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HQ 563059




November 4, 2004

CLA-2 RR:CR:SM 563059 AL

Category: CLASSIFICATION

Mr. Bennett Johnson
Nissin Customs Service, Inc.
1540 West 190th Street
Torrance, California 90501

RE: NAFTA; 19 CFR Part 181; General Note 12(a)(ii); 19 USC 3332(k); General Note 12(l); 9802.00.80, HTSUS

Dear Mr. Johnson:

This is in response to your letter dated June 16, 2004, concerning a ruling request on behalf of your client, Takane USA Inc. (“Takane”). A sample was provided.

FACTS:

According to your letter, Takane is considering to relocate the production of clock movements from the United States to a Maquiladora Plant in Mexico. The clock movements produced in Mexico will be imported to the United States and then exported to China where they will be incorporated and assembled into finished wall clocks. Then, the finished wall clocks will be imported into the United States for consumption.

ISSUE:

Whether wall clocks imported from China are eligible for preferential tariff treatment under the North American Free Trade Agreement (“NAFTA”) or subheading 9802.00.80, Harmonized Tariff Schedule of the United States (“HTSUS”).

LAW and ANALYSIS:

General Note 12(a)(ii) of the HTSUS provides that:

Goods that originate in the territory of a NAFTA party under the terms of 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 Agreement Implementation Act.

Part 181, Customs Regulations (19 CFR Part 181) implements the duty preference provisions of NAFTA. In this case, clock movements manufactured in Mexico will be imported into the United States under NAFTA and exported to China for incorporation and assembly into finished wall clocks.

General Note 12(l) of the HTSUS states that “[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.” See also 19 U.S.C. 3332(k).

The prohibitions on the transshipment of NAFTA originating goods are regulated under 19 CFR 181, Appendix, Part VI, Section 16(1). This regulation states, in pertinent part, that:

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
the good is withdrawn from customs control outside the territories of the NAFTA countries; or the good undergoes further production or any other operation outside the territories of the NAFTA countries, . . . .

Here, the Mexican clock movements imported into the United States and exported to China for incorporation into finished wall clocks while in China will be considered to have undergone further production outside the territories of the NAFTA parties. Therefore, the wall clocks incorporating the clock movements manufactured in Mexico will not be eligible for NAFTA preferential duty treatment upon importation to the United States.

You also inquired whether the clock movements manufactured in Mexico are eligible for preferential tariff treatment under subheading 9802.00.80, HTSUS. Subheading 9802.00.80, HTSUS provides a partial duty exemption for products of the United States. As the clock movements are manufactured in Mexico and would not be considered a “product of” the United States, subheading 9802.00.80, HTSUS, would not apply.

HOLDING:

The wall clocks from China incorporating the Mexican-made clock movements are not eligible for NAFTA preferential duty treatment pursuant to General Note 12(l), HTSUS, and 19 CFR Part 181, Appendix, Part VI, Section 16(1). Moreover, the clock movements manufactured in Mexico are products of Mexico and thus, subheading 9802.00.80, HTSUS would not apply because this provision only applies to products of the United States.

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 and Border Protection officer handling the transaction.

Sincerely,

Myles B. Harmon, Director
Commercial Rulings Division

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