CLA-2 R:C:S 559247 MLR
Mr. Jack Alsup
Alsup & Alsup, Inc.
P.O. Box 1251
Del Rio, Texas 78841
RE: Applicability of duty exemption under HTSUS subheading
9802.00.50 to used vehicle air brake systems; scrap;
Reconsider HRL 558823; NYRL 807803; Article 509; NAFTA
Dear Mr. Alsup:
This is in reference to your letter of May 31, 1995,
requesting reconsideration of Headquarters Ruling Letter
558823 dated February 6, 1995, on behalf of Allied Signal
Truck Brake Systems Co. ("Allied Signal").
FACTS:
HRL 558823 addressed the applicability of subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS), to rebuilt air brake system assemblies, and the
eligibility for preferential duty treatment under the North
American Free Trade Agreement (NAFTA) for those components
not rebuilt into the air brake system assemblies. The facts
of HRL 558823 are herein incorporated by reference.
However, the relevant facts pertinent to this request for
reconsideration concern the recovered parts from the air
brake system assemblies that will be returned to the U.S. as
unassembled, individual parts.
In HRL 558823, we determined that the recovered parts
were not "scrap" as defined in General Note 12(n)(ix),
HTSUS, because even though the articles may be used goods
collected in the U.S., they can be repaired and, therefore,
are not fit only for the recovery of raw materials.
Accordingly, to the extent that the components were not
otherwise wholly obtained or produced in the territory of
the U.S. or produced exclusively from originating materials
transformed in the United States as prescribed under General
Note 12(b), they were not eligible for preferential duty
treatment. However, in New York Ruling Letter 807803 dated
April 7, 1995, it was found that the recovered parts used in
the production of rebuilt air conditioning /refrigeration
compressors would be considered waste or scrap, as defined
in General Note 12(n)(ix), HTSUS.
ISSUE:
Whether the air brake system components returned to the
U.S. individually qualify for preferential duty treatment
under the NAFTA.
LAW AND ANALYSIS:
To be eligible for tariff preferences under the North
American Free Trade Agreement (NAFTA), goods must be
"originating goods" within the rules of origin set forth in
General Note 12(b), HTSUS. Goods imported into the United
States may be considered goods originating in the territory
of a NAFTA party if "they are goods wholly obtained or
produced entirely in the territory of Canada, Mexico and/or
the United States," or "they are goods produced entirely in
the territory of Canada, Mexico and/or the United States
exclusively from originating materials." See General Note
12(b)(i) and (iii), HTSUS. Goods may also be considered
originating if they have been "transformed in the territory
of Canada, Mexico and/or the United States" pursuant to
General Note 12(b)(ii)(A), HTSUS, which states:
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 . . . .
Under the NAFTA, a good can be considered to be "wholly
obtained or produced entirely in the territory of Canada,
Mexico and/or the United States," when it consists of "waste
and scrap derived from ... used goods collected in the
territory of one or more of the NAFTA parties, provided such
goods are fit only for the recovery of raw materials." See
General Note 12(n)(ix)(B).
In NYRL 807803, it was determined that the recovered
parts of the compressors were waste or scrap as defined in
General Note 12(n)(ix), HTSUS. However, in HRL 559199 dated
May 15, 1995, we modified NYRL 807803 and determined that
the recovered parts of the compressors are not considered
"scrap" within the meaning of General Note 12(n)(ix), since
the recovered parts may be repaired. Accordingly, we remain
of the position that the recovered parts of the air brake
assemblies will only be eligible for preferential duty
treatment under the NAFTA if the recovered parts are wholly
obtained or produced in the territory of a NAFTA country, or
produced exclusively from originating materials transformed
in the U.S. as prescribed under General Note 12(b), HTSUS.
HOLDING:
After reconsidering HRL 558823, we remain of the opinion
that the recovered parts of the air brake system assemblies
are not waste or scrap as defined in General Note 12(n)(ix),
but will only be eligible for preferential duty treatment
under the NAFTA if the recovered parts are wholly obtained
or produced in the territory of a NAFTA country, or produced
exclusively from originating materials transformed in the
U.S. as prescribed under General Note 12(b), HTSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division