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HQ 548364




October 2, 2003

VAL:RR:IT:VA 548364 jsj

CATEGORY: VALUATION

Mr. Richard J. Little
Assistant General Counsel
Mitsubishi Electric & Electronics USA, Inc. Americas Corporate Office – Legal Department P.O. Box 6007
Cypress, California 90630-007

RE: High Definition Television Receivers; Classification; NY H83220 (July 26, 2001); NAFTA; Goods Originating in the Territory of a NAFTA Party; Regional Value Content; Net Cost Method; 19 C.F.R. 181.100.

Dear Mr. Little:

The purpose of this correspondence is to respond to your request dated April 23, 2003. The correspondence in issue requested, on the behalf of Mitsubishi Digital Electronics America, Inc. (Mitsubishi Digital), an advance ruling as to whether goods described below qualify as an originating good under NAFTA. It is the understanding of this office that Mitsubishi Electric & Electronics USA, Inc. (Mitsubishi Electric), the entity that extends legal counsel to Mitsubishi Digital, and Mitsubishi Digital are both wholly-owned United States subsidiaries of Mitsubishi Electric Corporation of Tokyo, Japan (Mitsubishi Japan).

Mitsubishi Digital requested confidential treatment pursuant to 19 C.F. R. 181.93 (b)(7) for information contained in Exhibits “A,” the schematic flowcharts exhibiting the manufacturing process, Exhibit “C,” the summary of production costs, and Exhibit “G,” its regional value content cost analysis and accompanying supporting documents. Customs and Border Protection (CBP) will extend confidential treatment in accordance with the request of Mitsubishi Digital dated April 23, 2003. No confidential commercial or financial information is included in this ruling letter.

FACTS

Mitsubishi Digital designs, imports and sells projection television receivers (PTV) from the company’s offices in the United States. The PTV’s are manufactured by PIMS, S.A. de C.V, a maquiladora in Mexicali, Mexico, that is wholly owned by Mitsubishi Digital. The PTV’s at issue in this ruling letter bear model numbers: WS-48513, WS-48613, WS-55513, WS-55613, WS-55813, WS-65513, WS-65613, WS-65713, WS-65813, WS-73513 and WS-73713 and are collectively referred to by the importer as the “V-23 Models.”

The V-23 model PTV’s will be manufactured pursuant to a process detailed in schematic flowcharts provided by Mitsubishi Digital in its ruling request and identified as Exhibit “A.” The manufacturing process, because of its detail and the confidential nature of the information, will not be described, but is attached by reference to this ruling letter. Mitsubishi Digital advises Customs and Border Protection that the completed PTV’s will incorporate both NAFTA originating and non-NAFTA originating components. The importer specifically advises CBP that the V-23 models will use three cathode ray tubes (CRT’s) per television and that the CRT’s are of NAFTA origin.

The chassis of the V-23 model PTV’s will consist of four primary printed circuit assemblies (PCA’s). The primary PCA’s include the DTV Tuner, Signal, Main and Power PCA. The chassis also includes a fifth PCA identified in Exhibit “A” as the Digital Module. The Digital Module, CBP is advised, plugs into the DTV Tuner PCA.

The model V-23 PTV chassis will also consist of subassemblies identified by Mitsubishi Digital as the Demodulation Board, MBC1, MBC2, MBC3 and the 2HDW (Doubler). These subassemblies will each consist of smaller PCA’s that are “snapped apart when fully populated and then plugged into the four primary PCAs.”

The manufacturing process, according to Mitsubishi Digital, has five main steps. These steps are: (1) The automatic insertion; (2) The manual insertion; (3) Testing; (4) Optical/Modular; and (5) The final assembly.

The automatic insertion (AI) process is set forth in the schematic flowcharts identified as Exhibit “A.” The AI process populates the bare circuit boards. According to the importer, the “surface mounted technology components” are initially “placed onto the Signal, MBC1, MBC3, 2HDW, Demodulation Board, DTV Tuner and Digital Module boards.” The initial insertion is “followed by axial and radial components” after which the “boards” are tested electronically. The axial, radial, jumpers and eyelet components are then inserted on the Main, Power and MBC2 board and are also electronically tested.

The manual insertion process follows the automatic insertion process. During the manual insertion process, “remaining larger, active elements are surface mounted by hand onto the PCAs which then pass through the flux and wave folder machines.” Electronic testing is also conducted at this stage. The MBC1, MBC2, MBC3, DEMOD, DTV Tuner and 2HDW are then “snapped apart into smaller PCAs that are plugged into the DTV Tuner, signal, main and Power PCAs.” The four main PCA’s are then “tested on consoles.” The completed PCA’s are subsequently assembled into the model V-23 chassis that is subjected to a “final functional test” as set forth in Exhibit “A.”

The Optical/Modular production process follows the automatic insertion and the manual insertion processes. The production of the optical assembly, also set forth in Exhibit “A,” includes the CRT’s, the lenses, coolant and mounting brackets, among other items. The chassis is then physically brought together with the optical assembly in the “Inner” wood frame resulting in the “Modular” unit. The Modular unit then undergoes a pre-alignment process for focus, accurate color, contrast, brightness, degaussing, testing and inspection before proceeding to final assembly.

