CLA-2-85:OT:RR:NC:N1:108
Mr. Daniel Bazua
Richard L. Jones Customhouse Brokers, Inc.
P.O. Box 7350
San Luis, AZ 85349
RE: The tariff classification, status and country of origin under the North American Free Trade Agreement (NAFTA), of an encapsulated RFID chip from Mexico; Article 509
Dear Mr. Bazua:
In your letter dated October 16, 2014, on behalf of Gaming Partners International, you requested a ruling regarding the classification, status and country of origin under the NAFTA of an encapsulated RFID chip from Mexico.
The subject merchandise, which is referred to as the “Transponder Magellan 13.56 RFID,” is an encapsulated RFID chip. This RFID chip is composed of a single integrated circuit with memory and an external winded antenna, which will be produced in Thailand, and will also be recorded there with a unique serial number or SID (Specific Identifier). The RFID chip will then be exported, from Thailand, for entry into the commerce of the United States, where no processing will be performed, and thereafter will subsequently be shipped into Mexico for further manufacturing with U.S. components.
In Mexico, the RFID chip will be manually placed into a plastic part that acts as a housing. Then the RFID chip will be covered manually with a plastic clip to protect the chip with its antenna, and thereafter will be inserted into a mold cavity in an injection-molding machine to perform an overmolding operation. This operation will be done to add a layer of plastic on top of the assembly to cover the RFID chip and the clip for protection against damage. Next, some additional manual trimmings will occur to remove rough edges and to create a uniform finish. Lastly, the encapsulated RFID chip will be placed in an antenna station connected to a computer to verify the serial number on the RFID chip, thereby ensuring that the chip with its antenna has not been damaged during the encapsulating process.
The applicable tariff provision for the encapsulated RFID chip will be 8523.52.0090, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Discs, tapes, solid-state non-volatile storage devices, "smart cards" and other media for the recording of sound or of other phenomena, whether or not recorded, including matrices and masters for the production of discs, but excluding products of Chapter 37: Semiconductor media: "Smart cards": Other. The 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.
Based on the facts provided, the encapsulated RFID chip qualifies for NAFTA preferential treatment because it will meet the requirements of HTSUS General Note 12(b)(ii)(B). Moreover, based on the information submitted, the non-originating components will meet the requirements of General Note 12(t)/76D (A), which reads: “No required change in tariff classification to ‘smart cards’ which contain a single integrated circuit or parts of such smart cards of subheading 8523.52.” This merchandise will therefore be entitled to a free rate of duty under the NAFTA upon compliance with all applicable laws, regulations, and agreements.
Section 102.11 of the Customs Regulations (19 C.F.R. 102.11) sets forth the required hierarchy for determining the country of origin of goods from NAFTA countries.
Section 102.11(a) of the Customs Regulations 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 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 requirements of C.F.R.102.11(a) (1) and (2) are not applicable since the subject encapsulated RFID chip is neither wholly obtained nor produced exclusively from domestic materials and therefore analysis must continue to C.F.R. 102.11(a)(3) to determine the country of origin. In this regard, the relevant tariff rule at issue under C.F.R 102.20 (o) states: “A change to cards incorporating an electronic integrated circuit (‘smart’ cards) of subheading 8523.52 from any other subheading.” Since no change occurs in the classification of the RFID chip in Mexico, the subject merchandise has not undergone the required tariff shift as noted above and therefore section 102.11(a)(3) is not applicable.
Since the country of origin cannot be determined under paragraph (a) of Section 102.11, Section 102.11(b) must be addressed under the rules of origin hierarchy. Under Section 102.11(b)(1), “The country of origin of the good is the country or countries of origin of the single material that imparts the essential character of the good.” In this case, the essential character of the good is imparted by the RFID chip, which originates in Thailand.
It is noted, however, that section 102.19(a) of the Customs Regulations (19 C.F.R. 102.19(a)), contains a NAFTA preference override provision which states:
Except in the case of goods covered by paragraph (b) of this section, if a good which is originating within the meaning of § 181.1(q) of this chapter is not determined under § 102.11(a) or (b) or § 102.21 to be a good of a single NAFTA country, the country of origin of such good is the last NAFTA country in which that good underwent production other than minor processing….
In other words, the NAFTA preference override in section 102.19(a) allows a good that is otherwise originating within the meaning of General Note 12, but that is not determined under § 102.11(a) or (b) to be a good of a NAFTA country, to be considered a product of the last NAFTA country in which that good underwent production except in cases where the production consisted of minor processing.
In this case, the subject merchandise meets all the above-stated requirements of section 102.19(a). And specifically, the encapsulated RFID chip, in regard to section 102.11(b)(1), is not a good of a single NAFTA country, and, moreover, it has not undergone production beyond minor processing in Mexico and, as such, the country of origin is Mexico. Therefore, the encapsulated RFID chip is considered originating under General Note 12(b) and qualifies as a good of Mexico under the country of origin rules set forth in 19 C.F.R. 102, provided that a NAFTA Certificate of Origin has been completed and presented to CBP.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 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 Lisa Cariello at [email protected].
Sincerely,
Gwenn Klein Kirschner
Director
National Commodity Specialist Division