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HQ 558878




June 28, 1995

MAR-2-05 R:C:S 558878 WAS

CATEGORY: MARKING

Michael J. Kline, Esq.
Thorp, Reed & Armstrong
One Riverfront Center
Pittsburgh, PA 15222-4895

RE: Country of origin marking of a heating pad assembled in the U.S. from Mexican-origin subassemblies; Article 509; NAFTA; section 102; Marking Rules; 19 CFR 134.35(b)

Dear Mr. Kline:

This is in response to your letter dated October 27, 1994, on behalf of Sunbeam Corporation, concerning the country of origin marking requirements for heating pad components and the packaging of a heating pad. You have submitted a sample and videotape of the assembly processes which occur in the U.S. for our examination.

FACTS:

You state that the heating pad consists of the following four subassemblies:

(A) a base subassembly;

(B) a switch subassembly;

(C) a plastic cover subassembly;

(D) a cloth cover subassembly.

You state that each of the subassemblies comprise components and raw materials which originate from the U.S. You further state that the components and raw materials which comprise subassemblies A,B, and D are shipped to Mexico for further assembly. After subassemblies A,B, and D are processed in Mexico, they are returned to the U.S. where they are assembled into the finished heating pad. You state that subassembly C, the plastic cover subassembly, is never exported from the U.S. into Mexico.

The following is a description of the assembly processes involved in producing the heating pad in the U.S.:

At the beginning of the U.S. assembly process, each end of the plastic-coated wire on the base subassembly is stripped of its plastic covering to expose a portion of the bare wire. A plastic tube is then inserted onto each end of the wire. The bare portion of one end of the base subassembly wire is then placed next to the bare portion of the lead wire on the switch subassembly. The bare portions of both wires are then secured to each other through the use of a crimping machine. The crimping machine cuts a certain length of brass and wraps the length of brass around the overlapping bare portions of the wire to form a tube. Similarly, the bare portion of the three conductor cord is connected to the bare portion of the second end of the wire on the base subassembly.

The plastic tubes are then positioned over each of the connections to completely cover the bare portions of the wires.

The plastic tubes are then secured ("tacked") to the base subassembly. In addition, the thermostat in the switch subassembly is also tacked to the base subassembly. Finally, a grey wadding, similar in size and shape to the grey wadding of the base subassembly is sewn to the surface of the base subassembly, thus, "sandwiching" the plastic-coated wire between the two grey waddings.

The base subassembly is then placed on the plastic cover subassembly. The cover is folded over to completely cover the base subassembly. The cover is then heat-sealed and trimmed to remove any excess plastic covering.

The finished heating pad is then wrapped in the cloth cover subassembly and placed in packaging containing the label "Assembled in the U.S. with U.S. and Foreign Components." Twelve packaged heating pads are then packed together in a box and placed on a pallet for storage or shipment to retailers. All of the aforementioned processes occur in the U.S.

The operations involved in assembling the base subassembly are described as follows: The base subassembly comprises four components: a grey wadding, a white fabric material, plastic tabbing, and plastic-coated wire. Each of these components comprise raw materials which are 100 percent U.S. origin and sent into Mexico for further assembly into a base subassembly. All components, except for the wire, are imported into Mexico in rolls. The wire is shipped into Mexico in cardboard barrels. A "jet sew" machine simultaneously receives and sews the grey wadding, the white fabric material, the plastic tabbing, and the wire together to form the base subassembly. The base subassembly is then cut to shape by the jet sew machine and returned to the U.S. where it is further assembled with the other subassemblies into the heating pad.

The switch subassembly consists of the following three components:

(a) cordset - The cordset consists of a terminal, plug, and cord. The terminal and cord, all manufactured in the U.S., are exported into Mexico, where the wires are terminated to the terminal and the plug body is molded.

(b) switch - All components of the switch, except for the diode and resistor, are manufactured in the U.S. The diode and resistor are manufactured in Asia and imported into Mexico, where they are mounted onto a board, which in turn, is assembled in Mexico into the switch housing.

3-conductor cord with harness - The cord, lead wire and thermostat components are all manufactured in the U.S. The resistance heater is made of alloy and core materials of U.S. origin and twisted in Mexico. The thermostat components are assembled and calibrated in Mexico. The cord, thermostat, resistance heater, and lead wire are attached into a harness assembly in Mexico. In addition, the thermostat is wrapped in tape in Mexico.

