HQ 562037 - Eligibility of Ferroniobium Cored Wire for Preferential Tariff Treatment under HTSUS General Note 12; Transshipment; NAFTA - United States International Trade Commision Rulings

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HQ 562037

May 9, 2002

MAR-2-05 RR:IA 562037 RFC

CATEGORY: NAFTA

Mr. Richard Dougherty
Import Manager
TowerGroup International
107 Henderson Drive
Sharon Hill, PA 19079-1033

RE: Eligibility of Ferroniobium Cored Wire for Preferential Tariff Treatment under HTSUS General Note 12; Transshipment; NAFTA

Dear Mr. Dougherty:

This is in reference to your request, on behalf of Affival S.A., 70, Rue de L’Abaye, F-59730 Solesmes, France, for an administrative ruling on whether certain ferroniobium cored wire is eligible for preferential tariff treatment under General Note 12 to the Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

The facts as presented are as follows: Ferroniobium that is wholly obtained in Canada is exported to France. In France at Affival S.A.’s facility, the ferroniobium is encased in cored wire (which originates in France) producing a product described in the submission as “ferroniobium cored wire.” The cored wire manufacturing process involves placing a steel strip into a profiling machine. The steel strip is then turned into a tube shape by rollers. Before closing, the ferroniobium is placed inside the tube and the final operations result in the cored wire.

The ferroniobium cored wire is then shipped directly from France to the United States.

ISSUE:

Whether ferroniobium originating in Canada that is sent to France where it is processed into a ferroniobium cored wire and then shipped to the United States is eligible for preferential tariff treatment under HTSUS General Note 12.

LAW AND ANALYSIS:

General Note 12 to the HTSUS establishes the criteria by which a good imported into the customs territory of the United States qualifies as an originating good for purposes of being eligible for preferential tariff treatment under the North American Free Trade Agreement (NAFTA). See HTSUS General Note 12 (a) & (b). There exist certain prohibitions in the law, however, against the transshipment of originating goods outside the territories of the NAFTA parties or countries. The violation of these prohibitions can result in the loss of originating status for a good that has otherwise satisfied the criteria for originating status as set forth in HTSUS General Note 12.

The prohibitions relating to the transshipment of originating goods outside the territories of the NAFTA parties have their genesis in article 411 of the NAFTA:

A good shall not be considered to be an originating good by reason of having undergone production that satisfies the requirements of Article 401 if, subsequent to that production, the good undergoes further production or any other operation outside the territories of the 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 a Party.

Article 411, North American Free Trade Agreement, December 17, 1992, Can-Mex-U.S., 32 I.L.M. 289 (1993).

The NAFTA transshipment prohibitions have been implemented and codified into U.S. statutory law:

(k) Transshipment A good shall not be considered to be an originating good by reason of having undergone production that satisfies the requirements of subsection (a) of this section if, subsequent to that production, the good undergoes further production or any other operation outside the territories of the NAFTA countries, other than unloading, reloading, or any other operation necessary to preserve it in good condition or to transport the good to the territory of a NAFTA country.

Section 202 (k) of Pub. L.103-182 (19 U.S.C. § 3332(k)).

The legislative history to the North American Free Trade Agreement Implementation Act (Pub. L. 103-182) (December 8, 1993) discusses the prohibitions relating to the transshipment of originating goods:

Section 202(k). Transshipment

Present law

Section 202 of the U.S.-Canada FTA Implementation Act and General Note 3(c)(vii) of the HTS provides that goods exported from Canada are deemed to originate in Canada only if they are not further processed in a third country before being shipped to the United States.

Explanation of provision

Section 202(k) of H.R. 3450 provides that goods shipped outside the territories of the NAFTA countries for further processing or any other operation shall lose their status as originating goods. The subsection expressly exempts unloading, reloading, or any other operation necessary to preserve it in good condition or to transport the good to the territory of a NAFTA country.

Reasons for change

Section 202(k) enacts Article 411 of the NAFTA as a statutory provision.

Section 202(k) of H.R. Doc. No. 103-316, 103rd Cong., 1st Sess. (1993).

Item (l) to General Note 12 to the HTSUS restates the prohibitions under U.S. law against the transshipment of originating goods outside the territory of the parties or countries:

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.

General Note 12 (l) to the HTSUS.

The Customs Service’s regulations implement the above-mentioned prohibitions on the transshipment of NAFTA originating goods.

The regulations implementing the NAFTA were established, implemented and promulgated on a uniform basis by all three parties to the NAFTA. They are commonly referred to as the “NAFTA Uniform Regulations.” See Article 511, North American Free Trade Agreement, December 17, 1992, Can-Mex-U.S., 32 I.L.M. 289 (1993); Section 101(b)(1)(A) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182) (December 8, 1993); 19 CFR § 181.

Section 16. Transshipment

Effect of Subsequent Processing Outside the Territory of a NAFTA Country; Loss of Originating Good Status

(1) A good is not an originating good by reason of having undergone production that occurs entirely in the territory of one or more of the NAFTA countries that would enable the good to qualify as an originating good if subsequent to that production (a) the good is withdrawn from customs control outside the territories of the NAFTA countries; or (b) the good undergoes further production or any other operation outside the territories of the NAFTA countries, other than unloading, reloading or any other operation necessary to preserve the good in good condition, such as inspection, removal of dust that accumulates during shipment, ventilation, spreading out or drying, chilling, replacing salt, sulphur dioxide or other aqueous solutions, replacing damaged packing materials and containers and removal of units of the good that are spoiled or damaged and present a danger to the remaining units of the good, or to transport the good to the territory of a NAFTA country.

Transshipped Good Considered Entirely Non-Originating

(2) A good that is a non-originating good by application of subsection (1) is considered to be entirely non-originating for purposes of this appendix.

Exceptions for Certain Goods

(3) Subsection (1) does not apply with respect to a good provided for in any of subheadings 8541.10 through 8541.60 and 8542.11 through 8542.80 where any further production or other operation that that good undergoes outside the territories of the NAFTA countries does not result in a change in the tariff classification of the good to a subheading outside subheadings 8541.10 through 8542.90.

19 CFR § 181, Appendix, Part VI, Section 16

In the instant case, the ferroniobium is withdrawn from customs control outside the territories of the NAFTA countries insofar as it is sent from Canada to France for processing in Affival S.A.’s processing facility. At that facility, the ferroniobium undergoes a production or other operation outside the territories of the NAFTA countries, other than unloading, reloading or other operation necessary to preserve the ferroniobium in good condition insofar as it is processed into ferroniobium cored wire. Accordingly, pursuant to the above-cited provision 19 CFR § 181, Appendix, Part VI, Section 16, Subsection (1), the ferroniobium loses its originating status by being transshipped through and processed in France. It becomes a non-originating good, and thus not eligible for preferential tariff treatment under HTSUS General Note 12. See 19 CFR § 181, Appendix, Part VI, Section 16, Subsection (2).

HOLDING:

The above-mentioned product is not eligible for preferential tariff treatment under HTSUS General Note 12 insofar as it is a non-originating good when imported into the United States.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs Service officer handling the transaction.

Sincerely,

John A. Durant, Director
Commercial Rulings Division

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