Mr. Brian Kavanaugh
Deringer Logistics Consulting Group
1 Lincoln Boulevard, Suite 225
Rouses Point, NY 12979
RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA), of leather trimmings from Canada; Article 509
Dear Mr. Kavanaugh:
In your letter dated July 26, 2005, on behalf of Carroll Companies, Scrap Leather Division, 278 Industrial Park Drive, Boone, NC, you requested a ruling on the status of leather trimmings from Canada under the NAFTA. Your letter was received in our office on August 3, 2005, and was a follow-up to an earlier inquiry in response to which we requested additional information.
You submitted a small box of assorted pieces of leather, of varying sizes from small strips to pieces roughly 27 inches long by 3 inches wide, which will be imported into the United States from Canada. These leather pieces are left over after the Canadian furniture manufacturers make the covers for sofas, chairs, recliners, etc. Your letter indicated the pieces cannot be used in the manufacture of composition leather but they could be used in the manufacture of change purses, gloves or other small leather articles in China and Hong Kong. You stated the leather used to manufacture the Canadian furniture could have been produced or finished at tanneries/finishing plants in many different countries, such as the United States, Mexico, Italy, Argentina, Brazil, Germany or China. According to your letter, the leather is imported into Canada as finished upholstery leather and no further processing is done in Canada other than making the finished furniture. Specifications were not provided concerning the exact nature of the leather imported into Canada and no laboratory analysis has been done to verify all the trimmings are indeed bovine, split grain upholstery leather. For purposes of this letter it will be assumed that the leather imported into Canada was bovine, not whole hides or skins, grain splits, principally used as upholstery leather. If you determine these assumptions are not correct, or that the leather imported into Canada was already cut into shapes from a pattern, you would need to request a binding ruling covering these facts. Since the leather trimmings in their imported state, being the subject of this ruling request, are not of the class or kind of merchandise principally used as upholstery leather they are not classified as you propose in subheading 4107.92.5000, HTSUSA.
You have also proposed classification of these leather trimmings in tariff subheading 4115.20.0000, which provides for “parings and other waste of leather or of composition leather, not suitable for the manufacture of leather articles; leather dust, powder and flour.” In understanding the language of the HTSUSA, the Explanatory Notes (EN) of the Harmonized Commodity Description and Coding System may be utilized. The ENs, although not dispositive or legally binding, provide a commentary on the scope of each heading, and are generally indicative of the proper interpretation of the HTSUS. The EN to heading 41.15 (II) (1) states the heading covers “Parings and other waste of leather …resulting from the manufacture of leather goods, suitable for the production of composition leather or glue, etc., or for use as fertilizers.” It goes on to state “Scrap pieces of leather and worn out leather goods… capable of being used in the manufacture of leather goods are classified as leather in the appropriate heading (headings 41.07 or 41.12 to 41.14).” Based on the information you provided, that the leather trimmings would be exported by Carroll Companies to China and Hong Kong where they could be used in the manufacture of small leather articles, subheading 4115.20.0000 does not apply.
The applicable tariff provision for the leather trimmings will be 4107.92.7090, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), which provides for Leather further prepared after tanning or crusting, including parchment-dressed leather, of bovine (including buffalo) or equine animals, without hair on, whether or not split, other than leather of heading 4114: Other, including sides: Grain Splits: Other; Other: Other. The general rate of duty will be 5 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, 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; or
(iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the nonoriginating materials falling under provisions for "parts" and used in the production of such goods does not undergo a change in tariff classification because--
(A) the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a), or
(B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the goods themselves and their parts,
provided that such goods do not fall under chapters 61 through 63, inclusive, of the tariff schedule, and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note.
Based on the facts provided, the leather imported into Canada that was produced or finished in tanneries/finishing plants in the United States and Mexico described above qualify for NAFTA preferential treatment, because they will meet the requirements of HTSUSA General Note 12(b)(i) or (ii). These particular goods will therefore be entitled to a Free rate of duty under the NAFTA upon compliance with all applicable laws, regulations, and agreements.
Based on the facts provided, the leather imported into Canada that was produced or finished in tanneries/finishing plants in the Italy, Argentina, Brazil, Germany, China described above does not qualify for preferential treatment under the NAFTA because none of the above requirements are met.
In your letter you also suggest these leather trimmings may qualify for NAFTA originating good by application of GN 12 (n)(ix)(A). This note states, in part;
As used in subdivision (b)(i) of this note, the phrase “goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States” means—
(ix) waste and scrap derived from—
production in the territory of one or more of the NAFTA parties,…
The general meaning of waste and scrap, in Webster’s New Riverside University Dictionary is as follows; scrap – 3) discarded waste material, esp. metal suitable for reprocessing and waste n. 4.a) a worthless or useless by-product. Based on the assorted pieces of leather trimmings you have submitted for review by this office, it has been determined that the majority of the trimmings appear to be suitable, in their current state, to be used to manufacture various small leather articles. Therefore, these trimmings would not qualify as originating good under NAFTA GN 12 (n)(ix)(A).
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 Deborah Walsh at 646-733-3044.
Should you wish to request an administrative review of this ruling, submit a copy of this ruling and all relevant facts and arguments within 30 days of the date of this letter, to the Director, Commercial Rulings Division, Headquarters, U.S. Customs and Border Protection, 1300 Pennsylvania Ave. N.W., (Mint Annex), Washington, D.C. 20229.
Robert B. Swierupski