Modification of New York Ruling Letter N057699, dated May 15, 2009; classification of filler paper, composition notebooks, spiral notebooks, and wireless notebooks; eligibility of filler paper for preferential treatment under NAFTA

HQ H072375 November 10, 2015 CLA–2 OT:RR:CTF:TCM H072375 NCD CATEGORY: Classification TARIFF NO.: 4811.90.9080; 4820.10.2030; 4820.10.2040 David M. Murphy Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP 339 Park Avenue, 25th Floor New York, NY 10022-4877 RE: Modification of New York Ruling Letter N057699, dated May 15, 2009; classification of filler paper, composition notebooks, spiral notebooks, and wireless notebooks; eligibility of filler paper for preferential treatment under NAFTA Dear Mr. Murphy: This is in response to your June 18, 2009 letter, on behalf of Staples, Inc., requesting reconsideration of New York Ruling Letters (“NY”) N057699, dated May 15, 2009, and NY N063779, dated June 10, 2009. In NY N057699, U.S. Customs and Border Protection (CBP) classified filler paper, composition notebooks, spiral notebooks, and wireless notebooks under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA), and determined whether this merchandise is eligible for preferential tariff treatment under the North American Free Trade Agreement (NAFTA). NY N063779 involved determination of the subject products’ countries of origin for marking purposes pursuant to NAFTA. We have found NY N057699 to be in error with regard to the classification of all the subject merchandise and to the eligibility of the subject filler paper for NAFTA treatment, and, for the reasons set forth below, are modifying that ruling. Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. §1625(c)(1)), as amended by section 623 of Title VI, notice of the proposed action was published in the Customs Bulletin, Vol. 49, No. 30, on July 29, 2015. One comment supporting the proposed modification was received in response to that notice. FACTS: In NY N057699, CBP responded to your April 13, 2009 request for a ruling on “the status of filler paper, composition notebooks, spiral notebooks, and wireless notebooks from Mexico under NAFTA.” CBP stated in that ruling letter as follows: You state in your original request that all of the items will be formed from jumbo paper rolls sourced in Taiwan and substantially transformed in Mexico into separate and distinct articles of commerce. You state in your supplemental letter dated May 6, 2009, the items being imported into Mexico would be paper in rolls, weighing 40 g/m2 or more but not more than 150 g/m2. The paper would be in rolls that measure 100 - 102 cm in width. The paper is uncoated, designated as writing paper in the industry, and doesn’t contain fibers obtained by a mechanical or chemi-mechanical process. It is white in color, contains less than 3% ash, has a brightness of 60% or more, and is bleached uniformly throughout the mass. The paper is not embossed, perforated, creped or crinkled at the time of importation into Mexico. At the time of importation into Mexico, the paper would be classified in subheading 4802.55.1000, Harmonized Tariff Schedule of the United States. You state in your letter dated April 13, 2009, that once in Mexico the rolls will be transformed into filler paper, composition notebooks, spiral notebooks or wireless notebooks. The process for all the transformations begins with unwinding the rolls and processing the paper through a lining machine. The purpose of the lining machine is to print lines and margin rulings on the paper in a continuous manner. The lined paper is then jogged and cut into large sheets. The large sheets are cut and trimmed to the appropriate size of the item being formed. The filler paper is cut to notebook size (20.3 cm x 26.7 cm and 21.6 cm x 27.9 cm), counted and sorted into the specified number of sheets for each package, and three hole punched. The finished sheets are matched with a cover sheet, shrink wrapped and placed in cartons and shipped to your client in the United States for retail sale. The composition notebooks are cut from large sheets into medium sheets measuring 39 cm x 50 cm and counted and sorted into the specified number of sheets for each notebook. The lined and cut sheets are matched with the appropriate printed cover sheets. Two cover designs are printed on one cover sheet. One is on the top and the other is on the bottom. The covers and sheets of paper are sewn together to create the spine binding which is then folded over. Spine tape is applied to cover the binding. The composition books are cut and trimmed to their final size of 19 cm x 24 cm and placed in cartons and shipped to your client in the United States for retail sale. The spiral notebooks are further processed by being simultaneously perforated as it is going through the lining machine. The paper is then jogged and cut into large sheets. The large sheets