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HQ 560033

December 19,
CLA-2 RR:TC:SM 560033 BLS


TARIFF NO.: Subheading 8414.80

Robert E. Burke, Esq.
Lawrence M. Friedman, Esq.
Barnes, Richardson & Colburn
200 East Randolph Drive
Chicago, Illinois 60601

RE: Assembly of turbocharger from new and used parts; originating goods; General Note 12(b)(ii)(A); 19 CFR 181.31; Article 509


This is in reference to your letter dated August 16, 1996, requesting a NAFTA advance ruling as to whether certain parts used to produce remanufactured turbochargers will undergo a tariff shift and be considered originating for purposes of determining whether the turbochargers will be entitled to NAFTA preferential treatment upon importation into the U.S.


You present the following two scenarios:

1) Diesel Recon Company ("DRC"), a division of Cummins Engine Co., will begin the remanufacturing process with used, diesel-engine turbochargers that customers return to Cummins distributors when purchasing a remanufactured turbocharger. These turbochargers (referred to as "cores") will be shipped to DRC's facility in Mexico where workers will disassemble the turbochargers into their individual components which, at this point, are known as "dirty core." Parts which are acceptable for reuse will be processed to remove dirt and other residue. To the extent necessary, DRC will repair or machine the core parts to return them to useful condition. Reusable parts will be placed in inventory for use in production. Parts that cannot be reused are scrapped.

DRC will transfer "clean core" (parts machined, repaired or otherwise acceptable for reuse) to the assembly line as required for production. The turbocharger line workers will draw on that supply of parts as well as new parts to assemble remanufactured turbochargers.

2) DRC may also purchase used parts from an unrelated supplier in Mexico or the U.S. The supplier would receive the dirty core, salvage reusable parts and sell them to DRC, who would then use the salvaged parts in Mexico to build remanufactured turbochargers in the same manner as described above. Under this scenario, purchase from a Mexican supplier will also entail disassembly of the core in Mexico, while purchase from a U.S. vendor may require only cleaning, repair and assembly of the exported parts.

In either of the described scenarios, you state that disassembled core parts may be originating (product of U.S., Canada or Mexico) or non-originating (non-NAFTA country of origin).


Whether the imported turbochargers will be considered "originating goods" for purposes of determining their eligibility for preferential duty treatment under the NAFTA.


To be eligible for preferential duty treatment under the NAFTA, goods must be "originating" within the rules of origin in General Note 12(b), Harmonized Tariff Schedule of the United States (HTSUS), which provides, in part, as follows:

[f]or 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 classification is required, and the goods satisfy all other requirement of this note....

You state that DRC will treat the disassembled parts as "originating" under General Note 12(b)(i), when it can be verified that the parts are a product of Mexico, Canada or the U.S. However, you ask for our ruling when such verification cannot be made or when it is known that the materials originate from a country other than the United States, Mexico or Canada. In these situations, you believe that the parts will undergo the required change in classification as required by General Note 12(b)(ii)(A), under the applicable tariff shift rule. You believe that the parts should be treated for these purposes the same as if they were new, non-originating materials, and that disassembly of the "dirty core" in Mexico and reuse of the component materials to produce the remanufactured turbochargers should be considered "production" of the good in that country.

General Note 12, HTSUS, is implemented by the NAFTA Rules of Origin Regulations. (See Appendix to section 181.131, Customs Regulations, Part IV, section 4.) Section 4(2)(b) of the Regulations provides that a good originates in the territory of a NAFTA country where each of the non-originating materials used in the production of the good undergoes the applicable change in tariff classification, set forth in Schedule I of the Regulations (Annex 401 of NAFTA), as the result of production occurring entirely in the territory of one or more of the NAFTA countries, and the good satisfies the applicable regional value-content requirement. "Production" is defined in part as "... manufacturing, processing or assembling a
good..." (See Section 2, Part I, NAFTA Rules of Origin Regulations.) In this case, the non-originating disassembled parts are cleaned, repaired, and assembled in Mexico to produce the remanufactured turbochargers. Accordingly, we find that these materials will be used in production of the imported good. Therefore, the remanufactured turbochargers will be considered an "originating good," provided the non-originating materials meet the requirements of General Note 12(b)(ii), HTSUS.

The turbocharger is provided for under subheading 8414.80, HTSUS, "Air or vacuum pumps, air or other gas compressors and fans; ventilating or recycling hoods incorporating a fan, whether or not fitted with filters... Other,... Air compressors: Turbochargers and superchargers..." The non-originating materials are classifiable under subheading 8414.90, HTSUS as "Parts, Other...Of compressors of subheading 8414.40." The applicable rule (General Note 12(t)/84.30) requires:

(A) A change to subheading 8414.40 through 8418.80 from any other heading; or

(B) A change to headings 8414.40 through 8414.80 from subheading 8414.90, whether or not there is also a change from any other heading, provided there is a regional value content of not less than:

(1) 60 percent where the transaction value method is used, or

(2) 50 percent where the cost method is used.

Thus, for (A) to be applicable, any non-originating materials in the turbocharger must come from a heading other than subheadings 8414.40, HTSUS, through 8414.80, HTSUS. Since the non-originating materials are classifiable as Parts, under subheading 8414.90, HTSUS, a change in tariff classification does not occur under this subparagraph. However, subparagraph (B) will apply and, provided the regional value content requirement under that subparagraph is satisfied, the turbochargers will be considered "originating goods" pursuant to General Note 12(b)(ii)..


1) Non-originating parts from disassembled turbochargers, whether salvaged by the producer or purchased from a U.S. or Mexican supplier, and new non-originating replacement parts, will undergo production in Mexico as the result of the assembly and other processes performed there to produce remanufactured turbochargers. The
remanufactured turbochargers produced from non-originating parts will be considered "originating goods," provided the regional value content requirement of General Note 12(t)/84.30(b) is satisfied.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.


John Durant,

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