OT:RR:CTF:VS H326827 ARU
Ronald Malone
Consulting Manager
P F Collins Customs Broker Ltd.
251 White Hills Road
St. John's, NL
CANADA
A1A 5X7
RE: Eligibility of the United States-Mexico-Canada Agreement (USMCA) to fiber sensors, processing units, and programmable controllers from Canada
Dear Mr. Malone,
This is in response to your correspondence dated August 8, 2022, on behalf of your client Instrumar, Ltd., in which you request a ruling on whether fiber sensors, processing units and programmable controllers will be eligible for preferential tariff treatment under the United States-Mexico-Canada Agreement ("USMCA"). Your request was forwarded to this office from the National Commodity Specialist Division for response.
FACTS:
The three articles under review that comprise the Instrumar Fiber System are identified as follows:
. The G5 Sensor Unit (SU) - The SU is described as an aluminum enclosure containing a printed circuit board assembly (PCBA), a sensor element, and an electrical cable assembly.
. G5 Sensor Processing Unit Assembly (SPU) - The SPU is described as a PCBA having multiple connections where 20 SUs are connected and sensor signals are "processed", converted into phase digital data, and transmitted to the controller system. The SPU also supplies power to the individual SUs, generates and supplies a reference signal to the individual SUs, and supplies all communication with the controller via DeviceNet.
. Beckhoff Controller Assembly w/ Remote IO (PLC) - The PLC is described as a DIN rail mounted programmable controller consisting of a number of individual modules, which vary in type and quantity based on the intended application. The PLC modules, which include a CPU module, power supply modules, communication modules, etc., appear to be common industrial controller components that are sourced from the third party manufacturer, Beckhoff, as the name implies.
Each of the articles under consideration interact with a textile fiber production machine to inspect and measure the properties of the fiber as it passes over the sensor element. The sensor is said to measure the properties of the fiber by its interaction with a magnetic field created by the sensor, where the sensor output is described as a measurement of "node count", "amplitude", "magnitude", and "phase". This data is sent to the controller system via the processing unit.
The G5 Sensor Unit and G5 Sensor Processing Unit Assembly are manufactured in Canada using both originating and non-originating materials. The Beckhoff Controller modules are imported into Canada from Germany. The components will be imported into the United States in separate boxes and may be imported at different times, however, all components are required for an operable system.
ISSUE:
Whether the Instrumar Fiber System is eligible for preferential tariff treatment under the USMCA when it is imported from Canada into the United States.
LAW AND ANALYSIS:
The United States-Mexico-Canada Agreement ("USMCA") was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. 4511(a)). General Note ("GN") 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if -
(i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
(ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
(iii) the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); ....
The subject Instrumar Fiber System contains non-originating materials and is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the Instrumar Fiber System is not a good produced entirely in Canada exclusively from originating materials. Therefore, we must next determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o).
Note 4 of Section XVI in General Note 11 provides, "Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in chapter 84 or chapter 85, then the whole falls to be classified in the heading appropriate to that function."
Based on this instruction and the description of the Instrumar Fiber System included in your submission, we agree that the subject merchandise will be classified as a "functional unit" based on the classification of the Beckhoff Controller and the applicable subheading will be 8537.10.91, Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Boards, panels, consoles, desks, cabinets and other bases, equipped with two or more apparatus of heading 8535 or 8536, for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90, and numerical control apparatus, other than switching apparatus of heading 8517. For a voltage not exceeding 1,000 V: Other: Programmable controllers." The general rate of duty will be 2.7%. You state in your request that the components will be imported in separate boxes and may be imported at different times. To qualify as a functional unit covered by Note 4 of Section XVI in General Note 11, all components must be imported together in the same shipment and at the same time.
The applicable tariff shift rule for merchandise classifiable under heading 8537, HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
A) A change to heading 8537 from any other heading, except from printed circuit assemblies of subheading 8538.90 or moulded parts of subheading 8538.90; or
B) A change to heading 8537 from printed circuit assemblies of subheading 8538.90 or moulded parts of subheading 8538.90 or, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:
(1) 50 percent where the transaction value method is used; or
(2) 40 percent where the net cost method is used.
The remaining two components of the Instrumar Fiber System, the G5 Sensor Unit and the G5 Sensor Processing Unit Assembly are classified in subheading 8543.70.98, HTSUS, which provides for "Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof: Other machines and apparatus: Other: Other."
Based on your submission, two inputs, one for the G5 Sensor Unit Cable Assembly and the other for the Beckhoff Controller Assembly, are classified under subheading 8538.90, HTSUS. As a result, GN 11(o)/ 85.37(A) is inapplicable. Therefore, we apply GN 11(o)/ 85.37 (B). While the Instrumar Fiber System contains printed circuit assemblies of subheading 8538.90, HTSUS, there are also inputs classified under subheading 8537, HTSUS, and many other subheadings. As a result, we apply the regional value content requirement of not less than 50 percent using the transaction value method or 40 percent using the net cost method.
You propose to use the transaction value method for calculating regional value content. The transaction value method for determining RVC under the USMCA is set forth in GN 11(c)(ii):
Transaction value method.--- An importer, exporter or producer of a good may calculate the regional value content of the good on the basis of the following transaction value method:
RVC = ((TV-VNM)/TV) X 100
where RVC means the regional value content of the good, expressed as a percentage; TV means the transaction value of the good adjusted to exclude any costs incurred in the international shipment of the good; and VNM means the value of nonoriginating
materials, including materials of undetermined origin, used by the producer in the production of the good.
You provided a bill of materials for the Instrumar Fiber System, along with the total costs of the originating and nonoriginating components. You state that the transaction value of the Instrumar Fiber System is $[XXXX] USD. You provide the value of the non-originating materials is $[XXXX] USD. As such, the RVC is (($[XXXX] - $[XXXX]) /$[XXXX]) * 100] = [XXXX]%. This is above the 50% minimum required by GN 11(o)/ 85.37 (B)(1). Accordingly, the Instrumar Fiber System classified under subheading 8537.10.91, HTSUS, qualifies as a USMCA originating good.
Provided that all other requirements are met, the Instrumar Fiber System will be eligible for preferential treatment under the USMCA when imported into the United States from Canada. As indicated above, the system may be imported in separate boxes, but must be imported at the same time in order for this eligibility to apply.
HOLDING:
Based on the information provided, the Instrumar Fiber System will be classified in subheading 8537.10.91, HTSUS. The Instrumar Fiber System satisfies the product specific rule of origin and will be eligible for preferential tariff treatment under the USMCA when imported together into the United States from Canada.
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 [CBP] 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."
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been 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 and Special Programs Branch
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U.S. Department of Homeland Security
Washington, DC 20229
U.S. Customs and Border Protection