of lined, perforated paper are cut to the appropriate notebook size 20.3 cm x 26.7 cm, 21.6 cm x 27.9 cm or 22.9 cm x 27.9 cm, counted and sorted into the specified number of sheets for each notebook and are three hole punched. The lined sheets are matched with the printed covers and fly sheets (if applicable) and are bound with wire. Some of the notebooks may be matched with slip-sheets and shrink wrapped. All the finished notebooks are placed in cartons and shipped to your client in the United States for retail sale. The wireless notebooks like the spiral notebooks are simultaneously perforated as they go through the lining machine. The lined paper is then jogged and cut into large sheets. The large sheets are then cut to medium sheets 21.6 cm x 84 cm and counted and sorted into the specified number of sheets for the notebook. The lined sheets are then matched with printed covers and glued together. A spine tape is applied to cover the binding. The assembled notebooks are then cut to a final size of 21.6 cm x 27.9 cm or 22.9 cm x 27.9 cm and three hole punched. The finished product is placed in cartons and shipped to your clients in the United States. Based on these descriptions, in NY N057699 CBP classified the filler paper in subheading 4802.57.1000, HTSUSA, as “Writing and cover paper,” and classified the three notebooks under subheading 4820.10.2020, HTSUSA, as “Memorandum pads, letter pads and similar articles.” CBP further determined that the notebooks were eligible for preferential tariff treatment under NAFTA because they met the required tariff shift from heading 4802 to heading 4820 of General Note 12(t). However, CBP determined that the filler paper did not similarly meet the required tariff shift or satisfy any other General Note 12 provisions, and therefore did not qualify for preferential tariff treatment under NAFTA. In NY N063779, CBP ruled that each of the four subject products qualifies as “a good of a NAFTA country” for marking purposes. In your June 18, 2009 letter, you assert that the filler paper was improperly classified in heading 4802, HTSUSA, and that it is properly classified in heading 4811, specifically in subheading 4811.90.90 as “[o]ther paper, paperboard, cellulose wadding and webs of cellulose fibers.” You further assert that CBP’s erroneous classification of the filler paper resulted in the improper denial of eligibility for preferential tariff treatment of the filler paper under NAFTA. You also contend that the three notebooks were improperly classified in subheading 4820.10.2020, and that their proper classification is subheading 4820.10.2050, HTSUSA. You do not contest CBP’s determinations that the notebooks are eligible for preferential tariff treatment under NAFTA and that each of the four subject products is “a good of a NAFTA country” for marking purposes, although you request revocation of NY N063779 in which the latter determination was made. ISSUES: Whether the filler paper is properly classified in subheading 4802.57.1000, HTSUSA, as writing paper, or in subheading 4811.90.9080, HTSUSA, as other paper, and whether the notebooks are properly classified in subheading 4820.10.2020, HTSUSA, as memorandum pads, letter pads, or similar articles, in subheading 4820.10.2030, HTSUSA, as sewn composition books with dimensions of 152.4-381 mm x 222.5-381, in subheading 4820.10.2040, HTSUSA, as other notebooks with dimensions of 152.4-381 mm x 222.5-381, or in subheading 4820.10.2060, HTSUSA, as other notebooks. Whether the filler paper is eligible for preferential tariff treatment under NAFTA. LAW AND ANALYSIS: To determine whether the filler paper is eligible for preferential tariff treatment under NAFTA, we must first ascertain the proper classifications of the filler paper at the time of its entry into Mexico and at the time of its subsequent entry into the U.S. Accordingly, we initially address classification of the filler paper and notebooks under the HTSUSA. Classification Merchandise imported into the United States is classified under the HTSUSA. Tariff classification is governed by the principles set forth in the General Rules of Interpretation (GRIs) and, in the absence of special language or context which requires otherwise, by the Additional U.S. Rules of Interpretation. The GRIs and the Additional U.S. Rules of Interpretation are part of the HTSUSA and are to be considered statutory provisions of law for all purposes. GRI 1 requires that classification be determined first 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 heading and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order. GRI 6 requires that the classification of goods in the subheadings of headings shall be determined according to the terms of those subheadings, any related subheading notes and, mutatis mutandis, to GRIs 1 through 5. The Harmonized Commodity Description and Coding System Explanatory Notes (ENs), constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUSA and are generally indicative of the proper interpretation of the headings. It is CBP’s practice to consult, whenever possible, the terms of the ENs when interpreting the HTSUSA. See T.D. 89–80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). The 2015 HTSUSA provisions under consideration are as follows: 4802 Uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, and non perforated punch-cards and punch tape paper, in rolls or rectangular (including square) sheets, of any size, other than paper of heading 4801 or 4803; hand-made paper and paperboard: Other paper and paperboard, not containing fibers obtained by a mechanical or chemi-mechanical process or of which not more than 10 percent by weight of the total fiber content consists of such fibers: 4802.57 Other, weighing 40 g/m2 or more but not more than 150 g/m2: 4802.57.1000 Writing and cover paper 4811 Paper, paperboard, cellulose wadding and webs of cellulose fibers, coated, impregnated, covered, surface-colored, surface-decorated or printed, in rolls or rectangular (including square) sheets, of any size, other than goods of the kind described in heading 4803, 4809, or 4810: 4811.90 Other paper, paperboard, cellulose wadding and webs of cellulose fibers: 4811.90.90 Other: 4811.90.9080 Other 4820 Registers, account books, notebooks, order books, receipt books, letter pads, memorandum pads, diaries and similar articles, exercise books, blotting pads, binders (looseleaf or other), folders, file covers, manifold business forms, interleaved carbon sets and other articles of stationery, of paper or paperboard; albums for samples or for collections and book covers (including cover boards and book jackets) of paper or paperboard: 4820.10 Registers, account books, notebooks, order books, receipt books, letter pads, memorandum pads, diaries and similar articles: 4820.10.20 Diaries, notebooks and address books, bound; memorandum pads, letter pads, letter pads and similar articles: 4820.10.2020 Memorandum pads, letter pads and similar articles 4820.10.2030 Sewn composition books with dimensions of 152.4-381 mm (6" - 15"), inclusive (small side) X 222.5-381 mm (8.75" -15"), inclusive (large side) 4820.10.2040 Other note books with dimensions of 152.4-381 mm (6" - 15"), inclusive (small side) X 222.5-381 mm (8.75" -15"), inclusive (large side) 4820.10.2060 Other As a preliminary matter, we agree with CBP’s determination in NY N057699 that the subject products are classifiable in subheading 4802.55.1000, HTSUSA, at the time of their entry into Mexico. Subheading 4802.55.1000, HTSUSA, provides for “[u]ncoated paper and paperboard, of a kind used for writing…in rolls or rectangular (including square) sheets, of any size, other than paper of heading 4801 or 4803; hand-made paper and paperboard: Weighing 40 g/m2 or more but not more than 150 g/m2, in rolls: Other paper and paperboard, not containing fibers obtained by a mechanical or chemi-mechanical process or of which not more than 10 percent by weight of the total fiber content consists of such fibers: Of a width exceeding 15 cm: Writing and cover paper." Note 3 to Chapter 48 of the HTSUS states as follows: Subject to the provisions of note 7, headings 4801 to 4805 include paper and paperboard which have been subjected to calendering, super-calendering, glazing or similar finishing, false water-marking or surface sizing, and also paper, paperboard, cellulose wadding and webs of cellulose fibers, colored or marbled throughout the mass by any method. Except where heading 4803 otherwise requires, these headings do not apply to paper, paperboard, cellulose wadding or webs of cellulose fibers which have been otherwise processed. Additionally, Note 5 to Chapter 48 of the HTSUSA states as follows: For the purposes of heading 4802, the expressions “paper and paperboard, of a kind used for writing, printing or other graphic purposes” and “nonperforated punch-cards and punch tape paper” mean paper and paperboard made mainly from bleached pulp or from pulp obtained by a mechanical or chemi-mechanical process and satisfying any of the following criteria: For paper or paperboard weighing not more than 150 g/m2: … (c) Containing more than 3 percent ash and having a brightness of 60 percent or more… According to your submissions, all of the instant products remain incorporated in jumbo paper rolls at the time of their entry into Mexico. The jumbo rolls are uncoated, designated as writing paper, and contain no fibers obtained by a mechanical or chemi-mechanical process. They weigh between 40 g/m2 and 150 g/m2 and measure between 100 and 102 cm in width. In accordance with Note 5(c) to Chapter 48, they are white in color, contain less than 3 percent ash, and have a brightness of 60 percent or more. Thus, at the time of their arrival in Mexico, they are not excluded from heading 