HQ 563265 - NAFTA; regional value content; originating self-produced material; NAFTA Rules of Origin Regulations; 19 CFR part 181 Appendix; General Note 12(t). - United States International Trade Commision Rulings

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HQ 563265

July 20, 2005

CLA-02 RR:CR:SM 563265 NL

CATEGORY: CLASSIFICATION

Larry T. Ordet, Esq.
Sandler, Travis & Rosenberg, P.A.
The Waterford
5200 Blue Lagoon Drive
Miami, FL 33126-2022

RE: NAFTA; regional value content; originating self-produced material; NAFTA Rules of Origin Regulations; 19 CFR part 181 Appendix; General Note 12(t).

Dear Mr. Ordet:

This is in reply to your letter dated March 21, 2005, requesting a prospective ruling concerning certain synthetic coil and brass or aluminum zippers. The zippers will be imported into the U.S. by your client, Talon International (Talon) following assembly in Mexico from materials that originate both outside and inside the territory of the Parties to the North American Free Trade Agreement (NAFTA). At issue is whether the assembled zippers are eligible for tariff treatment as originating goods under the NAFTA.

FACTS:

Synthetic Coil Zippers (25” #5 Synthetic Open End Zip)

This product is assembled in Mexico from components from China that include greige chain, sliders, coils, pin and box. In Mexico, the chain and top and bottom stops will be cut from the coil, dyed, and in some cases, the slider will be painted. These goods are classified in subheading 9607.19, Harmonized Tariff Schedule of the United States (HTSUS). You have provided confidential business information concerning the value of non-originating materials for the purposes of determining the regional value content (RVC) of this good.

Brass or Aluminum Zippers (25” #5 Metal Open End Zip)

Assembly in Mexico takes place using Chinese-origin brass or aluminum preformed wire, tape, sliders, pin and box. The top and bottom stops are imported from the U.S. having been cut in the U.S. from U.S. origin wire. The production in Mexico consists of: dyeing the tape; in some instances, plating the sliders, pin and box; combining the preformed wire and tape to create zipper chain; and assembling the chain, sliders, pin, box and stops into finished brass or aluminum zippers. The brass and aluminum zippers are classified in subheading 9607.11, HTSUS. You have provided confidential business information regarding the value of non-originating materials. Also, you have given reasons why certain of the zipper components may be designated as self-produced materials that may be counted as originating materials for the purposes of determining NAFTA eligibility.

You represent that for both models of zippers, the assembly in Mexico will satisfy applicable RVC requirements of General Note 12(t), HTSUS - the NAFTA rules of origin. This ruling will assume compliance with RVC requirements, subject to any appropriate review at the time of importation when the appraised value of the goods is finally established.

ISSUE:

Whether the Talon model #5 Synthetic Coil Open End Zip and model #5 Metal Open End Zip satisfy the requirements for treatment as NAFTA originating goods.

LAW & ANALYSIS:

NAFTA Rules of Origin

General Note 12, HTSUS, incorporates Article 401 of NAFTA into the HTSUS. General Note 12(a)(ii) provides, in pertinent part:

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 (without regard to whether 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 NAFTA Implementation Act.

Accordingly, the Talon zippers will be eligible for the “Special” “MX” rate of duty provided it is a NAFTA “originating” good under General Note 12(b), HTSUS, and qualifies to be marked as a product of Mexico under the marking rules. General Note 12(b), HTSUS, provides, in pertinent part:

For the 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 (ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that— (A) except as provided in subdivision (f) of this note, each of the non-originating materials 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 (B) 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.

As claimed in the submission, the Talon synthetic zipper is classified in subheading 9607.19, HTSUS, while the Talon metal zipper is classified in subheading 9607.11, HTSUS. Zipper chains and sliders, some of the components used in the Mexican assembly, are classified in subheading 9607.20 HTSUS as parts of slide fasteners. The rule of origin applicable to both of the Talon zippers is set forth in GN 12(t)/96.5 which provides:

(A) A change to subheadings 9607.11 through 9607.19 from any other chapter; or (B) A change to subheadings 9607.11 through 9607.19 from subheading 9607.20, whether or not there is also a change from any other chapter, provided there is 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.

In this case, given that some of the key non-originating components – the zipper chains and sliders – are classified in subheading 9607.20, the assembly in Mexico will not satisfy Part A of GN12(t)/96.5, which requires that non-originating materials change at least from a different chapter of the HTSUS. Therefore, the rule will be satisfied and NAFTA eligibility established only if the zippers satisfy Part B of the rule, i.e., if the change from non-originating materials classified in subheading 9607.20 also satisfies one of the RVC requirements.

With regard to the synthetic coil zippers the confidential business information in the submission indicates that under the transaction value method, subtracting the value of non-originating materials from the transaction value of the zippers results in a regional value content in excess of the 60 percent required under GN12(t) 96.5(B). This calculation would be subject to appropriate review at importation. Therefore, based on the information submitted, the synthetic coil zippers would satisfy the applicable rule of origin for NAFTA eligibility.

The brass or aluminum zippers are also subject to GN 12(t)96.5 for NAFTA eligibility and satisfy one of the RVC requirements. You have elected to qualify these zippers under the transaction value method, which under this rule requires a regional value content of 60 percent or more. You submit that the zipper chain, which is produced in Mexico from Chinese and other components prior to its use in the final zipper, may be designated as an originating self-produced good which therefore is not included in the value of non-originating materials for the purposes of calculating RVC.

The NAFTA Rules of Origin Regulations as set forth in 19 CFR Part 181, App. define a “self-produced material” as “a material that is produced by the producer of a good and used in the production of that good.” See 19 CFR Part 181, App., sec. 2(1). Pursuant to 19 CFR Part 181, App. sec. 6(4), the value of non-originating materials used to produce an originating self-produced material which is designated as an intermediate material is not includable in the value of non-originating materials for the purposes of RVC calculation.

The submission states that Talon would designate the zipper chain as an originating intermediate material pursuant to these provisions, and would not include the value of the non-originating materials used to produce it in the value of non-originating materials used to produce the final zippers. For this to be permitted, the self-produced designated intermediate material must itself qualify as originating under the NAFTA rules of origin.

It is submitted that the non-originating materials used to produce the zipper chain, classified in subheading 9607.20, HTSUS, would undergo the change in tariff classification required by the rule of origin, i.e., change from any other chapter of the HTSUS. See Part A, GN 12(t)/96.5. Here, it is submitted that the round wire (heading 74.08) and tape (classified outside of Chapter 96) undergo the prescribed change in tariff classification to qualify as NAFTA-originating materials. In support of this change of classification analysis, a ruling of the National Commodity Specialist Division, NY L81577 (January 11, 2005) is cited. This office agrees with the analysis and that the ruling’s findings are applicable. Therefore, the zipper chain assembled in Mexico may be designated as an originating self-produced intermediate material. The value of the non-originating materials used to produce it may be omitted from the value of non-originating materials when calculating regional value content under the transaction value method.

HOLDING:

The zipper chain used in the production of metal or aluminum zippers may be considered a “self produced material” under 19 CFR Part 181, App. sec 4(8). Pursuant to 19 CFR Part 181, App. sec 6(4) the value of non-originating materials used to produce the zipper chain may be omitted from the calculation of regional value content under the transaction value method.

Based on the representations in the submission, both the synthetic zippers and the metal and aluminum zippers will satisfy the NAFTA rule of origin set forth at GN 12(t) 96/5, HTSUS. However, eligibility under the transaction value method is subject to review at importation based on the final appraised value of the merchandise.

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

Sincerely,

Monika R. Brenner
Valuation and Special

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