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HQ 004106

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September 26, 1996

RR:IA 004106 ch

CATEGORY: NAFTA

Martha L. Brown
Customs Administrator
Volkswagen of America, Inc.
3800 Hamlin Road
Auburn Hills, MI 48326

RE: General Note 12(l), HTSUS; transshipment.

Dear Ms. Brown:

This is in response to your letter, dated August 13, 1996, requesting an advance ruling concerning the eligibility of certain automobiles for preferential treatment under the North American Free Trade Agreement (NAFTA).

FACTS:

According to the submission, automobiles manufactured in Mexico are transported under bond through the United States to a port processing center in Canada. In Canada, the vehicles will be further processed in a Customs bonded warehouse facility. You indicate that such processing may include replacing or correcting defective items and adding optional equipment (e.g., radios). Thereafter, the vehicles will be exported from Canada to the United States for entry under a claim for NAFTA preference.

You have asked us to assume that the automobiles would qualify "as goods originating in the territory of a NAFTA party," pursuant to General Note 12 of the Harmonized Tariff Schedule of the United States (HTSUS), if the automobiles were entirely manufactured and processed in Mexico and exported directly to the United States.

ISSUE:

Whether transporting and processing the automobiles within the NAFTA territories in the manner described above precludes them from qualifying for preferential tariff treatment as originating goods under the NAFTA?

LAW AND ANALYSIS:

Subdivision (l) of General Note 12 states:

Transshipment. A good shall not be considered to be an originating good by reason of having undergone production that satisfies the requirements of this note if, subsequent to that production, the good undergoes further production or any other operation outside the territories of the NAFTA parties, other than unloading, reloading or any other operation necessary to preserve it in good condition or to transport the good to the territory of Canada, Mexico and/or the United States. (Emphasis supplied).

Regulations implementing this provision are found at 19 CFR 181, Appendix, Part VI, Section 16.

General Note 12(l) provides that goods which otherwise qualify for preferential treatment are not originating if they undergo processing unrelated to their preservation or transport outside the NAFTA territories. By its terms, the note does not apply to goods which undergo such processing within the NAFTA territories. In view of the foregoing, transporting and processing the vehicles as described above would not preclude them from qualifying for preferential tariff treatment as originating goods.

HOLDING:

Under the circumstances of this transaction, the automobiles are not precluded from qualifying for preferential tariff treatment as originating goods.

Sincerely,

John Durant, Director
Tariff Classification Appeals Division

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