The cordset, switch, and 3-conductor cord with harness assembly components are assembled into a switch subassembly in Mexico. The assembled switch subassembly is then returned to the U.S. for further assembly with other components into the heating pad.

The plastic cover subassembly is produced in the U.S. and is not exported to Mexico or any other foreign country. The plastic cover subassembly is assembled with the other subassemblies to produce the heating pad in the U.S.

The cloth cover subassembly consists of 100 percent polyester fabric which is cut and printed in the U.S., exported to Mexico, and sewn into the form of a cover. You state that snaps, which are imported from Japan, are attached to the cloth cover in Mexico. The assembled cloth cover subassembly is then returned to the U.S. where it is further assembled with other components to produce the heating pad.

ISSUE:

What are the country of origin marking requirements applicable to the heating pad?

LAW AND ANALYSIS:

The marking statute, section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin (or its container) imported into the U.S. 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 U.S. the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

The country of origin marking requirements for a "good of a NAFTA country" are also determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the interim amendments to the Customs Regulations published as T.D. 94-4 (59 Fed. Reg. 109, January 3, 1994) with corrections (59 Fed. Reg. 5082, February 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December 30, 1993). These interim amendments took effect on January 1, 1994, to coincide with the effective date of the NAFTA. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in T.D. 94-4 (adding a new Part 102, Customs Regulations). The marking requirements for these goods are set forth in T.D. 94-1 (interim amendments to various provisions of Part 134, Customs Regulations).

Section 134.45(a)(2) of the interim regulations, provides that "a good of a NAFTA country may be marked with the name of the country of origin in English, French, or Spanish. Section 134.1(g) of the interim regulations, 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.

Section 134.1(b) of the interim regulations defines "country of origin" as
the country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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.

The interim NAFTA regulations provide an exception from marking for a good of a NAFTA country which is to be processed in the U.S. in a manner that would result in the good becoming a good of the U.S. under the NAFTA Marking Rules. See 19 CFR 134.35(b). The outermost container of an article which qualifies for this exception must be marked with the article's origin, unless the good is processed by the importer or on its behalf.

Part 102 of the interim regulations, sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the interim regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the interim regulations states that "[t]he country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (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 requirements of these rules are satisfied."

"Foreign Material" is defined in section 102.1(e) of the interim regulations 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."

Prior to determining the country of origin of the finished heating pad, we first need to determine the country of origin of the three subassemblies which are produced in Mexico. With regard to the country of origin of the switch subassembly, sections 102.11(a)(1) and 102.11(a)(2) are not applicable, since the switch subassembly is neither wholly obtained or produced in Mexico, nor is it produced exclusively from domestic materials. Therefore, according to the NAFTA Marking Rules, the next rule that we consider is section 102.11(a)(3). Pursuant to section 102.11(a)(3) of the interim rules, the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20. Section 102.20 of the interim rules, sets forth the specific tariff classification changes and/or other operations, which are specifically required in order for country of origin to be determined on the basis of operations performed on the foreign materials contained in a good.

In the instant case, the switch subassembly is classified in subheading 8516.90.90, HTSUS, as part of an electrothermic appliance (the heating pad). Therefore, the change in tariff classification for this subassembly must be made in accordance with section 102.20(p), Section XVI: Chapters 84 through 85, subheading 8516.90, HTSUS, of the interim regulations, which states in part that:

A change to subheading 8516.90 from any other heading.

Therefore, each U.S.-origin material imported into Mexico and incorporated into the switch subassembly must come from a different heading than 8516, HTSUS. In the instant case, the cordset is classified in subheading 8544.51, HTSUS, which provides for "Insulated (including enameled or anodized) wire, cable (including coaxial cable) and other insulated electric conductors, whether or not fitted with connectors. . . : [o]ther electric conductors, for a voltage exceeding 80 V but not exceeding 1,000 V: [f]itted with connectors: [o]ther. . . ." The switch is classified in subheading 8536.10, HTSUS, which provides for "boards, panels. . . for electric control or the distribution of electricity, including those incorporating instruments or apparatus of chapter 90. . . : [f]or voltage not exceeding 1,000 V: [a]ssembled with outer housing or supports, for the goods of headings 8421, 8422, 8450 or 8516. . . ." The 3-conductor cord with harness is classified as a part of an electrothermic appliance in subheading 8516.90, HTSUS. As the 3-conductor cord with harness is classified in the same heading as the switch subassembly, the tariff shift rule under section 102.20(a)(3) is not satisfied.

