Internal Advice Request; Classification; NAFTA Eligibility; Country of origin marking; 9801.00.10 & 9802.00.80

HQ H242070 July 1, 2015 OT:RR:CTF:VS H242070 GaK CATEGORY: Classification Assistant Port Director U.S. Customs and Border Protection 240 N. Freeport Drive Nogales, AZ 85621 RE: Internal Advice Request; Classification; NAFTA Eligibility; Country of origin marking; 9801.00.10 & 9802.00.80 Dear Assistant Port Director: This is in response to your memorandum dated April 29, 2013, requesting internal advice concerning importations of plastic kits and components used in the plumbing industry. DBHL, Inc. (“DBHL”) requested internal advice from your port regarding classification, North America Free Trade Agreement (“NAFTA”) eligibility, country of origin marking, and applicability of provisions of Chapter 98, Harmonized Tariff Schedule of the United States (“HTSUS”). Your office forwarded DBHL’s request which discussed five products, categorized A through E. We also considered a spreadsheet of components submitted by DBHL. We regret the delay in responding. Per DBHL’s letter dated April 9, 2013, we have reviewed their request for confidentiality pursuant to 19 C.F.R. § 177.2(b)(7) with respect to the information submitted. As that information constitutes privileged or confidential matters, it has been bracketed and will be deleted from any published versions. FACTS: Category A Category A concerns the No. P9700 – P-Trap (“P-Trap”) kit, which is also known as a clean-out trap in the plumbing industry. The P-Trap is a curved pipe located underneath a plumbing fixture that creates a water block to prevent sewer gases from coming up the drain line and into the building. The P-Trap’s second essential function is catching items that may cause clogs or blockages if allowed to travel further into the drainage system. The P-Trap kit is comprised of a rigid slip nut-fitting (U.S./Mexico), plastic washer (U.S./Mexico), rigid J-bend tube (U.S.), rigid quarter bend tube (U.S.), individual retail carton (U.S.), shipping carton label (U.S.), and shipping carton (Mexico). The U.S. components are exported to Mexico and processed under two different scenarios. In the first scenario, the rigid slip nut-fitting and the plastic washer are screwed to the J-bend tube. The assembled component and the rigid quarter bend tube are packed in individual retail cartons and in a shipping carton. The shipping label is printed in Mexico to include the part number, description, origin, quantity, and bar code. The shipping carton label is affixed to the shipping carton. In the second scenario, no assembly occurs and each component is packaged in individual retail cartons and packed in a shipping carton. Category B Category B concerns the No. P9701BG – P-Trap (“P-Trap”), which is the same product as the P-Trap in Category A, except that all of the components are of U.S.-origin. Similarly, the shipping label and plastic bag are made in the U.S. and the cardboard carton is made in Mexico. The U.S. components are sent to Mexico without the benefit of drawback. Each component is packaged in a plastic bag, and then packed in a shipping carton. The label is printed in Mexico to include the part number, description, origin, quantity, and bar code, then affixed to the shipping carton. Category C Category C concerns the No. P9722BG – S-Trap with Adapter (“S-Trap”) kit, which is also known as a clean-out trap in the plumbing industry. The S-Trap is a curved pipe located under sinks, bathtubs and toilets and designed to capture objects that are inadvertently dropped into the sink. The S-Trap kit is comprised of a rigid slip nut-fitting (U.S./Mexico), plastic washer (U.S./Mexico), rigid plastic tube (China), rigid threaded adapter-fitting (U.S.), rigid J-bend tube (U.S.), rigid J-bend tube with fitting (U.S.), individual retail bag (U.S.), shipping carton label (U.S.), and shipping carton (Mexico). The U.S. components are exported to Mexico for packaging operations. The rigid slip nut-fitting and plastic washer are screwed to the J-bend tube only per customer requests. Then each component is packed in individual retail bags and in a shipping carton. The shipping label is printed in Mexico to include the part number description, origin, quantity, and barcode, then affixed to the shipping carton. Category D Category D concerns the No. HD2690B – Tubular Waste Arm (“Waste Arm”) kit, which is designed to be used in tubular drain applications. The Waste Arm is used to install a clean out trap under residential or commercial sinks, bathtubs and toilets. The Waste Arm kit is comprised of a rigid slip nut-fitting (U.S./Mexico), plastic washer (U.S./Mexico), rigid waste arm (U.S.), nipple (U.S.), individual retail bags (U.S.), shipping carton label (U.S.), and shipping carton (Mexico). The U.S. components are exported to Mexico and processed under two different scenarios. In the first scenario, the rigid slip nut-fitting and plastic washer are screwed to the rigid waste arm and along with the other components, are packed in individual retail cartons and a shipping carton. The shipping label is printed in Mexico to include the part number, description, origin, quantity, and bar code. The shipping carton label is affixed to the shipping carton. In the second scenario, no assembly occurs and each component is packaged in individual retail cartons and shipping cartons. Category E Category E concerns the No. P9100 Disposer drain (“Disposer”) kit, which is an end outlet disposer drain kit used in kitchen sinks. The disposer drain connects two different flows of water into a single trap located to one-side under the sink. The Disposer kit is comprised of a 12-inch rigid tailpipe (Mexico), 6-inch rigid flange tailpipe (U.S.), rigid polypropylene tee (U.S.), slip nut-fitting (U.S./Mexico), plastic washer (U.S./Mexico), rubber gasket (Taiwan), individual retail carton (U.S.), shipping carton label (U.S.), and shipping carton (Mexico). The U.S. components are exported to Mexico and processed under two different scenarios. In the first scenario, the rigid slip nut-fitting and plastic washer are screwed to the rigid polypropylene tee and along with the other components, are packaged in individual retail cartons and in a shipping carton. The shipping label is printed in Mexico to include the part number, description, origin, quantity, and bar code. The shipping carton label is affixed to the shipping carton. In the second scenario, each component is packaged in individual retail cartons and shipping cartons. ISSUES: What is the proper classification of the P-Trap kit, S-Trap kit, Waste Arm kit, and Disposer kit? Whether the goods are eligible for preferential treatment under NAFTA. Whether the U.S.