MAR-2:OT:RR:NC:N2:206
Carlos A. Cianca
AutoZone Texas LLC
123 South Front Street
Memphis, TN 38103
RE: Country of origin marking and NAFTA eligibility of imported cores from Mexico.
Dear Mr. Cianca:
This is in response to your letter dated August 2, 2018, requesting a ruling regarding the country of origin marking of used auto parts (cores) and the eligibility for preferential tariff treatment under the North American Free Trade Agreement (NAFTA).
The items you are referring to as “cores” are certain motor vehicle components, such as a distributor cap, vacuum power brake boost, mass air flow sensor, hydraulic power brake booster, disc brake caliper, camshaft synchronizer, vacuum pump, Reman diesel injector and engine control module.
This office has requested a detailed description of each individual component to determine the proper classification of the products. However, you have not supplied that information. Instead, you state in your letter that the definition of a core is a damaged, but “re-manufacturable” automotive hard part such as brake parts (calipers, brackets, master cylinder and boosters), axles, distributors, starters, alternators, camshaft synchronizers, fuel pumps, smog pumps, water pumps, vacuum pumps, fuel injectors, diesel injectors, mass air flow sensors, and air conditioner (AC) compressors.
As a result, this office cannot make a classification determination for the cores at issue.
You state that the cores are removed from used vehicles in Mexico and imported into the United States to be repaired. In most cases, the country of origin of the vehicle or the core is unknown.
Article 401 of the NAFTA provides, in relevant part, that a good shall originate in the territory of a Party where: (b) each of the non-originating goods used in the production of the good undergoes an applicable change in tariff classification set out in Annex 401 as a result of production occurring entirely in the territory of one or more of the Parties, or the good otherwise satisfies the requirements of that Annex where no change in tariff classification is required... General Note (GN) 12, Harmonized Tariff Schedule of the United States (HTSUS), incorporates Article 401 of NAFTA into the HTSUS. GN 12(b) provides, in pertinent part: 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 (emphasis added), 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.
The recovered disassembled parts will not be eligible for NAFTA originating treatment as goods wholly obtained or produced entirely in a NAFTA territory pursuant to GN 12(b)(i).
Therefore production of the parts must satisfy tariff shift rules and meet other applicable requirements as prescribed in GN 12(b)(ii). Some of the rules have a regional value content (RVC) component, which may be applicable in the context of disassembly.
Since you have not provided this office with the correct classification of the cores or supplied enough information to make a classification determination, this office is unable to verify whether the disassembled parts (cores) meet the tariff shift from vehicle to the part or require an RVC evaluation.
Assuming that the change in tariff classification to each of these automotive parts from vehicles classified in headings 8703 or 8704 satisfies the tariff shift prescribed under GN 12(t) for each of the parts, then these cores will meet the applicable rules set forth in U.S. General Note 12(t) and will qualify as NAFTA originating goods, provided other applicable requirements are met. Under both Article 401 and GN 12, qualifying changes in tariff classification must take place by reason of “production”. Pursuant to §181.132, CBP Regulations (19 CFR §181.132), subject to certain exceptions, disassembly operations are to be considered as production in the context of applying the NAFTA tariff shift rules. The regulation provides as follows:
Treated as production. For purposes of implementing the rules of origin provisions of General Note 12, HTSUS, and Chapter Four of the NAFTA, except as provided in paragraph (b) of this section, disassembly is considered to be production, and a component recovered from a good disassembled in the territory of a Party will be considered to be originating as the result of such disassembly provided that the recovered component satisfies all applicable requirements of Annex 401 and this part.
Exception; new goods. Disassembly, as provided in paragraph (a) of this section, will not be considered production in the case of components that are recovered from new goods. For purposes of this paragraph, a “new good” means a good which is in the same condition as it was when it was manufactured and which meets the commercial standards for new goods in the relevant industry.
In this case the automotive components recovered by disassembly from used vehicles (and thus not from new goods) will be eligible to be considered as a NAFTA originating goods or materials provided that the recovered component satisfies the applicable GN 12(t) rule of origin and satisfies other applicable requirements.
Goods that qualify as NAFTA originating goods under the rules of origin must also, pursuant to GN 12(a)(i) [q]ualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (without regard to whether the good[s] are marked)... Section 102.11, CBP Regulations (19 CFR §102.11) sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) provides 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 set out in §102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.
The imported enumerated parts are neither "wholly obtained or produced," or "produced exclusively from domestic (Mexican) materials." Therefore, reference is made to §102.11(a)(3). Pursuant to §102.20, assuming that the enumerated parts disassembled from the vehicles do undergo a change in tariff classification in Mexico; however, changes in tariff classification resulting from dismantling or disassembly are considered non-qualifying operations. See 19 CFR 102.17(b). Accordingly, 19 CFR §102.11(b) of the hierarchical rules must next be applied. 19 CFR §102.11(b) provides as that where the country of origin cannot be determined under paragraph (a), 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.
As the cores are taken from used vehicles in Mexico, the single material that shall be taken into consideration is the used vehicle, the only one material from which a shift is not allowed. Therefore, the origin of the enumerated parts is based on the origin of the vehicle.
No information was provided on the origin of the used vehicles. Assuming the origin of the vehicle is not a NAFTA country, then pursuant to 19 CFR §102.19(a), the origin of the disassembled part will be Mexico, the last country in which the part underwent production, provided a NAFTA Certificate of Origin is completed and signed for the part upon importation to the U.S.
Production of certain used auto parts by disassembly in Mexico from used vehicles satisfies applicable rules of origin for treatment as originating goods, provided that the Center Director is satisfied that the parts meet the tariff shift and/or RVC requirements, as described in GN 12(b)(ii). With regard to country of origin marking, if the origin of the vehicle is Mexico or a non-NAFTA country, the parts qualify to be marked as goods of Mexico.
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, please contact National Import Specialist Liana Alvarez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division