CLA-2-39: OT: RR: NC: 4:434
Ms. Yenne Luu
Avery Products Corporation
50 Pointe Drive
Brea, CA 92821
RE: The marking, country of origin and status under the North American Free Trade Agreement (NAFTA) of plastic dividers from Mexico
Dear Ms. Luu:
In your letter, dated November 26, 2019, you requested a ruling on the marking, country of origin and status under the North American Free Trade Agreement for one style of pocketed plastic divider. Samples were submitted for review and will be returned, per your request.
FACTS:
The item under consideration is a packaged set of five polypropylene insertable plastic dividers with pockets and tabs (SKU# 7278211902000MX), each measuring approximately 9 ¼ ” by 11 1/8”. The dividers can be inserted into a notebook or binder by the ultimate consumer.
The dividers will first undergo manufacturing in China and then be further processed in Mexico.
In China, plastic sheets are cut to specific dimensions, including a diagonal cut delineating the top of the pocket. They are scored along the main bottom fold line, or “kiss-cut” line, and folded along the side edges to form an overlap where the edges will be sealed. A tab is pre-cut and folded, ready for sealing along its edge. The unfinished dividers are then sent to Mexico.
In Mexico, the unfinished divider is finished via the following steps: It is folded along its pre-scored “kiss-cut” bottom line, and the side edges are heat sealed together. The tab is folded and sealed as well. Three holes are punched along the left hand side. The dividers are collated into sets of five multi-colored tabbed dividers and packaged as such with a literature sheet and paper insert in a clear polypropylene bag. The paper elements and bag are sourced in Mexico. Finally, the sets are packed into a shipper case for export to the United States.
CLASSIFICATION:
Although you did not explicitly request a tariff classification ruling, in order to arrive at NAFTA eligibility, a tariff classification is necessary.
In your submission, you propose classification of the dividers in 3926.10.0000, Harmonized Tariff Schedule of the United States (HTSUS). This subheading provides for “Office or school supplies” (of plastic). We agree that the plastic dividers with pockets meet the parameters of goods classifiable within 3926.10.0000, HTSUS. The General column rate of duty is 5.3 percent ad valorem.
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 the World Wide Web at https://hts.usitc.gov/current.
NAFTA-LAW AND ANALYSIS:
General Note 12 (b), HTSUS, sets the criteria for determining whether a good is originating under the North American Free Trade Agreement (NAFTA). General Note 12 (b) 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;
For goods classified in heading 3926, General Note 12(t) requires: A change to subheadings 3926.10 through 3926.40 from any other heading, provided there is regional value content of not less than:
60% where the transaction value method is used
50 percent where the net cost method is used
As stated earlier in this ruling, the finished dividers (SKU# 7278211902000MX) are classified under subheading 3926.10.0000, HTSUS. Based on the manufacturing facts provided, the non-originating materials fail to undergo the required tariff shift of General Note 12(t). Although you propose that the unfinished dividers made in China are classifiable in heading 3920.20.0055 upon export to Mexico, we disagree. Per the Explanatory Notes to the Harmonized Tariff Schedule, to be classified as a sheet in headings 3920 or 3921 the product cannot be further worked. (i.e. ground edges, drilled, milled, hemmed, twisted, framed or cut into shapes other than rectangular). The unfinished dividers are far more than sheets of plastic, as they are cut to size and shape; they are not rectangular. Rather, in their condition upon leaving China, they possess the essential character of the finished dividers. Under General Rule of Interpretation 2(a), HTSUS, “Any reference to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article.” At time of export from China, the pre-cut, scored, partially folded product is classifiable in subheading 3926.10.0000, the same classification as when it leaves Mexico for the United States after finishing in Mexico. As a result, the goods described above do not qualify for NAFTA preferential treatment.
COUNTRY OF ORIGN AND MARKING:
You have also requested a ruling on country of origin and marking.
The marking statute, 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 and exceptions of 19 U.S.C. 1304.
The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the North American Free Trade Agreement, as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat 2057) (December 8, 1993) and the appropriate Customs Regulations. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Part 102 of the Customs Regulations, the NAFTA Marking Rules. Because the plastic dividers are processed in Mexico prior to importation into the United States, we apply the NAFTA Marking Rules.
Part 102 of the regulations set forth the hierarchy for determining country of origin for marking purposes. Section 102.11(a) 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 as set out in section 102.20 and satisfies any other applicable requirements of that section.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the imported dividers are neither wholly obtained or produced nor produced exclusively from “domestic” materials. Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3) which requires that each foreign material incorporated into the good undergoes a change in tariff classification set out in Section 102.20. The applicable rule for subheading 3926.10.0000, HTSUS, requires:
A change to heading 3922 through 3926 from any other subheading, including another heading within that group, except for a change to heading 3926 from articles of apparel and clothing accessories, other articles of plastics, or articles of other materials of headings 3901 to 3914 of heading 9619.
Since both the Chinese origin material and the finished plastic dividers are classified in 3926.10.0000, HTSUS, the aforementioned rule is not met and the dividers retain their Chinese country of origin.
You propose several options for marking the products, “Made in Mexico,” “Product of Mexico from foreign components,” “Assembled in Mexico,” or “Assembled in Mexico from foreign components.”
The country of origin for marking purposes is China. The acceptable marking for the goods will be “Made in China” 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 Charlene Miller at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division