HQ 0954055 - Photocopier Accessories; Copiers; parts; Canadian Free- Trade Agreement (CFTA); "50 Percent Value-Content Test"; General Note 3(c)(vii)(G)(2); HQ 950005; HQ 951024 - United States International Trade Commision Rulings

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HQ 954055

August 25, 1993

CLA-2 CO:R:C:M 954055 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 9009.90.00

Mr. John M. Peterson
Neville, Peterson & Williams
39 Broadway
New York, NY 10006

RE: Photocopier Accessories; Copiers; parts; Canadian Free- Trade Agreement (CFTA); "50 Percent Value-Content Test"; General Note 3(c)(vii)(G)(2); HQ 950005; HQ 951024

Dear Mr. Peterson:

This is in response to your letter dated April 29, 1993, in which you inquired, on behalf of Xerox Corporation, as to the eligibility of certain photocopier accessories under the United States-Canada Free Trade Agreement (CFTA).

FACTS:

The merchandise consists of various input and output devices for electrostatic photocopiers. The input devices consist of automatic document feeders and conveyors. The output devices consist of sorters, collators, staplers and finishers. The input and output devices are major accessories used with copiers, and are designed to accept documents from a user, move them to a position within the copier system where they can be photocopied, and then return the originals to a position where they can be retrieved by the user.

The input and output devices must be specially designed to work with particular models of copiers/processors, and may have processing speeds varying from 28 to 100 pages per minute, and widely differing capabilities. While these devices are sometimes sold in configuration with electrostatic photocopiers, they are also commonly offered for sale and sold as discrete articles of commerce (i.e., for copier upgrades, repair, and replacements).

The input and output devices are assembled in Canada with the use of "originating" (United States and Canadian-origin) and non-originating (third country) copier parts which are imported into Canada. All of the operations performed in Canada are in the nature of assembly. Various components are positioned to specifications and assembled using fasteners, adhesives, force fitting and other assembly methods. All of the constituent parts and components, when received at the Canadian facility are ready for assembly without further fabrication. According to the information provided, we will assume that the majority of the non-originating parts used in the manufacture of the input and output devices are classifiable under subheading 9009.90.00, HTSUS, as parts of photocopiers.

ISSUE:

Whether the photocopier accessories, with third-country parts, qualify for duty-free treatment under the CFTA if more than 50 percent of the value of the product is added in Canada?

LAW AND ANALYSIS:

The CFTA was approved and implemented by the Implementation Act of 1988, Pub. L. 190-449, 101 Stat. 1851, September 28, 1988 (the Act). Chapter 3 of the CFTA sets forth the rules of origin for determining whether goods qualify for the tariff preferences under the CFTA. Section 202 of the Act refers to Chapter 3 of the CFTA, and paragraph (d) of Section 202 refers specifically to the Annex Rules (Annex 301.2 of the CFTA) and authorizes the President to proclaim the rules. The rules of origin, including the specific rules of the Annex, were implemented by Presidential Proclamation 5923, December 14, 1988, as General Note 3(c)(vii), HTSUS.

To be eligible for tariff preferences under the CFTA, goods must be "originating goods" within the rule of origin in General Note 3(c)(vii)(B), HTSUS. There are two primary means in General Note 3(c)(vii)(B), HTSUS, by which articles imported into the United States may be "goods originating in the territory of Canada." The first method is if the goods are "wholly obtained or produced in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(1), HTSUS. The second method is if the goods are transformed in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(2), HTSUS.

The subject merchandise is not wholly obtained or produced in Canada nor does it undergo a transformation as described in General Note 3(c)(vii)(B), HTSUS. However, you argue that the value-content test is applicable because the work performed in producing the photocopier accessories in Canada results in more than 50 percent of the value of the merchandise. General Note 3(c)(vii)(H) states the value-content test as follows:

[N]otwithstanding subdivision (c)(vii)(G), goods described in that paragraph shall be considered to have been transformed in the territory of Canada and be treated as goods originating in the territory of Canada

(1) the value of materials originating in the territory of Canada and/or the United States that are used or consumed in the production of the goods plus the direct cost of assembling the goods in the territory of Canada and/or the United States constitute not less than 50 percent of the value of the goods when exported to the territory of the United States, and

(2) the goods have not subsequent to assembly undergone processing or further assembly in a third country and they meet the requirements of subdivision (c)(vii)(E) of this note.

In order to qualify under the statutory provision of subdivision (c)(vii)(H), the goods must fall within one of the criterion in subdivision (c)(vii)(G) which provides as follows:

[w]henever the assembly of goods in the territory of Canada fails to result in a change of tariff classification because--

(1) the goods were imported into the territory of Canada in an unassembled or a disassembled form and were classified as unassembled or disassembled goods pursuant to General Rule of Interpretation(GRI) 2(a), or

(2) the tariff provision for the goods provides for both the goods themselves and their parts,
such goods shall not be treated as goods originating in the territory of Canada.

The proper interpretation of the 50 percent value test is that it applies only in the two specific contexts described in subdivision (c)(vii)(G). The issue here turns on whether the photocopier accessories meet one of the two criteria set out in subdivision (c)(vii)(G).

The first criterion is where the importation is of goods which are unassembled or disassembled but nonetheless are classified as if they were assembled pursuant to General Rules of Interpretation 2(a). According to the information provided, the parts for the input and output devices are imported from a third country and are assembled with other components from Canada to make the photocopier accessories. Because the parts for the input and output devices are not imported with the other components to turn them into usable photocopier accessories, they are not classifiable as unassembled or disassembled goods pursuant to GRI 2(a). Therefore, they do not meet the first criterion of subdivision (c)(vii)(G).

The second criterion of subdivision (c)(vii)(G) is when the imported goods meet the tariff provision which describes both the goods and their parts from which they were assembled. Heading 9009, HTSUS, provides for: "[p]hotocopying apparatus incorporating an optical system or of the contact type and thermocopying apparatus; parts and accessories thereof. . . ." Because heading 9009, HTSUS, provides for both photocopying apparatus and the parts and accessories thereof, we find that the subject merchandise meets the second criterion of subdivision

No documentation was submitted to determine whether or not the photocopier accessories meet the 50% value-content test. If documentation is provided which satisfies the value-content requirement at the time of entry, then the subject merchandise will be eligible for duty-free treatment under CFTA. See HQ 951024, dated March 5, 1992; HQ 950005, dated January 9, 1992.

HOLDING:

The subject merchandise is eligible for duty-free treatment under the CFTA, provided that documentation can be provided regarding the 50% value-content rule. The photocopier accessories are classifiable under subheading 9009.90.00, HTSUS, which provides for parts and accessories of photocopying apparatus. The column 1, general rate of duty is 3.9 percent ad valorem.

Sincerely,

John Durant, Director
Commercial Rulings Division

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