OT:RR:CTF:VS H288252 KF
Shannon Batkin Smith & Nephew, Inc.
130 Forbes Boulevard
Mansfield, MA 02048
RE: Modification of New York Ruling Letter (“NY”) N284181; NAFTA Preference; Country of Origin Marking of Acufex Disposable Knives
Dear Mr. Batkin:
This is in reference to New York Ruling Letter (“NY”) N284181, issued to you on April 6, 2017. NY N284181 held that surgical instruments with the trade name “Acufex Disposable Knife” (“knives”) qualified for preferential treatment under the North American Free Trade Agreement (“NAFTA”) pursuant to General Note (“GN”) 12(b)(i), and their country of origin was the United States pursuant to 19 C.F.R. § 102.19(a). Upon consideration, CBP has determined NY N284181 to be in error. For the reasons set forth below, NY N284181 is hereby modified.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. § 1625(c)(1)), as amended by section 623 of Title VI, a notice proposing to revoke NY N284181 was published on November 1, 2017, in Volume 51, Number 44 of the Customs Bulletin. No comments were received in opposition to the proposed action.
FACTS:
In your submission, you describe the knives as surgical instruments used mainly in meniscectomy surgeries and also in general surgeries requiring the cutting of suture and soft tissue. You state that the knives are first formed in the United States by stamping stainless steel sheets. You further state the origin of the steel can vary and is unknown. The stamping process which occurs in the United States produces flat blanks, approximately 0.185 inches in width, 0.060 inches in thickness, and 9.0 inches in length. The blanks have an embedded knurled form and ridges. The tip of the blanks at this stage is blunt. Afterwards, the blanks are sent to Mexico for heat treatment, flattening, and the addition (via grinding of the blunt tip) of the hook and sharpened blade end of the tools, to produce finished knives. The finished knives are then packaged and sent to the United States for sterilization, further packaging, and sale.
NY N284181 determined that the tariff classification applicable to the finished knives is subheading 9018.90.8000, Harmonized Tariff Schedule of the United States (“HTSUS”).
ISSUE:
Whether the knives qualify for preferential tariff treatment under NAFTA.
What are the country of origin marking requirements applicable to the knives?
LAW AND ANALYSIS:
Whether the knives qualify for preferential tariff treatment under NAFTA.
General Note (“GN”) 12(a)(ii) of the HTSUS provides that:
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), 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 "MX" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
GN 12(b) provides in relevant 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 –
they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
they have been transformed in the territory of Canada, Mexico and/or the United States so that—
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 subdivision (r), (s) and (t) of this note or the rules set forth therein, or
the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note.
they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.
Here, the knives are produced as follows: First, steel of unknown origin is stamped to produce knife blanks within the United States. Second, the knife blanks are produced into finished knives in Mexico via heating, flattening, and grinding to create the hook, and sharpening the blade end. Third, the finished knives are sent to the United States for sterilization, packaging, and sale.
Given that the blanks are produced in the United States from steel that is sourced from unknown countries, which may not be NAFTA parties, the finished knives are ineligible for preferential treatment pursuant to GN 12(b)(i) because it cannot be established that they are wholly obtained or produced entirely within NAFTA territory. However, the steel of unknown origin is stamped in the United States to form blanks which are classifiable under subheading 9018.90.80, HTSUS. The applicable tariff shift rule in Chapter 90(46), GN 12(t), permits a “change to subheading 9018.90 from any other heading.” While insufficient information was provided to ascertain the precise tariff classification of the steel, because a change from any other heading is permitted we can determine that the applicable tariff shift rule is satisfied. Accordingly, the blanks originate in the United States pursuant to GN 12(b)(ii)(A). The blanks are subsequently produced into finished knives in Mexico. No other materials are used or added to the knives during production in Mexico. The finished knives are therefore goods produced entirely in the territory of Mexico from blanks originating in the United States, and qualify for preferential tariff treatment under NAFTA pursuant to GN 12(b)(iii).
