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HQ 957425




May 12, 1995

CLA-2 CO:R:C:M 957425 LTO

CATEGORY: CLASSIFICATION

TARIFF NO.: 7320.90.50

Mr. Philip Freeman
Cain Customs Brokers
Progreso International Bridge
P.O. Box 10
Progreso, Texas 78579

RE: Automotive seat belt retractor assemblies; HQs 087588, 223491, 224283, 225368; NY 828235; headings 7211, 8708; subheading 9813.00.05; EN 73.20; Section XV, note 2; Section XVII, note 2(b); Chapter 98, subchapter XIII, U.S. note 1(c); NAFTA; Article 509; General notes 12(b)(ii)(A), 12(b)(iii) and 12(t)/73.16; Change in Tariff Classification; 19 U.S.C. 1313(a), 1313(b), 1313(j), 1677h, 3333(a), 3333(e); 19 CFR 10.31(f), 10.39(a), 113.55(a), 181.42(a), 181.45(b)(1)(iv); 60 FR 15845

Dear Mr. Freeman:

This is in response to your letter, on behalf of Kern- Liebers USA, Inc., of December 6, 1994, requesting information relating to the importation of automotive seat belt retractor assemblies, including the classification of these assemblies under the Harmonized Tariff Schedule of the United States (HTSUS) and their eligibility for preferential tariff treatment under the North American Free Trade Agreement (NAFTA).

FACTS:

Flat-rolled steel from the U.S., Great Britain, Germany, and possibly other countries, which are subject to the assessment of antidumping duties, will be slit in the U.S. Kern-Liebers intends to enter the imported flat-rolled steel under a temporary importation bond for the purpose of slitting the steel into strips under subheading 9813.00.05, HTSUS. The resulting slit steel will be exported to Mexico; the scrap steel will be entered, or accounted for, and the temporary importation bond canceled. In Mexico, these steel strips are to be coiled into springs, heat-treated for 30 minutes at 230 degrees Celsius, and assembled into automotive seat belt housings (plastic spring cup of U.S. origin) and lubricated. The resulting automotive seat - 2 -
belt retractor assemblies will be imported into the U.S.

ISSUE:

1. Whether the automotive seat belt assemblies are classifiable as springs and leaves for springs, of iron or steel, under heading 7320, HTSUS, or as motor vehicle parts or accessories under heading 8708, HTSUS.

2. Whether the automotive seat belt assemblies containing non- originating, flat-rolled steel, are eligible for preferential tariff treatment under the NAFTA.

3. Whether the slitting of foreign steel is an allowable operation under subheading 9813.00.05, HTSUS.

4. Whether the provisions of chapter 98, subchapter XIII, U.S. note 1(c), HTSUS, would effect the temporary importation of this steel after January 1, 2001, with regard to antidumping duties on non-U.S. steel.

LAW AND ANALYSIS:

I. CLASSIFICATION

The General Rules of Interpretation (GRI's) to the HTSUS govern the classification of goods in the tariff schedule. GRI 1 states, in pertinent part, that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes . . . ."

The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the Customs Co-operation Council's official interpretation of the Harmonized System. While not legally binding, and therefore not dispositive, the ENs provide a commentary on the scope of each heading of the Harmonized System, and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).

In NY 828235, issued to you on March 17, 1988, the automotive seat belt retractor assemblies were held to be classifiable under item 692.32, Tariff Schedules of the United States (TSUS), which provides for other motor vehicles parts. You were also advised that, although the HTSUS had not yet been implemented, the assemblies were classified under subheading 8708.21.00, HTSUS, which provides for motor vehicle safety seat belts.

NY 828235 stated that, with regard to the classification of the assemblies under the HTSUS, "[t]his classification represents - 3 -
the present position of the Customs Service regarding the dutiable status of the merchandise under the HTS. If there are changes before enactment this advice may not continue to be applicable." NY 828235, which was prepared before T.D. 89-90 was issued, was an advisory ruling which does not reflect the current position of the Customs Service concerning the classification of the automotive seat belt retractor assemblies in question.

