CLA-2-:94:OT:RR:NC:N4:433
Brian Kavanaugh
Trade Advisor
Deringer Logistics Consulting Group
173 West Service Road
Champlain, NY 12919
RE: The tariff classification of “Ottoman Queen Storage Bed” from Canada; North America Free Trade Agreement (NAFTA) eligibility; and proper country of origin.
Dear Mr. Kavanaugh:
In your letter dated October 14, 2014, on behalf of South Shore Industries, you requested a tariff classification ruling, NAFTA eligibility, and country of origin determination, for an Ottoman Queen Storage Bed. Descriptive and Illustrative literature were provided.
Model number 3107 is marketed and advertised as the South Shore, Ottoman Queen Storage Bed. By definition the merchandise concerned is not a true ottoman, as it is not a piece of furniture that has a soft top used for resting your feet upon, also known as a footstool, or a piece of furniture with no back that has a soft top used as a seat, often having space inside where things can be stored. For purpose of this ruling the merchandise concerned will be classified as a storage bed classifiable in heading 9403 of the Harmonized Tariff Schedule of the United States (HTSUS) over that of a seat that converts into a bed of heading 9401, HTSUS.
The Ottoman Queen Storage Bed is comprised of: a wooden bed platform made from particle board and Medium-density Fibreboard (MDF) produced in Canada; a mattress support consisting of a metal support frame with wooden cross slats and metal hardware produced in China; and a lifting mechanism for the mattress support consisting of lifting arms, gas struts and hardware to attach to the bed and mattress support produced in China. All of the items are shipped together from Canada to the United States in unassembled condition.
The applicable subheading for the Ottoman Queen Storage Bed will be 9403.50.9045, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Other furniture and parts thereof: Wooden furniture of a kind used in the bedroom: Other: Beds: Other.” The rate of duty will be free.
To be eligible for tariff preferences under NAFTA, goods, must be “originating goods” within the rules of origin in General Note 12 (b), HTSUS. In this instance, to be an “originating good” the Ottoman Queen Storage Bed must be transformed in the territory of Canada pursuant to General Note 12 (b) (ii), (A) and (B), which states: (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.
In examining whether or not the Ottoman Queen Storage Bed is transformed in the territory of Canada, the NAFTA tariff shift rule of origin, as provided in General Note 12 (t), Chapter 94, Note 4 to the HTSUS, is applicable. The rule states at: (A), A change to subheading 9403.10 through 9403.89 from any other chapter and (B), A change to subheading 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 (1) – 60 percent where the transaction value method is used, or (2) – 50 percent where the net cost method is used.
No itemized bill of materials or bills of materials, identifying component parts, costs of those components and country of origin of those components, was provided for the mattress support or lifting mechanism. Consequently, the entire mattress support and lifting mechanism will be considered foreign and of Chinese origin, while the wooden bed platform is originating as it is a product of Canada. Both the mattress support and lifting mechanism of Chinese origin are classifiable as parts of furniture in subheading 9403.90, HTSUS, and therefore do not meet the tariff shift rule of origin, as they are classified in Chapter 94, HTSUS, nor are the values of the non-originating materials for the mattress support and lifting mechanism De-minimis in accordance with General Note 12 (f), HTSUS. Accordingly, General Note 12 (t), Chapter 94, Note 4 rule (A), HTSUS, is not met.
We turn to General Note 12 (t), Chapter 94, Note 4 rule (B), HTSUS, to determine if the Ottoman Queen Storage Bed satisfies a regional value content requirement. Company provided information appears to indicate that the Canadian producer South Shore Furniture and importer South Shore Industries are related. No information was produced to determine if a viable transaction value could be established [see section 402 (b) of the Tariff Act of 1930, as amended by 19 USC 1401 (b)], and until such time one can be established, we will only accept a regional value content based upon net cost calculations. Additional company provided information indicates that the Ottoman Queen Storage Bed exceeds the 50% net cost requirement. Upon confirmation of: the costs of the originating Canadian particle board and MDF; the cost of the non-originating materials of the bed platform and lifting mechanism; and the product costs, period cost and other cost, as well as other net cost variables, the merchandise concerned satisfies Note 4 rule (B) above, and is therefore eligible for NAFTA preferential duty treatment.
Part 134, Customs Federal Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. In Section 134.1 (b), the country of origin of an article is defined as the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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 for country of origin marking purposes. 19 CFR 134.1 (b) is not applicable for NAFTA goods, as country of origin will be determined in accordance with 19 CFR 102 – Rules of Origin.
19 CFR, Section 102.20, “specific rule by tariff classification,” states: for 9403.10-9403.89 – A change to subheading 9403.10 through 9403.89 from any other subheading outside that group, except from subheading 9401.10 through 9403.89, and except from subheading 9401.90 and 9403.90 when that change is pursuant to General Rule of Interpretation 2 (a). Because the Ottoman Queen Storage Bed is imported in unassembled condition and is classified in accordance with General Rule of Interpretation 2 (a), both the bed platform and lifting mechanism classified in subheading 9403.90, HTSUS, do not meet the specific rule by tariff classification above.
In spite of failing to meet the specific rule by tariff classification above, 19 CFR 102.19, NAFTA Preference Override, provides an exception to the rules under19 CFR 102.20. 102.19 states: (a) Except in the case of goods covered by paragraph (b) of this section (not applicable), 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, provided that a Certificate of Origin (see 181.11 of this chapter) has been completed and signed for the good. 19 CFR 181 (q) states: Originating, when used with regard to a good or a material, means a good or material which qualifies as originating in the United States, Canada and/or Mexico under the rules set forth in General Note 12, HTSUS, and in the appendix to this part. We find that the manufacturing and assembling of the wooden bed platform in Canada is beyond minor processing as defined in 19 CFR 102.1(m). With case in point, the Ottoman Queen Storage Bed is a product of Canada.
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/.
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, contact National Import Specialist Neil H. Levy at E-mail address: [email protected].
Sincerely,
Gwenn Klein Kirschner
Director
National Commodity Specialist Division