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HQ 546079





November 22, 1995

VAL RR:IT:VA 546079 CRS

CATEGORY: VALUATION

Madeline B. Kuflik, Esq.
Assistant General Counsel
Matsushita Electric Corporation of America One Panasonic Way
Panazip: 3B-6
Secaucus, NJ 07094

RE: Article 509, NAFTA; exception to change in tariff shift rule not satisfied; parts; RVC

Dear Ms. Kuflik:

This is in reply to your letter of July 28, 1995, filed on behalf of Kyushu Matsushita Corporation of America ("AKME"), in which you requested an advance ruling as to whether a regional value content test may be used to qualify deflection yokes as originating goods under the North American Free Trade Agreement

FACTS:

AKME imports deflection yokes produced in Mexico by a related party producer. The deflection yokes are classified in subheading 8540.91.20, Harmonized Tariff Schedule of the United States (HTSUS). A major component of the deflection yokes is a ferrite core classified in subheading 8540.91.50, HTSUS.

The applicable rule of origin in this instance provides that a good classified in subheading 8540.91 originates in the territory of a NAFTA country where there is a change to subheading 8540.91 from any other heading. However, since the ferrite core and deflection yoke are classified in the same subheading, the deflection yoke does not qualify as an originating good because the ferrite core does not undergo a change in classification.

ISSUE:

The issue presented is whether the deflection yoke qualifies as an originating good under one of the exceptions to the change in tariff classification requirement such that the NAFTA origin determination may be based on a regional value-content test.

LAW AND ANALYSIS:

The Appendix to the NAFTA Rules of Origin Regulations ("ROR"; 19 C.F.R. pt. 181 app.; NAFTA Rules of Origin Regulations, as amended by T.D. 95-68, 60 Fed. Reg, 46334 (1995), 29:38 Cust. B. & Dec. 1 (1995)), sets forth, at section 4(4), certain exceptions to the change in classification requirement of section 4(2). In particular, section 4(4) provides in pertinent part that a good originates in the territory of a NAFTA country where:
b) except in the case of a good provided for in any of Chapters 61 through 63,

(i) the good is produced entirely in the territory of one or more of the NAFTA countries,

(ii) one or more of the non-originating materials used in the production of the good do not undergo an applicable change in tariff classification because

(A) those materials are provided for under the Harmonized System as parts of the good, and

(B) the heading for the good provides for both the good and its parts and is not further subdivided into subheadings, or the subheading for the good provides for both the good and its parts,

(iii) the non-originating materials that do not undergo a change in tariff classification in the circumstances described in subparagraph (ii) and the good are not both classified as parts of goods under the heading or subheading referred to in subparagraph (ii)(B),

(iv) each of the non-originating materials that is used in the production of the good and is not referred to in subparagraph (iii) undergoes an applicable change in tariff classification or satisfies any other applicable requirement set out in Schedule I,

(v) the regional value content of the good, calculated in accordance with section 6, 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

(vi) the good satisfies all other applicable requirements of this Appendix, including any applicable, higher regional value-content requirement provided for in section 13 or Schedule I.

60 Fed. Reg. 46395, ROR, section 4(4)(b).

In the instant case, the good, i.e., the deflection yoke, is produced entirely in Mexico and one of the non-originating materials, i.e., the ferrite core, is provided for under a parts provision, and the subheading for the good (8540.91) provides for both the good and its parts. Thus, the requirements of sections 4(4)(b)(i)-(ii) are satisfied. However, section 4(4)(b)(iii) of the ROR contains a further requirement that, in order for the good to originate, the non-originating material that does not undergo a change in tariff classification and the good in which that material is used must not be classified as parts of goods under a heading or subheading that provides for both the good and its parts. Here, this requirement is not met because the ferrite core that does not undergo a change in classification and is classified with the deflection yoke in a subheading that provides for the good and its parts. Since the deflection yokes do not meet all the requirements of section 4(4)(b) of the ROR the exception to the change in classification requirement does not apply. Consequently, the question of a regional value-content test does not arise.

HOLDING:

The deflection yokes do not qualify as originating goods under the exception to the change in tariff classification requirement set forth in section 4(4)(b) of the ROR. A regional value-content test may not be used to determine the origin of the deflection yokes.

This holding applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 181.100(a)(2), Customs Regulations, which states that a NAFTA ruling letter is issued on the assumption that all the information furnished in connection with the ruling request and incorporated therein, directly, by reference, or by implication, is accurate and complete in every respect. Should it subsequently be determined that the information furnished is not complete and/or does not comply with 19 C.F.R. ? 181.100(a)(2), this ruling will be subject to modification or revocation. In addition, any change in the facts furnished in connection with this ruling may affect the outcome of the regional value content determination. In such a case, it is recommended that a new ruling request be submitted in accordance with 19 C.F.R. ? 181.93.

Sincerely,


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