Ms. Sylvia Casas
Casas International Brokerage, Inc.
9355 Airway Road Suite 4
San Diego, California 92154-7931
RE: Eligibility of Automotive Wiring Harnesses for the Preferential Tariff Treatment under the North American Free Trade Agreement, General Note 12(d), HTSUS 8544.30, and Determination of Regional Value Content
Dear Ms. Casas:
This is in response to your request of March 12, 2012, asking for a binding ruling on the eligibility of automotive wire harnesses for preferential tariff treatment under the North America Free Trade Agreement (NAFTA) on behalf of your client JAE Oregon, Inc. (herein after JAE). Your request was forwarded by the Director, National Commodity Specialist Division to our office for a response.
JAE is a provider of products for the electronics industry. JAE’s related Mexican subsidiary in Tijuana manufactures wire harnesses which are imported in the United States and used as original equipment in the production of an automotive good classified under subheadings 8702.10.60, 8702.90.60, 8703.21 through 8703.90, 8704.21, or 8704.31, Harmonized Tariff Schedule of the United States (HTSUS).
You have provided a costed bill of materials, which indicates the country of origin, the classification under the HTSUS, and the value of the components used in the production of the wire harnesses. JAE imports the finished wire harnesses into the United States under subheading 8544.30, HTSUS. JAE purchases the wire and uses it to manufacture the wire harnesses in Mexico. The insulated copper wire is classifiable in subheading 8544.49, HTSUS and is imported into Mexico. While the insulated wire which is imported into Mexico is not an “originating good”, you state that all of the other components used to make the wire harnesses are originating goods or meet the applicable NAFTA tariff requirements.
Whether the imported automotive wire harnesses produced in Mexico using non-originating insulated copper wire are eligible for the NAFTA tariff preference?
LAW AND ANALYSIS:
The provisions of the NAFTA are implemented in the HTSUS in General Note (GN) 12. The automotive wiring harnesses at issue will qualify for preferential tariff treatment under the NAFTA provided that they qualify as originating goods under the provisions of GN 12 and qualify to be marked as goods of Mexico. GN 12(b) sets forth the various methods by which a good may be determined to originate in the territory of a NAFTA party. As the automotive wiring harnesses at issue are not wholly obtained or produced in the territories of the NAFTA parties, nor are they produced in the territories exclusively from originating goods, the wiring harnesses must be transformed in the territory of Mexico so that, except as provided for in GN 12(f) (de minimis), "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[.]" See GN 12(b)(ii)(A).
The automotive wiring harnesses are classifiable in subheading 8544.30, HTSUS, at importation into the United States. The applicable rule under GN 12(t) is Rule 147, Chapter 85, which provides:
(A) A change to subheadings 8544.11 through 8544.60 from any subheading outside that group, except from headings 7408, 7413, 7605 or 7614; or(B) 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 50 percent where the net cost method is used.
Since the insulating copper wire is classified in subheading 8544.49 which is within subheadings 8544.11 through 8544.60, Rule 147(A) is not satisfied.
With regard to the application of Rule 147(B), we continue to follow the interpretation of the rule set forth in our prior decisions of Headquarters Ruling Letters (HQ) 957188, dated February 9, 1995; HQ 546674, dated April 16, 1998, and HQ H099258 dated April 30, 2010. Under this interpretation of rule 147(B), in order to qualify for the NAFTA duty preference, the non-originating materials may change to a subheading in 8544.11 through 8544.60 from any other subheading within that group (or from headings 7408, 7413, 7605, or 7614), provided the regional value content is satisfied. Based on these previous rulings, because the insulated copper wire is classified in subheading 8544.49, HTSUS, we find that the applicable automotive wiring harnesses meet the applicable tariff shift requirement. Thus, we must determine whether the regional value content requirement is met.
You indicate that JAE uses the net cost method.
GN 12(c)(iv), HTSUS, provides that:
The regional value content of a good shall be calculated solely on the basis of the net cost method set out in subdivision (c)(ii) of this note where—
(D) the good is—
(2) identified in annex 403.1 or 403.2 to the NAFTA and is for use in a motor vehicle provided for in headings 8701 or 8702, subheadings 8703.21 through 8703.90, inclusive, or headings 8704, 8705 or 8706;
* * *
Pursuant to GN 12(c)(iv), HTSUS, because the wire harnesses are goods identified in Annex 403.1 to the NAFTA and they are for use in a motor vehicle provided for in subheadings 8703.21 through 8703.90, HTSUS, the regional value content is calculated based on the net cost method. See HQ H099258
The net cost method is set forth in GN 12(c)(ii), HTSUS, which provides as follows:
The regional value content of a good may be calculated on the basis of the following net cost method:
NC - VNM
RVC = ------------------------ X 100
where RVC is the regional value content, expressed as a percentage; NC is the net cost of the good; and VNM is
the value of non-originating materials used by the producer in the production of the good. See also 19 C.F.R. Part 181, Appendix, Part III, Sec. 6(3).
GN 12(c)(iii) provides, in pertinent part:
Except as provided in subdivisions (d)(i) . . . of this note, the value of non-originating materials [VNM] used by the producer in the production of a good shall not . . . include the value of non-originating materials used to produce originating materials that are subsequently used in the production of such good.