Since the country of origin is not determined by section 102.11(a) (incorporating section 102.20) of the interim regulations, the next step in the country of origin interim regulations hierarchy is section 102.11(b). Section 102.11(b) of the interim regulations states as follows:

Except for a good that is specifically described in the Harmonized Tariff Schedule as a set, or is classified as a set pursuant to General Rule of Interpretation 2, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:

(1) Is the country or countries of origin of the single material that imparts the essential character of the good. . .

"Material" is defined in section 102.1(1) of the interim regulations as "a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components."

Pursuant to section 102.18(b)(2), "for purposes of applying section 102.11, only domestic and foreign materials (including self-produced materials) that are classified in a tariff provision from which a change in tariff classification is not allowed in the rule for the good set out in section 102.20 shall be taken into consideration in determining the parts or materials that determine the essential character of the good."

Therefore, taking into account only those domestic and foreign materials that are classified in a tariff provision for which a change in tariff classification is not allowed in the rule for the good under section 102.20, we are of the opinion that the 3-conductor cord with harness, the only material which does not undergo the requisite tariff shift, is the material which imparts the essential character of the switch subassembly. Thus, the country of origin of the switch subassembly is the country of origin of the 3-conductor cord with harness -- the U.S.

However, section 102.14 of the interim regulations states that:

No good, last advanced in value or improved in condition outside the United States has United States origin. If under any other provision of this part such a good is determined to be a good of the United States, that determination will be disregarded and the country of origin of the good will be the last foreign country in which the good was advanced in value or improved in condition.

"Advanced in value" is defined in section 102.1(a) of the interim regulations as "an increase in the value of a good as a result of production with respect to that good, other than by means of those "minor processing" operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section." "Improved in Condition" is defined in section 102.1(I) as "the enhancement of the physical condition of a good as a result of production with respect to that good, other than by means of those "minor processing" operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section." "Minor processing" operations described in sections 102.1(m)(5), (m)(6) and (m)(7) of the interim regulations include unloading, reloading or any other operation necessary to maintain the good in good condition; putting up in measured doses, packing, repacking, packaging, repackaging; testing, marking, sorting or grading.

We find that the operation of assembling the U.S.-origin 3-conductor cord with harness with the cord and switch in Mexico to produce the switch subassembly results in an advancement in value or improvement in condition of the 3-conductor cord with harness. Accordingly, pursuant to section 102.14 of the interim regulations, the country of origin of the imported switch subassembly is Mexico, the last foreign country in which the good was advanced in value or improved in condition.

With regard to the base subassembly, neither section 102.11(a)(1) or (2) are applicable to the article as the base subassembly is not wholly obtained or produced or produced exclusively from domestic materials. Pursuant to section 102.11(a)(3), as the base subassembly is classified in subheading 8516.90, HTSUS, as "other electrothermic appliances of a kind used for domestic purposes: parts: other," the change in tariff classification must be made in accordance with section 102.10(p), Section XVI: Chapters 84 through 85, subheading 8516.90, HTSUS, of the interim regulations, which states that:

A change to subheading 8516.90 from any other heading

Therefore, each U.S.-origin component imported into Mexico and incorporated into the base subassembly must come from a different heading than heading 8516, HTSUS, in order to satisfy the tariff shift rule. As the grey fabric is classified in heading 5603, HTSUS, as "nonwovens, whether or not impregnated, coated, covered or laminated: other: other," and the white fabric is also classified in heading 5603, HTSUS, and the coated wire is classified in heading 8544, HTSUS, the base subassembly satisfies the tariff shift rule under section 102.11(a)(3) of the interim regulations. Therefore, the country of origin of the base subassembly is Mexico.

