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HQ 953359

May 26, 1993

CLA-2 CO:R:C:M 953359 DWS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9405.10.80

District Director
U.S. Customs Service
127 North Water Street
Ogdensburg, NY 13669

RE: Protest No. 0712-92-101137; Crystal Glass Jewels; Finished and Unassembled Crystal Chandeliers; GRI 2(a); Explanatory Note 2(a)(V); U.S.-Canada Free-Trade Agreement; 9405.91.60

Dear District Director:

The following is our decision regarding the request for further review of Protest No. 0712-92-101137 concerning your action in classifying and assessing duty on crystal chandeliers under the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The merchandise consists of finished and unassembled crystal chandeliers imported from Canada. Crystal glass jewels, imported from Czechoslovakia, classifiable under subheading 9405.91.60, HTSUS, as other glass parts of lighting fittings, are imported into Canada. In Canada, the glass jewels are joined together to form crystal chains of varying lengths which form ornamental parts of chandeliers. These crystal chains are packaged with other chandelier parts and exported to the U.S. as finished and unassembled chandeliers, classifiable under subheading 9405.10.80, HTSUS.

The merchandise was entered under subheading 9405.10.80, HTSUS. The entry was liquidated on October 9, 1992, also under subheading 9405.10.80, HTSUS. However, duty reduction benefits under the U.S.-Canada Free-Trade Agreement (CFTA) were denied. The protest was timely filed by the protestant on October 13, 1992.

The subheading under consideration is as follows:

9405.10.80: [c]handeliers and other electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares: [o]ther.

The general, column one rate of duty is 3.9 percent ad valorem. Goods classifiable under this provision which receive treatment under the CFTA are entitled to a duty rate of 1.9 percent ad valorem.

The protestant does not disagree with the classification of the merchandise under the HTSUS. However, it is argued that the merchandise is entitled to duty reduction benefits under the CFTA.

ISSUE:

Whether the finished and unassembled crystal chandelier qualifies for duty reduction benefits under the CFTA?

LAW AND ANALYSIS:

Classification of merchandise under the HTSUS is in accordance with the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes.

GRI 2(a) states that:

(a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled.

In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes may be utilized. The Explanatory Notes, although not dispositive, are to be used to determine the proper interpretation of the HTSUS. 54 Fed. Reg. 35127, 35128 (August 23, 1989).

Explanatory Note 2(a)(V) (p. 2) states that:

[t]he second part of Rule 2(a) provides that complete or finished articles presented unassembled or disassembled are to be classified in the same heading as the assembled article. When goods are so presented, it is usually for reasons such as requirements or convenience of packing, handling or transport.

When the glass jewels are imported into Canada, they are used to create finished crystal chandeliers. Before exportation into the U.S., for "convenience of packing, handling or transport", the finished chandeliers are disassembled. Under GRI 2(a), even though entered unassembled, these chandeliers are classifiable under subheading 9405.10.80, HTSUS.

Articles which are imported from Canada may be entitled to certain tariff preferences under the CFTA if the articles are "originating goods" defined by 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 U.S. may be "goods originating in the territory of Canada." The first method is if 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.

A product which is "wholly obtained or produced in the territory of Canada and/or the United States" is one which is grown, mined, harvested, born, and raised in Canada and/or the U.S., or otherwise intimately connected to the two countries and their land, air, and sea territories as defined in General Note 3(c)(vii)(L), HTSUS. Because the crystal chandelier is manufactured in part from glass jewels which are not from Canada or the U.S., the chandelier is not "wholly obtained or produced in the territory of Canada and/or the United States."

The second method to become an originating good for CFTA purposes is for an article made of foreign materials to be transformed in Canada and/or the U.S. in accordance with General Note 3(c)(vii)(B)(2), HTSUS. A transformation is evident when a change in tariff classification occurs which is authorized by General Note 3(c)(vii)(R), HTSUS.

In this instance, the foreign glass jewels, which are classifiable under subheading 9405.91.60, HTSUS, are used to create finished and unassembled crystal chandeliers which are classifiable under subheading 9405.10.80, HTSUS. For the crystal chandeliers to be considered originating goods, a transformation must be effected in accordance with General Note 3(c)(vii)(R)(20)(bb), HTSUS, which states that:

(R) Change in Tariff Classification Rules

(20) Section XX: Chapters 94 through 96.

(aa) xxx

(bb) A change to any heading of this section from a parts heading, or to any subheading from a parts subheading; provided, that the value of materials originating in the territory of Canada and/or the United States plus the direct cost of processing performed 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.

The glass jewels undergo the requisite change in tariff classification from a parts subheading to a subheading of chapter 94, HTSUS, and all parties agree that the conversion costs constitute at least 50 percent of the value of the goods when exported to the U.S. Therefore, as both requirements of General Note 3(c)(vii)(R)(20)(bb), HTSUS, have been met, it is our position that the required transformation has been effected and the chandeliers are eligible for duty reduction benefits under the CFTA.

It is argued that the application of General Note 3(c)(vii)(C)(1), HTSUS, negates any benefits under the CFTA. It states that:

(C) Goods shall not be considered to originate in the territory of Canada pursuant to subdivision merely by virtue of having undergone - -

(1) simple packaging or, except as expressly provided by the rules of subdivision (c)(vii)(R) of this note, combining operations. (emphasis supplied).

Because it is our position that the merchandise conforms to the rules set forth under General Note 3(c)(vii)(R)(20)(bb), HTSUS, General Note 3(c)(vii)(C)(1), HTSUS, does not apply.

It is also argued that General Note 3(c)(vii)(G), HTSUS, negates any benefits under the CFTA. It states that:

(G) Whenever 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 [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.

(emphasis supplied).

General Note 3(c)(vii)(G), HTSUS, does not apply to the merchandise because it is our position that the assembly of the goods in Canada does result in a change of tariff classification.

HOLDING:

As both requirements of General Note 3(c)(vii)(R)(20)(bb), HTSUS, have been met, it is our position that the required transformation has been effected and the chandeliers are eligible for duty reduction benefits under the CFTA.

Sincerely,

John Durant, Director
Commercial Rulings Division

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