What are the country of origin marking requirements applicable to the knives?
The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), provides that, unless excepted, every article of foreign origin (or its container) imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser within the United States the English name of the country of origin of the article. Part 134, Customs Regulations (19 C.F.R. § 134), implements the country of origin marking requirements of and exceptions to 19 U.S.C. § 1304.
Section 134.1(b) of the Customs Regulations defines “country of origin” as:
[T]he country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Section 134.1(j) provides that the NAFTA Marking Rules are promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) 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.” The NAFTA Marking Rules are set forth in Part 102, Customs Regulations (19 C.F.R. § 102). Section 102.11(a) contains the “General rules” for determining country of origin:
(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 knives’ country of origin cannot be determined pursuant to 19 C.F.R. § 102.11(a)(1) because they are produced from blanks that are first produced in the United States. Nor can the country of origin be determined pursuant to 19 C.F.R. § 102.11(a)(2) because the knives are not Mexican materials. It is therefore necessary to determine the knives’ country of origin pursuant to 19 C.F.R. § 102.11(a)(3). The applicable tariff shift rule for the knives in 19 C.F.R. § 102.20 permits a “change to subheading 9018.90 from any other subheading, except from subheading 9001.90 or synthetic rubber classified in heading 4002 when resulting from a simple assembly; or [a] change to defibrillators from printed circuit assemblies, except when resulting from a simple assembly.” Since the blanks are classified under the same subheading as the knives, the rule is not satisfied. Consequently, 19 C.F.R. § 102.11(b) of the hierarchical rules must be applied to determine the knives’ country of origin.
Section 102.11(b) provides that:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, the country of origin cannot be determined under paragraph (a) of this section:
The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good.
For purposes of identifying the material that imparts the essential character to a good under section 102.11(b), section 102.18(b) limits consideration to domestic and foreign materials “that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good.” The only material used in producing the knives for which a change in tariff classification is not allowed are the blanks likewise classified under 9018.90, HTSUS. Accordingly, the blanks’ country of origin is also the knives’ country of origin. As the blanks produced in the United States from steel of unknown origin satisfy the applicable tariff shift rule in the United States, the knives’ country of origin for marking purposes is the United States.
However, pursuant to 19 C.F.R. § 102.19(b):
[I]f the country of origin of a good which is originating within the meaning of § 181.1(q) of this chapter is determined to be the United States and that good has been exported from, and returned to, the United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin of such good for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the United States.
Here, blanks originating in the United States are exported to Mexico to be rendered suitable for sale through production into finished knives. The knives are therefore advanced in value or improved in condition in Mexico. Mexico is thus the knives’ country of origin for Customs duty purposes. Note that 19 CFR § 102.19(b) has no effect on the country of origin for marking purposes, and no marking on the knives is necessary. See HQ H046759 (June 29, 2009). Articles originating in the United States are generally not subject to the marking requirements of 19 U.S.C. § 1304. The Federal Trade Commission (“FTC”) has jurisdiction over marking such articles. Any inquiries concerning marking the knives with a phrase such as “Made in the USA” must be directed to the FTC. The FTC may be contacted at the following address: Federal Trade Commission, Division of Enforcement, 6th and Pennsylvania Ave. NW, Washington, DC 20508.
HOLDING:
We find that the knives are entitled to preferential tariff treatment under NAFTA pursuant to GN 12(b)(iii), the United States is the knives’ country of origin for marking purposes pursuant to 19 C.F.R. § 102.11(b)(1), and that Mexico is the knives’ country of origin for Customs duty purposes pursuant to 19 C.F.R. § 102.19(b).
EFFECT ON OTHER RULINGS:
NY N284181, dated April 6, 2017, is hereby MODIFIED. In accordance with 19 U.S.C. §1625(c)(2), this ruling will become effective sixty (60) days after the date of its publication in the Customs Bulletin.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division