HQ 547956 - NAFTA Advance Ruling Request - United States International Trade Commision Rulings

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HQ 547956

March 22, 2002

RR:IT:VA 547956 DCC

CATEGORY: VALUATION

Melvin S. Schwechter, Esq.
LeBoeuf, Lamb, Greene & McRae, L.L.P.
1875 Connecticut Avenue, N.W.
Washington, D.C. 20009-5728

RE: NAFTA Advance Ruling Request

Dear Mr. Schwechter:

This is in response to your NAFTA advance ruling request, dated April 20, 2001, on behalf of Alcoa Fujikura, Ltd. (“AFL”), pursuant to Customs Regulation § 181.92(b)(6), regarding NAFTA preferential treatment for automotive wire harnesses from Mexico. We also received a letter, dated July 19, 2001, in which you clarified the authority under which you submitted your request, and a letter dated February 4, 2002, clarifying the allocation of certain cost in the regional value content (“RVC”) calculation.

Facts:

AFL manufactures in Mexico automotive wire harnesses classified under subheading 8544.30 of the Harmonized Tariff Schedule of the United States (“HTSUS”). The wire harnesses consist of copper wire; metal terminals; plastic connectors, shields junction boxes, and insulated housings; compounds used on connectors, terminals, and tubing; tape; tubing and sleeves; spacers; locator clips, grommets, fuses, relays, switches, and diodes; and packaging materials.

Although AFL sources copper wire used in the production of harnesses from both NAFTA and non-NAFTA countries, for most harnesses it uses copper wire originating from a NAFTA country. According to Counsel, these harnesses made with originating copper wire qualify for NAFTA preferential treatment based on a change in tariff classification. For approximately 25 of AFL’s 11,000 harness models, however, the harnesses do not qualify under the tariff shift rule. Counsel states, however, that these wire harnesses qualify under the alternative RVC requirement. For these models, AFL includes the allocated period, product, and other costs attributable to the cost of producing these models in its calculation of the RVC.

Counsel seeks confirmation that AFL may use the tariff shift rule, the RVC requirement, or the de minimis rule to qualify wire harnesses for preferential treatment under NAFTA. In addition to the submissions noted above, Counsel provided a bill of materials for each of three of AFL’s wire harness models.

Issue:

Whether an importer may use the applicable tariff shift rule, RVC requirement, or de minimis rule to analyze on a model-by-model basis the eligibility of wire harnesses for preferential treatment under NAFTA.

Law and Analysis:

To be eligible for tariff preferences under NAFTA, goods must be “originating goods” within the rules of origin set forth in General Note (“GN”) 12(b), HTSUS, and the NAFTA Rules of Origin Regulations, Appendix to Part 181, Customs Regulation (19 C.F.R. Appendix to Part 181) (the “Rules of Origin”). Section 4 of the Rules of Origin sets forth the rules for determining whether a good originates in the territory of a NAFTA Party. For example, a good will originate if it was “wholly obtained or produced” in accordance with section 4(1) of the Rules of Origin, or if it satisfies the applicable change in tariff classification, the applicable RVC requirement, or combination thereof under section 4(2). For purposes of this ruling, we assume that transaction value is unacceptable and, therefore, net cost (“NC”) is the appropriate method for determining RVC.

For automotive wire harnesses classified under 8544.30, HTSUS, the NAFTA Rules of Origin Regulations authorize qualification by satisfying either the change in tariff or the RVC requirement. Specifically, General Note GN 12(t)/85.147 requires:

A change to subheadings 8544.11 through 8544.60 from any subheading outside that group, except from headings 7408, 7413, 7605 or 7614; or

A change to subheadings 8544.11 through 8544.60 from headings 7408, 7413, 7605 or 7614, whether or not there is also a change from any other subheading, including another subheading within subheadings 8544.11 through 8544.60, provided there is also a regional value content of not less than:

60 percent where the transaction value method is used; or

50 percent where the net cost method is used.

AFL claims that the different models of wire harnesses may qualify for NAFTA preferential treatment under either part A or B of General Note 12(t)/85.147, or by application of the de minimis rule. Counsel argues that the NAFTA Rules of Origin focus on originating status of particular goods—not the qualifying status of the producer as a whole. In particular, Counsel notes that section 6(3) defines the RVC variable NC as “the net cost of the good, calculated in accordance with subsection (11).” According to Counsel, the definite article “the,” as used in section 6(3) “clearly focuses on the specific good to be qualified by the calculation.” Counsel further notes that the regulations for filing a claim for preferential treatment apply to specific goods rather than producers. According to the Rules of Origin Regulations, “In connection with a claim for preferential treatment for a good under the NAFTA, the U.S. importer shall make a written declaration that the good qualifies for such treatment.” 19 C.F.R. 181.21(a) (emphasis added).

Finally, Counsel notes that two previous Customs ruling letters—HRLs 546674 and 957188—applied the tariff shift rule (GN 12(t)/85.147(A)), the RVC requirement (GN 12(t)/85.147(B)), and the de minimis rule to determine whether various models of wire harnesses qualified for NAFTA preferential treatment. In HRL 957188, dated February 9, 1996, Customs analyzed the NAFTA eligibility of wire harnesses manufactured under six different scenarios using the alternative analyses. Similarly, in HRL 546674, dated April 16, 1998, Customs analyzed the NAFTA eligibility of wire harnesses under the tariff shift rule and RVC requirement. In both rulings, Customs found different models of wire harnesses may qualify for preferential treatment under the tariff shift rule, the RVC requirement, or the de minimis rule

Based on the plain language of the Rules of Origin Regulations and prior rulings, we determine that AFL may use the applicable tariff shift rule, RVC requirement, or the de minimis rule for purposes of determining whether various models of wire harnesses qualify for NAFTA preferential treatment. The eligibility provisions of the NAFTA Rules of Origin Regulations consider the tariff shift or regional value of particular goods—not producers. Furthermore, HRLs 546674 and 957188 demonstrate that Customs may analyze the NAFTA eligibility of various models of wire harnesses under the alternative provisions of Rules of Origin Regulations.

Holding:

For the reasons discussed above, AFL may use the applicable tariff shift rule, RVC requirement, or the de minimis rule, on a model-by-model basis, to determine whether various types of wire harnesses qualify for NAFTA preferential treatment.

This holding applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in 19 C.F.R. § 181.100(a)(2), which states that a NAFTA ruling letter is issued on the assumption that all the information furnished in connection with the ruling request and incorporated therein, directly, by reference, or by implication, is accurate and complete in every respect. Should we determine that the information provided is not complete, does not comply with section 181.100(a)(2), or both, this ruling will be subject to modification or revocation.

Sincerely,

Virginia L. Brown
Chief, Value Branch

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