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HQ 562296




January 17, 2002

CLA-2 RR:CR:SM 562296 MLR

CATEGORY: CLASSIFICATION

Susan Kohn Ross, Esq.
S.K. Ross & Assoc., P.C.
5777 West Century Blvd., Suite 520
Los Angeles, CA 90045-5659

RE: General Note 12; NAFTA; Article 509; Photocopiers

Dear Ms. Ross:

This is in reference to your letter dated May 29, 1998, requesting a ruling pursuant to 19 CFR 177.2, on behalf of Eastman Kodak Company (“Kodak”) concerning the eligibility for preferential tariff treatment under the North American Free Trade Agreement (NAFTA) for photocopiers imported from Mexico. We note the additional filing of a post-importation NAFTA claim for preferential tariff treatment filed by Casas International Brokerage, Inc., and your filing of a protest and application for further review contesting the denial of the duty exemption under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). The post-importation NAFTA claim and protest 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 on May and June 25, 2001. We regret the delay in responding.

FACTS:

Counsel acknowledges that a post-entry NAFTA claim is pending for some entries. This ruling does not address those entries.

Kodak manufactured copier-duplicators at its facility in New York. The copiers are sold or leased to customers, and if a copier is salvageable it is 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 remain attached to the frame of the exported copier at all times. It is also stated that minor features remain attached to the carcass as well. 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 are 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:

Counsel seeks confirmation of NAFTA qualification for certain of Kodak’s photocopier operations, pursuant to 19 CFR 177.2. We note that pursuant to 19 CFR 181.91, Subpart I – Advance Ruling Procedures, the provisions of this subpart shall apply in lieu of the administrative ruling provisions contained 19 CFR Part 177, Subpart A, except where the request for the ruling involves a subject matter not specified in section 181.92(b)(6). We note that the subject of the ruling request does concern the subject matter set forth in section 181.92(b)(6)(v), namely whether a good qualifies as an originating good under General Note 12, HTSUS; accordingly, the request of the ruling by counsel should be pursuant to 19 CFR 181.91, Supart I.

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

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

Counsel cites Headquarters Ruling Letter (HRL) 959761 dated May 14, 1997, where non-originating photocopier “hulks”, some of which were no longer operational, were exported from the U.S. to Mexico, where they were disassembled into their constituent parts. Some of the disassembled parts were reused and were assembled with the five major subassemblies of each copier. Each of the major subassemblies of the copier (optics assembly, imaging assembly, fuser assembly, paper assembly, and control assembly) was assembled in Mexico, and at least one component of each subassembly was originating for purposes of NAFTA. Counsel states that, unlike HRL 959761, the exported models are claimed to be 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 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.

HOLDING:

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.

A copy of this ruling 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.

Sincerely,

John Durant, Director
Commercial Rulings Division


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