United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 2002 HQ Rulings > HQ 561827 - HQ 562175 > HQ 562056

Previous Ruling Next Ruling
HQ 562056




January 7, 2002

CLA-2 RR:CR:SM 562056 TJM

CATEGORY: CLASSIFICATION

Joseph Wilson
Port Director
U.S. Customs Service
111 West Huron Street, Room 603
Buffalo, New York 14202

RE: Internal advice; NAFTA de minimis; multiple shipments of merchandise as a single entity; fabricated structural steel; 19 C.F.R. 141.51; Tariff Suspension and Trade Act of 2000; NAFTA Rules of Origin Regulations; GN 12(t)/73.7.

Dear Port Director:

This is in response to your request for internal advice, dated January 16, 2001, regarding de minimis provisions of the NAFTA for shipments of fabricated structural steel. The issues covered by this internal advice were raised by KPMG on behalf of its client, Noront Steel Limited of Canada. Our response follows.

FACTS:

Noront Steel Limited of Copper Cliff, Ontario, Canada (“Noront Steel”), supplies, fabricates and delivers steel for complete and specific structures in heading 7308 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Noront Steel purchases various angles, shapes and sections classifiable in heading 7216, HTSUS, and assembles them to make components of the final steel structures (classifiable in heading 7308, HTSUS). We are advised by KPMG that most, but not all, of these components are NAFTA originating material. The size, magnitude and location of the structure usually warrants that the components of the complete structure are shipped unassembled. Due to the size and weight of the goods at issue, the delivery is also limited by regulations administered by the U.S. Department of Transportation. These steel structures are exported to the site unassembled and are erected on site. Most components are bolted together at the site to produce the final steel structure. Depending on the size of the structure, a complete structure may be shipped by one truck load or fifty truck loads. One truckload weighs approximately 20 tons. Each component is custom made to fit in a specific location of the specific structure being assembled. Each and every steel component is “detailed” in the shop fabrication area and systematically assigned unique identification numbers to facilitate assembly/erection of each piece at the site.

Components to be assembled first are shipped first. Additional components are also produced and shipped in the order that they will be used. Depending on the size of the structure, shipments may occur over several months before all components arrive at the assembly site.

Customs port in Buffalo, New York, conducted a NAFTA verification for goods exported to the United States by Noront. Customs officials at the port concluded that the goods Noront Steel exports to the United States did not qualify for NAFTA preferential duty rate because de minimis provisions did not apply to the goods at issue. Furthermore, the port determined that the entries are classifiable as components of steel structures under subheading 7308.90.30, HTSUS, and not as complete structures under subheading 7308.90.95, HTSUS.

On November 20, 2000, KPMG requested a ruling from Customs’ National Commodity Specialist Division (“NCSD”) in New York on the classification of the merchandise at issue. On December 14, 2000, NCSD declined to provide a ruling on the classification of the merchandise because it is the subject of a current or completed Customs transaction.

This office received the request for an internal advice on March 5, 2001. KPMG contends that the goods are classifiable as complete structures, 7308.90.95.90, HTSUS, and not as individual components of the steel structures, 7308.90.30.00, HTSUS. KPMG notes that General Rules of Interpretation (“GRI”) 2(a) supports KPMG’s assertion that the goods, although unassembled when imported, is classifiable in a heading referencing the finished article. KPMG maintains that, assuming the components are classified as complete structures, the goods would qualify for NAFTA preferential treatment by application of the NAFTA de minimis rule.

On August 10, 2001, the Entry Procedures and Carriers Branch in this office provided an opinion on the issue of whether multiple shipments should be classified together as one entity.

ISSUE:

Whether the shipments of structural steel components as described above qualify for NAFTA preferential treatment by application of the NAFTA de minimis rule.

LAW AND ANALYSIS:

Classification as Components or as an Unassembled Good

The issue of whether the multiple shipments in this case should be classified together as one entity was referred to the Entry Procedures and Carriers Branch whose opinion is incorporated herein. Current law requires all merchandise arriving on one vessel or vehicle and consigned to one consignees to be included in one entry. See 19 C.F.R. § 141.51. This means that an unassembled article whose components are shipped separately will be classified as components, not as the assembled article.

However, we note that section 1460 of the Tariff Suspension and Trade Act of 2000 (the “Act”), passed by Congress in November, 2000 (P.L. 106-476) amended section 484 of the Tariff Act of 1930 (19 U.S.C. § 1484) by adding a new paragraph (j). Section 484 (j)(1) addresses the very situation at issue here, that is, the entry of merchandise whose size or nature necessitates its shipment in an unassembled or disassembled condition on more than one conveyance. However, section 484(j) of the Act is not a self-executing statutory provision. Its implementation is dependent upon the promulgation of regulations, of which the process has not been completed at this time. Furthermore, the statutory provision is not retroactive in that the treatment of multiple entries of merchandise as a single transaction is conditioned upon the importer filing an application with Customs in advance. Section 1460 of the Act states, in pertinent part, that:

(a) IN GENERAL—Section 484 of the Tariff Act of 1930 (19 U.S.C. 1484) is amended by adding at the end of the following: “(j) TREATMENT OF MULTIPLE ENTRIES OF MERCHANDISE AS SINGLE TRANSACTION.—In the case of merchandise that is purchased and invoiced as a single entity but – is shipped in an unassembled or disassembled condition in separate shipment due to the size or nature of the merchandise, or is shipped in separate shipments due to the inability of the carrier to include all of the merchandise in a single shipment (at the instruction of the carrier), the Customs Service may, upon application by an importer in advance, treat such separate shipment for entry purposes as a single transaction.” (Emphasis added)

Because the statute has not yet been implemented by regulation and more importantly because the importer in the instant case has not made the required application with Customs in advance, the current regulations are the basis of our decision herein.

