OT:RR:CTF:VS H339849 AMW
Ms. Annelori Roder
Littelfuse, Inc.
8755 West Higgins Road
Suite 500
Chicago, IL 60631
RE: Electrical Contactor; United States-Mexico-Canada Agreement; Regional Value Content;
De Minimis
Dear Ms. Roder:
This is in response to your June 7, 2024, ruling request on behalf of Littelfuse Inc.
(“Littelfuse”), in which you request a ruling concerning the eligibility of certain electrical
contactors for preferential tariff treatment under the United States-Mexico-Canada Agreement
(“USMCA”). Your request, submitted as an electronic ruling request, was forwarded to this
office from the National Commodity Specialist Division (“NCSD”) for review. Our ruling is set
forth below.
FACTS:
The following facts are based on your June 7, 2024, ruling request as well as follow-up
information submitted to this office on August 7, 2024, August 8, 2024, August 12, 2024,
August 16, 2024, August 27, 2024, and September 11, 2024. The merchandise at issue consists
of electric contactors. According to Littelfuse’s website, the contactors function as on/off
switches controlled by thermostats, pushbuttons, and manual interfaces.1 The subject contactors
belong to a family of contractors identified by product numbers holding prefixes of “HCC”
followed by a sequence that identify the contactor as a one, two, or three pole contactor as well
as the voltage. The contactor subject to this request is model HCC3XU04CG.
According to your request, and confirmed by the NCSD, the subject contactor is
classified under subheading 8536.49.00, Harmonized Tariff Schedule of the United States
(“HTSUS”), which provides for, “Electrical apparatus for switching or protecting electrical
circuits, or for making connections to or in electrical circuits (for example, switches, relays,
1
See Contactors, available at https://www.littelfuse.com/products/contactors.aspx (accessed Aug. 19, 2024).
fuses, surge suppressors, plugs, sockets, lamp-holders and other connectors, junction boxes), for
a voltage not exceeding 1,000 V; connectors for optical fibers, optical fiber bundles or cables:
Relays: Other.”
The subject contactor is assembled at a facility in Matamoros, Mexico owned by
Productos Electromecanicos BAC, S. DE R.L. DE C.V. (the “Mexico facility”), which is a
related party to Littelfuse. The contactor is comprised of various originating components as well
as non-originating components purchased from unrelated manufacturers located in China and
India. A costed bill of materials (“BOM”) provided in your request indicates the components
incorporated into the finished contactor include the following:
Component HTSUS Country of Price
Description Classification Origin
SCREW, #4-24 7318.14.1060 IN [ ]
Zinc plated steel 7318.14.1060 IN [ ]
phillips head
screw
LUG, 40 AMP 7210.12.0000 CN [ ]
Flat Filler 4819.40.5060 MX [ ]
Cardboard 4819.40.5060 MX [ ]
Partitioned Filler
CONTACT 7409.40.0000 CN [ ]
COVER, 3 POLE, 8538.90.6000 CN [ ]
NC STYLE
BASE, 3 POLE 8538.90.6000 CN [ ]
20-40 AMP
3 POLE 8538.90.6000 CN [ ]
ACTUATOR
RUBBER PAD, 3 4016.99.6050 IN [ ]
POLE 20-40 AMP
TERMINAL, 3 & 8536.90.8585 CN [ ]
4 POLE LUG
STYLE
LUG SCREW, 20- 7318.14.1060 IN [ ]
40
BRIDGESPRING 7320.20.5060 IN [ ]
E-LAM ASSY, 3P 7326.90.8688 CN [ ]
20/40
COILSHIELD 8538.90.6000 CN [ ]
MOUNTING 7905.00.0000 CN [ ]
PLATE, 3 POLE
20-40 AMP
3P RETURN 7320.20.5060 IN [ ]
SPRING
SPRING CLIP 8302.30.6000 IN [ ]
2
BRIDGE, 3P & 7419.20.0050 CN [ ]
4P, 20-40 AMP
Label 4821.90.2000 MX [ ]
Master Box Label 4821.90.2000 US [ ]
BOBBIN, 3 POLE 3926.90.9985 CN [ ]
20-40 AMP
COIL 8536.90.8585 CN [ ]
TERMINAL
RIGHT
COIL 8536.90.8585 CN [ ]
TERMINAL
LEFT
Copper AWG 26.5 8544.11.0020 MX [ ]
Magnet Wire
Master box 4819.10.0040 MX [ ]
Labor rate – per MX [ ]
unit
Overhead – per MX [ ]
unit
As outlined in the chart, the total cost per unit of each contactor is $6.3659. The net cost
per unit, which excludes the packing and shipping costs in bolded text, is $5.4338. Once
finished, the subject contactors will be placed in corrugated boxes based on order quantities and
shipped to purchasers in various countries, including the United States.
