MAR-2-39:OT:RR:NC:N4:415
Ms. Lori Kathryn Paterson
PopSockets, LLC
5757 Central Avenue
Boulder, CO 80301
RE: The country of origin of the PopLips PopGrip.
Dear Ms. Paterson:
In your letter dated August 28, 2019, you requested a country of origin ruling.
A sample was submitted and will be returned separately.
The merchandise under consideration is described as the “PopLips PopGrip,” which is a composite good that includes a “PopSockets” grip and a lip balm compact. A container of lip balm is included with the product and is later loaded into the compact by the end customer. This product primarily functions as a collapsible grip and stand when attached, using adhesive, to the back of a cellphone.
In your submission, you indicated that the grip is manufactured in China, and the lip balm is manufactured in the United States. The “PopSockets” grip is first imported into the United States. They are then shipped separately to the maquiladora in Mexico. In Mexico, the grip and lip balm pan are combined into the retail packaging and then shipped back to the United States for sale.
The “country of origin” is defined in 19 CFR 134.1(b) as “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 to determine the country of origin for purposes of marking. 19 C.F.R. § 102.11 sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. 19 C.F.R. § 102.11(a) provides that the country of origin of a good is the country in which:
The good is wholly obtained or produced; The good is produced exclusively from domestic materials; or 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 applicable requirements of these rules are satisfied.
“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.” As previously noted, because the “PopLips PopGrip” is processed in Mexico from foreign materials, it is neither wholly obtained or produced (19 C.F.R. § 102.11(a)(1)), nor produced exclusively from domestic materials (19 C.F.R. § 102.11(a)(2)). Accordingly, 19 C.F.R. § 102.11(a)(3) is the applicable rule that must next be applied to determine the origin of the “PopLips PopGrip” for marking purposes. In order to determine whether Mexico is the country of origin, we must look at those materials whose country of origin is other than Mexico. The “PopLips PopGrip” would be classified under subheading 3926.90.99, Harmonized Tariff Schedule of the United States (HTSUS). Pursuant to 19 C.F.R. § 102.20(g), the applicable tariff shift rule is as follows:
A change to heading 3922 through 3926 from any other subheading, including another heading within that group, except for a change to heading 3926 from articles of apparel and clothing accessories, other articles of plastics, or articles of other materials of headings 3901 to 3914 of heading 9619.
Pursuant to 102.17, the “PopLips PopGrip,” as the grip and balm are only packaged in Mexico, the requisite change in tariff classification does not occur. Because 19 C.F.R. § 102.11(a)(1)-(3) is not determinative of origin, the analysis continues to 19 C.F.R. § 102.11(b) which provides in pertinent part:
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…
As this product is deemed to be a composite article, and both the plastic components and lip balm are important, the next step in the hierarchy is 102.11(d). As this packaging is a simple operation, pursuant to 19 CFR § 102.11(d)(1), the country of origin, for marking purposes, will be China and the United States. Whether an article may be marked with the phrase "Made in the USA" or similar words denoting U.S. origin is an issue under the authority of the Federal Trade Commission (FTC). We suggest that you contact the Federal Trade Commission, Division of Enforcement, 6th and Pennsylvania Avenue, NW, Washington, D.C. 20508, as to whether the proposed markings satisfy their requirements. The provided packaging example indicting “Parts made in China” and “Balm made in USA” would be considered acceptable.
However, the substantial transformation test governs the application of Section 301 duties. See, Headquarters Ruling (HQ) H301619, dated November 6, 2018. Similar to the NAFTA Marking Rules, as the grip and balm will not undergo a substantial transformation in China, the grip will remain a product of China. Typically, this merchandise would be subject to Section 301 duties, but U.S. Note 20(r) to subchapter III of chapter 99 provides the following information on the applicability of List 4 Section 301 measures:
The additional duties imposed by heading 9903.88.15 do not apply to goods for which entry is properly claimed under a provision of chapter 98 of the HTSUS, except for goods entered under subheadings 9802.00.40, 9802.00.50, and 9802.00.60, and heading 9802.00.80. For subheadings 9802.00.40, 9802.00.50, and 9802.00.60, the additional duties apply to the value of repairs, alterations, or processing performed abroad, as described in the applicable subheading. For heading 9802.00.80, the additional duties apply to the value of the article less the cost or value of such products of the United States, as described in heading 9802.00.80.
As the Chinese component is originally entered into the United States and then re-imported, we consider the application of subheading 9801.00.10, HTSUS, for section 301 duties not to be applicable.
