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HQ 546834




December 16, 1998

VAL RR:IT:VA 546834

CATEGORY: VALUATION

Mr. Bernard Notling
Account Manager
Rudolph Miles & Sons
P.O. Box 11057
El Paso, TX 79993

RE: Article 509; advance ruling request; wire harnesses

Dear Mr. Notling:

This is in reply to your letter of August 12, 1997, on behalf of Stoneridge Corp. (the importer), in which you requested an advance ruling under the North American Free Trade Agreement (NAFTA), concerning the determination of the value of non-originating materials in respect of certain automotive wire harnesses assembled in Mexico. We regret the delay in responding.

FACTS:

Automotive wire harnesses are assembled in Mexico from originating and non-originating materials and imported into the U.S. through the port of El Paso. The wire harnesses are classified in subheading 8544.30.0000, Harmonized Tariff Schedule of the United States (HTSUS). Some of the wire harnesses are designed for use in the assembly of heavy duty vehicles of heading 8701, HTSUS.

ISSUE:

The issue presented is how the value of non-originating materials should be determined for purposes of calculating the regional value content of the good.

LAW AND ANALYSIS:

The imported merchandise consists of wire harnesses of subheading 8544.30.0000, HTSUS, assembled in Mexico from originating and non-originating materials. The applicable rule of origin for subheading 8544.30.0000, HTSUS, provides that a good classified in subheading 8544.30.000, HTSUS, originates in the territory of a NAFTA party where the good undergoes:

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

(B) 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:

(1) 60 percent where the transaction value method is used, or

(2) 50 percent where the net cost method is used.

General Note (GN) 12(t)/85.147(A)-(B), HTSUS. No information was submitted concerning the non-originating materials used in the production of the wire harnesses. However, for purposes of this ruling we have assumed that GN 12(t)/85.147(B) is the rule of origin appropriate to the circumstances of this case and that, consequently, a regional value-content determination is required.

The Appendix to the final NAFTA Rules of Origin Regulations (“ROR”; 19 C.F.R. pt. 181 app.; NAFTA Rules of Origin Regulations, as amended by 60 Fed. Reg. 46,334, 46249, T.D. 95-68, 29:38 Cust. B. & Dec. 1), requires, in certain circumstances, that the net cost method be used to determine the regional value content of a good. The net cost method is required, inter alia, where the good is provided for in a tariff provision listed in Schedule IV, or is an automotive component assembly, automotive component, sub-component or listed material and is for use in a motor vehicle of, inter alia, of heading 8701, HTSUS, as either original equipment or as an after-market part. The imported wire harnesses are classified in subheading 8544.30.0000, HTSUS, a tariff provision listed in Schedule IV, and in certain instances are for use in the assembly of heavy duty vehicles of heading 8701, HTSUS. Accordingly, use of the net cost method is required in this instance. 19 C.F.R. pt. 181, app., § 6.

In determining the regional value content of a good under the net cost method, the ROR provide that the value of non-originating materials is to be determined in accordance with section 7, except as otherwise provided in sections 9 and 10. 19 C.F.R. pt. 181, app., § 7. Sections 9 and 10 of the ROR deal with the determination of the value of non-originating materials for, respectively, light-duty and heavy-duty automotive goods.

The term “light-duty automotive good” refers to “a light-duty vehicle or a good of a tariff provision listed in Schedule IV that is subject to a regional-value content requirement and is for use as original equipment in the production of a light-duty vehicle.” 19 C.F.R. pt. 181, app., § 2(1). A light-duty vehicle is defined as a motor vehicle provided for in certain specified subheadings of headings 8702, 8703 and 8704, HTSUS. The imported wire harnesses are classified in subheading 8544.30.0000, HTSUS, a tariff provision listed in Schedule IV. However, since the subject wire harnesses are not for use in the production of light-duty vehicles they do not meet the definition of light-duty automotive goods. Accordingly, the value of non-originating materials used in the production of the wire harnesses cannot be determined in accordance with section 9 of the ROR.

Pursuant to section 8 of the ROR, the term “heavy-duty automotive good” means either a heavy-duty vehicle or a heavy-duty component. The term “heavy-duty component” means an automotive component or automotive component assembly that is for use as original equipment in the production of a heavy-duty vehicle. 19 C.F.R. pt. 181, app., § 8. The term “automotive component” as defined in section 2 of the ROR means “a good that is referred to in column I of an item of Schedule V.” The term “automotive component assembly” means a “good, other than a heavy-duty vehicle, that incorporates an automotive component.” 19 C.F.R. pt. 181, app., § 2(1).

The goods referred to in column I of Schedule V are engines of heading 8407 or 8408, HTSUS, and gear boxes of subheading 8708.40, HTSUS. Column I of Schedule V does not refer to wire harnesses. Therefore, the subject wire harnesses do not constitute automotive components. Furthermore, they do not incorporate automotive components such that they constitute an automotive component assembly. Accordingly, the value of non-originating materials used in the production of the wire harnesses cannot be determined in accordance with section 10 of the ROR.

Since the methods set forth in sections 9 and 10 of the ROR for determining the value of non-originating materials are inapplicable, the value of the non-originating materials used in the production of the imported wire harnesses should be determined in accordance with section 7 of the ROR. Section 7 provides in pertinent part that the value of a material used in the production of a good shall be:

(a) except as otherwise provided in subsection (2), where the material is imported by the producer of the good into the territory of the NAFTA country in which the good is produced, the customs value of the material with respect to that importation, or

(b) where the material is acquired by the producer of the good from another person located in the territory of the NAFTA country in which the goods is produced

(I) the transaction value, determined in accordance with section 2(1) of Schedule VIII, with respect to the transaction in which the producer acquired the material, or

(ii) the value determined in accordance with sections 6 through 11 of Schedule VIII, where, with respect to the transaction in which the producer acquired the material, there is no transaction value under section 2(2) of that Schedule or the transaction value is unacceptable under section 2(3) of that Schedule.

19 C.F.R. pt. 181, app., § 7(1). Certain enumerated costs should also be included value of non-originating materials, to the extent that they are not included in paragraphs (a) and (b). 19 C.F.R. pt. 181, app., § 7(1)(c)-(f).

HOLDING:

In conformity with the foregoing, the value of the non-originating materials used in the production of the imported wire harnesses should be determined in accordance with section 7 of the ROR.

Sincerely,


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