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HQ 558897




March 8, 1995

CLA-2 CO:R:C:S 558897 WAS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Philip Freeman
Cain Customs Brokers
415 S. Industrial
P.O. Box 150
Hidalgo, TX 78557

RE: Applicability of subheading 9802.00.80, HTSUS, to "Cling-On" adjustable tie cords; NAFTA; Article 509; marking; originating good

Dear Mr. Freeman:

This is in reference to your letter dated October 26, 1994, on behalf of Arcadia Management Co., Inc., concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS) to a "Cling-On adjustable tie cord" which is imported from Mexico. You also request a determination on whether the article qualifies as an originating good in order to be eligible for preferential tariff treatment under the North American Free Trade Agreement (NAFTA), and the acceptability of the proposed country of origin marking for the good. You have submitted a sample and photograph for our examination.

FACTS:

You state that the subject merchandise, which is referred to as "Cling-On adjustable tie cord", consists of a textile-covered elastic rubber cord that is fitted with two plastic hooks and two "adjustment nuts" which are used to shorten or lengthen the cord. You claim that the cord is used as a general purpose light-duty tie-down to hold objects while in transit or to secure a cover, etc.

You submit that all of the parts of the adjustable tie cord are made in the U.S. The adjustable tie cord is assembled in Mexico as follows: (1) Cut roll stock expandable cord to length;

(2) Crimp "stop ring" to one end;

(3) Thread other end through termination sleeve and adjustable nut;

(4) Crimp "stop ring" on other end;

(5) Pack in blister pack; and

(6) Pack in bulk pack.

ISSUES:

(1) Whether the adjustable tie cord will qualify for the partial duty exemption under subheading 9802.00.80, HTSUS, when returned to the U.S.

(2) Whether the phrase "Assembled in Mexico" is a proper country of origin marking for the imported adjustable tie cord.

(3) Whether the adjustable tie cord qualifies as an originating article under the North American Free Trade Agreement.

LAW AND ANALYSIS:

I. Subheading 9802.00.80, HTSUS

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations {19 CFR 10.14(a)}, states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations {19 CFR 10.16(a)}, provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, lamination, sewing, or the use of fasteners.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. See 19 CFR 10.16(a). However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See 19 CFR 10.16(c).

The operations which consist of crimping metal rings to each end of the adjustable tie cord to prevent unraveling and threading the cord through the adjustment nuts are considered acceptable assembly operations pursuant to 19 CFR 10.16(a). Cutting the adjustable tie cord to length is considered an acceptable operation incidental to assembly pursuant to 19 CFR 10.16(b)(6). Therefore, we are of the opinion that the adjustable tie cord will qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS, when returned to the U.S.

II. Country of Origin Marking

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 English name of 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 134.1(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.

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.

In this case, you state that the textile-covered elastic rubber cord, plastic hooks and adjustment nuts which are made in the U.S. are exported to Mexico, a NAFTA country, where they are processed into the finished adjustable tie cord prior to being reimported into the U.S.

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."

Section 102.11(a)(1) and 102.11(a)(2) are not applicable to the facts at issue in this case because the article (adjustable tie cord) is neither wholly obtained or produced in Mexico, nor is it produced exclusively from domestic materials. 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, as the adjustable tie cord is classified in heading 5609, HTSUS, the change in tariff classification must be made in accordance with section 102.20(k), Section XI: Chapters 50 through 63, of the interim regulations. The applicable tariff shift rule for articles classified in heading 5609, HTSUS, states that:

A change to heading 5609 from any other heading except from heading 5004 through 5007, 5106 through 5113, 5204 through 5212, 5306 through 5311, 5401 through 5408, 5508 through 5516, and 5607.

In the instant case, all of the United States components of the adjustable tie cord meet the tariff shift rule because each component is classified in a heading other than heading 5609, HTSUS, and other than those listed headings from which a tariff shift is precluded. Therefore, the country of origin of the finished article is Mexico.

As previously noted herein, section 134.1(b) provides that for goods of a NAFTA party, the NAFTA Marking Rules will determine the country of origin. Pursuant to these rules, we have determined that Mexico is the country of origin of the good. However, with regard to the manner of marking the subject good, we find section 10.22, Customs Regulations (19 CFR 10.22) relevant. Section 10.22 provides special marking requirements for goods assembled abroad from United States components which are eligible for a duty exemption under subheading 9802.00.80, HTSUS. Section 10.22 provides, in pertinent part, as follows:

[a]ssembled articles entitled to the exception are considered products of the country of assembly for the purposes of the country of origin marking requirements of section 304, Tariff Act of 1930, as amended (19 U.S.C. 1304).

Section 10.22 further provides that if an imported article is assembled entirely of United States components, the United States origin of such components may be disclosed by marking the article "Assembled in ___ from material of U.S. origin" or a similar phrase. In this case, we have previously determined that the subject goods will be eligible for the partial duty exemption under subheading 9802.00.80, HTSUS, provided the documentary requirements are met. Therefore, since all of the assembled components of the Adjustable Tie Cord are of U.S.-origin, we find that the proposed mark "Assembled in Mexico" is acceptable. See Headquarters Ruling Letter (HRL) 558636 dated December 2, 1994.

III. NAFTA Originating Materials

General Note 12, HTSUS, provides that:

(b) For the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as 'goods originating in the territory of a NAFTA party' only if--

(i) they are goods wholly obtained or produced in the territory of Canada, Mexico and/or the United States; or

(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that--

(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such good undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or

(B) the goods otherwise satisfy the applicable requirements of subdivision (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or

(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials. . .

Assuming the assembled adjustable tie cords are not "wholly obtained or produced" in a NAFTA country, they are not considered "originating materials," the assembled adjustable tie cords will become "originating goods" if they are transformed in Mexico pursuant to General Note 12(b)(ii)(A). To become "originating goods" the component materials must satisfy the tariff shift provision applicable to the finished adjustable tie cord which is classified under subheading 5609.00.40, HTSUS. The applicable General Note 12(t) rule for this good provides as follows:

A change to headings 5601 through 5609 from any other chapter, except from headings 5106 through 5113, 5204 through 5212, 5307 through 5308 or 5310 through 5311, or chapters 54 through 55.

Since none of the components used in the assembly of the adjustable tie cord is classified in any of the listed headings from which a tariff shift is precluded, the assembly into a finished article in Mexico will result in the components undergoing the requisite tariff shift. Therefore, provided that the requisite tariff shift takes place in a NAFTA country, the components will be deemed "originating" and eligible for NAFTA preferential tariff treatment.

HOLDING:

Based on the information provided, we are of the opinion that the operations performed in Mexico constitute acceptable assembly operations within the meaning of subheading 9802.00.80, HTSUS. Therefore, the adjustable tie cords will be entitled to the partial duty exemption under this provision, provided that the documentary requirements of 19 CFR 10.24 are satisfied. Furthermore, the proposed phrase "Assembled in Mexico" is an acceptable country of origin marking, pursuant to the requirements set forth in 19 CFR 10.22. Finally, pursuant to General Note 12(b), the adjustable tie cords will qualify as "originating goods" and eligible for NAFTA preferential tariff treatment upon importation into the U.S.

A copy of this ruling 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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