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HQ 952027




October 13, 1992

CLA-2 CO:R:C:M 952027 MBR

CATEGORY: CLASSIFICATION

TARIFF NO.: 9028.90.00

District Director
U.S. Customs Service
127 North Water St.
Ogdensburg, New York 13669

RE: Protest No. 0712-9X-XXXXXX; Metscan Printed Circuit Boards; American Computer Assembly, Inc.; United States - Canada Free Trade Agreement; Kit Form

Dear Sir:

This is our response to Protest Number 0712-9X-XXXXXX, dated December 27, 1991, and Application for Further Review, regarding the applicability of the United States - Canada Free Trade Agreement to the "Metscan Printed Circuit Board" gas meter parts.

FACTS:

The Printed Circuit Boards (PCBs) and three different types of Integrated Circuits (ICs) are exported to Canada in bulk form (separate boxes) for future assembly. After the boards are assembled they are imported to the United States. The PCBs are manufactured in the United States. However, the integrated circuits are of third country origin. The completed "Metscan PCBs" are parts for gas meters.

ISSUE:

Is the United States - Canada Free Trade Agreement applicable to the "Metscan Printed Circuit Boards"?

LAW AND ANALYSIS:

The United States - Canada Free Trade Agreement rules for determining whether goods, when imported into the United States, are originating in the territory of Canada are set forth in General Note 3(c)(vii), of the Harmonized Tariff Schedule of the United States (HTSUS).

General Note 3(c)(vii)(B) states, in pertinent part:

(B) For the purposes of subdivision (c)(vii) of this note, goods imported into the customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" only if--

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

(2) they have been transformed in the territory of Canada and/or United States, so as to be subject-

(I) to a change in tariff classification in Canada as described in the rules of subdivision
(c)(vii)(R) of this note, or...

The Metscan PCBs at issue are not "goods wholly obtained or produced in the territory of Canada and/or United States," as required by General Note 3(c)(vii)(B)(1), because of the use of third country components (the integrated circuits). The definition of goods "wholly obtained or produced" is enumerated in General Note 3(c)(vii)(L), which states:

(L) As used in subdivision (c)(vii)(B) of this note, the phrase "goods wholly obtained or produced in the territory of Canada and/or the United States" means-- (1) mineral goods extracted in the territory of Canada and/or the United States, (2) goods harvested..., (3) live animals..., (4) fish..., (5) goods produced on factory ships..., (6) goods taken...from seabed..., (7) goods taken from space..., (8) waste and scrap derived from manufacturing..., (9) goods produced in the territory of Canada and/or the United States exclusively from goods referred to in subparagraphs (1) to (8), inclusive, or from their derivatives, at any stage of production.

Therefore, the question arises whether there has been a change in tariff classification, as required by General Note 3(c)(vii)(B)(2)(I). The file documentation states that the Metscan PCB is exported to Canada in the form of a "kit" which will be assembled into a gas meter part. GRI 2(a) states that "[a]ny reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete by virtue of this rule), entered unassembled or disassembled."

However, at the time of export to Canada, the unassembled gas meter part is not put up in "kit" form, i.e., the components for each unit are not separately packaged for individual unit assembly. The exportations merely consists of a number of separate components which are boxed in bulk form for a future assembly operation. Therefore,
upon exportation to Canada, each component is separately classifiable.

Upon exportation to Canada, the integrated circuits are classifiable in subheading 8542.11.00, HTSUS, which provides for: "[e]lectronic integrated circuits and microassemblies: [m]onolithic integrated circuits: [d]igital." Whereas, the printed circuit boards are classifiable in subheading 8534.00.00, HTSUS, which provides for: "[p]rinted circuits."

Upon importation to the United States, the completed "Metscan Printed Circuit Boards" are classifiable under subheading 9028.90.00, HTSUS, which provides for: "[g]as...meters: [p]arts and accessories."

Thus, the assembly process in Canada does result in a change in tariff classification in Canada, as is required by subdivision 3(c)(vii)(B)(2)(I). Therefore, the rules of General Note 3(c)(vii)(B) and subdivision (c)(vii)(R) are met since there is a change in Canada in tariff classification of the individual components, from one chapter to another. See General Note 3(c)(vii)(R)(16) and (18) regarding chapter 85 and chapter 90 tariff classification changes that are required.

HOLDING:

The rate of duty for the Metscan printed circuit boards gas meter parts is 5.4% ad valorem, since the requirements of the United States - Canada Free Trade Agreement have been met.

The protest should be allowed in full. A copy of this decision should be attached to the Customs Form 19 and provided to the protestant as part of the notice of action on the protest.

Sincerely,


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