CLA-2 OT:RR:CTF:VS H260751 CMR
Donald Harrison, Esq.
Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, NW
Washington, DC 20036-5306
RE: Ruling Request; NAFTA; Regional Value Content; 19 CFR, Part 181 App. Section 13(2) – Motor Vehicles Produced in a New Plant
Dear Mr. Harrison:
This is in response to your letter with attachments, dated January 7, 2015, on behalf of your client, American Honda Motor Co., Inc. (“American Honda”). You have asked U.S. Customs and Border Protection (“CBP”) to issue a binding ruling on whether American Honda’s importations of Honda HR-V compact sport utility vehicles produced at a Honda plant in Mexico qualify for the reduced regional value content (“RVC”) requirement under the North American Free Trade Agreement (“NAFTA”) Regulations, 19 CFR, Part 181 App., Section 13(2).
FACTS:
In your letter of January 7, 2015, you indicate that the Honda HR-V is being produced by Honda de Mexico, S.A. de C.V. (“HdM’) in its new plant in Celaya, Guanajuato, Mexico, beginning with prototype production in April 2014. The Honda
HR-V has not been produced by any Honda company prior to HdM’s production of this vehicle at its new Celaya plant.
Your current request is similar to the request resulting in Headquarters Ruling Letter (HQ) H256415, dated September 22, 2014, on the eligibility of Honda Fit motor vehicles, produced at the same Celaya, Mexico plant, for the fifty percent (50%) regional value content (RVC) test for NAFTA eligibility for the first five (5) years after the date on which the first prototype of that motor vehicle is produced.
Your letter notes that the circumstances concerning HdM’s production of the Honda Fit also apply to HdM’s production of the Honda HR-V. We will not repeat the relevant portions of the facts from HQ H237563, but they are incorporated herein by reference. You point out that:
. . . the basic specifications of the Honda HR-V are similar to those of the Honda Fit, involving somewhat larger dimensions and engine size reflecting the fact that the Honda HR-V is a small sport utility vehicle whereas the Honda Fit is a small station wagon. The Honda HR-V shares the same automobile platform as the Honda Fit, and this platform is very substantially different than the platform used for the automobile models produced at HdM’s El Salto plants. . . . a comparison between the Honda CR-V produced at HdM’s El Salto plant and the Honda HR-V produced at the new Celaya plant shows that the Honda HR-V is substantially smaller that the Honda CR-V, consistent with the fact that the Honda HR-V is a much smaller vehicle built on the same platform as the Honda Fit.
You rely on our holding in HQ H237563 that the Honda Fit qualifies for the reduced RVC requirement under the “new marque” language in the new plant provision. You note from the ruling that the Honda Fit qualified under this new marque provision:
“because ‘Honda Fit’, the Honda trade name used, is separate from any other marketing division of the motor vehicle assembled, i.e., HdM.”
You submit that the “[t]his circumstance is even clearer in the case of the Honda HR-V, which as noted has not been produced by any other Honda company. Based on our decision in HQ H237563 and the circumstances for the production of the Honda HR-V at HdM’s new Celaya plant, you believe that the Honda HR-V qualifies for the reduced RVC test for NAFTA eligibility under the new plant provisions.
ISSUE:
Whether the Honda HR-V vehicles produced at HDM’s new plant in Celaya, Mexico, are eligible for the fifty percent (50%) RVC test for the first five years after the date on which the first prototype of that motor vehicle is produced.
LAW AND ANALYSIS:
Section 13 of the Appendix to part 181 of the Customs Regulations, (19 CFR Pt. 181 App. § 13) sets forth the rules for determining the RVC level for light-duty automotive goods, as follows:
(1) Notwithstanding the regional value-content requirement set forth in
Schedule I, and except as otherwise provided in subsection (2), the regional value-content requirement for a good referred to in paragraph (a) or (b) is as follows:
for the fiscal year of a producer that begins on the day closest to January 1, 1998 and for the three following fiscal years of that producer, not less than 56 percent, and for the fiscal year of a producer that begins on the day closest to January 1, 2002 and thereafter, not less than 62.5 percent, in the case of (i) a light-duty vehicle, and (ii) a good provided for in any of headings 8407 and 8408 and subheading 8708.40, that is for use in a light-duty vehicle[.]
