CLA-2-84:OT:RR:NC:N1:102
Ms. Kitty Johnson
UPS Supply Chain Solutions
P.O. Box 369
Pembina, ND 58271
RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA), of reconditioned tapered roller bearings from rail cars from Canada; Article 509
Dear Ms. Johnson:
In your letter dated July 8, 2010 you requested a ruling on the status of reconditioned tapered roller bearings from rail cars from Canada under the NAFTA on behalf of your client Comet Industries. The request concerns whether the bearings as parts acquired from rail cars are NAFTA originating goods by application of the NAFTA regulation on disassembly, set forth at 19 CFR 181.32. Comet Industries purchases U.S. made tapered roller bearings from Canada that have been salvaged from railroad cars. You indicate that in the U.S., these bearings will undergo a reconditioning process which includes disassembling and cleaning the bearing and an inspection calcification process that will determine whether the bearings can be used again. The bearings are assembled and marked reconditioned, new seals are applied and then they are sold as reconditioned bearings in the U.S. Included with your submission are two illustrations of the subject bearings as well as a parts list from the Association of American Railroads roller bearing manual.
The applicable subheading for the tapered roller bearings will be 8482.20.00, Harmonized Tariff Schedule of the United States (HTSUS), which provides for tapered roller bearings, including cone and tapered roller assemblies. The rate of duty is 5.8 percent ad valorem.
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 (emphasis added), 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 recovered disassembled parts will not be eligible for NAFTA originating treatment as goods wholly obtained or produced entirely in a NAFTA territory pursuant to GN 12(b)(i). Therefore production of the parts must satisfy tariff shift rules and meet other applicable requirements as prescribed in GN 12(b)(ii).
The specific rules of origin of NAFTA Annex 401 are set forth at General Note 12. The requirement for tapered roller bearings classified in heading 8482 is a change to subheadings 8482.10 through 8482.80 from any subheading outside that group. Applying this rule, a change from a railroad car of heading 8603 to a bearing of heading 8482 will result in an original recovered bearing.
Under both Article 401 and GN 12, qualifying changes in tariff classification must take place by reason of “production.” Pursuant to §181.132, CBP Regulations (19 CFR §181.132), subject to certain exceptions, disassembly operations are to be considered as production in the context of applying the NAFTA tariff shift rules. The regulation provides as follows:
§ 181.132 Disassembly. (a) Treated as production. For purposes of implementing the rules of origin provisions of General Note 12, HTSUS, and Chapter Four of the NAFTA, except as provided in paragraph (b) of this section, disassembly is considered to be production, and a component recovered from a good disassembled in the territory of a Party will be considered to be originating as the result of such disassembly provided that the recovered component satisfies all applicable requirements of Annex 401 and this part. (b) Exception; new goods. Disassembly, as provided in paragraph (a) of this section, will not be considered production in the case of components that are recovered from new goods. For purposes of this paragraph, a "new good" means a good which is in the same condition as it was when it was manufactured and which meets the commercial standards for new goods in the relevant industry.
In this case the tapered roller bearings recovered by disassembly from used vehicles (and thus not from new goods) will be eligible to be considered as a NAFTA originating goods or materials provided that the recovered component satisfies the applicable GN 12(t) rule of origin and satisfies other applicable requirements.
Goods that qualify as NAFTA originating goods under the rules of origin must also, pursuant to GN 12(a)(i) [q]ualify to be marked as goods of Canada under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the good[s] are marked)...
Section 102.11, CBP Regulations (19 CFR §102.11) sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) provides 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 requirements of these rules are satisfied. The imported bearings are neither "wholly obtained or produced," or "produced exclusively from domestic (Canadian) materials." Therefore, reference is made to §102.11(a)(3).
Pursuant to §102.20, the subject bearings disassembled from the railroad cars do undergo a change in tariff classification in Canada; however, changes in tariff classification resulting from dismantling or disassembly are considered non-qualifying operations. See 19 CFR 102.17(b). Accordingly, 19 CFR §102.11(b) of the hierarchical rules must next be applied. 19 CFR §102.11(b) provides as that where the country of origin cannot be determined under paragraph (a), 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. As the bearings are taken from used railroad cars in Canada, the single material that shall be taken into consideration is the used railroad car, the only one material from which a shift is not allowed. Therefore, the origin of the bearings is based on the origin of the railroad car. No information was provided on the origin of the used rail cars.
Assuming the origin of the rail car is Canada, pursuant to 19 CFR §102.11(b), the origin of the disassembled bearings will be Canada. Assuming the origin of the rail car is the U.S., pursuant to 19 CFR §102.11(b), the origin of the disassembled bearings will be the U.S. and no marking will be required; however, for purposes or preferential tariff treatment under the NAFTA, the country of origin of the disassembled bearings will be Canada, the last country in which the good was advanced in value or improved in condition before its return to the U.S. See 19 CFR §102.19(b). Assuming the origin of the rail car is not a NAFTA country, then pursuant to 19 CFR §102.19(a), the origin of the disassembled bearings will be Canada, the last country in which the bearings underwent production, provided a NAFTA Certificate of Origin is completed and signed for the bearing upon importation to the U.S.
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 Kenneth T. Brock at (646) 733-3009.
Sincerely,
Robert B. Swierupski
Director
National Commodity Specialist Division