Throughout the ruling process, Littelfuse provided to CBP various product descriptions
and BOMs that contained different and, at times, conflicting information. For example, in an
earlier iteration of the BOM, the per-unit cost of the “screw, #4-24” was listed as $0.0022, but a
later iteration of the BOM reported the component’s per-unit cost to be $0.265. Littelfuse
explained this discrepancy by stating that the sourcing costs of certain components had changed
during the period between generating the earlier and more recent versions of the BOM. In
addition, Littelfuse’s initial ruling request reported that the subject contactor would incorporate
certain components that were not in fact reflected in the BOM. Littelfuse reported that this
discrepancy was the result of a clerical error and that the BOM, excerpted above, contains the
complete and final list of all components. As a result, we note that this ruling relates exclusively
to contactor units comprised of the above components, with the same component costs listed
above. This ruling is not applicable to any units imported by Littelfuse that have different
pricing or component profiles.
ISSUE:
Whether contactor model HCC3XU04CG is eligible for preferential tariff treatment
under the USMCA when imported from Mexico into the United States.
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LAW AND ANALYSIS:
The USMCA was signed by the Governments of the United States, Mexico, and Canada
on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on
January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19
U.S.C. § 4511(a)). General Note (“GN”) 11 of the HTSUS implements the USMCA.
GN 11 states, in relevant part:
… (b) For the purposes of this note, a good imported into the customs territory of
the United States from the territory of a USMCA country, as defined in
subdivision (l) of this note, is eligible for the preferential tariff treatment provided
for in the applicable subheading and quantitative limitations set forth in the tariff
schedule as a “good originating in the territory of a USMCA country” only if-
(i) the good is a good wholly obtained or produced entirely in the territory of
one or more USMCA countries;
(ii) the good is a good produced entirely in the territory of one or more
USMCA countries, exclusively from originating materials;
(iii) the good is a good produced entirely in the territory of one or more
USMCA countries using non-originating materials, if the good satisfies all
applicable requirements set forth in this note (including the provisions of
subdivision (o)); or
…
Here, the subject contactors contain non-originating materials. As such, they are not
considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i)
and 11(b)(ii). Thus, we must determine whether the contactors qualify under GN 11(b)(iii).
As noted above, the NCSD has determined that the applicable subheading for the
contactors is 8536.49.00, HTSUS. The applicable rule of origin for merchandise under heading
8536.49, HTSUS, is in GN 11(o)/85(83), which provides:
(A) A change to subheadings 8536.41 through 8536.49 from any other heading,
except from tariff items 8538.90.10, 8538.90.30 or 8538.90.60; or
(B) A change to subheadings 8536.41 to 8536.49 from tariff items 8538.90.10,
8538.90.30 or 8538.90.60, whether or not there is also a change from any other
heading, 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.
According to the costed BOM, a majority of components utilized in the subject contactors
are non-originating, including four which you have classified in subheading 8538.90.60, HTSUS.
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Considering four components are classified under 8538.90.60, the tariff shift rule set
forth in GN 11(o)/85(83)(A) is not satisfied. We therefore turn to GN 11(o)/85(83)(B),
which specifies in relevant part that merchandise classified under 8536.49, HTSUS, but
containing items classified under 8538.90.60 will be eligible for USMCA preference
provided there is 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.
