CLA-2 OT:RR:CTF:VS H245093 KSG
Sanyo Customs Brokerage, Inc.
9850 Siempre Viva Road, Suite 3
San Diego CA 92154
Re: NAFTA eligibility; De Minimis
Dear Ms. Donate:
This is in response to the request for a binding ruling filed on behalf of Sanyo Energy USA Corporation, dated July 9, 2013, forwarded to us by our New York office, asking whether a nickel cadmium rechargeable battery pack imported from Mexico into the U.S is eligible for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”).
Sanyo classifies the imported good in subheading 8507.30 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Further, Sanyo states that the transaction value of the imported good is $[xxx] and the value of non-originating materials is $[xxx]. Sanyo states that the value of non-originating materials that do not satisfy the NAFTA is $[xxx], which is 4.47 percent of the transaction value of the good.
A Bill of Material was submitted. Fourteen parts listed are manufactured in Japan. Sanyo states that the Japanese parts are classified in the following subheadings: subheading 2815.20; 3920.20; 5911.10; 6807.90; 7326.90; 8481.10; 8507.90; 8533.40; and 8546.90, HTSUS. Sanyo listed other parts manufactured in Mexico or the United States that are classified in the following subheadings: subheading 2825.20; 2902.41; 3919.10; 3926.90; 4008.11; 4016.99; 4821.10; 4822.90; 5903.90; 7318.15; 7326.90; 7506.10; 8311.30; 8507.90; 8536.90; and 8707.90, HTSUS.
The rechargeable nickel-cadmium battery packs are manufactured in Mexico. This includes the assembly of the battery core, the tower assembly, attachment of the tower to the battery core, and packing the batteries into the pack. We assume for the purposes of this ruling that all the tariff classifications and cost figures provided are correct.
Whether the imported nickel cadmium rechargeable battery pack described above is eligible for preferential tariff treatment under the NAFTA
LAW AND ANALYSIS:
General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS. General Note 12(a)(ii) provides, in pertinent part:
(ii) 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 Mexico 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), 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 “MX” in parentheses, are eligible for such duty rate, in accordance with section 201 of the NAFTA Implementation Act.
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;
Because the imported battery pack is not produced entirely in Mexico and/or the United States, pursuant to GN 12(b)(i), we must determine whether GN 12(b)(ii)(A) is met.
The GN 12(t) rule for subheading 8507.30 is as follows:
(A) A change to subheadings 8507.10 through 8507.80 from any other heading, except from tariff items 8548.10.05 or 8548.10.15.
(B) A change to subheadings 8507.10 through 8507.80 from subheading 8507.90, whether or not there is also a change from any other heading, except from tariff items 8548.10.05 or 8548.10.15, provided there is a regional value content of not less than (1) 60 percent where the transaction value method is used, or (2) 50 percent where the net cost method is used.
Since there are items listed on the bill of materials that are within the heading, tariff shift rule A is not met. GN 12(c), HTSUS, provides the methods of calculating RVC for purposes of NAFTA. You have requested that we review the RVC calculation using the transaction value method. The formula set forth in GN 12(c)(i), HTSUS, for the transaction value method is as follows:
RVC= TV-VNM x 100
where RVC is the regional value content, expressed as a percentage; TV is the transaction value of the good adjusted to a F.O.B. basis; and VNM is the value of non-originating materials used by the producer in the production of the good. See also 19 CFR Part 181, Appendix, Part III, Sec. 6(2). The RVC calculation for the imported battery pack under the transaction value method is as follows:
[(xxx)] x 100 = 45%.
Therefore, the regional value content in tariff shift rule B is not met.
The importer argues that the good is originating pursuant to the de minimis rule. The de minimis rule, which is set forth in GN 12(f), HTSUS, provides as follows:
(i) 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 an F.O.B. basis.
In this case, Sanyo states that the value of non-originating materials that do not undergo an applicable change in tariff classification are less than 5 percent of the transaction value of the good. Therefore, in accordance with the de minimis rule set forth in GN 12(f), the battery packs satisfy the GN 12, HTSUS rule. Please be advised, however, that this calculation would be subject to appropriate review upon importation into the United States based on the final appraised value of the merchandise, and assumes that all product costs, including labor and overhead, will be considered as well. We also note that the NAFTA Rules of Origin Regulations provide, in pertinent part that:
[i]f the good does not satisfy the regional value-content requirement on the basis of actual costs during that period, [the producer shall] immediately inform any person to whom the producer has provided a Certificate of Origin for the good, or a written statement that the good is an originating good, that the good is a non-originating good. 19 CFR Part 181, Appendix, Part III, Sec. 6(20).
We must next consider whether the goods qualify to be marked as goods of Mexico under the NAFTA Marking Rules.
Under 19 CFR 102.11(a), the country of origin of a good is the country in which:
The good is wholly obtained or produced;
The good is produced exclusively from domestic materials; or
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 battery pack is neither wholly obtained or produced in a single NAFTA country or produced exclusively from domestic materials. The tariff shift rule for goods of subheading 8507.30, HTSUS, set forth in 19 CFR 102.20 is as follows:
A change to 8507.10 through 8507.80 from any other subheading, including another subheading within that group, except for a change to subheading 8507.80 from subheading 8507.50 or 8507.60.
The tariff shift rule set forth above is met and the good would qualify to be marked as a product of Mexico. Accordingly, the goods are originating goods under the NAFTA and therefore, eligible for preferential tariff treatment.
The imported rechargeable nickel-cadmium battery packs are originating goods under the NAFTA and eligible to be marked as products of Mexico.
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.
Monika R. Brenner, Chief
Valuation & Special Programs Branch