The tariff classification and status under the North American Free Trade Agreement (NAFTA), of a silver pendant necklace from Canada; Article 509

N048859 February 11, 2009 CLA-2-71:OT:RR:E:NC:SP:233 CATEGORY: Classification TARIFF NO.: 7113.11.5080 Jim Twining Independant 2045 Whyte Avenue Vancouver, British Columbia V6J 1B6, Canada RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA), of a silver pendant necklace from Canada; Article 509 Dear Mr. Twining: In your letter dated January 9, 2009, you requested a ruling on the status of a silver pendant necklace from Canada under the NAFTA. Your letter requested a country-of-origin determination on a necklace, which you state is composed of a silver pendant produced in Canada and a silver chain produced in Italy. The worth of the pendant is stated to be $25.00 and the chain $3.00. Specifically, you ask: does the Italian chain undergo a tariff classification change when it is combined with the Canadian pendant to become a necklace, and is the finished necklace eligible for NAFTA status with Canada as country-of-origin? For purposes of North American Free Trade Agreement (NAFTA), we must determine the Harmonized Tariff Schedule of the United States (HTSUS) classification for the silver pendant necklace, in order to determine the applicable NAFTA tariff shift rule of origin. 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 terms of the headings and any relative section or chapter notes...." The applicable tariff provision for the silver pendant necklace will be 7113.11.5080, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Articles of jewelry and parts thereof, of precious metal or of metal clad with precious metal...Of precious metal whether or not plated or clad with other precious metal...Of silver, whether or not plated or clad with precious metal: Other: Other.” To be eligible for tariff preferences under NAFTA, goods must be "originating goods" within the rules of origin in General Note 12(b), HTSUS. In this case, to be an "originating good" the silver pendant necklace must be "transformed in the territory of Canada, Mexico and/or the United States" pursuant to General Note 12(b)(ii)(A), HTSUS, which states: 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.... First, we must examine whether the silver pendant necklace is "transformed in the territory of Canada, Mexico and/or the United States" pursuant to General Note 12(b)(ii)(A), HTSUS. The necklace is subject to the NAFTA tariff shift rules of origin, as provided in General Note 12(t) to the HTSUS. The NAFTA tariff shift rules of origin for duty purposes are defined at the HTSUS six digit subheading level. As the silver pendant necklace is classified under subheading HTSUS 7113.11, the applicable NAFTA tariff shift rule of origin for the good is located in General Note 12(t), Chapter 71, Note 2 to the HTSUS, which states: A change to headings 7113 through 7118 from any heading outside that group. The non-originating Italian silver chain is classified under subheading 7113.11, HTSUS, which is the same heading and subheading as the silver pendant necklace. A change in tariff classification of the Italian silver chain does not occur. Therefore, the silver pendant necklace produced from a non-originating Italian silver chain is not eligible for preferential tariff treatment under the NAFTA. The marking statute, section 304, 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 U.S. shall be marked in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR 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 North American Free Trade Agreement (“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 appropriate Customs Regulations. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Part 102, Customs Regulations. The marking requirements for the good are set forth in Part 134, Customs Regulations. 19CFR, Part 102, sets forth the "NAFTA Rules of Origin" for purposes of determining country-of-origin. Section 102.11 sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) of the regulations states that the country of origin of a good is the country in which: (1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or (3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied." “Domestic Material” is define in section 102.1(d) of the regulations as “a material whose country-of-origin as determined under these rules is the same country as the country in which the good is produced.” "Foreign Material" is defined in section 102.1(e) of the regulations as "a material whose country of origin as determined under these rules is not the same country as the country in which the good is produced." “Material” is defined in section 102.1(l) of the regulations as “a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components.” The silver pendant necklace is neither wholly obtained or produced, or produced exclusively from domestic materials. 19CFR102.11(3) is joined to 19CFR102.20, for purposes of determining the country-of-origin of imported goods other than textile and apparel products. Under 19CFR102.20 the “Specific rule by tariff classification” for goods of 7113.11-7115.90, provide for: A change to subheading 7113.11 through 7115.90 from any other subheading, including another subheading within that group. As the silver pendant from Canada and the Italian silver chain from Italy are both classified in the same subheading 7113.11, neither material undergoes the applicable tariff shift, as set forth above. We must therefore proceed down the 102.11 hierarchy for determining country-of-origin for the good. 19CFR102.11(b) provides for where the country-of-origin for the good cannot be determined in accordance with 102.11(a), and the good is not classified as a set, the origin for the good is the single material that imparts the essential character to the good. We find that the pendant from Canada and the silver chain from Italy do not meet the criteria for classification as a set, as the pendant and chain are both classified in the same HTSUS heading. Therefore 19CFR102.11(b) is applicable for determining country-of-origin for the silver pendant necklace. Under this provision the country-of-origin for the good “is the country or countries of origin of the single material that imparts the essential character to the good the good.” “Rules of Interpretation” provided for in 19CFR102.18(b)(1) state: for purposes of identifying the material that imparts the essential character to a good under 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under 19CFR102.20. Since the domestic pendant from Canada and the foreign chain from Italy did not undergo the applicable tariff shift, both materials will be considered for determining the essential character for the silver pendant necklace. The following factors were examined: the nature of the pendant versus the chain, the value of the pendant versus the chain, and the consumer adornment for the good. Based on the information you provided and the nature of the necklace, the essential character is the silver pendant, resulting in country-of-origin Canada for the necklace. For duty purposes the good is not NAFTA eligible for duty-free treatment and the applicable duty rate is 5% ad valorem. For country-of-origin purposes the good is to be marked made in Canada. Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/. This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181) – NAFTA. A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Neil H. Levy at (646) 733-3036. Should you wish to request an administrative review of this ruling, submit a copy of this ruling and all relevant facts and arguments within 30 days of the date of this letter, to the Director, Commercial Rulings Division, Headquarters, Bureau of Customs and Border Protection, 1300 Pennsylvania Ave. N.W., Washington, D.C. 20229. Sincerely, Robert B. Swierupski Director National Commodity Specialist Division