North American Free Trade Agreement ("NAFTA"); regional value content; General Note 12, HTSUS; lawnmower transmissions.

HQ W563589 December 14, 2006 CLA-02 RR:CTF:VS W563589 EAC CATEGORY: Classification Mr. Crispin N. Flores President C & J Logistical Services, Inc. 9103 S. Austin Drive Pharr, TX 78577 RE: North American Free Trade Agreement (“NAFTA”); regional value content; General Note 12, HTSUS; lawnmower transmissions. Dear Mr. Flores: This is in response to your electronic submissions of August 21, 2006, in which you request a ruling on behalf of General Transmission, Inc., pertaining to whether lawnmower transmissions from Mexico are eligible to receive preferential treatment under the NAFTA. All confidential financial information in this ruling letter will be bracketed and redacted from the public version. FACTS: The imported products under consideration in this case are ten lawnmower transmissions that are assembled in Mexico from parts of various origins. You state that the assembled lawnmower transmissions are all classified under subheading 8483.40.50, Harmonized Tariff Schedule of the United States (“HTSUS”). The name, origin, tariff classification, and cost of the originating and non-originating parts utilized to assemble each of the lawnmower transmissions identified below was provided in your submissions. ********** Lawnmower Transmission #1 (P/N: 194935) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Fork U.S. 7326.90, HTSUS [xxxxxx] EHP Spring U.S. 7320.20, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Fix DC EHP Mexico 8483.60, HTSUS [xxxxxx] Mobil DC EHP Mexico 8483.60, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Lever MTD Mexico 7326.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] O-ring Taiwan 4016.93, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #2 (P/N: 199205) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Fork U.S. 7326.90, HTSUS [xxxxxx] EHP Spring U.S. 7320.20, HTSUS [xxxxxx] Flask MTD Pulley U.S. 8483.90, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Fix DC EHP Mexico 8483.60, HTSUS [xxxxxx] Mobil DC EHP Mexico 8483.60, HTSUS [xxxxxx] Pulley Hub Mexico 8483.50, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Lever EHP Mexico 7326.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] O-ring Taiwan 4016.93, HTSUS [xxxxxx] Screw MTD Taiwan 7318.15, HTSUS [xxxxxx] Nut NUT Pulley Taiwan 7318.16, HTSUS [xxxxxx] Elastic Pin Taiwan 7318.29, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #3 (P/N: 193354) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #4 (P/N: 194936) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Fork U.S. 7326.90, HTSUS [xxxxxx] EHP Spring U.S. 7320.20, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Fix DC EHP Mexico 8483.60, HTSUS [xxxxxx] Mobil DC EHP Mexico 8483.60, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Lever MTD Mexico 7326.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] O-ring Taiwan 4016.93, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #5 (P/N: 199206) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Fork U.S. 7326.90, HTSUS [xxxxxx] EHP Spring U.S. 7320.20, HTSUS [xxxxxx] Flask MTD Pulley U.S. 8483.90, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Fix DC EHP Mexico 8483.60, HTSUS [xxxxxx] Mobil DC EHP Mexico 8483.60, HTSUS [xxxxxx] Pulley Hub MTD Mexico 8483.50, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Lever ETD Mexico 7326.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] O-ring Taiwan 4016.93, HTSUS [xxxxxx] Screw MTD Taiwan 7318.15, HTSUS [xxxxxx] Nut MUT Pulley Taiwan 7318.16, HTSUS [xxxxxx] Elastic Pin Taiwan 7318.29, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #6 (P/N: 191636) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Fork NPI U.S. 7326.90, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Fix DG NPI Mexico 8483.60, HTSUS [xxxxxx] Mobil DC EHP Mexico 8483.60, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Lever EHP Mexico 7326.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] Seal Taiwan 4016.93, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Spring France 7320.20, HTSUS [xxxxxx] Screw Germany 7318.15, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #7 (P/N: 188645) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #8 (P/N: 188295) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #9 (P/N: 188296) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Fork U.S. 7326.90, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Fix DG NPI Mexico 8483.60, HTSUS [xxxxxx] Mobil DC EHP Mexico 8483.60, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Lever EHP Mexico 7326.