The Modular unit, in the final assembly process, is placed inside a PTV cabinet with a “mirror that reflects the CRT image onto the front viewing screen, under the ‘input’ caption.” This is followed by the “assembly and installation of the viewing screen ‘sandwich’ at the front of the cabinet.” The front of the “consumer operated controls” and the PCA related to those controls are then installed. The final alignment of the completed HDTV is the last step in the production process. The finished product is subsequently packaged with its accessories for shipment.

ISSUES

What is the classification, pursuant to the Harmonized Tariff Schedule of the United States, of the above-described Mitsubishi Digital Electronics America, Inc. high definition television receivers bearing model numbers: WS-48513, WS-48613, WS-55513, WS-55613, WS-55813, WS-65513, WS-65613, WS-65713, WS-65813, WS-73513 and WS-73713 ?

Do the above-described Mitsubishi Digital Electronics America, Inc. high definition television receivers bearing model numbers: WS-48513, WS-48613, WS-55513, WS-55613, WS-55813, WS-65513, WS-65613, WS-65713, WS-65813, WS-73513 and WS-73713 qualify to receive the North American Free Trade Agreement (NAFTA) “Special” Column 1 “MX” rate of duty pursuant to General Note 12 (a)(ii) of the Harmonized Tariff Schedule of the United States Annotated as goods that originate in the territory of a NAFTA Party ?

LAW AND ANALYSIS

The federal agency responsible for interpreting and applying the United States Code, including the Harmonized Tariff Schedule of the United States, and the regulations of the Bureau of Customs and Border Protection, as they relate to the importation of merchandise, is U.S. Customs and Border Protection. The Customs laws subject to analysis in this ruling letter are the Harmonized Tariff Schedule of the United States and Part 181 of the regulations of Customs and Border Protection. See 19 U.S.C. 1202; 19 U.S.C. 1500; 19 C.F.R. 181 et seq.

Classification

Mitsubishi Digital requested classification of certain high definition digital televisions (“HDTV’s”) imported from Mexico. The televisions, models WS-48513, WS-48613, WS-55513, WS-55613, WS-55813, WS-65513, WS-65613, WS-65713, WS-65813, WS-73513, and WS-73713 (collectively referred to as the “V-23” series) are projection-type televisions incorporating cathode ray tubes (“CRT’s”) of varying size viewing areas. The V-23 series televisions, according to information provided in your submission of April 23, 2003, are similar to the televisions that were the subject of New York Ruling Letter H83220 (July 26, 2001) previously issued to Mitsubishi Electric on the behalf of Mitsubishi Digital. New York Ruling Letter H83220 classified four high-definition color televisions, rear projection type with cathode-ray tubes (Models WS-55909, WS-55859, WS-65869, and WS-73909) which had a screen aspect ratio of 16:9 and each viewing screen capable of displaying more than 700 scanning lines under subheading 8528.12.56, HTSUS. Subheading 8528.12.56, HTSUS, provides for:

Reception apparatus for television, whether or not incorporating radiobroadcast receivers or sound or video recording or reproducing apparatus; video monitors and video projectors: Reception apparatus for television, whether or not incorporating radiobroadcast receivers or sound or video recording or reproducing apparatus:

Color:
High definition, projection type, with a cathode-ray tube:

8528.12.56 Other.

The classification ruling set forth in NY H83220, based upon the information provided in the instant ruling request, is applicable to the present merchandise.

North American Free Trade Agreement

The applicable rule of origin provides:

89. (A) A change to tariff item 8528.12.52 or 8528.12.56 from tariff items 8528.12.04 or 8528.12.08 or any other heading, except from tariff items 8540.12.20, 8540.12.70 or 8540.91.15. In addition, no more than half the number of semiconductors of tariff item 8542.21.40, used in the television receiver component, may be non-originating; or

(B) A change to tariff items 8528.12.52 or 8528.12.56 from tariff items 8528.12.04 or 8528.12.08 or any other heading, except from tariff items 8540.12.20, 8540.12.70 or 8540.91.15. In addition, the regional value content must not be less than:

60 percent where the transaction value method is used, or

50 percent where the net cost method is used.

Based on the information provided in your ruling request and in as much as the producer and Mitsubishi are related, NAFTA origin is determined in this instance under GN 12 (t)/85.89 (B)(2). Furthermore based on the information provided in your ruling request both elements of the rule of origin are met. All of the materials in the production of the good undergo the applicable change in tariff classification, and regional value content of the good is greater than fifty percent under the net cost method.

HOLDING

The high definition television receivers bearing model numbers: WS-48513, WS-48613, WS-55513, WS-55613, WS-55813, WS-65513, WS-65613, WS-65713, WS-65813, WS-73513 and WS-73713 to be imported by Mitsubishi Digital Electronics America, Inc. are classified in subheading 8528.12.56, Harmonized Tariff Schedule of the United States.

The Mitsubishi Digital Electronics America, Inc. high definition television receivers bearing model numbers: WS-48513, WS-48613, WS-55513, WS-55613, WS-55813, WS-65513, WS-65613, WS-65713, WS-65813, WS-73513 and WS-73713 qualify to receive the North American Free Trade Agreement “Special” Column 1 “MX” rate of duty as goods that originate in the territory of a NAFTA Party.

Customs NAFTA Regulations, 19 C.F.R. 181.100 (a)(2), provides that each NAFTA ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of an advance ruling letter by a Customs field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the advance ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the advance ruling was based. If any of the facts are materially different or a condition has not been satisfied, the treatment specified in the advance ruling will not be applied to the actual transaction.

Sincerely,

Virginia L. Brown, Chief
Value Branch

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