OT:RR:CTF:VS H064379 ARU
Mr. Leonard Floyd
Tahoco Logistics Inc.
2760 Kenmore Avenue
Tonawanda, NY 14150
RE: NAFTA; Used Alternator and Starter Cores and Parts; HTSUS 8511.40,
HTSUS 8511.50; 19 C.F.R. 181.132; Originating Goods
Dear Mr. Floyd:
This is in response to your request dated May 28, 2009, made on behalf of Dixie Electric Inc. (“Dixie Electric”). You requested an amendment to HQ 563285, dated August 18, 2005. It is the opinion of U.S. Customs and Border Protection (“CBP”) that the facts presented in your ruling request of May 28, 2009 are significantly different than the facts considered in HQ 563285. Therefore, an amendment of the previous ruling is not necessary and CBP will issue a new ruling to you based on the facts presented in your May 28, 2009 submission.FACTS: Dixie Electric operates a business in remanufactured automotive alternators and starters. You provide the following assumptions for the Dixie Electric business model:
The vehicles from which the alternator cores and starter cores are removed are non-originating and classifiable under Chapter 87 of the Harmonized Tariff Schedule of the United States (“HTSUS”).
While in Canada, the alternator cores and starter cores are removed by disassembly.
The alternator cores are stated to be classifiable under subheading 8511.50, HTSUS, and the starter cores are stated to be classifiable under subheading 8511.40, HTSUS.
Reusable parts are cleaned or repaired as necessary.
The cleaned or repaired parts, as an entity, together with the new parts as necessary, are assembled into remanufactured alternators and starters in Canada.
Whether the alternator and starter cores qualify as NAFTA originating materials for the purpose of certifying the NAFTA eligibility of alternators and starters rebuilt in Canada using these components.
LAW AND ANALYSIS:
Article 401 of NAFTA provides, in relevant part, that a good shall originate in the territory of a Party where:
… (b) each of the non-originating goods used in the production of the good undergoes an applicable change in tariff classification set out in Annex 401 as a result of production occurring entirely in the territory of one or more of the Parties, or the good otherwise satisfies the requirement of that Annex where no change in tariff classification is required …
General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS. General Note 12(a)(i) provides:
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 Canada 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 “CA” in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
Accordingly, the rebuilt alternators and starters will be eligible for the “Special” “CA” rate of duty provided that they are NAFTA “originating” goods under General Note 12(b), HTSUS, and qualify to be marked as products of Canada under the marking rules. General Note 12(b), HTSUS, provides, in pertinent part:
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 subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (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.
The specific rules of origin of NAFTA Annex 401 are set forth at General Note 12(t). This office confirms that the automotive starters are classifiable in subheading 8511.40, HTSUS, and that the automotive alternators are classifiable in subheading 8511.50, HTSUS.
Origin of Used Cores
Under the facts presented, the key issue is whether the recovered used alternator cores and starter cores may be considered as NAFTA originating materials that are used to produce rebuilt alternators and starters. Pursuant to 19 C.F.R. 181.92(b)(6)(v), CBP may issue an advance ruling on whether a good qualifies as an originating good under General Note 12 HTSUS and under the Appendix to Part 181 of the CBP Regulations. The General Note 12 NAFTA
rules of origin are used to determine the originating status of both goods and of materials used in the production of those goods. Dixie Electric submits that the change by disassembly in a NAFTA party from vehicles in HTSUS Chapter 87 (assumed to be non-originating) to alternators or starters in HTSUS subheadings 8511.40 and 8511.50 satisfies the NAFTA General Note 12(t) rule of origin for alternators and starters. On this basis it would consider the core alternators and starters as NAFTA originating materials.
For goods classified in subheadings 8511.40 and 8511.50, HTSUS, the specific rule of origin under General Note 12(t)/85.22 requires:
(A) A change to subheadings 8511.10 through 8511.80 from any other heading; or …
In the present context, a change to starter cores or alternator cores classifiable in subheadings 8511.40 or 8511.50, HTSUS, from non-originating materials classifiable in Chapter 87 (vehicles) satisfies the requirement of General Note 12(t)/85.22(A) that there be a change from (at least) a different HTSUS heading, i.e., at the four digit level of the nomenclature.
