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HQ 563405




April 5, 2006

CLA-02:RR:CTF:VS 563405 JPP

CATEGORY: MARKING

Mr. Douglas A. Kalvig
Decatur Mold Tool & Engineering, Inc.
2050 W. Sunset Lane
North Vernon, Indiana 47265

RE: Classification, Country of Origin and Status under the North American Free Trade Agreement (“NAFTA”) of Mold with Sensors

Dear Mr. Kalvig:

This is in response to your letter dated October 18, 2005, requesting a ruling on the classification, country of origin and North American Free Trade Agreement (“NAFTA”) status of a steel mold with sensors assembled in a U.S. Foreign Trade Zone (“FTZ”). Product literature and cost information regarding materials and processing operations have been included with your submission. Our response follows.

FACTS:

According to your submission, you have a patented cavity sensor (hereinafter “sensor”) and a documented process to produce molded plastic parts. You state that the sensors, which you refer to as “self-produced materials,” are made in the United States and will be installed in a Chinese-origin steel mold used for injection molding for rubber or plastic. You plan to import the steel mold from China into a FTZ in privileged foreign status, where the tool will be inspected and the sensors and pressure transducers installed in the mold to accommodate what is known in the industry as “decoupled injection molding methodology.” A data terminal, which you describe as a box that receives input from the sensors, will be mounted on the mold. You plan to conduct tests by using plastic resin of U.S. origin to produce molded plastic parts. The data created from the sampling and testing will be used to evaluate whether the plastic parts conform to customer specifications. After installation and testing, the mold with installed sensors, data terminal, sample plastic parts and documentation will be sent to customers at U.S. or NAFTA (Canada or Mexico) manufacturing facilities.

The product literature contains images of digital, strain gauge and piezoelectric sensors. You state that two sensors will be installed per cavity in the mold. Thus, a two- cavity mold would have four sensors. You suggest classification of the sensors under 8542.40.00,

/ Effective January 1, 2002, subheading 8542.40, HTSUS, was superseded by subheading 8542.60, HTSUS./ Harmonized Tariff Schedule of the United States (“HTSUS”); and classification of the steel mold under 8480.71.80, HTSUS.

You are of the opinion that your request involves the interpretation in 19 C.F.R. 181.31, NAFTA Rules of Origin Regulations, Appendix, Part II, of Sections 4(8) and (9) under the heading “self-produced material may be a material for determining applicability of rules of origin.”

ISSUES:

What is the country of origin of the mold with sensors and entire mold package?

Whether the subject merchandise is entitled to NAFTA preference when withdrawn for consumption from the FTZ.

Whether the NAFTA rules of origin “self-produced material” rule may be used to determine NAFTA eligibility.

LAW AND ANALYSIS:

You state that the Chinese steel mold will be admitted into the FTZ in privileged foreign (PF) status. With respect to PF status merchandise, 19 C.F.R. 146.65(a)(1) provides that PF status merchandise will be classified according to its character, condition and quantity, at the rate of duty and tax in force on the date of filing the application for privileged status. We assume that the U.S.-origin components will be in domestic status, and that you comply with all applicable FTZ regulations (19 C.F.R. Part 146).

Classification

Classification of goods under the HTSUS is governed by the General Rules of Interpretation (“GRIs”), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative Section or Chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs may then be applied.

Steel Mold

The applicable subheading for the Chinese steel injection mold for plastic is 8480.71.80, HTSUS, which provides for Molding boxes for metal foundry; mold bases; molding patterns; molds for metal (other than ingot molds), metal carbides, glass, mineral materials, rubber or plastics: Molds for rubber or plastics: Injection or compression types: Other.

Cavity Pressure Sensors

Depending on their technical specifications, the sensors may be classified under various headings in Chapter 85, HTSUS, which provides for, inter alia, electrical machinery and equipment and parts thereof. See, e.g., strain gauge sensor device classified as electrical resistors under heading 8533, HTSUS (Headquarters Ruling Letter (“HRL”) 083952, dated March 22, 1999); transducer classified as a mounted piezoelectric crystal under heading 8541, HTSUS (HRL 960633, dated September 5, 1997); electromagnetic sensor classified as a monolithic integrated circuit under heading 8542, HTSUS (HRL 085688, dated January 25, 1990); and acceleration sensors classified as hybrid integrated circuits also under heading 8542, HTSUS (HRL 963150, dated March 29, 2002).

Mold with Installed Sensors and Mold Package

We assume that the mold with installed sensors, data terminal, sample plastic parts and documentation will be packaged together prior to being sent to customers in the United States and other NAFTA countries.

The materials comprising the mold with sensors are separately classifiable. Therefore, classification of the mold with sensors must be made pursuant to GRIs 2(b) and 3. GRI 2(b) provides, in pertinent part, that “the classification of goods consisting of more than one material or substance shall be according to the principles of rule 3.” GRI 3(b) provides, in pertinent part, that “composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.”

We find that the essential character of the mold with installed sensors is imparted by the mold itself. The sensors serve the function of measuring the pressure inside the mold, but the mold itself serves the more important function of molding plastic or rubber material. Therefore, based on the component that imparts the essential character to the mold, the mold with sensors is classifiable in subheading 8480.71.80, HTSUS, which provides for injection type molds for rubber or plastic.

