CLA-2-94:OT:RR:NC:N4:433
Lisa Murrin
Expeditors Tradewin LLC.
3 Technology Drive
Peabody, MA 01960
RE: The tariff classification, country of origin, marking, North American Free Trade Agreement (NAFTA), and applicability of Section 301 trade remedies of a computer server cabinet from Mexico. Correction to Ruling Number N302029.
Dear Ms. Murrin:
This replaces Ruling Number N302029, dated December 18, 2018, which contained an omission regarding the applicability of Section 301 trade remedies. A complete corrected ruling follows.
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 applicable subheading for the cabinet is 9403.10.0040, Harmonized Tariff Schedule of the United States, (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.
Foxconn outlines two scenarios wherein the 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, inspected and additional assembly of Chinese component parts (side panels, castors, patch panels, clips, a busbar, and brackets) are performed by skilled technicians. The 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 the 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 occurs in Mexico. The cabinet will then be imported into the United States.
Country of Origin and Marking (Scenario 1 and 2)
Pursuant to 19 Code of Federal Regulations (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 an article in another country must effect a substantial transformation in order to render such other country the “country of origin.” Further, pursuant to 19 CFR 10.14(b) a substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character, or use.
However, for a good of a NAFTA country (Mexico, Canada), the NAFTA Marking Rules (set forth in 19 CFR 102) will determine the country of origin. Because the cabinet is manufactured in part in Mexico, a NAFTA country, the NAFTA origin marking rules will determine the country of origin.
Part 102.11(a)(3) of 19 CFR provides that for the purposes of determining the country of origin of imported goods other than textile and apparel products each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
Part 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, a change in tariff occurs for scenarios 1 and 2 as the material components undergo a substantial transformation to become a cabinet, taking on a new name, character, and identity. The country of origin is conferred in Mexico.
Part 134, of 19 CFR implements the country of origin marking requirements of 19 U.S.C. 1304. Unless excepted by law, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. As a product of Mexico, the cabinet is to be marked accordingly.
Trade Agreement – NAFTA (Scenario 1 and 2)
General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. To be an “originating good” the material components must be transformed in the territory of Mexico pursuant to GN12(b)(ii)(A)(t), HTSUS, which states:
Chapter 94, Rule 4,
(A) A change to subheadings 9403.10 through 9403.89 from any other chapter; or
(B) 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:
(1) 60 percent where the transaction value method is used, or
(2) 50 percent where the net cost method is used.
In both scenarios the material components from China and Mexico are classifiable outside of Section XX (miscellaneous manufactured articles), and a change in tariff occurs in Mexico as a result of manufacturing, therefore, the cabinet is eligible for NAFTA preferential duty treatment.
Furthermore, the cabinet is not subject to the Section 301 trade remedies as provided for under 9903.88.03, HTSUS.
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