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] Seal Taiwan 4016.93, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Spring France 7320.20, HTSUS [xxxxxx] Screw Germany 7318.15, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Lawnmower Transmission #10 (P/N: 188294) Originating Parts (U.S.- and Mexican-origin) Part Origin Tariff Classification Cost Washer U.S. 7318.22, HTSUS [xxxxxx] Grease Mexico 3403.99, HTSUS [xxxxxx] Worm Screw Mexico 8483.90, HTSUS [xxxxxx] Shaft Mexico 8483.10, HTSUS [xxxxxx] Inf Carter Mexico 8483.90, HTSUS [xxxxxx] Sup Carter Mexico 8483.90, HTSUS [xxxxxx] Wheel Mexico 8483.40, HTSUS [xxxxxx] Bushing Mexico 3926.90, HTSUS [xxxxxx] Total: [xxxxxx] Non-Originating Parts (Other) Part Origin Tariff Classification Cost Staples Taiwan 7326.90, HTSUS [xxxxxx] Thermo Screw Taiwan 7318.15, HTSUS [xxxxxx] ACM 12.5 Taiwan 4016.93, HTSUS [xxxxxx] ACM 12 Taiwan 4016.93, HTSUS [xxxxxx] Bearing China 8482.10, HTSUS [xxxxxx] Silicone Belgium 3910.00, HTSUS [xxxxxx] Total: [xxxxxx] This lawnmower transmission is assembled in Mexico at a cost of [xxxxxx] per unit. The total per unit cost is [xxxxxx]. ********** Based upon the foregoing information, you claim that the various lawnmower transmissions will satisfy the applicable regional value content (“RVC”) requirements of General Note 12(t), HTSUS. This ruling will assume compliance with the RVC requirements, subject to any appropriate review at the time of importation when the appraised value of the lawnmower transmissions is finally established. ISSUE: Whether the imported lawnmower transmissions qualify for preferential treatment under the NAFTA. LAW AND ANALYSIS: General Note 12, HTSUS, incorporates Article 401 of the NAFTA into the HTSUS. General Note 12(a)(ii), HTSUS, provides: 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 Treasury (without regard to whether the goods are marked), 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 North American Free Trade Agreement Implementation Act. Accordingly, the lawnmower transmissions will be eligible for the “Special” “MX” rate of duty provided: (1) they are deemed to be NAFTA originating under the provisions of General Note 12(b), HTSUS; and, (2) qualify to be marked as products of Mexico under the NAFTA Marking Rules. In order to determine whether the lawnmower transmissions are NAFTA-originating, we must consult General Note 12(b), HTSUS, which provides, in pertinent part: 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 they have been transformed in the territory of Canada, Mexico, and/or the United States so that except as provided in subdivision (f) of this note, each of the nonoriginating material 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 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 they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials. Because the lawnmower transmissions are comprised, in part, of non-originating materials, General Note 12(b)(i), HTSUS, does not apply. Therefore, we must determine whether the non-originating materials undergo the tariff shift (or other applicable requirement) prescribed under General Note 12(b)(ii), HTSUS. As applied, the imported lawnmower transmissions are classified under subheading 8483.40.50, HTSUS. The applicable rule in General Note 12(t)/84.246, HTSUS, provides for: A change to subheadings 8483.40 through 8483.60 from any subheading outside that group, except from subheadings 8482.10 through 8482.80, tariff items 8482.99.05, 8482.99.15 or 8482.99.25, or subheading 8483.90; or A change to subheadings 8483.40 through 8483.60 from subheadings 8482.10 through 8482.80, tariff items 8482.99.05, 8482.99.15 or 8482.99.25, or subheading 8483.90, whether or not there is also a change from any subheading outside that group, provided there is a regional value content of not less than: 60 percent where the transaction value method is used, or (2) 50 percent where the net cost method is used. Part A of General Note 12(t)/84.246, HTSUS, is not satisfied in this case because the Chinese-origin bearings used in the ten transmissions are classified under subheading 8482.10, HTSUS. Therefore, the rule will be satisfied and NAFTA eligibility established only if the lawnmower transmissions satisfy Part B of the ru