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HQ H019603

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February 20, 2008

CLA-2 OT:RR:CTF:TCM H019603 GC

CATEGORY: CLASSIFICATION

Mr. Syd Marton
Affimex Customs and Trade Services, Inc.
500 Carlingview Drive
Etobicoke, Ontario M9W 5R3

RE: NAFTA preferential treatment of light fixtures

Dear Mr. Marton:

This is in reference to your request to Customs and Border Protection (CBP), National Commodities Specialist Division, New York, dated October 23, 2007, on behalf of Ledalite Architectural Products (Ledalite), concerning the tariff classification of a light fixture under the Harmonized Tariff Schedule of the United States (HTSUS), and the eligibility for treatment under the North American Free Trade Agreement (NAFTA). Your request was forwarded to this office for a response.

FACTS:

The merchandise under consideration is the PureFX 2x2 recessed light fixture. It is a square metal fixture, measuring 2 feet long by 2 feet wide by 4 and 3/8 inches deep and containing two fluorescent lamps within the architectural recessed lay-in fixture. The fixture is designed for use with a suspended ceiling and utilizes two “U” shape fluorescent lamps.

The assembled fixture housing is imported into Canada from a non-NAFTA source. The housing is comprised of the metal frame, side reflector, light blocking strip, two rubber gaskets, lamp-holder bracket, two lamp holders, top reflector, Universal Ballast and wiring.

After importation into Canada, an Optical Frame Subassembly is added to the light fixture. The optical frame consists of twelve parts - two optical frame end caps, two center extruded reflectors, two frame side extrusions, one center lens extrusion, two non-glare acrylic side panels, two MesoOptics® side panels, and one MesoOptics® center diffuser. Ledalite claims that this optical frame is certified to NAFTA tariff preferences. At the same time the optical frame is being assembled, the fixture housing portion of the light fixture is tested, which involves the temporary installation of a lamp in the housing, to ensure it is wired properly and in working order. Once testing is complete, the optical frame is inserted into the fixture housing for final assembly. The completed light fixture is then packaged for sale.

Ledalite asserts that the fixture is classifiable under subheading 9405.40, HTSUS, which provides for other electric lamps and lighting fittings, and is entitled to preferential tariff treatment under NAFTA.

ISSUE(S):

What is the proper classification under the HTSUS for the subject merchandise?

Is the subject light fixture entitled to preferential tariff treatment under NAFTA?

LAW AND ANALYSIS:

Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule 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 2 through 6 may then be applied in order. The HTSUS provisions under consideration in this case are as follows:

9405 Lamps and lighting fittings including searchlights and spotlights and parts thereof, not elsewhere specified or included; illuminated signs, illuminated nameplates and the like, having a permanently fixed light source, and parts thereof not elsewhere specified or included:

9405.10 Chandeliers and other electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares: Of base metal:

9405.10.60 Other,

9405.10.6020 Other

9405.40 Other electric lamps and lighting fittings: Of base metal:

9405.40.6000 Other

Parts:

9405.99 Other:

9405.99.4000 Other

We agree with Ledalite that the finished light fixtures are classifiable in heading 9405, HTSUS, which provides for, inter alia, “Lamps and lighting fittings” In its submitted materials, Ledalite simply states that the light fixture is of a kind used to light public open spaces and is classified in subheading 9405.40, HTSUS. However, Ledalite did not provide any evidence to support classification in that subheading. In comparing provisions of the tariff schedule at the subheading level, GRI 6 must be applied. It states:

For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.

Examination of the provided diagrams and marketing material of the PureFX 2x2, indicates that the subject light fixture is designed for use on the ceilings of places like offices, board rooms or even private residences. Therefore, we find that the merchandise should be classified in subheading 9405.10, HTSUS, which provides for, inter alia, “other electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares.” Because the subject light fixtures are not of a kind used for lighting public open spaces or thoroughfares, they are most specifically provided for by the terms of subheading 9405.10, HTSUS.

Ledalite also asserts that the subject light fixtures are entitled to NAFTA preferences. General Note 12 to the HTSUS, incorporates Article 401 of NAFTA into the HTSUS. General Note 12(a)(i) provides, in pertinent part:

(i) 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 Canada 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 “CA” in parentheses, are eligible for such duty rate, in accordance with section 201 of the [NAFTA] Implementation Act.

Accordingly, the subject light fixtures will be eligible for the special “CA” rate of duty provided it is a NAFTA “originating” good under General Note 12(b), HTSUS. 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;

In the instant case, in order for the light fixtures to be eligible for preferential tariff treatment under General Note 12 by application of the tariff-shift rule for heading 9405, each of the non-originating materials used in the production of the good must undergo the required change in tariff classification. See General Note 12 (b)(ii)(A). The rule for heading 9405 provides as follows:

(A) A change to subheadings 9405.10 through 9405.60 from any other chapter; or

(B) A change to subheadings 9405.10 through 9405.60 from subheadings 9405.91 through 9405.91 through 9405.99, 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.

See General Note 12(t) Chapter 94, HTSUS.

The principal issue in this case is the proper classification of the fixture assembly, as imported into Canada. If it is merely a part, classifiable in heading 9405.99, HTSUS, then the addition of the Optical Frame Subassembly completes the finished light and thus satisfies the requisite tariff change, which entitles the merchandise to NAFTA preference. However, if the fixture assembly has the essential character of a completed light fixture under subheading 9405.10, HTSUS, then the tariff change requirement for NAFTA preference is not met. This requires a determination of the tariff classification of the fixture assembly, as imported into Canada.

This implicates GRI 2(a), which states, in pertinent part, “Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article.”

In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes (ENs) may be utilized. The ENs, though not dispositive or legally binding, provide commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. CBP believes the ENs should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989).

The EN to GRI 2(a) notes that the first part of GRI 2(a), which is germane to this particular case, “extends the scope of any heading which refers to a particular article to cover not only the complete article, but also that article incomplete or unfinished, provided that, as presented, it has the essential character of the complete or finished article.” (Emphasis in original). The term “essential character,” in the context of applying GRI 2(a), means the attribute that serves to distinguish what an article is; that which is indispensable to the structure, core or condition of the good; the aggregate of distinctive component parts that establishes the identity of an article as what it is, its very essence. See HQ 967975, dated March 24, 2006.

Ledalite submits that the assembled fixture housings do not have the essential character and are properly classifiable in subheading 9405.99, HTSUS, as parts of lamps or lighting fittings. As a consequence of the manufacturing process that takes place in Canada, Ledalite posits that the completed light fixtures are then classifiable under subheading 9405.40, HTSUS. Even though we have determined that the completed light fixtures are actually classifiable under heading 9405.10, HTSUS, the requirements set forth in the tariff-shift rule for heading 9405 under General Note 12, would still be met if we were to adopt the substance of Ledalite’s argument.

Ledalite points to two main factors in support of its argument that the fixture assembly does not have the essential character of the finished light fixture. First, Ledalite points to the fact that the material and manufacturing costs of the Optical Frame subassembly are greater than the costs associated with the fixture housing imported from non-NAFTA countries. Because the costs associated with the fixture housing are low relative to the costs of the Optical Frame Subassembly, Ledalite posits that the fixture housing can not be considered to possess the essential character of the finished light fixture. Second, Ledalite states that the subassembly is the substantial part of the complete light fixture in terms of functionality, purpose, and intellectual property. In this regard, Ledalite notes that the various technological features associated with the subassembly provide the completed light fixture with the ability to deliver superior light distribution at the highest possible efficiency.

With respect to Ledalite’s first point regarding the cost of the Optical Frame Subassembly, the difference in cost between the Optical Frame Subassembly and the fixture assembly does not relate directly to the issue of whether or not the fixture assembly possesses the essence of the finished light fixture. The focus of the analysis in this particular case is on whether any additional components must be added to the fixture assembly for it to accomplish its purpose as a light fixture.

This requires discussion of Ledalite’s second point, which is that the Optical Frame Subassembly is actually the most substantial part of the finished light fixture. While the subassembly, and its technological features, may very well make the PureFX 2x2 a more effective and marketable light fixture, the component does not appear to be indispensable with respect to the light fixture’s function or purpose, which is to provide light. The provided information shows that the fixture housing does indeed possess the essential characteristics of the finished product. It is particularly noteworthy that the fixture assembly is tested by adding a lamp to the fixture housing to see if the housing is properly wired and in working order. This shows that the fixture assembly possesses the essence of the finished light fixture. In addition, it shows that the Optical Frame Subassembly, inserted into the fixture housing in Canada, merely enhances the ability of the fixture to provide light. While this might make the light fixture more valuable to the consumer, it certainly does not impart the essential character to the finished product. Moreover, the fact that the fixture housing contains all of the fittings and wiring necessary to produce light once a lamp is added to it indicates that it embodies the essential character of the finished light fixture.

We find that the subject light fixtures are not entitled to NAFTA tariff preference because the production in Canada does not result in the requisite tariff shift set forth in the rule for heading 9405, General Note 12, HTSUS. This is the case because the fixture assembly, as imported into Canada, possesses the essential character of the finished light fixture as described in GRI 2(a). Consequently, the addition of the Optical Frame Subassembly does not result in a shift of tariff classification.

HOLDING:

By application of GRI 1, the Ledalite Architectural Products PureFX 2x2 is classifiable under heading 9405, HTSUS, as an electric ceiling lighting fitting. The light fixture is specifically provided for in subheading 9405.10.6020, HTSUS, which covers: “lighting fittings, not elsewhere specified: electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares: Of base metal: Other: Other.” The column one, general rate of duty is 7.6 percent ad valorem.

By application of the tariff shift rule for heading 9405, General Note 12, HTSUS, the subject merchandise is not entitled to preferential treatment under NAFTA.

Duty rates are provided for your convenience and subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at www.usitc.gov.

Sincerely,

Gail A. Hamill, Chief
Tariff Classification and Marking Branch

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See also:

• Tariff No.: 9405.10.60 - Chandeliers and other electric ceiling or wall lighting fixtures (o/than used for public spaces), of base metal (o/than brass)
• Tariff No.: 9405.40.60 - Electric lamps and lighting fixtures nesoi, of base metal (o/than brass)
• Tariff No.: 9405.99.40 - Parts of lamps, lighting fixtures, illuminated signs & the like, not of glass, plastics or brass