In addition to current regulations (19 C.F.R. § 141.51), Customs noted in Headquarters Ruling Letter (“HRL”) 958807, dated April 30, 1996, that:

It is well settled that merchandise must be classified and assessed with duty in its condition as imported. Components of a machine that arrive within the customs territory on different days cannot be aggregated for classification and appraisement purposes under a single HTS provision. See United States v. Baldt Anchor, Chain & Forge Division of Boston Metals Co., 59 C.C.P.A. 122, C.A.D. 1051, 429 F.2d 1403 (1972), Franklin Industries, Inc. v. United States, 1 Ct. Int’l Trade 349 (1981), HQ 085252, dated September 29, 1989, and HQ 954820, dated December 13, 1993.

This means that if the components of the final steel structure are entered on separate occasions, the entries are classified not as an unassembled finished steel structure, but as separate components of the final good. Therefore, based on the facts provided by your office and the inquirer, we find that your office’s classification of the entries in subheading 7308.90.30, HTSUS, and not in 7308.90.95, HTSUS, is correct.

B. The NAFTA Rule of Origin

You also stated that Noront Steel uses some non-originating materials to produce the steel structure components. In cases where non-originating materials are used to produce a good in a NAFTA country, that good will qualify for the NAFTA preferential treatment only if the non-originating materials, under applicable provisions of General Note (“GN”) 12, HTSUS, (19 U.S.C. § 1202) and the NAFTA Rules of Origin Regulations (“ROR”) (19 C.F.R. part 181, app.): 1) undergo a change in tariff classification; 2) undergo the applicable change in tariff classification and the final product meets regional value-content requirements; or 3) the final product meets regional value-content requirements. See GN 12(b), HTSUS (19 U.S.C. § 1202) and 19 C.F.R. part 181, app. § 4(2)(a) – (c), the former which states, in pertinent part, that:

For 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 – 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, or the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note. . . .

1. Rule of Origin for Heading 7308, HTSUS

General Note 12(t)/73.7, HTSUS, sets forth the applicable NAFTA rule for goods in heading 7308. It states, in pertinent part, that:

A change to heading 7308 from any other heading, except for changes resulting from the following processes performed on angles, shapes, or sections of heading 7216: drilling, punching, notching, cutting, cambering, or sweeping, whether performed individually or in combination; adding attachments or weldments for composite construction; adding attachments for handling purposes; adding weldments, connectors or attachments to H-sections or I-sections, provided that the maximum dimension of the weldments, connectors, or attachments is not greater than the dimension between the inner surfaces of the flanges of the H-sections or I-sections; painting, galvanizing, or other coating, adding a simple base plate without stiffening elements, individually or in combination with drilling, punching, notching, or cutting, to create an article suitable as a column.

Thus, in order to qualify for the NAFTA preference, the goods of heading 7308, HTSUS, must undergo a change in tariff classification from another heading. The exception is that changes in tariff classification to heading 7308 from heading 7216, HTSUS, must result from processes other than those explicitly proscribed in GN 12(t)/73.7. The rule includes no regional value-content requirement. There is insufficient information in the record before us to determine whether the non-originating components purchased by Noront satisfy the GN 12(t) rule for heading 7308, HTSUS, as a result of processing in Canada.

Applicable De Minimis Provisions

On the issue of whether the de minimis provision applies in this case, the general de minimis rule for the NAFTA is provided for in section 5(1) of the NAFTA ROR, which states, in pertinent part, that:

(1) Except as otherwise provided in subsection (4), a good shall be considered to originate in the territory of a NAFTA country where the value of all non-originating materials that are used in the production of the good and that do not undergo an applicable change in tariff classification as a result of production occurring entirely in the territory of one or more of the NAFTA countries is not more than seven percent. . . . (Emphasis added)

See also General Note 12(f)(i), HTSUS.

We have determined that the various steel components imported in multiple shipments are not classified as unassembled steel structures but as separate individual components. Under these circumstances, KPMG concedes that the imported non-originating structural steel components will not qualify for NAFTA preferential treatment by application of the de minimis rule. Therefore, the components made by Noront in Canada from non-originating materials (e.g., angles, shapes, sections) that do not meet the GN 12(t)/73.7 tariff shift rule are fully dutiable when imported. Conversely, the components made in Canada from non-originating materials that satisfy the GN 12(t)/73.7 tariff shift rule and components made from originating material may qualify for NAFTA preference, assuming compliance with all other NAFTA requirements.

HOLDING:

Based on the information presented in regard to this case, components of a steel structure imported into the U.S. in separate shipments are classified as individual components of the final product in subheading 7308.90.30, HTSUS. Therefore, the components made by Noront Steel in Canada from non-originating materials that do not meet the GN 12(t)/73.7 tariff shift rule are fully dutiable when imported. Conversely, the components made in Canada from non-originating materials that satisfy the GN 12(t)/73.7 tariff shift rule and components made from originating materials may qualify for NAFTA preference, assuming compliance with all other NAFTA requirements.

This internal advice should be mailed by your office to the requester no later than sixty days from the date of this letter. On that date, the Office of Regulations & Rulings will take steps to make the decision available to Customs Personnel and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act and other means of public distribution

Sincerely,

John Durant
Director

Previous Ruling Next Ruling

See also: