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HQ 562267




January 17, 2002

CLA-2 RR:CR:SM 562267 MLR

CATEGORY: CLASSIFICATION

Port Director
U.S. Customs Service
610 W. Ash St.
San Diego, CA 92188

RE: Post-Importation NAFTA claim; Internal Advice; General Note 12; Article 509; 19 CFR 181.31 & 32; Photocopiers

Dear Sir:

This is in reference to a post-importation North American Free Trade Agreement (NAFTA) claim for preferential tariff treatment filed by Casas International Brokerage, Inc., pursuant to 19 U.S.C.1520(d). A prospective ruling request for confirmation of NAFTA qualification was also filed by S.K. Ross & Assoc., P.C. (hereinafter “counsel”) on behalf of Eastman Kodak Company (“Kodak”). A protest and application for further review was also filed by counsel on behalf of Kodak, contesting the denial of the duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to photocopiers imported from Mexico. The protest and ruling request will be addressed in separate decision letters. A meeting was held April 11, 2001, and further information on the processing of the photocopiers was submitted May and June 25, 2001. We regret the delay in responding.

FACTS:

Kodak manufactured copier-duplicators at its facility in New York. The copiers were sold or leased to customers, and if a particular copier was salvageable it was exported to Mexico to be refurbished and, if warranted, also upgraded and returned to the U.S. It is stated that Kodak’s exported copiers are not completely disassembled, and that the major features such as the mechanical frame, casters and wheel systems, film core, drive train, illumination housing and optical tub remained attached to the frame of the exported copier at all times. It is also stated that minor features remained attached to the carcass as well.

On January 29, 1998, a post-importation NAFTA duty claim filed by Casas International Brokerage, Inc. pursuant to 19 CFR 181.31 and 181.32(b)(1) (and erroneously dated January 28, 1997), was received by your office. The post-importation NAFTA duty claim letter states that it covers entry summaries presented by Kodak for the period of December 3, 1996 through September 25, 1997. However, a list of entries dating from January 30, 1997 to September 26, 1997, is attached to the letter. Three Certificates of Origin, each dated November 17, 1997, are submitted for the blanket periods January 1, 1996-December 31, 1996, 1997, and 1998. The exporter listed is Eastman Kodak Company; the importer’s name is listed as “Various”; and the producer’s name is listed as “Available to Customs upon Request.” Certificates of Origin are also filed dated January 1, 1996, 1997, and 1998, for their respective blanket periods, which lists “Industria Mexicana de Fotocopiadoras” as the exporter and “Eastman Kodak Company” as the importer. The letter also states that the “claimant is unaware if any other [Customs officials] received the attached documentation.” The letter also states that the claimant has filed a protest for some of the entries in question, which was filed by counsel on July 29, 1997 (we note, as indicated above, that this submission by counsel deals with the issues on 9802.00.50).

On May 29, 1998, our office received a letter from counsel, requesting a prospective ruling concerning the eligibility of photocopiers for preferential tariff treatment under the NAFTA. Attached to the ruling request is Casa’s post-importation NAFTA claim; however, the attached list covers additional entries from December 4, 1996, through January 28, 1997. A letter from counsel to your office dated July 17, 1998 notes that the post-entry NAFTA claim may have lacked certain information which the ruling request letter should now provide.

In the May 29, 1998 ruling request, counsel cites Rule 3, Chapter 90, HTSUS, and General Note 12(t), HTSUS, and states that certain parts for photo-copying apparatus are classifiable under subheading 9009.90.10 and 9009.90.30, HTSUS.

Counsel claims that Kodak’s copiers were originally built in Rochester, New York, and are eligible for NAFTA, but that Kodak also qualifies for NAFTA preference treatment by establishing the originating status of the following parts:

Subassembly Part
Imaging Kodak “A” Loop, i.e., Photoreceptor belt Optics Mirror
User Control Cable assembly, i.e., wire harness Image Fixing Fuser Roller and Bearing, i.e., Fuser or Pressure roller Paper Handling OVF Tube, lower assembly, i.e., roller

It is stated that Kodak either makes the part at its Rochester facility or has evidence of the originating status of the part it sources from a third party vendor, and that Kodak possesses either a NAFTA certificate of origin or some other written confirmation of origin for each part listed above.