In HQ 087588, dated April 16, 1991, similar automotive seat belt retractor assemblies were classified under subheading 7320.90.50, HTSUS, which provides for other springs and leaves for springs, of iron or steel. Note 2(b) to section XVII, HTSUS, provides that the term "parts and accessories" does not apply to "[p]arts of general use, as defined in note 2 to section XV, of base metal . . . ." Note 2 to section XV, HTSUS, provides that "parts of general use" include "[s]prings and leaves for springs, of base metal . . . ." Accordingly, as the seat belt retractor assemblies were classifiable under heading 7320, HTSUS, they could not be classified, as parts or accessories, under heading 8708, HTSUS. See EN 73.20, pg. 1031-2 ("[t]he heading covers iron or steel springs of all types, irrespective of their use . . .," and that "[s]prings may be equipped with U-bolts (e.g., for leaf-springs) or other fittings for assembly or attachment"). Similarly, the assemblies in question are classifiable under subheading 7320.90.50, HTSUS.

II. NAFTA APPLICABILITY

The automotive seat belt retractor assemblies imported into the U.S. will consist of non-originating (Great Britain, Germany, etc.) flat-rolled steel, or flat-rolled steel of U.S. origin. To be eligible for tariff preferences under the NAFTA, goods must be "originating goods" within the rules of origin in general note 12(b), HTSUS. General note 12(b)(ii)(A) and 12(b)(iii), HTSUS, provide as follows:

[f]or 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 --

(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 goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein . . . - 4 -

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

The assemblies containing steel from the U.S. are "originating goods" within the rules of origin in general note 12(b)(iii), HTSUS, and are, therefore, eligible for tariff preferences under the NAFTA. With regard to the assemblies containing steel from countries other than Mexico, Canada and/or the U.S., general note 12(b)(ii)(A), HTSUS, requires that the non-originating steel undergo the appropriate change in tariff classification.

Because the subject assemblies are provided for under subheading 7320.90.50, HTSUS, a transformation is evident when a change in tariff classification occurs which is authorized by general note 12(t)/73.16, HTSUS, which states: "[a] change to headings 7319 through 7320 from any heading outside that group." Thus, any non-originating materials in the assemblies must come from a heading other than heading 7319 or 7320, HTSUS.

The non-originating flat-rolled steel is classifiable under heading 7211, HTSUS, which provides for "[f]lat-rolled products of iron or nonalloy steel, of a width of less than 600 mm, not clad, plated or coated." Consequently, a change in tariff classification does occur, and the automotive seat belt retractor assemblies, containing non-originating, flat-rolled steel, are eligible for preferential tariff treatment under the NAFTA.

III. ENTRY

Subheading 9813.00.05, HTSUS, provides for temporary duty- free entry, under bond, for merchandise imported into the United States for the purpose of repair, alteration or processing. Over the years, Customs has liberally interpreted this provision to include processes which would not otherwise qualify as a manufacture or production for drawback under 19 U.S.C. 1313(a) or

U.S. Note 1(c), Chapter 98, Subchapter XIII, HTSUS (as amended by Presidential Proclamation 6780 of March 23, 1995 (published in the Federal Register on March 27, 1995 (60 FR 15845, 15853)), provides:

For purposes of this subchapter, if an article imported into the United States under heading 9813.00.05 is withdrawn for exportation to the territory of Canada or of Mexico, the duty assessed shall be waived or reduced in an amount that does not exceed the lesser of the total amount of duty payable on the article that would - 5 -
have been payable on importation under chapters 1 through 97, inclusive, of the Harmonized Tariff Schedule of the United States or the total amount of customs duties paid to Canada or Mexico on the exported article, unless such article is covered by section 203(a)(1) through 203(a)(8), inclusive, of the NAFTA Implementation Act. The amount of duties or refunds calculated on such articles pursuant to this note shall be adjusted to take into account any subsequent claim for preferential tariff treatment made to another NAFTA country. This note shall apply to shipments to Canada on or after January 1, 1996, and to Mexico on or after January 1, 2001. (Emphasis added).