4802 by operation of Note 3 to Chapter 48. Accordingly, they are, at that time, classifiable under subheading 4802.55.1000. While in Mexico, the paper rolls have been imprinted with lines and margin rulings and cut to size. In addition, the filler paper has been three-hole punched, the paper comprising the composition notebooks has been sewn and bound with spine tape, the paper comprising the spiral notebooks has been perforated, three-hole punched and bound with wire, and the paper comprising the wireless notebooks has been perforated, three-hole punched, and bound with glue. None of this additional processing is described by either heading 4802 or Note 3 to Chapter 48, the latter of which explicitly excludes from headings 4801 through 4805 products that have undergone processes beyond those enumerated in the note. Accordingly, all of the products are effectively excluded from heading 4802 and must be classified elsewhere. While this determination is not in dispute with regard to the three notebooks, which CBP classified under heading 4820 in NY N057699, it renders the classification of the filler paper under subheading 4802.57.10, HTSUSA, in that case incorrect. As stated above, you assert in your June 18, 2009 letter that the filler paper is instead properly classified in heading 4811. This heading covers, among other things, paper in rectangular sheets. The General EN to Chapter 48 provides, in pertinent part, as follows: This Chapter covers: Paper… of all kinds, in rolls or sheets: … (B) Headings 48.06 to 48.11 relate to…paper, paperboard or cellulose wadding and webs of cellulose fibres which have been subjected to various treatments, such as coating, design printing, ruling, impregnating, corrugation, creping, embossing, and perforation. (Emphasis added). Additionally, EN 48.11 provides that “[p]aper and paperboard are classified in this heading only if they are in strips or rolls or in rectangular (including square sheets, of any size.” Consistent with these ENs, CBP has repeatedly classified rectangular filler paper that has been ruled, perforated, or three-hole punched in heading 4811, specifically in subheading 4811.90.90. See NY N248171, dated November 27, 2013; NY N233367, dated October 17, 2012; NY N113475, dated July 30, 2010; NY N021510, dated February 6, 2008; NY N021508, dated February 6, 2008; NY L82778, dated March 15, 2005; and NY J81599, dated March 10, 2003. As in these previous rulings, the instant filler paper is in rectangular form, measuring either 20.3 centimeters by 26.7 centimeters or 21.6 centimeters by 27.9 centimeters, and has been imprinted with lines and margin rulings and three-hole punched. Accordingly, we agree with your assertion that it is properly classified in subheading 4811.90.9080, HTSUSA. You also assert in your letter that, within subheading 4820.10.20, the subject composition notebooks, spiral notebooks, and wireless notebooks qualify as “Diaries, notebooks and address books, bound; memorandum pads, letter pads and similar articles: Other,” which, as of 2010, is described by subheading 4820.10.2060. As support for your contention, you cite several rulings in which CBP classified notepads and notebooks in subheading 4820.10.2050, the predecessor to subheading 4820.10.2060. See Headquarters Ruling Letter (HQ) 965595, dated August 5, 2002; NY N004628, dated January 18, 2007; NY M87370, dated November 14, 2006; and NY M83981, dated June 16, 2006. However, in 2010, following the filing of your letter, subheading 4820.10.20 was revised at the 10-digit level, resulting in the additions of subheading 4820.10.2030, which covers “Sewn composition books with dimensions of 152.4-381 mm (6" - 15"), inclusive (small side) X 222.5-381 mm (8.75" -15"), inclusive (large side),” and subheading 4820.10.2040, which covers “Other note books with dimensions of 152.4-381 mm (6" - 15"), inclusive (small side) X 222.5-381 mm (8.75" -15"), inclusive (large side).” In the wake of these revisions, CBP has consistently classified sewn composition journals in subheading 4820.10.2030 while classifying spiral and other non-sewn notebooks in subheading 4820.10.2040. See NY N255460, dated August 19, 2014; NY N254683, dated July 11, 2014; NY N252384, dated May 5, 2014; NY N246920, dated November 1, 2013; and NY N140787, dated February 2, 2011. Consequently, while we agree that the notebooks qualified as “Diaries, notebooks and address books, bound; memorandum pads, letter pads and similar articles: Other” at the time your letter was filed, they are now described instead by the terms of subheadings 4820.10.2030 and 4820.10.2040. Specifically, the composition notebooks are properly classified in subheading 4820.10.2030, as they are sewn and boast dimensions of 240 millimeters by 190 millimeters. The spiral notebooks and wireless notebooks are properly classified in subheading 4820.10.2040 because they are not sewn an