OT: RR: CTF: VS H304107 CMR
Mr. Porfirio Waters
Global Logistix Co.
24449 Laguna Seca Road South
Edinburg, TX 78541
RE: Eligibility for preferential tariff treatment under the NAFTA of a wiring harness for medical use
Dear Mr. Porfirio:
This is in response to your request, on behalf of your client, Odu USA Inc., for a ruling on the eligibility for preferential tariff treatment under the North American Free Trade Agreement (NAFTA) of a wiring harness for medical use which is produced in Mexico of components from various countries.
FACTS:
Your client’s related party manufactures wiring harnesses for medical use in Mexico. You are requesting a ruling for a wiring harness identified as the 317 Alco A19Min wiring harness. You indicate that the wiring harnesses are classified under subheading 8544.42, Harmonized Tariff Schedule of the United States (HTSUS), which provides for: “Insulated (including enameled or anodized) wire, cable (including coaxial cable) and other insulated electric conductors, whether or not fitted with connectors; optical fiber cables, made up of individually sheathed fibers, whether or not assembled with electric conductors or fitted with connectors: Other electric conductors, for a voltage not exceeding 1,000 V: Fitted with connectors.”
With the exception of a connector from Germany (subheading 8536.90, HTSUS), and wire from China (subheading 8544.42, HTSUS), the components of the wiring harness are imported into Mexico from the United States for assembly. The Chinese wire is valued at XXX USD. The ex-factory value of the finished good is YYY USD.
The production process in Mexico involves receipt of the various components; cutting, preparing and crimping cable; soldering conductors to connectors; applying epoxy or silicon to isolate the connector’s terminals and protect the finished good; molding the cable based on length and customer requirements, and removing any burrs; visually inspecting and performing electrical testing; and, performing quality inspection and packaging.
ISSUE:
Whether the wiring harness at issue produced in Mexico of originating and non-originating components qualifies 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:
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(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 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
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials; ….
You submit that the production in Mexico results in an originating good under the NAFTA as the non-originating components, with the exception of the Chinese wire, make the applicable tariff shift requirement in the NAFTA and that the wire represents a de minimis amount (XXX USD). You submit that the Chinese wire is de minimis as it is less than 1% of the total cost of the ex-factory cost of the finished good (YYY USD). You also submit that if the good were subject to a regional content rule that it would satisfy it.
In this case, the imported wiring harness, classified in subheading 8544.42, HTSUS, is assembled in Mexico of originating and non-originating components. Therefore, the wiring harness must meet the applicable tariff rule as required by GN 12(b)(ii). GN 12, Chapter 85, Rule 147, provides:
A change to subheadings 8544.11 through 8544.60 from any subheading outside that group, except from headings 7408, 7413, 7605 or 7614; or
A change to subheadings 8544.11 through 8544.60 from headings 7408, 7413, 7605 or 7614, whether or not there is also a change from any other subheading, including another subheading within subheadings 8544.11 through 8544.60, provided there is also a regional value content of not less than:
60 percent where the transaction value method is used, or
(2) 50 percent where the net cost method is used.
As the Chinese wire is classified in subheading 8544.42, HTSUS, it does not meet the required tariff shift. However, you believe that the wiring harness still qualifies for preferential tariff treatment under the NAFTA as the Chinese wire is de minimis. The de minimis rule in GN 12(f), states in relevant part:
Except as provided in subdivisions (f)(iii) through (vi), inclusive, a good shall be considered to be an originating good if the value of all non-originating materials used in the production of the good that do not undergo an applicable change in tariff classification set out in subdivision (t) of this note is not more than 7 percent of the transaction value of the good, adjusted to a F.O.B. basis, or, if the transaction value is unacceptable under section 402(b) of the Tariff Act of 1930, as amended, the value of all such non-originating materials is not more than 7 percent of the total cost of the good, provided that—
if the good is subject to a regional value-content requirement, the
value of such non-originating materials shall be taken into account in calculating the regional value content of the good; and
the good satisfies all other applicable requirements of this note.
You have provided CBP with the value of the Chinese wire and the FOB cost of the wiring harness. Based upon the information you have provided, we agree with you that the Chinese wire is de minimis and the wiring harness qualifies for preferential tariff treatment under the NAFTA.
Having met the preferential rule set forth in GN 12(b), we must determine whether the wiring harness qualifies to be marked as a good of Mexico. We look to the NAFTA Marking Rules contained in 19 CFR Part 102 of the CBP Regulations in determining the marking of the wiring harness.
Section 102.11 sets forth the General Rules for determining the country of origin of imported merchandise, with the exception of textile goods which are subject to the provisions of § 102.21. In this case, § 102.11(a)(3) is applicable and provides that the country of origin of a good is the country in which:
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.
The wiring harness is classified in subheading 8544.42, HTSUS. The applicable rule set forth in § 102.20 is:
8544.11 – 8544.70 A change to subheading 8544.42 from any good of subheading 8544.42, except when resulting from a simple assembly; or
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A change to subheading 8544.11 through 8544.70 from any other subheading, including another subheading within that group, except when resulting from simple assembly.
The only foreign materials in the production of the wiring harness at issue are the German connector of subheading 8536.90 and the Chinese wire of subheading 8544.42. Each material makes the requisite tariff shift required by the rules set forth in § 102.20. However, we must determine if the tariff shift is the result of a simple assembly.
“Simple assembly” is defined, for purposes of the NAFTA Marking Regulations, as: “the fitting together of five or fewer parts all of which are foreign (excluding fasteners such as screws, bolts, etc.) by bolting, gluing, soldering, sewing or by other means without more than minor processing.” See 19 CFR § 102.1(o).
Based on the description of the production process in Mexico set forth above, which involves more than assembly, the wiring harness qualifies to be marked as a good of Mexico.
HOLDING:
The wiring harness at issue, manufactured as described above, qualifies for preferential tariff treatment under the NAFTA, and qualifies to be marked as a good of Mexico under the NAFTA Marking Regulations.
Sincerely,
Monika R. Brenner, Chief
Valuation & Special Programs Branch