With regard to the country of origin of the cloth cover subassembly, section 102.11(a)(1) and (2) is not applicable since the good is not wholly obtained or produced and is not produced exclusively from domestic materials. The applicable rule is section 102.11(a)(3) of the interim regulations which provides that the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20. As the cloth cover subassembly is classified in subheading 6307.90, HTSUS, which provides for other made up articles of textile materials: other: other: other: other: other, the change in tariff classification must be made in accordance with section 102.20(k), Section XI: Chapters 50 through 63, subheading 6307.90, HTSUS, which states that:

A change to subheading 6307.90 from any other heading provided that the change is the result of at least cutting and a significant sewing or assembly operation.

Therefore, in order to satisfy the tariff shift rule for the cloth cover subassembly, the U.S.-origin polyester fabric and the Japanese-origin snaps must be classified in a different heading than 6307.90, HTSUS, and the change must be the result of at least cutting and a significant sewing or assembly operation. Both the fabric and the snaps are classified in separate headings than 6307.90, as the fabric is classified in heading 6002, HTSUS, as other knit fabric and the snaps are classified in heading 3926, HTSUS, as other articles of plastics. However, the tariff shift rule is not satisfied because the fabric is cut and printed in the U.S.

Since the country of origin is not determined by section 102.11(a) (incorporating section 102.20) of the interim regulations, the next step in the NAFTA Marking Rules hierarchy is section 102.11(b). As previously stated above, pursuant to section 102.18(b)(2), "for purposes of applying section 102.11, only domestic and foreign materials (including self-produced materials) that are classified in a tariff provision from which a change in tariff classification is not allowed in the rule for the good set out in section 102.20 shall be taken into consideration in determining the parts or materials that determine the essential character of the good."

Therefore, taking into account only those domestic and foreign materials that are classified in a tariff provision for which a change in tariff classification is not allowed in the rule for the good under section 102.20, we find that the fabric imparts the essential character of the good. Accordingly, the country of origin of the cloth cover subassembly is the country of origin of the fabric -- the U.S. However, as previously discussed, pursuant to section 102.14 of the interim regulations, the country of origin of the imported cloth cover subassembly is Mexico -- the last foreign country in which the good was advanced in value or improved in condition.

The question we are asked to address is whether the production of the heating pad from the three Mexican-origin subassemblies in the U.S. results in the heating pad becoming a good of the U.S. under the NAFTA Marking Rules. See 19 CFR 134.35(b). In the instant case, as the heating pad is classified in subheading 8516.79, HTSUS, the change in tariff classification must be made in accordance with section 102.20(p), Section XVI: Chapters 84 through 85, subheading 8516.79, HTSUS, provides that:

A change to subheading 8516.10 through 8516.79 from any other subheading, including another subheading within that group.

Therefore, each imported subassembly (switch subassembly, base subassembly, and cloth cover subassembly) incorporated into the heating pad must be classified in a subheading other than subheading 8516.79, HTSUS. As the plastic cover subassembly is produced in the U.S. The switch subassembly is classified in subheading 8516.90, HTSUS, the base subassembly is classified in subheading 8516.90, HTSUS, and the cloth cover subassembly is classified in subheading 6307.90, HTSUS. Therefore, as each Mexican-origin subassembly is classified in a subheading other than subheading 8516.79, HTSUS, the heating pad becomes a good of the U.S. under the NAFTA Marking Rules and is excepted from marking. Unless the good is processed by the importer or on its behalf, the outermost container of the good must be marked in accord with Part 134, Customs Regulations (19 CFR Part 134).

The Federal Trade Commission ("FTC") has jurisdiction concerning the use of the appropriateness of the phrase "Made in the U.S.A." or "Assembled in the U.S.A."; consequently, any inquiries regarding use of these phrases should be directed to the FTC in the future. The address is: Federal Trade Commission, Division of Enforcement, 6th & Pennsylvania Avenue, N.W., Washington, D.C. 20508.

HOLDING:

On the basis of the information presented, we are of the opinion that, pursuant to section 134.35(b), the heating pads are considered to be a good of the U.S. and are excepted from country of origin marking. Unless the good is processed by the importer or on its behalf, the outermost container of the good must be marked in accord with Part 134, Customs Regulations (19 CFR Part 134).

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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