It is stated that when the various parts are received in Mexico, they are taken into inventory by part number for control purposes. It is stated that the copiers are identified with a unique serial number during reconditioning or upgrading. New parts are ordered to the assembly line by copier serial number. Computerized records of these transactions are entered into the database to maintain a history of key part usage (the parts Kodak relies on in claiming NAFTA eligibility) by individual copier serial number. For every copier shipped, a record is maintained to ascertain whether the original key parts remained in the unit or whether any were replaced. If a key part was replaced, the recordkeeping allows identification, including origin, of the replacement part.

It is stated that the Mexican plant’s sources for the key parts are the same as Kodak’s. Typical scenarios involve a model C built in Rochester which is sent to Mexico for refurbishing with no model change; a model B built in Rochester and upgraded in Mexico into a model D; a model B built in Rochester upgraded in Mexico to a model C, sent back into the U.S. market then returned to Mexico for an upgrade into a model D; or a model I built in Rochester, refurbished in Mexico with no model change, then later upgraded in Mexico into a model D, and then later again refurbished in Mexico with no model change.

It is claimed that the copiers retain their NAFTA eligibility as the key components remain NAFTA originating components. Kodak has enclosed as an example, NAFTA certificates of origin for 1996, 1997, and 1998.

ISSUE:

Whether the Kodak copiers qualify for preferential tariff treatment under the North American Free Trade Agreement.

LAW AND ANALYSIS:

To be eligible for tariff preference under the NAFTA, goods must be “originating goods” within the rules of origin in general note 12(b), HTSUS, which, in part, state that:

[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 –
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 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; (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 they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.

In the ruling request, Counsel states that the exported models are NAFTA originating, in that, as set forth in the “Facts” above, certain parts in each of the five subassemblies are originating. Counsel states that Kodak either made the part in the U.S. or has evidence of the originating status of the part if sourced from a third party vendor, and that there exists either a NAFTA Certificate of Origin or some other written confirmation of origin for each part. Counsel states that for every copier shipped, a record is maintained to ascertain whether the original key parts remained in the unit or whether any were replaced. If key parts were replaced, it is stated they were replaced with NAFTA originating parts.

The finished copiers are classifiable under subheading 9009.12, HTSUS. With respect to General Note 12(b)(ii)(A), the applicable tariff shift rules under General Note state:

21. A change to subheading 9009.12 from any tariff item, except from tariff items 9009.90.10 and 9009.90.30

22. xxx

23. A change to tariff items 9009.90.10 or 9009.90.30 from tariff items 9009.90.50 or 9009.90.70, or any other heading, provided that at least one of the components of such assembly named in chapter rule 3 to chapter 90 is originating.

General Note 12(t)/90.CR3 (chapter rule 3), HTSUS, integrates Chapter 90, Additional U.S. Note 5, HTSUS, into General Note 12(t)/90, HTSUS, and defines the parts which are to be included under subheadings 9009.90.10 and 9009.09.30, HTSUS. Chapter rule 3 provides that tariff items 9009.90.10 and 9009.90.30 cover the following parts for photo-copying apparatus of subheading 9009.12, HTSUS:

(A) imaging assemblies, incorporating more than one of the following: photoreceptor belt or cylinder; toner receptacle unit; toner distribution unit; developer receptacle unit; developer distribution unit; charge/discharge unit; cleaning unit;

(B) optics assemblies, incorporating more than one of the following: lens; mirror; illumination house; document exposure; glass

(C) user control assemblies, incorporating more than one of the following: printed circuit assembly; power supply; user input keyboard; wiring harness; display unit (cathode-ray type or flat panel);

(D) image fixing assemblies, incorporating more than one of the following: fuser; pressure roller; heating element; release oil dispense; cleaning unit; electrical control;

(E) paper handling assemblies, incorporating more than one of the following: paper transport belt; roller; print bar; carriage; gripper roller; paper storage unit; exit tray; or

(F) combinations of the above specified assemblies.

