OT:RR:CTF:VS H282603 CMR
George R. Tuttle, III, Esq.
Tuttle Law Offices
1100 Larkspur Landing Circle
Suite 385
Larkspur, CA 94939
RE: Request for a prospective ruling on the NAFTA eligibility of certain PBMC Isolation Tubes
Dear Mr. Tuttle:
This is in response to your submission, dated January 9, 2017, on behalf of your client, STEMCELL Technologies Canada, Inc., of Vancouver, British Columbia, Canada (hereinafter, STEMCELL), requesting a prospective ruling on the eligibility of the SepMate™ 15 milliliter and SepMate™ 50 milliliter peripheral blood mononuclear cell (PBMC) isolation tubes for preferential tariff treatment under the North American Free Trade Agreement (NAFTA). You submitted information regarding the component materials of the tube, along with promotional materials and literature. The tubes differ only in size with slight differences in the cost of materials.
FACTS:
The goods at issue are the SepMate™ 15 and 50 milliliter PBMC isolation tubes, which facilitate the isolation of PBCMs or specific cell types by density gradient centrifugation. You describe each good as:
[a tube] contain[ing] an insert that provides a barrier between the density gradient medium and blood, eliminate[ing] the need for careful layering of blood onto the density gradient medium, and allow[ing] for fast and easy harvesting of the isolated mononuclear cells. The proprietary Sepmate™ insert allows the user to quickly layer blood over the density gradient medium and prevents the layers from mixing.
The goods to be imported into the U.S., i.e., the SepMate™ 15 and 50 milliliter PBMC isolation tubes, each consist of a centrifuge tube and cap sourced from Germany and a plastic insert sourced from the United States. You indicate that the plastic insert is a U.S. originating material. The insert is the subject of a pending U.S. patent application. You indicate that it “aids in the separation of the blood product and aids in keeping the blood products separated, enhancing the purity of the sample obtained from the centrifuging process.”
You submit that all components of the goods, i.e., the tubes, caps and inserts are classified as laboratory ware under the subheading for “other, other articles of plastics” in subheading 3926.90.9910, Harmonized Tariff Schedule of the United States Annotated (HTSUSA). Further, you submit that the finished goods are also classified as laboratory ware under subheading 3926.90.9910, HTSUSA.
A Canadian contract manufacturer is responsible for procuring the components and assembling and packaging the goods. The manufacturer inserts the plastic insert into the tubes and screws on the caps, arranges for irradiation of the tubes, and packages the irradiated tubes with inserts for sale. STEMCELL purchases the goods from the contract manufacturer for global distribution.
In addition to the origin of the components of the goods, you indicate that the packaging materials used in packaging the goods for sale are of U.S. and Canadian origin. You assert that the finished goods are eligible for preferential tariff treatment under the NAFTA based on the application of General Note (GN) 12(b)(iv)(B). You submit that the finished goods meet the regional value content requirement of GN 12(b)(iv)(b) based upon the application of Article 409 of the NAFTA.
ISSUE:
Whether the SepMate™ 15 and 50 milliliter PBMC isolation tubes processed in Canada qualify for preferential tariff treatment under the NAFTA.
LAW AND ANALYSIS:
The NAFTA is implemented in General Note (GN) 12 of the HTSUS. GN 12(a)(ii) states that goods are eligible for the NAFTA rate of duty if they originate in the territory of a NAFTA party and qualify to be marked as goods of Mexico. GN 12(b) sets forth the various methods for determining whether a good originates in the territory of a NAFTA party. Specifically, these provisions provide, in relevant part, as follows:
(a) Goods originating in the territory of a party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note—
(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 North American Free Trade Agreement Implementation Act.
(b) 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 subdivision (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
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(iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the non-originating
materials falling under provisions for "parts" and used in the production of such goods does not undergo a change in tariff
classification because--
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(B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is
not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the
goods themselves and their parts, . . . ,
and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note. For purposes of this note, the term "material" means a good that is used in the production of another good, and includes a part or an ingredient; or . . . .
Article 409 of the NAFTA is implemented in GN 12(j) which provides:
Packaging materials and containers for retail sale. Packaging materials and containers in which a good is packaged for retail sale shall, if classified with the good, be disregarded in determining whether all the non-originating materials used in the production of the good undergo the applicable change in tariff classification set out in subdivision (t) of this note, and, if the good is subject to a
regional value-content requirement, the value of such packaging materials and containers shall be taken into account as originating or non-originating materials, as the case may be, in calculating the regional value content of the good.
As noted above, the imported SepMate™ PBMC isolation tubes, as well as the components of the tubes, i.e., the centrifuge tubes with caps, and the plastic inserts, if entered separately, are classifiable in subheading 3926.90.99, HTSUS. The tariff shift rule under GN 12(t) for goods classifiable in subheading 3926.90 is:
A change to subheading 3926.90 from any other heading, except from appliances for ostomy use of subheading 3006.91. In addition, the regional value content must be not less than:
(1) 60 percent where the transaction value method is used, or
(2) 50 percent where the net cost method is used.