Section 203(a)(2) of the NAFTA Implementation Act exempts from the general duty drawback (that is, the NAFTA "lesser of" rule) and duty deferral rules of article 303 of NAFTA, merchandise which is exported to another NAFTA party in the same condition as when it was imported. See Article 303.6(b) of NAFTA, which permits full drawback of U.S. duties upon exportation to other countries, including Canada and Mexico; 19 U.S.C. 3333(a)(2). However, antidumping and countervailing duties are not subject to drawback under NAFTA. See 19 U.S.C. 3333(e); 19 CFR 181.42(a). The Customs Regulations defining "same condition" under NAFTA specifically include slitting as one of the permissible operations. See 19 CFR 181.45(b)(1)(iv); see also 19 U.S.C. 1313(j)(3).

Customs has recently held that it is possible for a process such as slitting to be considered "processing" for TIB purposes and, at the same time, be considered in the "same condition" for drawback purposes under section 203(a)(2) of the NAFTA Implementation Act (codified at 19 U.S.C. 3333(a)(2)) because it does not materially alter the characteristics of the good. See HQ 225368, dated February 1, 1995 (copy enclosed); HQ 224283, dated March 17, 1993 (copy also enclosed), which held that the slitting operation which trimmed the width of the flat-rolled steel coils from 40 inches to 10 or 12 inches, and which also cut the edges to certain tolerances constituted a "processing" within the meaning of subheading 9813.00.05, HTSUS.

In this case, it appears that the processing of the steel involves only slitting, which does not alter the characteristics or otherwise rise to the level of a manufacture. The steel strips after undergoing this operation would be exported in essentially the same condition as imported, with only its dimensions having undergone a change. The processing by Kern- Liebers of imported flat-rolled steel into steel strips in the United States, which will then be exported to Mexico to be coiled, heat-treated, and assembled into seat belt housings, is an allowable operation under subheading 9813.00.05, HTSUS, as well as for unused merchandise drawback under 19 U.S.C. - 6 -

1313(j)(1) (previously "same condition" drawback). Thus, the non-NAFTA temporary importation under bond regulations (see 19 CFR 10.39(a) and 113.55(a)) would apply to the imported steel which was slit, and the exportation to Canada and Mexico qualifies for cancellation of the bond. See U.S. Note 1(c), Chapter 98, Subchapter XIII, HTSUS.

The provisions of U.S. Note 1(c) of Subchapter XIII, Chapter 98, HTSUS, would have no effect on the temporary importation of non-U.S. steel with regard to antidumping duties after January 1, 2001. Under 19 CFR 10.31(f), unless otherwise provided, a bond is required for a TIB entry in an amount equal to double the duties which it is estimated would accrue ". . . had all the articles covered by the entry been entered under an ordinary consumption entry." The temporary importation bond may be set in an amount to take into account antidumping or countervailing duties in order to protect the revenue and to prevent the circumvention of the anti-dumping or countervailing duty laws. See HQ 223491, dated March 30, 1992 (copy also enclosed); see also 19 U.S.C. 1677h, 19 CFR 181.42(a).

HOLDING:

The automotive seat belt retractor assemblies are classifiable under subheading 7320.90.50, HTSUS, which provides for other springs and leaves, of iron or steel.

The assemblies, manufactured with U.S. or non-originating steel, are eligible for preferential tariff treatment under the NAFTA. The Column 1 (Special) (MX) rate of duty for articles of subheading 7320.90.50, HTSUS, is free.

The slitting of the imported flat-rolled steel is a permissible operation under subheading 9813.00.05, HTSUS. The NAFTA duty deferral rules do not apply to the slitted steel strips.

The treatment of antidumping duties on TIB entries remains the same after January 1, 2001, for this steel which is covered under section 203(a)(2) of the NAFTA Implementation Act.

Sincerely,

John Durant, Director

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