Internal Advice No. 31/91; camera and gyroscopically stabilized housing unit; CFTA; General Note 3(c)(vii)(C)(3); circumvention of the rules of origin; configuration of merchandise

HQ 556054 February 24, 1992 CLA-2 CO:R:C:S 556054 KCC CATEGORY: Classification TARIFF NO.: 8525.30.00; 8529.90.30 District Director of Customs 111 West Huron Street Buffalo, New York 14202-2378 RE: Internal Advice No. 31/91; camera and gyroscopically stabilized housing unit; CFTA; General Note 3(c)(vii)(C)(3); circumvention of the rules of origin; configuration of merchandise Dear Sir: This is in response to your memorandum of May 21, 1991, forwarding the above-referenced request for Internal Advice No. 31/91, initiated by PBB USA Inc., on behalf of Istec Inc., regarding the tariff classification under the Harmonized Tariff Schedule of the United States (HTSUS) and the applicability of the United States-Canada Free Trade Agreement (CFTA), to a camera and gyroscopically stabilized housing unit. FACTS: Istec Inc. manufactures airborne surveillance systems mainly for use in the law enforcement field. The system under consideration consists of a broadcast quality television camera mounted within a gyroscopically stabilized housing (pod). The pod consists of a camera housing along with the electronic components that move the camera in a desired direction. Istec manufactures this system in Canada using United States, Canadian, and third country components and materials. The majority of the components and materials are obtained or produced in Canada or the United States. However, the television camera is manufactured in Japan. Upon completion of the final assembly and testing of the system, the foreign made broadcast camera will be removed and shipped to the U.S. separately from the pod. Istec is concerned that separately shipping the camera and the pod may be construed as circumventing the CFTA rules of origin in General Note 3(c)(vii)(C)(3), HTSUS. Istec contends that separating the camera from the pod is not done to circumvent the CFTA rules origin but, rather, allows Istec to take full advantage of the benefits provided for in the CFTA. Your office would classify the camera and the pod, if imported as an assembled unit, as a functional unit pursuant to Note 4, Section XVI, HTSUS, under subheading 8525.30.00, HTSUS, which provides for "...Television cameras." CFTA eligibility of the entire system would be denied since the system incorporates a Japanese-origin camera which was classifiable under subheading 8525.30.00, HTSUS, when imported into Canada, and upon importation into the U.S. the system would not be "transformed in the territory of Canada" into an "originating good" pursuant to General Note 3(c)(vii)(B)(2), HTSUS. However, the pod, if imported separately from the Japanese-origin camera, would be considered an "originating good" pursuant to General Note 3(c)(vii)(B), HTSUS. Additionally, Istec contends that the camera, if permitted to be shipped separately, should be classified under subheading 8525.30.00, HTSUS. Istec further submits that the pod should then be classified under either subheading 8529.90.30, HTSUS, or subheading 8479.89.90, HTSUS. ISSUE: I. Whether separate importation of the camera and the pod into the U.S. is construed as circumventing the CFTA rules of origin in General Note 3(c)(vii)(C)(3), HTSUS? II. What is the proper tariff classification of the pod and the camera under the HTSUS when imported separately? LAW AND ANALYSIS: I. Eligibility for Preferential Treatment under the CFTA Articles which meet the definition of "originating goods" are subject to reduced rates of duty under the CFTA, provided they are classified under an eligible tariff provision. The rules of origin in the CFTA prohibit, both implicitly and explicitly, processes that could circumvent the purposes of the rules of origin. General Note 3(c)(vii)(C)(3), HTSUS, states that: Goods shall not be considered to originate in the territory of Canada...merely by virtue of having undergone...any process or work in respect of which it is established, or in respect of which the facts as ascertained clearly justify the presumption, that the sole object was to circumvent the provisions of subdivision (c)(vii) of this note. In this case, the Japanese-origin camera will be imported into Canada, inserted into the pod for testing, and then removed so that the camera can be imported into the U.S. separately from the pod. We are of the opinion that the removal of the camera from the pod and the separate importation of the two items is not a "circumvention" of the CFTA rules of origin as contemplated by General Note 3(c)(vii)(C)(3), HTSUS. Prior to the insertion of the camera into the pod for testing, the pod qualified for special tariff treatment under the CFTA as an "originating good." The removal of the camera from the pod is not designed to obtain CFTA treatment for a non-originating good (the camera), but merely is designed to retain "originating goods" status for the pod. Therefore, under the specific circumstances of this case, we conclude that the separation of the camera from the pod in Canada and the separate importation of the two items will not affect the pod's entitlement to CFTA treatment. II. Tariff Classification The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUS, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes." The pod is classified under subheading 8529.90.30, HTSUS, which provides for "Parts suitable for use solely or principally with the apparatus of headings 8525 to 8528...Other...Of television apparatus...Other...Parts of television cameras." Explanatory Note 85.29 of the Harmonized Commodity Description and Coding System (HCDCS) indicates that motorized rotors as well as cases and cabinets specialized to receive cameras are classifiable within heading 8529, HTSUS. HCDCS, Vol. 4, p. 1379. This tariff provision is eligible for preferential tariff treatment under the CFTA. As an "originating good" pursuant to General Note 3(c)(vii)(B), HTSUS, the pod would be dutiable at the rate of 0.8 percent ad valorem. The camera is properly classified under subheading 8525.30.00, HTSUS, which provides for "Transmission apparatus for radiotelephone, radiotelegraphy, radiobroadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras...Television cameras," dutiable at the rate of 4.2 percent ad valorem. HOLDING: The removal in Canada of the Japanese-origin camera from the pod, which qualifies as an "originating good" under the CFTA, and the separate importation of the two items into the U.S. is not the type of circumvention operation contemplated by General Note 3(c)(vii)(C)(3), HTSUS. The camera and the pod may be separately entered into the U.S. The pod is classified under subheading 8529.90.30, HTSUS, which provides for "Parts suitable for use solely or principally with the apparatus of headings 8525 to 8528...Other...Of television apparatus...Other...Parts of television cameras." The camera is classified under subheading 8525.30.00, HTSUS, which provides for "Transmission apparatus for radiotelephone, radiotelegraphy, radiobroadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras...Television cameras." Sincerely, John Durant, Director Commercial Rulings Division