In this case, GN 12(d)(i) is relevant. GN 12(d)(i), HTSUS, provides, in relevant part:
For purposes of calculating the regional value content under the net cost method set out in subdivision (c)(ii) of this note for—
* * *
(B) a good provided for in the tariff items listed in Annex 403.1 where the good is subject to a regional value content requirement and is for use as original equipment in the production of a good provided for in tariff items 8702.10.60 or 8702.90.60, or subheadings 8703.21 through 8703.90, inclusive, 8704.21 or 8704.31, the value of non-originating materials used by the producer in the production of the good shall be the sum of the values of non-originating materials, determined in accordance with subdivision (c)(vii) of this note at the time the non-originating materials are received by the first person in the territory of Canada, Mexico or the United States who takes title to them; that are imported from the outside the territories of Canada, Mexico and the United States under the tariff items listed in Annex 403.1 to the NAFTA and that are used in the production of the good or that are used in the production of any material used in the production of the good.
The purpose of this section is to make sure that the value of materials that are first imported into the territory of the NAFTA parties and that may be made into something else, is also taken into account.
NAFTA Rules of Origin Regulations, Appendix to 19 C.F.R. Part 181, which implement the rules of origin provisions of GN 12, HTSUS, and Chapter Four of the NAFTA, provides in Section 9(1):
For purposes of calculating the regional value content of a light-duty automotive good under the net cost method, the value of non-originating materials used by the producer in the production of the good shall be the sum of the values of the non-originating materials that are traced materials and are incorporated into the good.
Section 8 defines “traced material” as a “material, produced outside the territories of the NAFTA countries, that is imported from outside the territories of the NAFTA countries and is, when imported, of a tariff provision listed in Schedule IV.”
Section 2(1) defines “light-duty automotive good” as “a light-duty vehicle or a good of a tariff provision listed in Schedule IV that is subject to a regional value-content requirement and is for use as original equipment in the production of a light-duty vehicle.” “Light-duty vehicle” is defined in Section 2(1) as “a motor vehicle provided for in any of tariff items 8702.10.60 and 8702.90.60 (vehicles for the transport of 15 or fewer persons) and subheadings 8703.21 through 8703.90, 8704.21 and 8704.31.”
The wire harnesses are classified under subheading 8544.30, HTSUS, which is a tariff provision listed in Schedule IV. You also state that they will be used as original equipment in the production of light-duty vehicles. Accordingly, the wire harnesses meet the definition of a light duty automotive good pursuant to Section 2(1) of the NAFTA Rules of Origin Regulations. To calculate the regional value content of the wire harnesses under the net cost method, we must calculate the value of the non-originating materials, which per Section 9(1) cited above is the sum of the values of the non-originating traced materials incorporated into the wire harnesses.
In the instant case, the non-originating material that is incorporated into the wire harnesses is the insulated copper wire. The insulated copper wire is not listed on Schedule IV of the NAFTA Rules of Origin Regulations and, thus, is not a traced material. Therefore, the value of this material (insulated copper wire) is not included in the value of the non-originating goods when calculating the regional value content of the wire harnesses. However, their values are included in the net costs of the wire harnesses. Based on the cost information you have submitted, since the materials used in the manufacture of the wire harnesses are all non-traced materials, the value of the non-originating materials is zero. Therefore, the regional value content of the wire harnesses is 100 percent. See HQ 547073, dated March 8, 2000; and HQ H114975 dated September 10, 2010.
Accordingly, we find that the wire harnesses meet the requirements of GN 12(t)/84.241, HTSUS, and are considered “originating goods” pursuant to General Note 12(b).
COUNTRY OF MARKING
GN 12(a)(i), HTSUS, provides that NAFTA-originating goods must also qualify to be marked as products of Mexico under the NAFTA Marking Rules to be eligible for NAFTA duty preferential treatment. In this regard, 19 C.F.R. § 134.1(j) provides that "[t]he “NAFTA Marking Rules” are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country.” 19 C.F.R. § 134.1(j) defines a “good of a NAFTA country” as “an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.” Therefore, in order for the wiring harnesses at issue to qualify for preferential treatment under the NAFTA, they must not only originate in the territory of Mexico under the provisions of GN 12, but they must also qualify to be marked as goods of Mexico. Consequently, we must apply the NAFTA Marking Rules contained in 19 CFR Part 102 of the Customs and Border Protection (CBP) Regulations.
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 harnesses at issue are classified in subheading 8544.30, HTSUS, and therefore, the applicable rule set forth in § 102.20 is:
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.
“Simple assembly” is defined in § 102.1 as:
“Simple assembly” means 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.
In the case of the assembly of the wiring harnesses in Mexico, the numerous components involved in the assembly of the harnesses, including more than five components of foreign origin, clearly removes the assembly from the definition of “simple assembly” in § 102.1. Therefore, the assembly which occurs in Mexico to produce the wiring harnesses of subheading 8544.30, HTSUS, qualifies the harnesses to be marked as goods of Mexico.
The wiring harnesses qualify to be marked as goods of Mexico and meet the terms for preferential treatment under GN 12(d) and GN 12(t). Based on the information you provided, the wiring harnesses at issue are eligible for preferential treatment as originating goods 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.
Monika R. Brenner, Chief
Valuation and Special Programs Branch