CLA-2-90:OT:RR:NC:N4:414
Mr. Robert G. Gaydo
Deringer Logistics Consulting Group
6930 Metroplex Drive
Romulus, MI 48174
RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA) and the Country of Origin Marking of the FTB-200 platform and the FTB-7300E from Canada; Article 509
Dear Mr. Gaydo:
In your letter dated July 31, 2013, you requested a ruling on the tariff classification, NAFTA eligibility and country of origin of the FTB-200 Compact Modular Platform (hereafter referred to as the FTB-200) and the FTB-7300E-PON FTTx/MDI OTDR (hereafter referred to as the FTB-7300E) on behalf of EXFO, Inc.
The FTB-200 platform and the FTB-7300E are used in the testing of fiber optic systems. The FTB-200 and the FTB-7300E are assembled in EXFO’s plant in China and are not tested or programmed prior to shipping to Canada. In Canada, the units undergo extensive testing to assure that the units will function as intended. Once tested, software is installed, the units are set up and calibrated, and optional programming and/or equipment is added. The units are tested again prior to being imported into the United States. According to your letter, the units as imported into Canada from China have a very low value, as opposed to the finished units exported from Canada.
The FTB-200 is a platform that by itself is incapable of performing any function. It interfaces with 30 different optical test modules and has a processor which, when connected, allows the modules to function for their intended testing functions. The results of these tests are displayed on the FTB-200 platform. The FTB-200 platform, without a module, cannot do any type of test. The FTB-200 is not used with any type of electrical test equipment.
The FTB-7300E is used for testing the integrity of fiber optic cables. It can detect and locate connections, splices, losses, macro bends, measure length, etc. The unit is used to create a “picture,” which is called a trace, of the fiber optic cable when it is newly installed. The trace can be stored for later reference to check against a blueprint when network problems arise. The FTB-7300E has to be connected to the FTB-200 platform to perform a test.
The applicable tariff provision for the FTB-200 and the FTB-7300E will be 9027.90.6400, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Parts and accessories: Other: Of optical instruments and apparatus: of instruments and apparatus of subheading 9027.20, 9027.30, 9027.50, 9027.80. The general rate of duty will be free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.
General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that
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; or
(iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the nonoriginating materials falling under provisions for “parts” and used in the production of such goods does not undergo a change in tariff classification because--
(A) the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a), or
(B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the goods themselves and their parts,
provided that such goods do not fall under chapters 61 through 63, inclusive, of the tariff schedule, and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note.
Based on the facts provided, the FTB-200 and the FTB-7300E are classified under subheading 9027.90.64, HTSUS. With respect to General Note 12(b)(ii)(A), the applicable tariff shift rule under General Note 12(t)/9027.90 provides for a change to subheading 9027.90 from any other heading; or, no required change in tariff classification to subheading 9027.90, 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. Your letter states that the regional value content added in Canada is over 100 percent of the value of the FTB-200 and the FTB-7300E. Based on the information you provided, the FTB-200 and the FTB-7300E are eligible for NAFTA preferential treatment upon compliance with all applicable laws, regulations, and agreements, including Regional Value Content requirements specified in General Note 12(t)/9027.90.
This ruling letter has not addressed the actual Regional Value Content of the subject goods. If you desire a ruling regarding the RVC of your goods, provide the information noted in Section 181.93(b) of the Customs Regulations (19 CFR 181.93(b)), to U.S. Customs and Border Protection, Regulations and Rulings, 799 9th Street N.W.-7th Floor, Washington, DC 20229-1177, along with a copy of this letter.
You have also requested a ruling on the country of origin marking of the FTB-200 and the FTB-7300E. The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. 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 in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.
The country of origin marking requirements for a “good of a NAFTA country” are also determined in accordance with Annex 311 of the North American Free Trade Agreement (“NAFTA”), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat 2057) (December 8, 1993) and the appropriate Customs Regulations. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Part 102, Customs Regulations. The marking requirements of these goods are set forth in Part 134, Customs Regulations.
Section 134.1(b) of the regulations defines “country of origin” as the country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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) of the regulations provides that the “NAFTA Marking Rules” are the rules promulgated for the purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) of the regulations, 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. Section 134.45(a)(2) of the regulations, provides that “a good of a NAFTA country” may be marked with the name of the country of origin in English, French or Spanish.”
The FTB-200 and the FTB-7300E are processed in Canada prior to being imported into the United States. Since Canada is defined under 19 CFR 134.1(g) as a NAFTA country, we must apply the NAFTA Marking Rules in order to determine if the goods are subject to the NAFTA marking requirements.
Part 102 of the regulations sets forth the NAFTA Marking Rules. Section 102.11 of the regulations sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) states that the country of origin of a good is the country in which (1) the good is wholly obtained or produced; (2) the good is produced exclusively from domestic materials; or (3) each foreign material incorporated in that good undergoes an applicable change in tariff classification as set out in section 102.20 and satisfies any other applicable requirements of that section.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the FTB-200 or the FTB-7300E. Section 102.20 for 9027.10-9027.90 requires a change to any other good of subheading 9027.10 through 9027.90 from any other subheading, including another subheading within that group. Since the FTB-200 and the FTB-7300E do not undergo the appropriate tariff shift, section 102.11(a)(3) does not apply.
Section 102.11(b) states that except for a good that is specifically described in the Harmonized System as a set, or classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of section 102.11, then 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. This section does not apply to the FTB-200 and the FTB-7300E.
Section 102.19 states that except in the case of a good of paragraph (b), if a good which is originating within the meaning of 181.1(q) of this chapter is not determined under section 102.11(a) or (b) to be a good of a single NAFTA country, the country of origin of the good is the last NAFTA country in which the good underwent processing other than minor processing. Under Section 102.19, the NAFTA Preference Override, the country of origin of the FTB-200 and the FTB-7300E is Canada for marking purposes.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 CFR Part 181).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Barbara Kiefer at (646) 733-3019.
Sincerely,
Myles B. Harmon
Acting Director
National Commodity Specialist Division