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HQ 955740




October 18, 1995

CLA-2 R:C:M 955740 RFA

CATEGORY: CLASSIFICATION

TARIFF NO.: 8421.21.00

Port Director
U.S. Customs Service
Main and Stebbins Streets
Post Office Building
P.O. Box 1490
St. Albans, VT 05478

RE: Protest 0201-92-100426; Water Purifying System; U.S.-Canada Free Trade Agreement (CFTA); General Notes 3(c)(vii)(B)(2) and (R)(16)(aa); Goods Transformed; Change in Tariff Classification

Dear Port Director:

The following is our decision regarding Protest 0201-92-100426, which concerns the applicability of the United States-Canada Free Trade Agreement (CFTA), to a water purifying system.

FACTS:

The subject merchandise is a water purifying system, manufactured in Canada. Five items contained in the water purifying system were from countries other than the United States or Canada. They are: a pressure gauge from Germany; terminal blocks from Brazil, Italy or Germany; relays from Germany; retainer clips from Germany; and an enclosure fabrication plinth for rittal panel from Germany.

The merchandise was entered under subheading 8421.21.00, HTSUS, as filtering or purifying machinery for water, eligible for CFTA preferential duty treatment. The entries were liquidated on August 7, 1992, as ineligible for CFTA preferential duty treatment. The protest was timely filed on September 22, 1992.

The subheading under consideration is as follows:

8421.21.00: Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases . . . : [f]iltering or purifying machinery and apparatus for liquids: [f]or filtering or purifying water. . . .

Goods classifiable under this provision have a general, column one rate of duty of 3.9 percent ad valorem.

Goods qualifying for CFTA treatment have a special, column one rate of duty of 0.7 percent ad valorem.

ISSUE:

Whether the water purifying system qualifies for duty reduction treatment under the CFTA?

LAW AND ANALYSIS:

To be eligible for tariff preference under the CFTA, goods must be "originating goods" within the rule of origin in General Note 3(c)(vii)(B), Harmonized Tariff Schedule of the United States (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 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. According to the information provided, most of the components of the water purifying system are of North American origin. However, the water purifying system also contained components from countries other than Canada and the United States (i.e., non-originating goods). Therefore, we find that the subject merchandise does not meet the criterion of being "wholly obtained or produced in the territory of Canada and/or the United States." 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 transformation is evident when a change in tariff classification occurs that is authorized by General Note 3(c)(vii)(R), HTSUS.

Customs agrees with the protestant that the water purifying system is classifiable under subheading 8421.21.00, HTSUS. General Note 3(c)(vii)(R)(16)(aa), HTSUS, states that for chapters 84 and 85, HTSUS, a change from one chapter to another, other than a change to heading 8544, HTSUS, is acceptable. Therefore, to be entitled to preferential tariff treatment under the CFTA, the non-originating goods imported into Canada must be classified in a chapter other than chapter 84, HTSUS. The non-originating goods are: a pressure gauge provided for under heading 9026, HTSUS; terminal blocks provided for under heading 8536, HTSUS; relays from provided for under heading 8536, HTSUS; retainer clips provided for under heading 7318, HTSUS; and an enclosure fabrication plinth for rittal panel provided for under heading 8538, HTSUS. None of the non-originating goods are classifiable under chapter 84, HTSUS. Therefore, we find that a tariff shift requirement of General Note 3(c)(vii)(R)(16)(aa), HTSUS, has been met, and that the water purifying system is eligible for preferential tariff treatment under the CFTA.

HOLDING:

For the foregoing reasons, the Glegg water purifying system is classifiable under subheading 8421.21.00, HTSUS, as filtering or purifying machinery for water, eligible for CFTA preferential duty treatment.

The protest should be GRANTED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision, together with the Customs Form 19, should be mailed by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director
Tariff Classification Appeals Division

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