CLA-2-94:OT:RR:NC:N4:433
Lisa Murrin
Expeditors Tradewin LLC.
3 Technology Drive
Peabody, MA 01960
RE: The tariff classification and country of origin of a computer server cabinet from Mexico.
Dear Ms. Murrin:
In your letter dated November 30, 2018, you requested a binding ruling for country of origin on behalf of your client, Foxconn. Illustrative literature and a product description were received.
Foxconn item, the “Computer Server Cabinet” is a floor-standing moveable steel storage cabinet on four swivel castors designed to secure a computer server and hardware. The cabinet measures approximately 44” in length, 24” in width, and 80” in height.
The Explanatory Notes (ENs) to the Harmonized Tariff Schedule of the United States (HTSUS) constitute the official interpretation of the tariff at the international level. The ENs to Chapter 94, heading 9403, under the category of [offices] list clothing lockers, filing cabinets, filing trolleys, card index files, etc. as falling under the list of exemplars for other furniture classified under heading 9403, HTSUS. In the opinion of this office the “Computer Server Cabinet” falls within the construct of EN 9403, HTSUS.
The applicable subheading for the “Computer Server Cabinet” is 9403.10.0040, HTSUS, which provides for “Other furniture and parts thereof: Metal furniture of a kind used in offices: Other.”
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 https://hts.usitc.gov/current.
You outline two scenarios wherein the computer server cabinet is manufactured. In scenario 1, six vertical posts, a base subassembly, and a top subassembly of Chinese origin are welded together in Mexico to form the main computer server frame. In Mexico, the frame and welds are further polished, cleaned, painted, and inspected. In Mexico, additional assembly of Chinese component parts (side panels, castors, patch panels, clips, a busbar, and brackets) are performed by skilled technicians. The computer server cabinet will then be imported into the United States.
In scenario 2, the base subassembly and top subassembly are of Chinese origin whereas the six vertical posts are of Mexican origin. In Mexico, additional assembly of Chinese component parts (side panels, castors, patch panels, clips, a busbar, and brackets) are performed by skilled technicians. Welding, assembly, polishing, painting, cleaning and inspection of the main frame occurs in Mexico. The computer server cabinet will then be imported into the United States.
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;
The computer server cabinet is constructed partially of non-originating materials. As such, neither rule (i) nor rule (iii) apply. Under rule (ii), subdivision (t) states that:
A change to subheadings 9403.10 through 9403.89 from any other chapter; or
A change to subheadings 9403.10 through 9403.89 from subheading 9403.90, whether or not there is also a change from any other chapter, 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.
Thus, based on the facts provided; the computer server cabinet described above qualifies for NAFTA preferential treatment. The cabinet will meet the requirements of HTSUS General Note 12(b) (ii) (A). The good will therefore be entitled to a free rate of duty under the NAFTA upon compliance with all applicable laws, regulations and agreements.
In your letter you also requested a country of origin determination. With regard to country of origin and marking thereof, 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 of 19 U.S.C. §1304. Pursuant to 19 CFR 134.1(b), “country of origin” means the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to a foreign article in Mexico must effect a substantial transformation in order to render the final product a good of Mexico. A substantial transformation results when a new and different article emerges from the processing having a distinctive name, character or use. However, for a good of a NAFTA country, the NAFTA Marking Rules (set forth in 19 CFR Part 102) will determine the country of origin. Because the computer server cabinet is manufactured in part in Mexico, a NAFTA country, the NAFTA rules govern the current scenario.
Part 102.11, Customs regulations (19 CFR 102.11), provides that:
The following rules shall apply for purposes of determining the country of origin of imported goods other than textile and apparel products covered by § 102.21:
(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.
Part 102.20, Customs Regulations (19 CFR 102.20), states that, for goods of heading 9403.10 - 9403.89 to be of Mexican origin, they must undergo
A change to subheading 9403.10 thru 9403.89 from any other subheading outside that group, except from subheading 9401.10 through 9403.89 and except from subheading 9401.90 or 9403.90, when that change is pursuant to General Rule of Interpretation (GRI) 2(a).
Based on the information provided, the manufacturing in Mexico meets the origin rule set forth in 19 CFR 102.20. Mexico, therefore, is the country of origin.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
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, please contact National Import Specialist Dharmendra Lilia at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division