Similarly, and pursuant to GRI 3(b), we find that the steel mold gives the essential character to the entire mold package (mold with sensors, data terminal, sample plastic parts and documentation). Without the steel mold, the package would not meet its intended function. Therefore, the classification of the mold package will be the classification of the mold, 8480.71.80, HTSUS.

Country of Origin

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304) provides that, unless excepted, every article of foreign origin (or its container) imported into the United States shall be marked to indicate the country of origin of the article (or its container) to the ultimate purchaser in the United States. The marking must be in English, legible, indelible and as permanent as the nature of the article will permit. Part 134 of the CBP Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.

Section 134.1(b), CBP Regulations (19 C.F.R. 134.1(b)), defines “country of origin” as the country of manufacture, production or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the “country of origin” within the meaning of the marking laws and regulations.

A substantial transformation of an imported article occurs when the article loses its identity and becomes a new article having a new name, character, or use. United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 at 270 (1940); Koru North America v. United States, 12 CIT 1120, 701 F. Supp. 229 (1988). On the other hand, if the manufacturing or combining process is merely a minor one which leaves the identity of the imported article intact, a substantial transformation has not occurred and an appropriate marking must appear on the imported article so that the consumer can know the country of origin. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).

In the instant case, we find that the imported Chinese steel mold does not undergo a substantial transformation by the operations performed in the FTZ. The installation of the sensors inside the mold and mounting of the data terminal on the mold, do not appear to be exceedingly complex operations and the steel mold does not lose its identity or characteristics during the process. As imported, the steel mold is referred to as a “mold,” and, after the installation of the sensors, the name is unchanged. Furthermore, the mold is imported in its final shape, and that form remains the same after the sensors are installed. The intended purpose of the imported steel mold is to mold plastic parts and that use is not changed after the processing operations in the FTZ. Therefore, the steel mold retains its own identity and is not substantially transformed. Accordingly, the country of origin of the mold remains China and the country of origin of the mold with sensors and mold package is the country of origin of each of the components that comprise the finished article, i.e., China and the United States.

Please note that products of U.S. origin are not subject to the country of origin marking requirements of 19 U.S.C. 1304.

NAFTA Preference

The mold with sensors undergoes assembly operations within a FTZ in the United States, which is a country provided for under the NAFTA. You ask whether the installation of the U.S.-made sensors in the Chinese-origin mold is an operation that will confer NAFTA origin to the finished mold with sensors and mold package.

Under NAFTA Article 401(b) and 19 U.S.C. 3332(a)(1)(B)(i), a good originates in the territory of a party where each of the non-originating materials used in the production of the good undergoes an applicable change in tariff classification set out in Annex 401 of the NAFTA as a result of production occurring entirely in the territory of one or more of the parties. These change in tariff classification rules are set forth in General Note (GN) 12(t), HTSUS. / As the mold with sensors is classifiable under subheading 8480.71.80, HTSUS, the applicable tariff shift rule as set forth in GN 12(t)/238, HTSUS, is “[a] change to heading 8480 from any other heading.”/ There is specific statutory language, however, which governs the tariff treatment of goods produced in an FTZ or subzone and entered for consumption into the United States. 19 U.S.C. 3332(a)(2)(A) provides as follows:

Foreign-trade zones

Subparagraph (B) of paragraph (1) shall not apply to a good produced in a foreign trade zone or subzone (established pursuant to the Act of June 18, 1934, commonly known as the Foreign Trade Zones Act [19 U.S.C.A. § 81a et seq.]) that is entered for consumption in the customs territory of the United States.

In accordance with 19 U.S.C. 3332(a)(2)(A), the NAFTA tariff shift rules are not applicable to goods produced in an FTZ or subzone and entered for consumption in the United States. Therefore, because all of the U.S. processing is performed in an FTZ, the Chinese-origin mold will not undergo the requisite NAFTA tariff shift. Consequently, the mold with sensors and complete mold package (mold with installed sensors, data terminal, plastic parts and documentation) will not be eligible for tariff preferential treatment under NAFTA when withdrawn for consumption from the FTZ.

IV. “Self-Produced Material” Rule

You claim that the NAFTA “self-produced material” rule applies to the facts in this situation and should be used to determine NAFTA eligibility for the subject mold with sensors.

Under the NAFTA Rules of Origin, a non-originating material that is manufactured into an intermediate article (a “self-produced material”) in a NAFTA country prior to being manufactured into the finished article, may be designated as the non-originating material for purposes of applying the applicable NAFTA tariff-shift rule. See 19 C.F.R. Part 181.31, App., Sections 4(8) and (9). As stated above, however, the NAFTA tariff shift rules do not apply to goods produced in an FTZ. Therefore, the NAFTA “self-produced material” rule is inapplicable to the instant set of facts.

HOLDING:

On the basis of the facts presented and applicable provisions in the NAFTA and CBP Regulations, we find that the installation of the U.S.-origin sensors inside the Chinese steel mold does not effect a substantial transformation in the imported mold. Therefore, the country of origin of the mold remains China and the country of origin of the mold with sensors and mold package is the country of each of the components that comprise the finished article, i.e., China and the United States.

The NAFTA tariff shift rules do not apply to goods produced in a FTZ pursuant to 19 U.S.C. 3332(a)(2)(A). Therefore, the finished mold with sensors and mold package are not eligible for NAFTA status, and the NAFTA “self-produced material” rule is inapplicable.

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

Sincerely,

Monika R. Brenner, Chief
Valuation and Special Programs Branch


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