CLA-2-94:OT:RR:NC:N4:433

Jeremy Page
Page Fura, P.C.
939 W. North Avenue, Suite 750
Chicago, Illinois 60642

RE: The United States-Mexico-Canada Trade Agreement (USMCA), country of origin marking, and the applicability of Section 301 trade remedy of an automotive seat frame.

Dear Mr. Page:

In your letter dated May 11, 2021, on behalf of Yanfeng Seating Mexico S.A. de C.V., you request a USMCA and country of origin marking ruling for an automotive seat frame. The request also seeks confirmation that the seat frame is not subject to China Section 301 duties. In lieu of samples, illustrative literature, a product description, and manufacturing processes were provided.

The item subject of this ruling request is constructed of foreign and domestically sourced raw materials. A description of the item immediately follows.

The "Automotive 3rd Row Backrest Seat Frame," is a metal frame seat structure. The seat structure is comprised of an independent left passenger backrest and an independent right passenger backrest in which both components are affixed to a single pivot base. The structure contains no upholstery, no cushions, no seat base, legs, or armrests. The seat structure will be permanently incorporated into the 3rd row of an automobile according to Original Equipment Manufacturer (OEM) specifications.

You state the subject merchandise is classified in subheading 9401.90.1085, Harmonized Tariff Schedule of the United States (HTSUS).

The applicable subheading for the subject merchandise will be 9401.90.1085, (HTSUS), which provides for "Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof: Parts: Of seats of a kind used for motor vehicles: Other."

Sourcing Scenario

The ruling request outlines an operation where (2) metal components are sourced from Japan and (33) metal components are sourced from China. The components are shipped and exported to Mexico. An additional (17) metal components are sourced from Mexico. Collectively, the seat frame is constructed of 33 discrete components comprising 52 total pieces. In Mexico, manufacture entails joining, arc welding, and integration in a specific order using jigs and other tools; each operation results in a more complex subassembly for subsequent incorporation onto the exterior structural frame. Step 1 creates the left- and right-hand recliner assembly. Step 2 incorporates bracket stiffeners as well as the left- and right-hand bracket arms. Step 3 incorporates a range of additional brackets and infrastructure components for rigidity. Step 4 incorporates a tube and actuator pan. Step 5 incorporates the right passenger vertical backrest assembly and the left passenger vertical backrest assembly onto a pivot base and adjoining pivot base brackets. The final article is a unified 3rd row seat frame subassembly comprising an independent left passenger backrest and an independent right passenger backrest in which both are affixed to a single pivot base.

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.[1] 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 9401.90. 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.

A tariff shift occurs with 12 of the foreign origin Chinese material components; they are classified in a subheading other than 9401.90, HTS, at the time of importation into Mexico. A tariff shift does not occur with 5 of the foreign origin Chinese material components; they are classified in subheading 9401.90, HTS, at the time of importation into Mexico. A tariff shift does not occur with 2 of the foreign origin Japanese material components; they are classified in subheading 9401.90, HTS, at the time of importation into Mexico. The requisite tariff shift rule under GN 11(o), Rule 2 to Chapter 94, HTSUS, is not met.

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."[2]

To allow for a more seamless transition period, at this time, CBP continues to utilize the marking rules set forth in 19 C.F.R. Part 102, with the exception of 19 C.F.R. 102.19, for purposes of country of origin marking with respect to goods 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.[3] 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 9401.90, states:

A change to subheading 9401.90 from any other heading, except from subheading 9403.90.

The subject merchandise incorporates 2 discrete components (3R recliner, 2R recliner) of Japanese origin and 5 discrete components (Tether wire, Pivot shaft, Fix tube, LH belt guide wire, RH belt guide wire) of Chinese origin classified in heading 9401, HTSUS, the tariff shift requirement of section 102.11(a)(3) is not met. 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 Y 3R 7S RH and the Y 3R 7S LH seat components of Mexican origin, the 3R and 2R recliner components of Japanese origin, and the tether wire, pivot shaft, fix tube, LH belt guide wire, and RH belt guide wire 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.

Of the parts that do not undergo the applicable tariff shift requirement, no single item imparts the essential character. None of these parts individually contribute 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.

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).

Based on the facts provided, the operations performed in Mexico constitute more than "minor processing" and exceed "simple assembly," Rule (1) and Rule (2) of 102.11(d) is 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 Automotive 3rd Row Backrest Seat Frame 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.[4] 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.[5] This determination is based on the totality of the evidence.[6]

In the instant case, the foreign Chinese components, the foreign Japanese components, and the domestic Mexican material components lose their identity in Mexico and undergo a substantial transformation, thereby, taking on a new name, character, and identity. The joining, arc welding, processing, and combining of individual components into more substantial subcomponents that are then integrated into a larger more complex subassembly is distinguishable from the individual components sourced from China, Japan, and Mexico. In view of these facts, the Automotive 3rd Row Backrest Seat Frame 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 on the World Wide Web at https://hts.usitc.gov/current.

This ruling is being issued under the provisions of Part 177 of the Customs 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 19 C.F.R. 177.9(b)(1). In the event that the facts or merchandise are modified in any way, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and you should resubmit for a new ruling in accordance with 19 C.F.R. 177.2.

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 Dharmendra Lilia at dharmendra.lilia@cbp.dhs.gov.

Sincerely,

Steven A. Mack
Director
National Commodity Specialist Division


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[1] USMCA Implementation Act - Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. 4511(a)).
[2] Marking - United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 (1940).
[3] Country of origin for marking purposes - See 19 C.F.R. 102.11.
[4] Substantial Transformation - See HQ H301494 (Oct. 29, 2019), HQ H301619 (Nov. 6, 2018); and Belcrest Linens v. United States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984) (stating that "the term 'product of' at the least includes manufactured articles of such country or area" and that substantial transformation "is essentially the test used...in determining whether an article is a manufacture of a given country").
[5] Substantial Transformation - See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (1940) (setting forth the three main factors for a substantial transformation determination).
[6] Substantial Transformation - 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).