-origin components are eligible for entry under subheadings 9801.00.10 and/or 9802.00.80, HTSUS. LAW AND ANALYSIS: Classification Classification under the HTSUS is made in accordance with the General Rules of Interpretation (“GRI”). GRI 1 provides that the classification of goods 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 GRI 2 through 6 may be applied in order. Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the good. When no single heading provides for all of the articles in the kit, we must proceed to GRI 2. GRI 2 provides for unfinished articles as well as mixtures and combinations. GRI 3(a) states that when merchandise is classifiable under more than one heading, the merchandise should be classified in the most specific heading. However, GRI 3(a) further states that “when two or more headings each refer to . . . part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods.” GRI 3(b) states, in relevant part, that goods put up in sets for retail sale shall be classified as if consisting of the material or component which gives them their essential character, insofar as this criterion is applicable. Explanatory Note (X) to GRI 3(b) states that for purposes of Rule 3(b) the term "goods put up in sets 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). Under GRI 3(b), a retail set shall be classified according to the component which gives the kit its essential character. See Estee Lauder, Inc. v. United States, 46 Cust. B. & Dec. 4, 13 - 28 (Ct. Int'l Trade 2012). Explanatory Note (VIII) to GRI 3(b) states that "essential character will vary as between different kinds of goods . . . it may, for example, 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." There have been several court decisions on "essential character" for purposes of classification under GRI 3(b). See, Conair Corp. v. United States, 29 C.I.T. 888 (2005); Structural Industries v. United States, 360 F. Supp. 2d 1330, 1337-1338 (Ct. Int'l Trade 2005); and Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278, 1295-1356 (Ct. Int'l Trade 2006), aff'd 491 F.3d 1334 (Fed. Cir. 2007). "[E]ssential character is that which is indispensable to the structure, core or condition of the article, i.e., what it is." Home Depot USA, Inc. v. United States, 427 F. Supp. 2d at 1293 quoting A.N. Deringer, Inc. v. United States, 66 Cust. Ct. 378, 383 (1971). In particular in Home Depot USA, Inc. v. United States, the court stated "[a]n essential character inquiry requires a fact intensive analysis." 427 F. Supp. 2d 1278, 1284 (Ct. Int'l Trade 2006). Category A & Category B Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the good. The P-Trap components are made of polypropylene and low density polyethylene. The articles within the kit are classified under separate headings. The J-bend tube, rigid slip nut-fitting, and quarter bend tubes are classified under subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings...” and the plastic washers are classified under subheading 3926.90.4590 as “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914.” Since no single heading provides for all of the articles in the kit, we must proceed to GRI 2. GRI 2 provides for unfinished articles as well as mixtures and combinations. None of these terms describe the P-Trap kit, so we must proceed to GRI 3. The P-Trap kit satisfies the aforementioned GRI 3(b) criteria for a retail set. The kit consists of several components which are prima facie classifiable under different HTSUS headings. Moreover, all of the articles are components of a clean-out trap. The P-Trap components are packed in individual retail cartons. Under GRI 3(b), the P-Trap kit is a retail set and shall be classified according to the component which gives the kit its essential character. The J-bend and quarter bend tubes made of polypropylene are the largest components in the kit and form the curved shape of the P-Trap for the sink. The remaining components are minor accessory pieces that support the P-Trap function. The curved shape prevents sewer gases from coming up the drain line and into the house, and catches items that may cause major clogs or blockages. DBHL provided an excerpt from the U.S. Army Plumbing Manual, which shows how the J-bend tube traps the liquid content from flowing into the quarter bend tube. As such, we find the J-bend tube provides the kit’s essential character and the kit must be classified according to the J-bend tube. The P-Trap kit is classified under subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings....” Category C Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the S-Trap kit. The S-Trap kit components are made of polypropylene, low density polyethylene, and PVC. The articles within the kit are classified under separate headings: the rigid plastic tube is classified under subheading 3917.22.0000, HTSUS, as “[t]ubes, pipes and hoses and fittings therefore…: [t]ubes, pipes and hoses, rigid: [o]f polymers of propylene”; the rigid slip nut-fitting, rigid threaded adapter-fitting, and rigid J-bend tubes are classified under subheading 3917.40.0090 