CLA-2-94:OT:RR:NC:N5:433
Jeremy Page
Page Fura, P.C.
939 W. North Avenue, Suite 750 Chicago, IL 60642
RE: The United States-Mexico-Canada Trade Agreement (USMCA), country of origin marking, and the applicability of Section 301 trade remedy of an automobile seat component.
Dear Mr. Page:
In your letter dated September 12, 2023, on behalf of Keiper Seating Mechanisms Co., Ltd., you request a USMCA and country of origin marking binding ruling for an automobile seat track assembly. The request also seeks confirmation that the automobile seat track assembly is not subject to China Section 301 duties. In lieu of samples, illustrative literature, a product description, and manufacturing processes were provided.
The item that is the subject of this ruling request is constructed of foreign sourced raw materials. A description of the item immediately follows.
The “Track3000 Assembly” is a seat component constructed of metal and plastic that will be permanently affixed to the metal frame of an automobile seat. Documentation provided states “the assembly will serve two functions: (1) speed-controlled horizontal movement of an automotive seat through the conversion of motor rotation to the track system; and (2) longitudinal strength through the joinder of the car body to the seat to ensure passenger safety.” The assembly contains no upholstery, cushions, seat foundation, backrest, legs, or armrests. The assembly will be incorporated into the front and second seat rows of motor vehicles, according to Original Equipment Manufacturer (OEM) specifications.
The applicable subheading for the subject merchandise will be 9401.99.1085, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof: Parts: Other: Of seats of a kind used for motor vehicles: Other.”
Sourcing Scenario:
The ruling request outlines an operation where (16) metal components (upper track, front bracket spindle, locating pin, wire harness bracket, 10mm spacer, 12mm spacer, lower rail, outer front bracket, outer rear bracket, ball, gear box, spindle, screw washers (2), spindle nut assembly, bolt, spring pin) and (2) plastic components (ball cage, bracket) are sourced from China. In China, these components were produced through cold forming, diecasting, injection mold, machining, and stamping manufacturing operations. The components are shipped and exported to Mexico. No additional components are sourced in Mexico. Collectively, each assembly unit is constructed of 18 discrete components comprising 19 total pieces. The production process undertaken in Mexico follows.
Arc-welding and joining of the upper track and the front bracket spindle to form the upper track subassembly.
Laser-welding and combining of the outer front bracket and the outer rear bracket to form the upper rail subassembly.
Project welding and joining of the locating pin, wire harness bracket, 10MM spacer, 12MM spacer, and the lower rail to form the lower rail subassembly.
Joining of the ball cage and ball to form the ball cage subassembly.
The “track marriage assembly” entails the combining, lubrication, bending, alignment and multiple sub-operations of the upper rail subassembly, the ball cage subassembly, and the lower rail subassembly to ensure free movement of the ball stop. The resulting unified subassembly is then gauged and supplemental bending occurs prior to final assembly.
Combining of the gearbox, spindle, screw washer, and the spindle nut assembly through pressing operations to form the horizontal transmission assembly.
Combining of the horizontal transmission subassembly, bolt, spring pin, and plastic bracket to form the final unified automobile seat track assembly. The automobile seat track assembly will then be greased, tested and packaged for onward shipment to Keiper's customer.
Each unassembled component is integrated in a specific sequence and each operation results in a more complex subassembly. The final article is a unified seat track assembly component. Information provided cites the design and development period is between 6 months to 2 years.
Eligibility for preferential treatment under the USMCA:
The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act. General Note (GN) 11 of the HTSUS implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if -
i. the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
ii. the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
iii. the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or…
The subject merchandise contains non-originating materials, therefore it is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i). Moreover, under GN 11(b)(ii), the subject merchandise is not a good produced entirely in Mexico, exclusively from originating materials. Therefore, we must next determine whether the non-originating materials undergo the tariff shift and other requirements provided for in GN 11(b)(iii) and GN 11(o).
The applicable rule of origin for merchandise under subheading 9401.99 HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
Chapter 94
…2. A change to subheading 9401.90 from any other heading.
As an initial matter, the following “Compiler’s Note” is identified in part on page 2 of the General Notes (GN) of the HTSUS (2023) (Rev. 10):
“COMPILER’S note: Multiple sets of changes to the Harmonized System have caused heading and subheading numbers and product coverage in some rules of origin for free trade agreements to be inconsistent with those in current tariff schedule chapters. Negotiations are required to enable agreement partners to update each text, plus domestic actions to implement agreed changes. As a result, the rules of origin provisions for certain United States free trade agreements have NOT been updated since major changes to the HTS were proclaimed. Where not updated for HS changes, be aware that the rule you try to apply may contain HTS numbers as in effect in 2002, 2007 or 2012. You can find U.S. proclamations updating rules in the Federal Register (see annexes for operative language). Changes in rules of origin reflecting HS 2022 modifications are generally not yet negotiated and proclaimed for FTAs.”
Based on the documentation submitted, a tariff shift occurs with 14 of the discrete foreign origin Chinese material components; they are classified in a subheading other than 9401.99, HTS, at the time of importation into Mexico. A tariff shift does not occur with 4 of the discrete foreign origin Chinese material components; they are classified in subheading 9401.99, HTS, at the time of importation into Mexico. Therefore the requisite tariff shift rule under GN 11(o), Rule 2 to Chapter 94, HTSUS, is not met. In view of these facts, the subject merchandise described above does not qualify for USMCA preferential tariff treatment.
Country of Origin Marking:
The marking statute, Section 304(a), Tariff Act of 1930, as amended (19 U.S.C. § 1304(a)), provides that unless excepted, 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 manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” (See United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940).
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico.
Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. Applied in sequential order, the required hierarchy establishes that:
The country of origin of a good is the country in which:
(a)(1) The good is wholly obtained or produced; (a)(2) The good is produced exclusively from domestic materials; or (a)(3) 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 requirements of these rules are satisfied.
As the subject merchandise is not wholly obtained or produced in a single country, Rule (1) of § 102.11(a)(1) is inapplicable.
As the subject merchandise is not produced exclusively from domestic materials, Rule (2) of § 102.11(a)(2) is inapplicable. Accordingly, Rule (3) applies.
Section 102.20 sets forth specific rules by tariff classification. The pertinent tariff shift rule for subheading 9401.99, states:
A change to subheading 9401.91 through 9401.99 from any other heading, except from
subheading 9403.91 through 9403.99.
The subject merchandise incorporates 4 discrete components (gear box, spindle nut assembly, lower rail, upper track) of Chinese origin classified in heading 9401, HTSUS, therefore, the tariff shift requirement of section 102.11(a)(3) is not met. As Section 102.11(a) has not produced a country of origin determination, we turn to section 102.11(b) of the regulations.
Section 102.11.(b) provides: Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section: (1) 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, or
When determining the essential character of a good under 19 C.F.R. § 102.11, 19 C.F.R. § 102.18(b)(1) provides that only domestic and foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good shall be taken into consideration. In this case, the materials that do not undergo the applicable tariff shift are the gear box, spindle nut assembly, lower rail, and upper track components of Chinese origin.
Section 102.18(b)(2), Customs Regulations (19 C.F.R. § 102.18(b)(2)), provides:
For purposes of determining which one of two or more materials described in paragraph (b)(1) of this section imparts the essential character to a good under § 102.11, various factors may be examined depending upon the type of good involved. These factors include, but are not limited to, the following:
(i) The nature of each material, such as its bulk, quantity, weight or value; and
(ii) The role of each material in relation to the use of the good.
Information provided by your office states, “As assembled, the finished unit represents an automotive seat track assembly; however, as individual components, no single component can be said to represent the essential character of the final good. Instead, it is only once the components are brought together through the previously discussed manufacturing process that the identity and function of the components overall becomes apparent.” We concur. Of the parts that do not undergo the applicable tariff shift requirement, no single item imparts the essential character. None of these parts individually contributes significantly to the purpose of the subject merchandise. Therefore, 19 C.F.R. § 102.11(b) cannot be used to determine the country of origin, we turn to section 102.11(c) of the regulations.
Section 102.11.(c) provides: Where the country of origin cannot be determined under paragraph (a) or (b) of this section and the good is specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture or composite good pursuant to General Rule of Interpretation 3, the country of origin of the good is the country or countries of origin of all materials that merit equal consideration for determining the essential character of the good.
Plastic and metal are the materials that merit equal consideration; however, they do not aid in a determination of the essential character of the good. The subject merchandise cannot be determined by application of 19 C.F.R. § 102.11(c), as it is not specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture, or composite good pursuant to General Rule of Interpretation 3. Accordingly, we turn to section 102.11(d) of the regulations. Where the country of origin of a good cannot be determined under paragraph (a), (b), or (c) of this section, the country of origin of the good shall be determined as follows:
(1) If the good was produced only as a result of minor processing, the country of origin of the good is the country or countries of origin of each material that merits equal consideration for determining the essential character of the good;
(2) If the good was produced by simple assembly and the assembled parts that merit equal consideration for determining the essential character of the good are from the same country, the country of origin of the good is the country of origin of those parts; or
(3) If the country of origin of the good cannot be determined under paragraph (d)(1) or (d)(2) of this section, the country of origin of the good is the last country in which the good underwent production.
“Minor processing” is defined in 19 C.F.R. § 102.1(m). “Production” is defined in 19 C.F.R. § 102.1(n). “Simply assembly” is defined in 19 C.F.R. § 102.1(o).
In view of the facts provided, the operations performed in Mexico constitute more than “minor processing” and exceed “simple assembly,” therefore Rule (1) and Rule (2) of § 102.11(d) are inapplicable. Mexico is the last country in which the subject merchandise underwent manufacturing, processing, and assembly; these operations constitute production. In accordance with 19 C.F.R. § 102.11(d), Rule (3), the country of origin of the “Track3000 Assembly” for origin and marking purposes is Mexico.
Section 301 Trade Remedy:
The substantial transformation analysis is applicable when determining the country of origin for purposes of applying Section 301 trade remedies. (See HQ H301494 (Oct. 29, 2019); HQ H301619 (Nov. 6, 2018); and Belcrest Linens v. Unites States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984). The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. (See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (1940)). This determination is based on the totality of the evidence. (See National Hand Tool Corp. v. United States 16 Ct. Int’l Trade 308, 312 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In the instant case, the foreign Chinese components lose their identity in Mexico and undergo a substantial transformation, thereby, taking on a new name, character, and identity. The joining, pressing, assembly, attaching, greasing, loading, laser welding, re-striking, insertion and placement, alignment, and positioning of individual components into more substantial subcomponents that are then integrated into a larger more complex subassembly that is distinguishable from the individual components sourced from China. After final assembly manufacturing operations, the complete seat track assembly is then laser-marked with a part number. The seat track assembly is manufactured to an extent that none of the individual components alone can perform (1) the “speed controlled horizontal movement of an automotive seat through the conversion of motor rotation to the track system” or (2) the “longitudinal strength through the joinder of the car body to the seat to ensure passenger safety” functionality. Only through the integration of the material components into a more substantial subassembly is the functional end product created. In view of these facts, the Track3000 assembly is not subject to the additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation into the United States.
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 at https://hts.usitc.gov/current.
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection Regulations (19 C.F.R. 177).
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
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