HQ 0556294 - Eligibility for duty preference under the U.S.-Canada Free Trade Agreement of certain safety restraint systems; Article 301, Article 302, Annex 301.2; General Note 3(c)(vii) - United States International Trade Commision Rulings

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HQ 556294
March 12, 1992

CLA-2 CO:R:C:S 556294 SER

CATEGORY: CLASSIFICATION

Herbert J. Lynch, Esq.
Sullivan & Lynch, P.C.
156 State Street
Boston, MA 02109

RE: Eligibility for duty preference under the U.S.-Canada Free Trade Agreement of certain safety restraint systems; Article 301, Article 302, Annex 301.2; General Note 3(c)(vii)

Dear Mr. Lynch:

This is in response to your letter of September 25, 1991, on behalf of Bendix Safety Restraints Division (Bendix), concerning whether certain safety restraint systems assembled in Mexico qualify as "goods originating" in the U.S. and/or Canada pursuant to the U.S.-Canada Free Trade Agreement (CFTA), and, accordingly, whether Bendix may execute an Exporter's Certificate of Origin attesting to the U.S. origin of the safety restraint systems. In addition, if U.S. and foreign components are used in the assembly of the restraint systems, you ask whether the U.S. components may be considered CFTA-eligible materials.

FACTS:

Bendix manufactures automobile safety restraint systems (seat belts) of various configurations. These systems range from the least sophisticated assembly, usually found in the rear center passenger seat, to more complex assemblies which are usually the driver seat safety restraint systems.

This ruling primarily concerns the assembly of the safety restraint systems by Bendix's related company in Mexico. In Mexico, the safety restraint systems will be assembled from fully fabricated components. In most instances, the components will be of U.S. origin. However, a few components may be of foreign origin. After assembly in Mexico, the safety restraint systems will be imported into the U.S. and placed into inventory. They will then be sold and exported to a Canadian automobile manufacturer, who ultimately will incorporate the safety restraint systems into automobiles.

ISSUES:

1. Whether the safety restraint systems assembled in Mexico entirely of U.S. components, or of U.S. and foreign components, are considered to be "originating goods" pursuant to the CFTA, and, whether an Exporter's Certificate of Origin may be executed by Bendix attesting to the "originating goods" status of the systems.

2. If U.S. and foreign components are used in the assembly of the systems in Mexico, whether the U.S. components qualify as "originating materials" under the CFTA for purposes of the value-content test for the automobiles into which the systems are incorporated.

LAW AND ANALYSIS:

1. "Originating Goods" Status for Safety Restraint Systems Assembled in Mexico.

Article 301 of the CFTA establishes the standards for the Rules of Origin for goods, and, therefore, the eligibility of goods to receive preferential duty treatment under the CFTA. To be an "originating good" under the CFTA, goods must be wholly obtained or produced in the territory of Canada and/or the U.S., or the goods must have been transformed in the territory of either party or both parties so as to be subject to a change in tariff classification as described in Annex 301.2 of the Agreement. See also, General Note 3(c)(vii)(B), Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

Pursuant to Article 301 of the CFTA, the safety restraint systems would not be "originating goods" under the CFTA. The assembly of the components into the final articles--the safety restraint systems--occurs in Mexico, and therefore, the safety restraint systems, whether comprised wholly of U.S. components or U.S. and foreign components, are not wholly obtained or produced in the territory of Canada and/or the U.S. Furthermore, as the safety restraint systems are not transformed in the territory of Canada and/or the U.S. so as to be subject to a change in tariff classification, they do not obtain "originating" status in this manner.

The safety restraint systems are returned to the U.S. prior to shipment to Canada. However, since they do not undergo a transformation in the U.S., pursuant to Article 301, which would subsequently transform them into "originating goods," they do not obtain "originating" status in the U.S. Therefore, since the safety restraint systems are not considered "originating goods" under the CFTA, an Exporter's Certificate of Origin stating that the safety restraint systems are of U.S. origin may not be executed by Bendix.

2. "Originating Materials" Status for the U.S. Components Assembled in Mexico into the Safety Restraint Systems.

Article 302 of the CFTA provides that goods exported from the territory of one party originate in the territory of that party only if they meet the applicable requirements of Article 301 and are shipped to the territory of the other party without having entered the commerce of any third country and, if shipped through the territory of a third country, they do not undergo any operations other than unloading, reloading, or any operation necessary to transport them to the territory of the other party, and the documents related to their exportation and shipment from the territory of a Party show the territory of the other Party as their final destination.

The U.S. components, when exported to Mexico where they are assembled into the safety restraint systems, clearly enter the commerce of a third country, and, therefore, would lose their "originating materials" status. In summary, the U.S. components, when exported to Canada, after incorporation into the safety restraint systems in Mexico, are not considered CFTA-eligible materials and cannot be counted as such in the value-content calculation for the automobiles into which the systems are incorporated in Canada.

HOLDING:

The safety restraint systems, assembled in Mexico, are not considered "originating goods" pursuant to the CFTA requirements, and, therefore, an Exporter's Certificate of Origin attesting to their U.S. origin may not be executed. In addition, the U.S. components used in the assembly of the safety restraint systems in Mexico, are not considered CFTA "originating materials" for CFTA value-content purposes upon importation into Canada.

Sincerely,

John Durant, Director
Commercial Rulings Division

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