as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings...”; and the plastic washers are classified under subheading 3926.90.4590 as “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914.” Since no single heading provides for all of the articles in the kit and GRI 2 applies to unfinished articles and mixtures, we must proceed to GRI 3. The S-Trap kit satisfies the aforementioned criteria for a retail set under GRI 3(b). The kit consists of several components which are prima facie classifiable under different HTSUS headings. Moreover, all of the components are used in a clean-out trap. The S-Trap components are packed in individual retail cartons. Under GRI 3(b), the P-Trap kit is a retail set and shall be classified according to the component which gives the kit its essential character. The shape of the S-Trap traps objects dropped into the sink which is achieved by combining the two rigid J-bend tubes (one with a fitting). Since the two components that impart the essential character are classified under subheading 3917.40.0090, HTSUS, the S-Trap will be classified under subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings....” Category D Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the Waste Arm kit. The Waste Arm kit components are also made of polypropylene and low density polyethylene. The articles within the kit are classified under separate headings: the rigid slip nut-fitting and nipple are classified under subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings...”; the rigid waste arm is classified under subheading 3917.22.0000 as “[t]ubes, pipes and hoses and fittings therefore…: [t]ubes, pipes and hoses, rigid: [o]f polymers of propylene”; and the plastic washers are classified under subheading 3926.90.4590 “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914” HTSUS. Since no single heading provides for all of the articles in the kit, we must proceed to GRI 2. GRI 2 provides for unfinished articles as well as mixtures and combinations. None of these terms describe the Waste Arm kit, so we must proceed to GRI 3. The Waste Arm kit satisfies the aforementioned criteria for a retail set under GRI 3(b). The kit consists of several components which are prima facie classifiable under different HTSUS headings. Moreover, all of the components are used in a Waste Arm. The Waste Arm components are packed in individual retail cartons. Under GRI 3(b), the Waste Arm kit is a retail set and shall be classified according to the component which gives the kit its essential character. The rigid waste arm made of polypropylene is the largest component in the kit and it changes the direction of the flow of fluid. The remaining components are minor accessory pieces that support the waste arm function. As such, the rigid waste arm provides the kit’s essential character and the kit must be classified according to the rigid waste arm. Since it is made of plastics, it would be fully described by the text of the heading as plastic fittings as set forth in subheading 3917.22.0000, HTSUS, as “[t]ubes, pipes and hoses and fittings therefore…: [t]ubes, pipes and hoses, rigid: [o]f polymers of propylene.” Category E Under GRI 1, we must look to the terms of headings and any relevant section or chapter notes in order to classify the Disposer kit. The Disposer kit components are also made of polypropylene and low density polyethylene. The components within the kit are classified under separate headings: the rubber gasket is classified under subheading 4016.93.5010, HTSUS, as “[g]askets, washers and other seals . . .O-Rings”; the slip nut-fitting, 6-inch rigid flange tailpipe polypropylene, 12-inch rigid tail pipe, and 6-inch rigid polypropylene tee are classified under subheading 3917.40.0090 as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings...”; and the plastic washer is classified under subheading 3926.90.4590 as “[o]ther articles of plastics and articles of other materials of headings 3901 to 3914.” Since no single heading provides for all of the articles in the kit, we must proceed to GRI 2. GRI 2 provides for unfinished articles as well as mixtures and combinations. None of these terms describe the Disposer kit, so we must proceed to GRI 3. The Disposer kit satisfies the aforementioned criteria for a retail set under GRI 3(b). The kit consists of several components which are prima facie classifiable under different HTSUS headings. Moreover, all of the components are used in an end outlet disposer drain. The Disposer components are packed in individual retail cartons. Under GRI 3(b), the Disposer kit is a retail set and shall be classified according to the component which gives the kit its essential character. The rigid polypropylene tee is the component in the kit to which the two rigid tailpipes are connected so that the liquid flow is re-directed to a single trap under the sink. The remaining components are minor accessory pieces that support the disposer drain function. As such, the rigid propylene tee provides the kit’s essential character and the kit must be classified according to the rigid polypropylene tee. Since it is made of plastics, it would be fully described by the text of the heading as plastic fittings set forth in subheading 3917.40.0090, HTSUS, as “[t]ubes, pipes and hoses and fittings therefor…:[f]ittings....” 2) NAFTA Eligibility General Note (“GN”) 12, HTSUS, incorporates Article 401 of North American Free Trade Agreement (“NAFTA”) into the HTSUS. GN 12(a)(ii) provides, in pertinent part: (ii) 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 Mexico 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), and goods enumerated in subdivision (u) of this note, 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 "MX" in parentheses, are eligible for such duty rate, in accordance with section 201 of the NAFTA Implementation Act. GN 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) o