CLA-2 RR:TC:SM 560028 DEC
Ms. Martha L. Brown
Volkswagen of America, Incorporated
3800 Hamlin Road
Auburn Hills, Michigan 48326
RE: NAFTA; 19 CFR Part 181; transshipment; originating
Dear Ms. Brown
This is in response to your letter dated August 13, 1996,
concerning the eligibility of automobiles for duty-free treatment
that will be transshipped within North American Free Trade
Agreement (NAFTA) territory prior to importation into the U.S.
FACTS:
Automobiles manufactured in Mexico pursuant to U.S.
specifications will be loaded on railcars in Mexico City and
transit the U.S. in bond to the port processing center in
Vancouver, British Columbia, Canada. In Vancouver, the
automobiles will undergo various processes that may include the
following:
quality control inspections to ensure belts,
hoses, fluid levels, etc. are to manufacturers'
specifications
replacement of defective items
disassembly and reassembly of packaged items such
as wheel discs, mirrors, or floor mats which are
included in the price of the vehicle, but which
are placed within the vehicle to offset theft or
damage
print and install Monroney label provided by
Volkswagen in compliance with the American
Automobile Labeling Act.
After this processing is completed, the automobiles will be
shipped in bond via truck for Customs clearance at Blaine,
Washington and delivered to various U.S. destinations. Terms
of delivery will be FOB Laredo or Eagle Pass. Title and risk of
loss or damage will pass from Volkswagen of Mexico to Volkswagen
of America when the vehicles cross the Mexico/U.S. border. Due
to the nature of these transshipments, you state that three bills
of lading will be issued for each shipment: (1) from Mexico City
to the Mexico/U.S. border, (2) from Mexico/U.S. border to
Vancouver, and (3) from Vancouver to the U.S. destination via
truck. The evidence of the intent to ship to the U.S. is the
fact that the automobiles will be built to meet the U.S.
emissions and safety specifications.
For purposes of this ruling, you have asked that we assume
that all other criteria for NAFTA eligibility are met.
ISSUE:
Will transshipment within the North American Free Trade
Agreement territory render the automobiles ineligible for duty-free treatment under NAFTA?
LAW AND ANALYSIS:
Section 16 of the NAFTA Rules of Origin Regulations,
Appendix to Part 181, Customs Regulations (19 CFR Appendix to
Part 181), sets forth the rules with respect to transshipment and
the subsequent processing outside the territory of a NAFTA
country. In this regard Section 16 provides, in pertinent part,
that:
EFFECT OF SUBSEQUENT PROCESSING OUTSIDE THE TERRITORY
OF A NAFTA COUNTRY; LOSS OF ORIGINATING GOOD STATUS
(1) A good is not an originating good by reason of
having undergone production that occurs entirely in the
territory of one or more of the NAFTA countries that
would enable the good to qualify as an originating good
if subsequent to that production
(a) the good is withdrawn from customs control
outside the territories of the NAFTA countries; or
(b) the good undergoes further production or any
other operation outside the territories of the
NAFTA countries, other than unloading, reloading
or any other operation necessary to preserve the
good in good condition, such as inspection,
removal of dust that accumulates during shipment,
ventilation, spreading out or drying, chilling,
replacing salt, sulphur dioxide or other aqueous
solutions, replacing damaged packing materials and
containers and removal of units of the good that
are spoiled or damaged and present a danger to the
remaining units of the good, or to transport the
good to the territory of a NAFTA country.
TRANSSHIPPED GOOD CONSIDERED ENTIRELY NON-ORIGINATING
(2) A good that is a non-originating good by
application of subsection (1) is considered to be
entirely non-originating for purposes of this appendix.
These provisions expressly apply to operations that are performed
to goods outside the NAFTA territory.
In the case presented, you state that the automobiles will
be manufactured in Mexico. Presuming that the manufacturing
operation entitles the automobile to originating status in
Mexico, the fact that the automobiles are sent to Canada for
further processing will not serve to disqualify the automobiles
for the NAFTA duty-free rate when they subsequently enter the
U.S.
HOLDING:
The automobiles which are manufactured in Mexico and
presumed to be originating goods will not lose their originating
status when they are transshipped and further processed within
NAFTA territory.
A copy of this ruling 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 Customs officer handling the
transaction.
Sincerely,
John Durant, Director
Tariff Classification Appeals
Division