Section 904(b) of the Trade Facilitation and Trade Enforcement Act of 2015 (Pub. L. 114-125, February 24, 2016) amended subheading 9801.00.10, HTSUS, to include any products which are returned within 3 years after having been exported. Previously, subheading 9801.00.10, HTSUS, applied only to products of the United States. Subheading 9801.00.10, HTSUS, now provides for the duty-free treatment of:
Products of the United States when returned after having been exported, or any other products when returned within 3 years after having been exported, without having been advanced in value or improved in condition by any process of manufacture or other means while abroad.
Section 10.1, U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. § 10.1) sets forth the documentary requirements for entry under subheading 9801.00.10, HTSUS. We note that CBP has not yet amended the regulations to implement the change to subheading 9801.00.10, HTSUS. While portions of the regulations are no longer pertinent, some portions of 19 C.F.R. § 10.1 still remain valid. For example, 19 C.F.R. § 10.1(a)(1) requires the foreign shipper to declare the following information with regard to articles in a shipment valued over $2,500: the port of exportation, the date of exportation, the quantity, the description of the merchandise, the value of the merchandise, the date of the declaration, and whether the articles were returned without having been advanced in value or improved in condition by any process of manufacture or other means. As the plastic components are of Chinese origin, they must be returned to the United States within three years in order to qualify under subheading 9801.00.10, HTSUS. Accordingly, the remaining issue is whether the goods are “advanced in value or improved in condition by any process of manufacture or other means” when they are packaged for retail sale in Mexico. The courts have consistently held that the mere packaging of an item does not constitute “advance[ing] in value or improv[ing] in condition” for purposes of subheading 9801.00.10, HTSUS. For example, in John v. Carr & Sons, Inc. v. United States, 69 Cust. Ct. 78, C.D. 4377, 347 F. Supp. 1390 (1972), aff’d 61 CCPA 52, C.A.D. 1118, 496 F.2d 1225 (1974), the court held that U.S.-origin fish hooks were not advanced in value or improved in condition when they were sent to Hong Kong to be sorted and placed into containers. The court explained that “[a]bsent an alteration or change in the fish hooks themselves, their mere sorting and repackaging, even for the purposes of resale to the ultimate consumer, do not preclude their classification as returned American products” for purposes of item 800.00, Tariff Schedules of the United States (TSUS) (the precursor provision to subheading 9801.00.10, HTSUS). See also Superscope, Inc. v. United States, 13 C.I.T. 997, 727 F. Supp. 629 (CIT 1989) (holding that certain glass panels of U.S. origin that were exported, repacked abroad with certain foreign components, and returned to the United States as part of unassembled audio cabinets, were entitled to free entry under item 800.00, TSUS, since the U.S. panel portion of the imported article was “not advanced in value or improved in condition . . . while abroad, but (was) merely repacked.”). CBP decisions have followed this precedent. In HQ H285605, dated August 31, 2017, for instance, we held that splice kits designed to protect cables from the elements were not advanced in value or improved in condition in Mexico, where they were packaged together as kits for sale in the United States. We noted that “[n]o other operations besides packaging the components into kits are performed while in Mexico” and that “mere repacking of the components into kits is not an advancement in value or improvement in condition.” Because all other requirements were met, the splice kits were eligible for a duty exemption under subheading 9801.00.10, HTSUS, when they were returned to the United States. See also HQ 555685, dated August 15, 1990, (holding that infant formulas that were exported in a finished condition to Canada and packaged into consumer-size cans without being subjected to any other operations were eligible for classification under 9801.00.10, HTSUS, when they were returned to the United States); and HQ 555148, dated March 15, 1990 (holding that soybean and corn oil that was shipped to Canada and packaged into consumer-size bottles were eligible for classification pursuant to subheading 9801.00.10, HTSUS, when the oils were returned to the United States). Here, as in the cases and decisions cited above, the goods themselves will not be altered or changed in any way while they are abroad. Because the operation in Mexico consists of mere repackaging, the goods will not be “advanced in value or improved in condition” in Mexico. Accordingly, provided that all documentary requirements are met, and the Chinese components are, indeed, returned to the United States within three years, the goods will be eligible for a duty exemption pursuant to subheading 9801.00.10, HTSUS. Accordingly, Section 301 measures do not apply to goods for which entry is properly claimed under subheading 9801.00.10, HTSUS. Therefore, provided that the merchandise in this case is reimported with a proper claim under subheading 9801.00.10, HTSUS, the Section 301 measures will not apply upon reimportation.
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 Kristopher Burton at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division