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HQ 547020





April 9, 1999

RR:IT:VA 547020 CRS

CATEGORY: VALUATION

Mr. Les Suzuki
Livingston Trade Services
1140 West Pender Street
Suite 400
Vancouver, B.C.
CANADA V6E 4G1

RE: Article 509; NAFTA; exceptions to the change in tariff classification requirement

Dear Mr. Suzuki:

This is in reply to your letter of February 24, 1998, submitted on behalf of your client, Weiser Lock, of Tuscon, Arizona, concerning the eligibility of certain imported door handles for preferential duty treatment under the North American Free Trade Agreement (NAFTA). We regret the delay in responding.

FACTS:

Weiser Lock imports door handles produced at its factory in Canada. The finished door handles are classified in subheading 8302.41, Harmonized Tariff Schedule of the United States (HTSUS).

Most of the parts used by Weiser in manufacturing the door handles, including such items as screws, pins and washers, are manufactured by Weiser in the U.S. or Canada, or are purchased from U.S. or Canadian vendors. Weiser obtains manufacturers’s affidavits in respect of the parts purchased from independent suppliers. In some instances Weiser purchases non-originating lever components which are also classified in subheading 8302.41, HTSUS. Since these materials are classified in the same heading as are the finished door handles they do not undergo a change in tariff classification. The value of the non-originating components exceeds seven percent of the total cost of the finished door handles.

Your submission included a bill of materials and descriptive literature concerning an “LA Series,” “Saratoga” style, non-keyed, four post, leverset (door handle). All of the parts and components listed on the bill of materials are originating, with the exception of two levers purchased from sellers outside the territory of the NAFTA parties. The total unit cost of manufacturing the Saratoga leverset is [*****]. The cost of the non-originating levers is [******], or approximately 37.5 percent.

Since the non-originating lever components of the Saratoga style leverset are classified in the same subheading as the finished good, i.e., subheading 8302.41, HTSUS, they do not undergo a change in classification as required by the applicable rule of origin. Given that the non-originating materials used in the production of the good exceed seven percent of the total cost of the good, the finished door handles imported into the U.S. do not qualify for preferential treatment under NAFTA using the de minimis rule.

ISSUE:

The issue presented is whether the imported door handles qualify as originating goods under NAFTA pursuant to one of the exceptions to the change in tariff classification requirement.

LAW AND ANALYSIS:

Section 4 of the Appendix to part 181, Customs Regulations, (19 C.F.R. pt. 181 app.; NAFTA Rules of Origin Regulations (the "ROR")), sets forth the rules for determining whether a good originates in the territory of a NAFTA party. A good will originate, e.g., if it was "wholly obtained or produced" in accordance with section 4(1) ROR, or if it satisfies the applicable change in tariff classification, the applicable regional value-content requirement or combination thereof under section 4(2). See 19 C.F.R. pt. 181, app., § 4; General Note (GN) 12, HTSUS.

In the instant case, the applicable rule of origin for goods of heading 8302 through 8304, HTSUS, requires that all the non-originating materials used in the production of the good undergo a change to heading 8302 to 8304 from any other heading, including a heading within that group. GN 12(t)83.3, HTSUS. Nevertheless, because certain non-originating handle components used in the production of the leversets are also classified in heading 8302, specifically, subheading 8302.41, HTSUS, the production process in Canada does not result in a change in tariff classification.

However, section 4(4) of the ROR sets forth two exceptions to the change in tariff classification requirement. Section 4(4)(b) provides in pertinent part, and subject to certain exceptions not here relevant, that a good originates in the territory of a NAFTA country where:

(I) the good is produced entirely in the territory of one or more of the NAFTA countries,

(ii) one or more of the nonoriginating materials used in the production of the good do not undergo an applicable change in tariff classification because

(A) those materials are provided for under the Harmonized System as parts of the good, and

(B) the heading for the good provides for both the good and its parts and is not further subdivided into subheadings, or the subheading for the good provides for both the good and its parts,

(iii) the nonoriginating materials that do not undergo a change in tariff classification in the circumstances described in subparagraph (ii) and the good are not both classified as parts of goods under the heading or subheading referred to in subparagraph (ii)(B),

(iv) each of the nonoriginating materials that is used in the production of the good and is not referred to in subparagraph (iii) undergoes an applicable change in tariff classification or satisfies any other applicable requirement set out in Schedule I,

(v) the regional value content of the good, calculated in accordance with section 6, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used....

19 C.F.R. pt. 181 app., § 4(4)(b).

In the instant case, the “Saratoga” style leversets satisfy the requirements of section 4(4)(b)(I)-(iv) of the ROR. In addition, based on the information presented, the imported leversets also satisfy the requirements of section 4(4)(b)(v) of the ROR.

According to the bill of materials you submitted, the regional value content of the imported leversets under the net cost method would appear to exceed fifty percent under the net cost method. Please note, however, that for purposes of this decision we have assumed that the value of the non-originating materials was determined in accordance with section 7 of the ROR, and that total cost and net cost were determined in accordance with section 2(6) and/or section 6 of the ROR. In addition, we have assumed that Weiser has in its possession valid certificates of origin in respect of all materials claimed as originating. 19 C.F.R. pt. 181, subpart B. Accordingly, based on these assumptions we find that the imported door handles qualify for preferential duty treatment pursuant to section 4(4)(b) of the ROR. 19 C.F.R. pt. 181, app. § 4(4)(b).

HOLDING:

In conformity with the foregoing, the imported “Saratoga” style door handles qualify for preferential duty treatment under NAFTA in accordance with section 4(4)(b) of the ROR.

Sincerely,

Thomas L. Lobred

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