap kit is eligible for duty-free entry under subheadings 9801.00.10, HTSUS.
The S-Trap kit is classified under subheading 3917.40.0090, HTSUS. Based on the information provided, the Chinese component does not undergo the requisite change in tariff classification, and therefore the kit does not qualify for preferential treatment under NAFTA. The U.S.-origin components of the S-Trap kit are eligible for duty-free entry under subheading 9801.00.10, HTSUS when only packaging occurs and subheading 9802.00.80, HTSUS when the U.S. components are assembled.
The Waste Arm kit is classified under subheading 3917.22.0000, HTSUS, which provides for “[t]ubes, pipes and hoses and fittings therefore…: [t]ubes, pipes and hoses, rigid: [o]f polymers of propylene.” Based on the information provided, the Waste Arm kit qualifies for preferential treatment under NAFTA under the first scenario and the second scenario if Mexican components are used. The Waste Arm kit is eligible for duty-free entry under subheading 9801.00.10, HTSUS if only U.S.-origin components are used.
The Disposer kit is classified under subheading 3917.40.0090, HTSUS. Based on the information provided, the Disposer kit qualifies for preferential treatment under NAFTA under the first and second scenarios.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch