Eligibility of certain medical products for preferential duty treatment under NAFTA; classification; GRI 3; country of origin marking; Article 509; 19 C.F.R. §102.19; General Note 12(a); "Special" rate of duty; 9801.00.10

HQ 559421 September 16, 1996 MAR-05 RR:TC:SM 559421 BLS CATEGORY: Marking Michael E. Rolle, Esq. Katten Muchin & Zavis 525 Monroe Street Chicago, Illinois 60661-3693 RE: Eligibility of certain medical products for preferential duty treatment under NAFTA; classification; GRI 3; country of origin marking; Article 509; 19 C.F.R. §102.19; General Note 12(a); “Special” rate of duty; 9801.00.10 Dear Mr. Rolle: This is in reference to the letter from your office dated August 31, 1995, and subsequent correspondence, on behalf of Baxter Healthcare Corporation (“Baxter”), requesting a ruling with respect to the tariff classification of certain medical kits and whether such products qualify for preferential duty treatment under the North American Free Trade Agreement (“NAFTA”). FACTS: You state that Baxter intends to import from Mexico the following four products: Major Basin Set Plus; Hip Set-Up Pack; Obstetrical Pack; and the Eye Prep Tray. Each of the component packages will be sterilized after importation in the poly bag in which it is imported. 1) Major Basin Set Plus The Major Basin Set Plus (No. 28025-200A) consists of a series of disposable and pre-packaged operating room articles used by hospitals and clinics for set-up and clean-up purposes. These are identified as follows: closure label, master carton, instruction label, tower side, blank PB, bag label, instruction sheet, OR wash basin, sponge bowl, lid for 32 oz. sponge bowl, emesis bowl, specimen cup, specimen container, medicine cup, lid for 2 oz. Medicine cup, graduated pitcher, bulb syringe, polypropylene hard light handles, laparotomy sponges, X-ray detectable sponges, Yankauer suction handle, banded tubing, glassine bag, cautery - 2 - caddy pad/tip cleaner, foam sharps caddy, surgical pencil, electro-surgical access holster, carbon steel blades, and back table cover. You state that the three piece bulb syringe (comprised of the syringe, bulb, and cap) is assembled in Mexico from U.S-origin fabricated components, as described in your Exhibit 5. The conditioning laparotomy sponge and X-Ray detectable sponge are made in, and imported into Mexico from, the People’s Republic of China (“China”). All other items in the Major Basin Set Plus are of U.S.-origin. All of the components of this product are packaged together in Mexico. 2) Hip Set-Up Pack The Hip Set-Up Pack (No. 28200-400F) consists of disposable and pre-packaged operating room articles used by hospitals and clinics in hip and joint replacement procedures. These are identified as follows: closure label; master carton, foreign comp label spec., blank PB30, pack label, sterile wrap, scrub nurse gown with cloth towel, poly Mayo stand cover, top sheet, cloth towels, poly-reinforced gowns, suture bag, adhesive towels, plastic U-drape, split sheet, top sheet, Yankauer suction handle, bulb syringe, stockinette, tubing, laparotomy sponges, glassine bag, cautery tip cleaner, blades, prep tray, trays, and poly wrap table cover. You state that the bulb syringe, top sheet, split sheet, poly- reinforced gown, U- drape, and scrub nurse gown are assembled in Mexico entirely of fabricated components of U.S.-origin, by operations which include fitting, gluing and sewing (as described in your Exhibit 6), and that the cloth towels are a product of Mexico. The conditioning laparotomy sponge is a product of China. You state that all other items in the Hip Set-Up Pack are of U.S.-origin. All of these components are packaged in Mexico. 3) Obstetrical Pack The Obstetrical Pack (No. 29750K) consists of disposable and pre-packaged articles used by hospitals and clinics for use in labor, delivery and birthing room procedures. These are identified as follows: closure label, master carton, polybag, tower side seal tear bag, Holl cord clamp instruction sheet, polyliner, comp super single, setup cover, standard back gown, under buttocks drape, leggings, abdominal cover, towels, X-ray sponge, vaginal packing sponge, Davol bulb syringe, peri pads, Hollister umbilical cord clamp, placenta basin, and delivery blanket. You state that the abdominal cover and the standard back gown are assembled in Mexico of fabricated components of U.S.-origin, by operations which include folding, sewing, gluing and taping, as described in your Exhibit 7. The X-ray - 3 - sponge and the vaginal packing sponge are made in, and imported into Mexico from, China. All other items in the Obstetrical Pack are of U.S.-origin. In addition to the assembled items, all articles are packaged together in Mexico. 4) Eye Prep Tray The Eye Prep Tray (No. 4493) is a series of disposable and pre-packaged operating room articles used by hospitals and clinics for set up and clean up in eye operation procedures. These are identified as follows: overlabel, shipping case, tower bag, clear tape, towel-under pad, cotton-tipped applicators, procedure gloves, hospital wrap, gauze, medicine cups, emesis basin, forceps, syringe and towel. You state that the gauze is made in, and imported into Mexico from, China The gloves are made in, and imported into Mexico from, Malaysia. Finally, the medicine cups are made in, and imported into Mexico from, Canada. All other items in the Eye Prep Tray are of U.S.-origin. The individual components of the Eye Prep Tray are packaged together in Mexico. ISSUES: 1) What is the tariff classification of each of the four instrument packages? 2) Whether the imported products are eligible for preferential duty treatment under the NAFTA. LAW AND ANALYSIS: I. Classification Merchandise is classifiable under the Harmonized Tariff Schedule of the United States (HTSUS), in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides in part that for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes, and provided the headings or notes do not require otherwise, according to GRIs 2 through 6. GRI 3 provides the rules for goods that are prima facie classifiable under two or more headings. Under Rule 3(a) the heading which provides the most specific description for the goods shall be preferred to headings providing a more general description. Rule 3(b) states in part that goods put up in sets for retail sale which cannot be classified under Rule 3(a) shall be classified as if consisting only of that component which gives them their essential character, insofar as this criteria - 4 - is applicable. Rule 3(c) provides that goods that cannot be classified by reference to Rule 3(a) or 3(b) shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. The Harmonized Commodity Description and Coding System Explanatory Notes (ENs) constitute the official interpretation of the Harmonized System. While not legally binding and therefore not dispositive, they are useful in determining the scope of each heading of the HS in the classification of goods in the System. Customs believes the notes should always be consulted. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (Aug. 23, 1989). Relevant ENs on pg. 4 provide that the factor which determines essential character will vary with the goods. It may be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods. Additional Ens on the same page provide that for purposes of Rule 3 the term “goods put up for retail sale” means goods which: (a) consist of at least two different articles which are, prima facie, classifiable in different headings; (b) consist of products or articles put up together to meet a particular need or carry out a specific activity; and, (c) are put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards). The articles comprising the Major Basin Set Plus are provided for in heading 3005, Harmonized Tariff Schedule of the United States (HTSUS), pharmaceutical gauze, in headings 3923, 3924 and 3926, plastic bowls, bags, and other plastic articles, in heading 4006, rubber tubing, in heading 4014, rubber syringes, in headings 4806, 4819 and 4821, as various articles of paper, in heading 6805, as an abrasive cleaning material (for instruments), in heading 8505 as non-metallic magnetic devices, and in heading 9018 as medical and surgical instrument. Applying the above criteria to the goods in issue, we find that the articles comprising the Major Basin Set Plus meet each of the three requirements for “sets” stated above. These articles are, in the main, bowls, cups and containers for holding bodily fluids and other liquids. They are advertized as a practical alternative to stainless steel articles. There is no heading in the HTSUS which provides a specific description for these articles pursuant to GRI 3(a). We find no basis on which to determine which of the articles, if any, imparts essential character to the whole. Accordingly, they cannot be classified pursuant to GRI 3(b). Inasmuch as the carbon steel blades and handle for the suction device are surgical instruments and appliances of heading 9018, we find that under GRI 3(c), - 5 - the Major Basin Set Plus is provided for in heading 9018, the heading which occurs last in numerical order. Actual classification is in subheading 9018.90.80, HTSUS. Articles comprising the Hip Set-Up Pack are provided for in heading 3005, pharmaceutical gauze, in heading 3923, as plastic bags, in heading 3926, as other articles of plastic, in heading 4006, as rubber tubing, in heading 4014 as rubber syringes, in headings 4806, 4818, 4819 and 4821 as articles of paper, in heading 6110, as knitted pullovers and waistcoats, in heading 6210 as fabric garments, in heading 6307 as other made up articles, in heading 6805 as abrasive material (for cleaning instruments), and in heading 9018 as medical and surgical instruments. These articles are single use items intended for ready disposal. These articles likewise meet each of the three requirements for “sets” stated above. However, there is no heading in the HTSUS which provides a specific description for these articles. For this reason, they cannot be classified according to GRI 3(a). Moreover, none of the articles imparts the essential character to the whole. Inasmuch as the carbon steel blades and handle for the suction device are parts of surgical instruments and appliances of heading 9018, we find that under GRI 3(c), the Hip Set-Up Pack is provided for in heading 9018, the heading which occurs last in numerical order. Actual classification is in subheading 9018.90.80, HTSUS. Articles comprising the Obstetrical Pack are provided for in heading 3005, as pharmaceutical gauze, in heading 3923 as plastic bags, in heading 3926, as other articles of plastics, in heading 4014 as rubber syringes, in headings 4818, 4819, and 4821 as articles of paper, in heading 6210 as fabric garments, in heading 6307 as other made up articles, and in heading 9018 as medical and surgical instruments. These articles are gowns, sheets, drapes, and sponges and pads advertised as single use items intended primarily to reduce risk to staff members from blood and other bodily fluids during the birthing process. The articles meet each of the three criteria for “sets.” Of these articles the one designated umbilical cord clamp is an actual instrument used to secure the umbilical cord after it is severed from the newborn. Because of its direct and specific role in the birthing process, we find that this clamp imparts the essential character to the whole. Under GRI 3(b) the Obstetrical Pack is to be classified as if consisting only of the umbilical cord clamp, which is a good of heading 9018. Actual classification is under subheading 9018.90.80, HTSUS. Finally, the articles comprising the Eye Prep Tray are provided for in heading 3005, as pharmaceutical gauze, in heading 3923 as plastic bags, in heading 3924 as plastic tableware, in heading 4014 as rubber syringes, in heading 4015 as rubber - 6 - gloves, in headings 4818, 4819, and 4821 as articles of paper, in heading 5601 as textile wadding, and in heading 9018 as medical and surgical instruments. These articles are single use items such as gauze, towels, wraps and applicators, and meet the three criteria for sets. However, the article designated forceps resembles surgical tweezers and appears to be used to manipulate the eyelid and surrounding skin. Because of its specific role in procedures involving the eye, we find that the forceps imparts the essential character to the whole. Under GRI 3(b), the Eye Prep Tray is to be classified as if consisting only of the forceps which is a good of heading 9018. Actual classification is in subheading 9018.90.80, HTSUS. II. NAFTA Preference - “Special” Duty Rate Article 401 of the NAFTA is incorporated into General Note 12 of the HTSUS. General Note 12(a) provides in pertinent part that: (i) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Canada under the terms of the marking rules ....and are entered under a subdivision for which a rate of duty appears in the “Special” subcolumn followed by the symbol “CA” in parentheses, are eligible for such duty rate... (ii) Goods that originate in the territory of a NAFTA party under subdivision (b) of this note and that qualify to be marked as goods of Mexico under the terms of the marking rules....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.... Accordingly, since each of the four sets is classified under subheading 9018.90.80, HTSUS, a subheading for which the “Special” rate of duty of “MX” is applicable, they will be eligible for the MX duty rate provided they are “originating” goods under General Note 12(b), HTSUS, and qualify to be marked as goods of Mexico. Similarly, since the “Special” rate of duty of “CA” is also applicable to articles classified under subheading 9018.90.80, HTSUS, the sets will be eligible for this “Special” rate of duty provided they are “originating” goods and qualify to be marked as goods of Canada. - 7 - A. Originating Goods General Note 12 of the HTSUS, incorporates Article 401 of the NAFTA into the HTSUS. General Note 12(b) provides in pertinent part the following: For 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 subdivision (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. Since, as described, each of the four sets is comprised in part of materials which come from countries other than Mexico, Canada and/or the United States, neither General Note 12(b)(i) or 12(b)(iii) is applicable. Therefore, we must ascertain whether the non-originating materials in each case are transformed in the territory of Canada, Mexico and/or the U.S. pursuant to General Note 12(b)(ii)(A), HTSUS. To qualify under this provision, the non-originating material(s) must undergo the - 8 - requisite change in tariff classification required in General Note 12(t). As noted, each of the imported sets is classified in subheading 9018.90.80, HTSUS, “Instruments and appliances used in medical, surgical, dental or veterinary sciences,Other, Other,Other...” All of the non-originating materials, as also noted above, are classified in provisions outside of heading 9018, HTSUS. General Note 12(t)(90)(46) requires “A change to subheading 9018.90 from any other heading.” Thus, a change in tariff classification does occur in each case, and the Major Basin Set Plus, Hip Set-Up Pack, Obstetrical Pack, and Eye Prep Tray are considered to be “goods originating in the territory of a NAFTA party.” B. Country of Origin - Marking The marking statute, 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 in a conspicuous place as legibly, indelibly, and permanently as the nature of the article will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Part 134, Customs Regulations (19 C.F.R. Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. §1304. The country of origin marking requirements for a “good of a NAFTA country” are also determined in accordance with Annex 311 of the NAFTA, as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993) and the regulations set forth in 19 CFR Parts 102, 134. Section 134.1(b) (19 C.F.R. §134.1(b)) of the regulations defines “country of origin” as: The country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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”; howe