Accordingly, in order for the photocopiers to receive tariff preference under the NAFTA, they must be made from parts in subheading 9009.90.10 and 9009.90.30, HTSUS (as defined in Chapter 90, Additional U.S. Note 5, HTSUS, and General Note 12(t)/90.CR3, HTSUS), that themselves are originating.

Counsel states that in the subject photocopiers the following parts will be originating as required in General Note 12(t)/90.23: Kodak “A” Loop, i.e., Photoreceptor belt; Mirror; Cable assembly, i.e., wire harness; Fuser Roller and Bearing, i.e., Fuser or Pressure roller; and OVF Tube, lower assembly, i.e., roller. To the extent these parts were replaced in the subject photocopiers, and these parts were originating, the photocopiers imported into the U.S. are eligible for preferential treatment under the NAFTA.

Under 19 U.S.C. 1520(d), notwithstanding that a valid protest was not filed, Customs may reliquidate an entry to refund any excess duties paid on a good qualifying under the NAFTA rules of origin for which no claim for preferential tariff treatment was made at the time of importation if the importer, within 1 year after the date of importation, files a claim meeting certain conditions. The conditions required to be met for a claim filed under section 1520(d) are that the claim must include a written declaration that the good qualified under the NAFTA rules of origin at the time of importation, copies of all applicable NAFTA Certificates of Origin, and such other documentation relating to the importation of the goods as is required by Customs. The Customs Regulations promulgated under this provision are found in 19 CFR 181.31 through 181.33.

Section 181.33(b), Customs Regulations (19 CFR 181.33), provides that if the port director determines that any protest or any petition or request for reliquidation relating to the good has not been finally decided, the port director “shall suspend action on the claim filed until the decision of the protest, petition or request becomes final.”

We note that Casas indicates that some of the entries listed in their post-importation NAFTA claim are also the subject of a protest. Accordingly, the proper action by your office is to suspend action on the post-importation NAFTA claim. By forwarding the claim to our office, it appears that no action was taken by your office and your office confirms that the post-importation NAFTA claim has not been denied.

As indicated above, we are addressing the subheading 9802.00.50, HTSUS, issue covered by the protest and application for further review via a separate ruling letter due to the complexity of this issue. Therefore, final action on the post-NAFTA importation claim should await a decision on the protest and application for further review. Nonetheless, we believe it would not be inappropriate to start review of any necessary documentation to expedite the post-NAFTA importation claim.

We note that it appears that Casas has properly satisfied the filing procedures for the post-importation NAFTA claim, set forth in 19 CFR 181.32. The entries listed by Casas in the post-importation NAFTA claim dated January 30, 1997 through September 26, 1997, also appear to have been timely filed within one year after the date of importation of the goods, according to the list provided by Casas; however, we note that the post-importation NAFTA claim would not be timely filed for the additional entries listed by counsel (attached to the ruling request) dated December 4, 1996-January 28, 1997. We also note that your office may only deny the post-importation NAFTA claim for the reasons set forth in 19 CFR 181.33(d).

HOLDING:

The post-importation NAFTA claim is being returned to your office for consideration. To the extent a Kodak “A” Loop, i.e., Photoreceptor belt; Mirror; Cable assembly, i.e., wire harness; Fuser Roller and Bearing, i.e., Fuser or Pressure roller; and OVF Tube, lower assembly, i.e., roller will be replaced in the subject photocopiers, and these parts are originating, the photocopiers imported into the U.S. will be eligible for preferential treatment under the NAFTA.

You are to mail this decision to the internal advice applicant no later than 60 days from the date of this letter. On that date, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and other methods of public distribution.

Sincerely,

John Durant, Director

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