As you note, the non-originating tubes with caps do not meet the tariff shift requirement of GN 12(t) as they are classified in subheading 3926.90, HTSUS. As the finished SepMate™ PBMC isolation tubes and the non-originating tubes with caps are classified in subheading 3926.90, HTSUS, the non-originating components fail to meet the requisite tariff shift requirement.
However, you submit that by application of GN 12(b)(iv)(B), the SepMate™ PBMC isolation tubes qualify for preferential treatment under the NAFTA. Part I, Section 4, NAFTA Rules of Origin (Appendix to Part 181 of the CBP Regulations, codified at 19 C.F.R. § 181), provides as follows with regard to GN 12(b)(iv)(B):
PART II
SECTION 4. ORIGINATING GOODS
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EXCEPTIONS TO THE CHANGE IN TARIFF CLASSIFICATION REQUIREMENT
(4) A good originates in the territory of a NAFTA country where
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(b) except in the case of a good provided for in any of Chapters 61 through 63,
(i) the good is produced entirely in the territory of one or more of the NAFTA countries,
(ii) one or more of the non-originating materials used in the production of the good do not undergo an applicable change in tariff classification because
(A) those materials are provided for under the Harmonized System as parts of the good, and
(B) the heading for the good provides for both the good and its parts and is not further subdivided into subheadings, or the subheading for the good provides for both the good and its parts, (emphasis added)
(iii) the non-originating materials that do not undergo a change in tariff classification in the circumstances described in subparagraph (ii) and the good are not both classified as parts of goods under the heading or sub-heading referred to in subparagraph (ii)(B),
(iv) each of the non-originating materials that is used in the production of the good and is not referred to in subparagraph (iii) undergoes an applicable change in tariff classification or satisfies any other applicable requirement set out in Schedule I,
(v) the regional value content of the good, calculated in accordance with section 6, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and
(vi) the good satisfies all other applicable requirements of this appendix, including any applicable, higher regional value-content requirement provided for in section 13 or Schedule I.
INTERPRETATION: HEADING OR SUBHEADING WHICH PROVIDES
FOR BOTH A GOOD AND PARTS OF THE GOOD
(5) For purposes of subsection (4)(b),
(a) the determination of whether a heading or subheading provides for a good and its parts shall be made on the basis of the nomenclature of the heading or subheading and the relevant Section or Chapter Notes, in accordance with the General Rules for the Interpretation of the Harmonized System; and
(b) where, in accordance with the Harmonized System, a heading includes parts of goods by application of a Section Note or Chapter Note of the Harmonized System and the subheadings under that heading do not include a subheading designated “Parts”, a sub-heading designated “Other” under that heading shall be considered to cover only the goods and parts of the goods that are themselves classified under that subheading.
As you note, heading 3926, HTSUS, provides for “Other articles of plastics and articles of other materials of headings 3901 to 3914.” Subheading 3926.90.99, HTSUS, further provides for “Other: Other” articles of plastics, with no separate provisions for parts. You refer to note 5(b) above from the Appendix to Part 181 to contend that the subheading designation of “other” under heading 3926 “shall be considered to cover the goods and parts of the goods that are themselves classified under that subheading.” We disagree.
Note 5(b) cited above, requires that a heading in the tariff include parts of goods of that heading by either the application of a Section Note or a Chapter Note of that tariff. There is no Section Note or Chapter Note applicable to heading 3926 that directs that parts of goods of that heading should be classified therein. Further, there is no specific provision for parts in heading 3926, HTSUS. Therefore, GN 12(b)(iv)(B) does not apply in this case. As the non-originating tubes with caps failed to meet the required tariff shift set forth in GN 12(t), the SepMate™ 15 and 50 milliliter PBMC isolation tubes failed to qualify as originating goods under the NAFTA.
Further, we note that in order to qualify as eligible for preferential treatment under the NAFTA, the SepMate™ 15 and 50 milliliter PBMC isolation tubes in Canada would need to be found to be goods of Canada under the NAFTA marking rules set forth in 19 C.F.R. Part 102. Section 102.17 sets forth operations which preclude a finding of origin within a NAFTA party and includes “simple packing, repacking or retail packaging without more than minor processing.” The processing in Canada entails placing the plastic insert into tubes with caps, packaging and sterilizing by irradiation. 19 C.F.R. § 102.1(m) defines “minor processing” to mean, among other things, “repairs and alterations, washing, laundering or sterilizing.” The tube and cap are centrifuge tubes. The placement of the inserts into centrifuge tubes does not change the character of the item, i.e., they remain centrifuge tubes; the inserts may merely enhance their function. In other words, the placement of the inserts is an alteration to already finished goods. Thus, the alteration and sterilization of the centrifuge tubes in Canada, along with the packaging falls within the definition of “minor processing,” and the goods would not qualify to be marked as goods of Canada, thus precluding eligibility for preferential tariff treatment under the NAFTA.
HOLDING:
The SepMate™ 15 and 50 milliliter PBMC isolation tubes processed as described herein do not qualify for preferential tariff treatment under the NAFTA. 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,
Yuliya A. Gulis, Acting Chief
Valuation and Special Programs Branch