* * *
(2) Notwithstanding the regional value-content requirement set out in Schedule I, the regional value-content requirement for a light-duty vehicle or a heavy-duty vehicle that is produced in a new plant or refit plant is as follows:
not less than 50 percent for five years after the date on which the first prototype of the motor vehicle is produced in the plant by a motor vehicle assembler, if
(i) the motor vehicle is of a class, or marque or, except in the case of a heavy-duty vehicle, size category and type of underbody, that was not previously produced by the motor vehicle assembler in the territory of any of the NAFTA countries,
(ii) the plant consists of, or includes, a new building in which the motor vehicle is assembled, and
(iii) the value of machinery that was never previously used for production, and that is used in the new building or buildings for the purposes of the complete motor vehicle assembly process with respect to that motor vehicle, is at least 90 percent of the value of all machinery used for purposes of that process; and,
(b) not less than 50 percent for two years after the date on which the first prototype of the motor vehicle is produced in the plant by a motor vehicle assembler following a refit of that plant, if the motor vehicle is of a class, or marque or, except in the case of a heavy-duty vehicle, size category and type of underbody, that was not assembled by the motor vehicle assembler in the plant before the refit.
See also 19 U.S.C. § 3332.
Thus, while the general requirement is that motor vehicles must meet a 62.5% RVC to attain eligibility for NAFTA benefits, in the case of new or refitted plants, a lesser 50% RVC threshold is applicable if the requirements of 19 CFR Pt. 181 App. § 13(2) are met.
We found in HQ H237563 that, based on the information provided, the Celaya plant meets the requirements that the plant consists of, or includes, a new building in which the motor vehicle is assembled, and that the value of machinery not previously used for production and that is used in the new building or buildings for the purposes of the complete motor vehicle assembly process with respect to the Honda Fit, is at least 90 percent of the value of all machinery used for purposes of that process. See 19 CFR Pt. 181 App. § 13(2)(a)(ii) and (iii). The production of the Honda Fit at the plant began in March 2014. Prototype production of the Honda HR-V began in April 2014. Based on the information previously considered in HQ H237563, we find that the Celaya plant meets the requirements of 19 CFR Pt. 181 App. § 13(2)(a)(ii) and (iii), i.e., the plant consists of, or includes, a new building in which the motor vehicle is assembled, and the requisite value for machinery used in assembling the vehicles is met for the Honda HR-V.
Additionally, the NAFTA Regulations require that the motor vehicles produced by HdM’s new plant must be of a class, marque, or size category and type of underbody that was not previously produced by HdM in the territory of any of the NAFTA countries. See 19 CFR Pt. 181 App. § 13(2)(a)(i). The terms “class,” “marque,” “size category,” and “underbody” are defined in 19 CFR Pt. 181, App. § 8, as follows:
“[C]lass of motor vehicles” means any one of the following categories of motor vehicles:
(a) motor vehicles provided for in any of subheading 8701.20, tariff items 8702.10.30 and 8702.90.30 (vehicles for the transport of 16 or more persons), subheadings 8704.10, 8704.22, 8704.23, 8704.32, and 8704.90 and headings 8705 and 8706;
(b) motor vehicles provided for in any of subheadings 8701.10 and 8701.30 through 8701.90;
(c) motor vehicles provided for in any of tariff items 8702.10.60 and 8702.90.60 (vehicles for the transport of 15 or fewer persons) and subheadings 8704.21 and 8704.31; and
(d) motor vehicles provided for in any of subheadings 8703.21 through 8703.90.
“[M]arque” means a trade name used by a marketing division of a motor vehicle assembler that is separate from any other marketing division of that motor vehicle assembler.
“[S]ize category” with respect to a light-duty vehicle, means that the total of the interior volume for passengers and the interior volume for luggage is
(a) 85 cubic feet or less;
(b) more than 85 cubic feet but less than 100 cubic feet;
(c) 100 cubic feet or more but not more than 110 cubic feet;
(d) more than 110 cubic feet but less than 120 cubic feet; or,
(e) 120 cubic feet or more.
“[U]nderbody” means the floor plan of a motor vehicle.
See also 19 U.S.C. § 3332(p)(1), (10), (30), and (34).
Pursuant to 19 CFR Pt. 181 App. § 13(2)(a)(i), if the motor vehicle meets any one of the criteria, i.e., if it is a new class, or a new marque, or a new size and underbody, and it is a motor vehicle produced in a new plant, it will qualify for the 50% RVC. See also 19 U.S.C. § 3332(c)(6); Headquarters Ruling Letter H087456, dated January 13, 2010. In this case, any and all light-duty motor vehicles produced at HdM’s new plant in Celaya with the Honda HR-V brand name will bear a new marque, because “Honda HR-V”, the Honda trade name used, is separate from any other marketing division of the motor vehicle assembler, i.e., HdM.
HOLDING:
Based on our review of the facts presented in HQ H237563 and presented in your letter of January 7, 2015, we find that all Honda HR-V motor vehicles produced at the new plant in Celaya, Mexico, qualify for the fifty percent (50%) RVC test for NAFTA eligibility for the first five (5) years after the date on which the first prototype of that motor vehicle is produced.
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.
Please note that 19 C.F.R. § 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs Service field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based."
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch