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HQ 562607




March 19, 2003

CATEGORY: CLASSIFICATION

CLA-02 RR:CR:SM 562607 KKV

Fusae Nara, Esq.
Pillsbury Winthrop
One Battery Park Plaza
New York, NY 10004-1490

RE: Eligibility of certain “flat panel” color television receivers for preferential tariff treatment under NAFTA

Dear Ms. Nara:

This is in response to your letter dated December 11, 2002 (and subsequent facsimile dated December 27, 2002), on behalf of Sharp Electronics (“Sharp”), which requests a binding ruling regarding the eligibility of certain liquid crystal display (LCD) flat screen color television receivers for preferential tariff treatment under the North American Free Trade Agreement (NAFTA) upon importation from Mexico.

FACTS:

You state that Sharp Electronica Mexico S.A. de C.V. (“SEMEX”) plans to manufacture a flat screen LCD television receiver (Model No. LC-20E1UM) in Mexico from the following non-originating components, which you assert are classifiable in the Harmonized Tariff Schedule of the United States (HTSUS) as follows:

LCD Panel Unit
The LCD panel unit, classifiable in subheading 9013.80.90, HTSUS, consists of an LCD display glass subassembly, optical sheets and backlight unit. The display glass subassembly is an LCD glass panel affixed with driver (gate and source) electronics. The optical sheets include a reflection/deflection sheet, prism sheet, indium tin oxide (ITO) sheet, diffusion sheets and a diffusion panel, and are affixed to the frame of the LCD panel unit. The backlight unit consists of fluorescent lamps, lamp fixing holders, a reflection mirror and a back panel. You state that the back panel is equivalent to the “flat panel display module” described in Customs Informed Compliance Publication, Classification of Flat Panel Displays. Moreover, you state that similar to the “mechanical package” described within that publication, the backlight unit gives the visibility of the LCD panel screen and “adds strength and protection to the display glass and provides the means whereby the user mounts the display into the end-user screen.”

Television Chassis Frame
The television chassis frame, classifiable in subheading 8529.90.9380, HTSUS, is a plastic board upon which the printed wiring board assemblies described below are mounted after importation.

Printed Wiring Board Assemblies (PWBs)
The PWBs include: an analog unit PWB, classifiable in subheading 8529.90.13, HTSUS, that detects and amplifies the video and audio signals and converts analog signals to digital signals; a digital unit PWB, classifiable in subheading 8529.90.06, HTSUS, that converts digital signals into the appropriate number of pixels used by the LCD panel, by generating color, brightness, horizontal and vertical signals from the digital signals received by the analog PWB; a control unit PWB, classifiable in subheading 8529.90.03, HTSUS, that controls the operation of the television receiver (channel selection, audio volume, power, menu screen, TV/video switching, etc.); a remote control/light emitting diode (LED) unit PWB, classifiable in subheading 8529.90.06, HTSUS, incorporating the reception device for remote control signals and two LEDs for power and “sleep” functions; and two inverter unit PWBs, classifiable in subheading 8529.90.06, HTSUS, that control the fluorescent lamps in the backlight unit.

Front and Back Television Cabinets
The front cabinet, classifiable in subheading 8529.90.9380, HTSUS, contains the television speakers. The back cabinet, also classifiable in subheading 8529.90.9380, HTSUS, connects to the adjustable stand and houses the video, audio and antenna input and output terminals.

Adjustable Stand
The adjustable stand, classifiable in subheading 8529.90.9380, HTSUS, has a carrying handle and an angle that allows the screen to be adjusted backwards between 12 and 35 degrees.

Accordingly you assert that the fully-assembled LCD flat screen television receiver, classifiable in subheading 8528.12.72, HTSUS, is eligible for preferential tariff treatment under NAFTA upon importation into the United States.

ISSUE:

Whether the subject LCD flat screen television receiver manufactured in Mexico is eligible for preferential tariff treatment under NAFTA.

LAW AND ANALYSIS:

Article 401 of the NAFTA is incorporated into General Note 12, HTSUS, which provides, in pertinent part, as follows:

(a)(ii) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules set forth in regulations issued by the Secretary of the Treasury (whether or not the goods are marked), when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn followed by the symbol “MX” in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Implementation Act.

Thus, by operation of General Note 12, the eligibility of a particular article for NAFTA duty preference is predicated, in part, upon a determination under the NAFTA Marking Rules that the good is product of Mexico.

Section 102.11, Customs Regulations (19 CFR 102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for the purposes of country of origin marking and determining the rate of duty and staging category applicable to an originating good as set out in Annex 302.2. Paragraph (a) of this section states that the country of origin of a good is the country in which:

The good is wholly obtained or produced;

(2) The good is produced exclusively from domestic materials; or

(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

“Foreign material” is defined in 19 CFR 102.1(e) as “a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced.” Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the flat panel television is assembled in Mexico from non-originating components and therefore is neither wholly obtained or produced, nor produced exclusively from domestic materials. Since an analysis of sections 102.11(a)(1) and 102.11(a)(2) will not yield a country of origin determination, we look to section 102.11(a)(3).

Section 102.11(a)(3) provides that the country of origin is the country in which “each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in 19 CFR 102.20...” Upon receipt at Customs, your ruling request was forwarded to the General Classification Branch, Office of Regulations and Rulings, and National Commodity Specialist Division, New York, which confirmed that the fully assembled Model LC-20E1UM flat screen television receiver would be classifiable in subheading 8528.12.72, HTSUS. Further, it was confirmed that the component materials would be classifiable in the following manner set forth in your submission. The applicable tariff shift rule found in section 102.20(o) provides as follows:

A change to subheading 8528.12 through 8528.30 from any other subheading, including another subheading in that group, except from 8540.11 through 8540.12

You indicate that the LCD panel unit, the television chassis frame, the printed wiring board assemblies (PWBs), front and back television cabinets and adjustable stand are non-originating materials, thus qualifying as “foreign materials” subject to the rule set forth above.

Under the facts provided, component materials initially classifiable in subheadings 8529.90.03 (control unit PWB), 8529.90.06 (digital unit PWB, remote control/LED unit PWB and inverter unit PWB)), 8529.90.13 (analog unit PWB), 8529.90.90 (front and back television cabinets, adjustable stand), 8529.90.93.80 (television chassis frame), and 9013.80.90 (LCD panel unit) are subsequently classifiable in subheading 8528.12.72, HTSUS, as a result of assembly operations in Mexico. Therefore, the requisite tariff shift rule is met and the country of origin of the fully-assembled Model LC-20E1UM flat screen television receiver is Mexico, pursuant to 19 CFR 102.11(a)(3).

With regard to the status of the assembled television receiver as an “originating good” pursuant to the rules of origin in General Note 12, section (b) provides, in pertinent part:

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

(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
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 nonoriginating material 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; or

(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials. Inasmuch as the facts presented state that the components referenced above are non-originating, General Note 12(b)(i) and (iii) are inapplicable. Therefore, to determine whether the television receiver is considered to be “originating,” consideration must be given to General Note 12(b)(ii)(A) which provides, in pertinent part, that the goods are “transformed in the territory of Canada, Mexico and/or the United States” in such a manner that “each of the non-originating materials undergoes a change in tariff classification described in subdivisions (r), (s) and (t)or the rules set forth therein.”

As previously indicated, the fully assembled receiver is classifiable in subheading 8528.12.72, HTSUS. With respect to General Note 12(b)(ii)(A), the applicable tariff shift rule under General Note 12(t)85.90 states:

90 A change to tariff items 8528.12.62, 8528.12.64, 8528.12.68 or 8528.12.72 from tariff items 8528.12.04 or 8528.12.08 or any other heading, except from tariff item 8529.90.53.

Based upon the information provided, all of the component materials (comprised of items in subheadings 8529.90.03, 8529.90.06, 8529.90.13, 8529.90.90, 8529.90.93.80, and 9013.80.90) undergo the necessary change in subheading as a result of processing in Mexico. Because none of the components are classifiable in subheading 8529.90.53, a provision from which a change is disallowed, the component materials satisfy the tariff shift rule in General Note 12(t).85.90. Accordingly, the fully assembled flat screen TV is an “originating good” for purposes of General Note 12 and 19 CFR Part 181.1(q).

Consequently, the completed Model LC-20E1UM LCD flat screen color television receiver will be entitled to NAFTA duty preference when imported into the U.S. from Mexico.

HOLDING:

Based upon the information provided, where non-originating component materials meet the requisite tariff shift rule set forth in General Note 12(t) to the HTSUS, the finished good will qualify for preferential tariff treatment under the NAFTA.

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

Sincerely,

Myles B. Harmon

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