The tariff classification and status under the North American Free Trade Agreement (NAFTA) of a Martial Arts Breaking Board Kit

N067748 July 30, 2009 CLA-2-95:OT:RR:NC:N4:424 CATEGORY: Classification TARIFF NO.: 9506.99.6080 Mr. Terry Jenkins Cole International Inc. 3033- 34th Avenue NE Calgary, Alberta T2P 3C2 Canada RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA) of a Martial Arts Breaking Board Kit Dear Mr. Jenkins: In your letter dated July 6, 2009, written on behalf of Master’s Secret, Inc., you requested a ruling on the status of a Martial Arts Breaking Board Kit from Canada under the NAFTA. A sample of a Martial Arts Breaking Board Kit was received with your request. The item is a martial arts training device designed to help one practice the technique of breaking wood boards. Included in the kit are the following items of Chinese origin: steel pole, steel locking nuts, steel clips, specially fitted nylon bag, kicking pads, silicone strip, hook and loop strip, bungee cords, bolts with nuts and a screwdriver. The following components are of Canadian origin: ABS vertical supports, back support and handles, which comprise the body of the board holding device and the cardboard carton. The applicable subheading for the Martial Arts Breaking Board Kit will be 9506.99.6080, Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Articles and equipment for general physical exercise, gymnastics, athletics, other sports…or outdoor games…; swimming pools and wading pools; parts and accessories thereof: Other: Other: Other…Other." The general rate of duty will be 4 percent ad valorem. 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/. General Note 12(b), HTSUS, sets forth the criteria for determining whether a good is originating under the NAFTA. General Note 12(b), HTSUS, (19 U.S.C. § 1202) states, in pertinent part, that 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) of this note or the rules set forth therein, or (B) the goods otherwise satisfy the applicable requirements of subdivisions (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; or (iv) they are produced entirely in the territory of Canada, Mexico and/or the United States but one or more of the non-originating materials falling under provisions for “parts” and used in the production of such goods does not undergo a change in tariff classification because-- (A) the goods were imported into the territory of Canada, Mexico and/or the United States in unassembled or disassembled form but were classified as assembled goods pursuant to general rule of interpretation 2(a), or (B) the tariff headings for such goods provide for and specifically describe both the goods themselves and their parts and is not further divided into subheadings, or the subheadings for such goods provide for and specifically describe both the goods themselves and their parts, provided that such goods do not fall under chapters 61 through 63, inclusive, of the tariff schedule, and provided further that the regional value content of such goods, determined in accordance with subdivision (c) of this note, is not less than 60 percent where the transaction value method is used, or is not less than 50 percent where the net cost method is used, and such goods satisfy all other applicable provisions of this note. Since the Breaking Board Kit is comprised of many parts and components originating in a country other than Mexico, Canada or the United States, General Note 12(b)(i), HTSUS, does not apply. Therefore, we must next refer to General Note 12(b)(ii)(A). General Note 12(b)(ii)(A), HTSUS, specifies in part that merchandise will qualify as originating goods for NAFTA eligibility if each of the non-originating materials – in this case, the steel pole, steel locking nuts, steel clips, specially fitted nylon bag, kicking pads, silicone strip, hook and loop strip, bungee cords, bolts with nuts and a screwdriver – undergoes a change in tariff classification described in subdivision (t). The finished Breaking Board Kit is classified within heading 9506, HTSUS. The rule applicable to merchandise classifiable in this heading is found in General Note 12(t), Chapter 95, Rule 9, which requires “a change to headings 9506.40 through 9506.99 from any other chapter.” Therefore, all of the non-originating components of the Breaking Board Kit must be classifiable within a chapter of the HTSUS other than Chapter 95 for the finished Breaking Board Kit to be an originating good for NAFTA purposes under this rule and qualify for NAFTA preferential treatment. You acknowledge in your letter that not all of the non-originating components undergo the requisite tariff chapter shift. You have suggested that the steel pole and the kicking pads are described in heading 9506 as parts of equipment for exercise, athletics and other sports and that therefore these components do not undergo a chapter shift. This office does not believe that the steel pole belongs to a class or kind solely or principally used as a part of such equipment. Since we would classify the steel pole in heading 7326 as an other article of steel or iron, this component does undergo the necessary chapter shift when it becomes part of the Martial Arts Breaking Board Kit classifiable in 9506. However, we agree that the kick pads are described in heading 9506, so they do not undergo a chapter shift when they become part of the Breaking Board Kit. Therefore, the Breaking Board Kit does not qualify as originating goods under General Note 12(b)(ii)(A), HTSUS, since the non-originating kicking pads do not undergo the change in tariff classification described in subdivision (t), Chapter 95, Rule 9. You ask whether the Breaking Board Kit may qualify for NAFTA, even though the kick pad components do not undergo the requisite tariff shift, based on the NAFTA de minimis provision. You have provided calculations based on your intended selling price. The NAFTA de minimis provisions state, in relevant part: (f) De minimis. (i) Except as provided in subdivisions (f)(iii) through (vi), inclusive [inapplicable exceptions], a good shall be considered to be an originating good if the value of all non-originating materials used in the production of the good that do not undergo an applicable change in tariff classification set out in subdivision (t) of this note is not more than 7 percent of the transaction value of the good, adjusted to a F.O.B. basis, or, if the transaction value is unacceptable under section 402(b) of the Tariff Act of 1930, as amended, the value of all such non-originating materials is not more than 7 percent of the total cost of the good. Applying this exception to the product under review, if the value of the Chinese-origin kicking pads does not exceed 7 percent of the transaction value or total cost of the good, as the case may be, the Breaking Board Kit may be considered a NAFTA originating good eligible to a free rate of duty under the NAFTA upon compliance with all applicable laws, regulations, and agreements. Although it appears that the de minimis rule will not apply to the Martial Arts Breaking Board Kit, based on the costs you have submitted, this office is unable to make a determination as to whether the value of the kicking pads is considered to be de minimis since the appraised value of the imported article cannot be determined until the time of entry. Therefore, we cannot currently rule as to the applicability of Part 102.13 of the Customs Regulations (the de minimis rule) to the Breaking Board Kit. Please note, however, that the calculation of de minimis is made against the transaction value of the good as determined under section 402(b) of the Tariff Act of 1930, as amended. The calculation is not made against your selling price to the retail customer. This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181). 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 James Forkan at (646) 733-3025. 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, U.S. Customs and Border Protection, Regulations & Rulings, 799 9th Street N.W. - 7th floor, Washington, DC 20229-1177. Sincerely, Robert B. Swierupski Director National Commodity Specialist Division