91 North G. Ave.
Douglas, AZ 85607
RE: The country of origin and North American Free Trade Agreement (NAFTA) eligibility of electric motor stators from Mexico
Dear Mr. Corona:
In your letter dated October 26, 2018 you requested a country of origin and NAFTA determination for electric stators.
The merchandise under consideration consists of two electric motor stators identified as the Wound Stator Assembly, Part Number 20762/WS, and the Wound Stator Assembly, Part Number 837070-0004. You indicate that the both stators are assembled in Mexico from foreign and domestic components and suggest they qualify for preferential treatment under the NAFTA based on a regional value content (RVC) calculation.
Initially, we would note that the subject stators are properly classified under 8503.00.6500, Harmonized Tariff Schedule of the United States (HTSUS). Based on the bill of material information you have provided, all of the material that is used in the production of the stators is originating with respect to the NAFTA with the exception of the stator housing, which you indicate is manufactured in China and is classifiable under 8503.00.9560, HTSUS.
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.
With respect to General Note 12(b)(ii)(A), the applicable tariff shift rule under General Note 12(t) Chapter 85 states:
3. A change to heading 8503 from any other heading.
As stated above, you suggest the Wound Stator Assemblies qualify for preferential treatment under the NAFTA because the goods satisfy the regional value content requirements. However, General Note 12(t) for Heading 8503 does not provide for an RVC based qualification method and the stators must instead undergo a tariff shift. Based on the facts provided, the subject stators do not qualify for NAFTA preferential treatment because the stator housings, products of China, do not make the required tariff shift. Furthermore, the value of the housing for each stator assembly exceeds the maximum de minimus allowed.
With regard to the country of origin marking of the Wound Stator Assemblies, Section 304 of the 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 container) will permit in such a manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article. The regulations implementing the requirements and exception to 19 U.S.C. 1304 are set forth in Part 134, Customs and Border Protection Regulations (19 C.F.R. Part 134).
19 C.F.R. 134.1(b) provides as follows:
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" within the meaning of this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Since Mexico is a NAFTA country, the NAFTA Marking Rules must be applied in this case for determining the country of origin for purposes of marking.
Part 102, Customs and Border Protection Regulations (19 C.F.R. Part 102), sets forth the NAFTA Marking Rules. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes. See 19 C.F.R. 102.11. 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 applicable requirements of these rules are satisfied.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the stators are neither wholly obtained 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). "Foreign material" is defined in 19 C.F.R. 102.1(e) as "a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced." Since the Wound Stator Assemblies do not undergo the appropriate tariff shift, section 102.11(a)(3) does not apply.
Section 102.19 states that except in the case of a good of paragraph (b), if a good which is originating within the meaning of 181.1(q) of this chapter is not determined under section 102.11(a) or (b) to be a good of a single NAFTA country, the country of origin of the good is the last NAFTA country in which the good underwent processing other than minor processing. Under section 102.19, the country of origin of the Wound Stator Assemblies, Part Numbers 20762/WS and 837070-0004, is Mexico for marking purposes.
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 Karl Moosbrugger at firstname.lastname@example.org.
Steven A. Mack
National Commodity Specialist Division