Under both Article 401 and General Note 12, qualifying changes in tariff classification must take place by reason of "production". The Final Rule, published at 70 F.R. 37669 (June 30, 2005), added a new section 181.132 to the CBP Regulations providing as follows:
§ 181.132 Disassembly.
(a) Treated as production. For purposes of implementing the rules of origin provisions of General Note 12, HTSUS, and Chapter Four of the NAFTA, except as provided in paragraph (b) of this section, disassembly is considered to be production, and a component recovered from a good disassembled in the territory of a Party will be considered to be originating as the result of such disassembly provided that the recovered component satisfies all applicable requirements of Annex 401 and this part.
(b) Exception; new goods. Disassembly, as provided in paragraph (a) of this section, will not be considered production in the case of components that are recovered from new goods. For purposes of this paragraph, a "new good" means a good which is in the same condition as it was when it was manufactured and which meets the commercial standards for new goods in the relevant industry.
A component recovered from a good (other than a new good) by disassembly is therefore eligible to be considered as a NAFTA originating good or material provided that the recovered component satisfies the applicable General Note 12(t) rule of origin and satisfies other applicable requirements. In its Final Rule CBP noted that:
CBP finds no evidence showing that the NAFTA intended not to treat "disassembly" as a production process. The term "production" includes a broad range of economic activity. Moreover, the goals of the NAFTA include elimination of barriers to trade, facilitation of cross-border movement of goods, promotion of economic activity in North America, and protection of the environment. Thus, it is consistent with the free trade purposes of NAFTA to treat the recovery of goods by disassembly as "production" under the NAFTA rules of origin.
70 F.R. at 37671. CBP further observed that:
It is likely that the used good will be assumed to be non-originating. However, the new regulation allows the component recovered from the used good to qualify as an originating good. If the recovered component meets the Annex 401 rule applicable to that component, the recovered component will be considered to be an originating good (or material).
70 F.R. at 37674.
Dixie Electric will assume that the vehicles from which the cores are recovered are non-originating. Pursuant to 19 C.F.R. 181.132, the recovery of cores from non-originating vehicles by disassembly is considered "production" for the purposes of the NAFTA rules of origin. The change to used cores (alternators and starters) of subheadings 8511.40 and 8511.50, HTSUS from vehicles of Chapter 87, HTSUS, satisfies the applicable tariff shift rule of origin, i.e., that there is a change to these subheadings from (at least) a different heading of the HTSUS. Therefore, assuming all other applicable requirements are met, the producer or exporter may consider used cores recovered from used vehicles within one or more NAFTA territories as originating materials.
This ruling does not address whether the alternators and starters rebuilt in Canada from used cores qualify as NAFTA originating goods when imported into the U.S. To qualify, production of the rebuilt alternators and starters would have to satisfy the applicable tariff shift or RVC requirements of General Note 12(t)/22 and any other applicable requirements. Further, pursuant to General Note
12(a)(i), the rebuilt alternators or starters must qualify to be marked as goods of Canada. For your information, the country of origin of a good for NAFTA marking purposes would be determined by application of the rules set forth in Part 102, CBP Regulations (19 C.F.R. Part 102) ("NAFTA Marking Rules").
Production by disassembly of used alternator cores and starter cores from non-originating vehicles satisfies the applicable origin requirements of the NAFTA. The cores may be considered NAFTA originating materials. Therefore, assuming all other applicable requirements are met, the producer or exporter may consider used cores recovered from used vehicles within one or more NAFTA territories as originating materials.
Reference to this ruling letter should be made in the entry documents filed at the time the subject goods are entered. See CBP Form 7501 – Instructions, Additional Data Elements (available online at: www.cbp.gov). If the entry summary has been filed without reference to this ruling letter, the ruling letter should be brought to the attention of the appraising officer at the port of entry.
Monika R. Brenner, Chief
Valuation & Special Programs Branch