CLA-2-85:OT:RR:NC:N2:208
Gerardo L. Blanco
Blanco Customs Brokerage, Inc.
425A Pan American Dr., Ste. #1
El Paso, Texas 79907
RE: The tariff classification, country of origin, NAFTA eligibility, and marking for dome cameras
Dear Mr. Blanco:
In your letter dated October 21, 2019, on behalf of Pegatron USA Corporation, you requested a ruling on the classification, country of origin, and marking for dome cameras.
The merchandise under consideration is dome network cameras, model DH-IPC-HDBW2531R-ZS/VFS. These progressive CMOS surveillance cameras can capture “real time” video and transmit it to a location outside the camera for remote recording or viewing. In addition, the subject cameras can record video internally onto an SD card. However, the dome cameras in question cannot record still images.
In your request, you suggest that the subject surveillance cameras are classified in subheading 8525.80.30, HTSUS, which in pertinent part, provides for television cameras. However, these cameras also have the function of recording video images internally. It is the opinion of this office that both features equally merit consideration in determining the principal function of this multifunctional camera. Therefore, classification in subheading 8525.80.30, HTSUS, is not applicable.
The applicable subheading for the subject dome cameras will be 8525.80.5050, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Transmission apparatus for radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus;…: Television cameras, digital cameras and video camera recorders: Other: Other. The rate of duty will be free.
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 World Wide Web at https://hts.usitc.gov/current.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8525.80.5050, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 8525.80.5050, HTSUS, listed above.
The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china, respectively.
In your request, you describe the manufacturing process for the subject cameras. According to the information provided, the cameras will be assembled with foreign components that will be imported into Mexico. The assembly, including the mainboard installation, VGA fixed, HDD installation, the labeling, the testing, and the packaging processes will be done in Mexico.
However, the SMT process, which involves solder paste stenciling, the loading of raw printed circuit board with resistors, ceramic capacitors, PTC thermistor, aluminum electrolytic, alloy power inductor, rectifier diode, MOS signal tube, light touch switch, infrared lamp, DRAM memory, Micro SD card, socket, CMOS image sensor, and the multimedia processor, is performed in China. Thereby, the printed circuit board assembly (PCBA) mainboard is produced in China.
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), 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 its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. By enacting 19 U.S.C. § 1304, Congress intended to ensure that the ultimate purchaser would be able to know by inspecting the marking on the imported goods the country of which the goods are the product. “The evident purpose is to mark the goods so that at the time of purchaser 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.” United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 C.A.D. 104 (1940).
Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” 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 Section 134.1(j) provides that the “NAFTA Marking Rules” are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) defines a “good of a NAFTA country” as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules. Part 102 of the CBP 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 dome cameras 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.” In this case, the subject cameras are classified under subheading 8525.80.5050, HTSUS. The applicable rule for subheading 8525.80.5050, HTSUS, in section 102.20 requires:
A change to any other good of subheading 8525.80 from television cameras of subheading 8525.80 or any other subheading.
In this instance, the non-originating materials (the PCBA mainboard) which are imported to Mexico from China would be classified under heading 8529, HTSUS. Since the dome cameras are classified under subheading 8525.80.5050, HTSUS, the materials undergo an applicable change in tariff classification as set out in 19 C.F.R. § 102.20, and thus the cameras in question qualify to be marked as a good of Mexico.
Nonetheless, while the NAFTA marking rules contained in 19 C.F.R. Part 102 will determine the country of origin for marking purposes, the substantial transformation test will determine the country of origin for purposes of the Section 301 measures. See, e.g., Headquarters Ruling Letter (“HQ”) H301619, dated November 6, 2018.
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. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993).
In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, all factors such as the components used to create the product and manufacturing processes that these components undergo are considered in order to determine whether a product with a new name, character, and use has been produced. No one factor is decisive, and assembly operations that are minimal will generally not result in a substantial transformation.
Based on the facts presented, it is the opinion of this office that the PCBA mainboard, which is created in China, is the essence of the finished cameras. The assembly processes that take place in Mexico do not result in a substantial transformation of the PCBA mainboard. Therefore, the country of origin of the subject dome cameras will be China.
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 Lisa Cariello at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division