You have opted to report the net cost of the contactor. GN 11(l)(viii) defines the
term “net cost” to mean “total cost minus sales promotion, marketing and after service
costs, royalties, shipping and packing costs and nonallowable interest costs that are
included in the total cost.
As outlined in GN 11(c)(iii), the net cost value method is set forth as follows
Net cost method – An importer, exporter or producer of a good may calculate the
regional value content of a good on the basis of the following net cost method:
RVC = ((NC-VNM)/NC) X 100
where NC means the net cost of the good; RVC means the regional value content,
expressed as a percentage; and VNM is the value of non-originating materials,
including materials of undetermined origin, used by the producer in the
production of the good.
Based on the costed BOM, you state that the total cost per unit is $6.3659, and the net
cost per unit, which deducts certain shipping and packing costs, is $5.4338. The costed BOM
indicates that the value of the non-originating materials is $3.4580, the value of originating
components is $1.3906, and the per-unit labor cost is $0.8973 and the per-unit overhead cost is
$0.6200. As such, the RVC is (($5.4338-$3.4580)/$5.4365) X 100 = 36.3432%. This is below
the 50% minimum required by GN 11(o)(85(83)(B)(2). Accordingly, the subject contactor
classified under 8536.49.00, HTSUS, does not qualify as a USMCA originating good under the
regional value content requirement outlined at GN 11(o)/85(83)(B).
It is nevertheless possible for merchandise that fails the corresponding regional value
content requirement to be considered a USMCA originating good if it falls within the de minimis
threshold of GN 11(e), which specifies:
(i) In general. –…A good that does not undergo a change in tariff classification
or satisfy a regional value content requirement set forth in subdivision (o) of
this note is an originating good if—
a. The value of all non-originating materials that are used in the production
of the good, and do not undergo the applicable change in tariff
classification set forth in subdivision (o) of this note— (i) Does not exceed
10 percent of the transaction value of the good, adjusted to exclude any
costs incurred in the international shipment of the good; or (ii) Does not
exceed 10 percent of the total cost of the good;
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b. The good meets all other applicable requirements of this note; and
c. The value of such non-originating materials is included in the value of
non-originating materials for any applicable regional value content
requirement for the good.
(Emphasis added.)
In relevant part, GN 11(l)(xxv) defines total cost to mean “all product costs, period costs
and other costs for a good incurred in the territory of one or more USMCA countries; and…does
not include—(I) profits that are earned by the producer of the good, regardless of whether the
costs are retained by the producer or paid out to other persons as dividends; or (II) taxes paid on
those profits, including capital gains taxes.”
In the present matter, you report the total cost per unit of the subject contactor to be
$6.3586. Meanwhile, the non-originating materials that are used in the production of the good
and do not undergo a change in tariff classification set forth in GN 11(o) is represented by the
four components classified under 8538.90.60, HTSUS. As reported in the costed BOM, these
materials are valued at a total of $0.5517. This amount, $0.5517, represents approximately 8.7%
of the total cost of the subject contactor. This amount is below 10% of the total per-unit cost of
the subject contactor. As a result, based on the information provided, we determine that the non-
originating components classified under subheading 8538.90.60, HTSUS, are de minimis as they
represent less than 10% of the total value of the contactor. Accordingly, contactor model
HCC3XU04CG imported from Mexico qualifies for preferential treatment under the USMCA.
HOLDING:
Based on the information provided, the contactor model HCC3XU04CG as described
above is eligible for preferential tariff treatment under the USMCA.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the
assumption that all of the information furnished in connection with the ruling request and
incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and
complete in every material respect. The application of a ruling letter by a [CBP] field office to
the transaction to which it is purported to relate is subject to the verification of the facts
incorporated in the ruling letter, a comparison of the transaction described therein to the actual
transaction, and the satisfaction of any conditions on which the ruling was based.”
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.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch
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