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HQ 563274

August 3, 2005

CLA-02 RR:CR:VS 563274 NL


Mr. Barry Schwartz, President
Mascot Truck Parts Ltd.
1415 Shawson Drive
Mississauga, Ontario L4W 1X7

RE: NAFTA Article 501; 19 CFR Part 181; Used Cases for Rebuilt Truck Transmissions; NAFTA Certificate of Origin; Producer; Reasonable Reliance; Wholly Obtained Goods; General Note 12(n)(ix)

Dear Mr. Schwartz:

This is in reply to your letter dated April 18, 2005, in which you request a prospective ruling concerning tariff treatment under the North American Free Trade Agreement (NAFTA) of certain remanufactured transmissions that are imported into the United States. Our ruling follows.


Mascot Truck Parts Ltd. (Mascot), a Canadian corporation, is engaged in remanufacturing transmissions for heavy-duty trucks. In this request you ask U.S. Customs and Border Protection (CBP) to review and rule on whether Mascot has adequate basis to determine the origin of transmission cases that it uses in remanufactured transmissions. You ask also whether Mascot’s origin determinations are sufficient basis for the issuance of certifications of NAFTA eligibility for transmissions rebuilt using those parts.

The transmission cases used as materials by Mascot are recovered from transmissions manufactured as original equipment by Transmission Technologies Corporation (TTC), a Michigan corporation. TTC’s transmissions are produced in Mexico and sold under the trade name “Spicer”. TTC transmissions that have become damaged or subject to wear and tear are purchased by various rebuilders and remanufacturers, including Mascot.

Mascot is interested in certifying the TTC transmissions that it rebuilds as NAFTA originating for purposes of importation into the U.S. To this end, it has obtained information directly from TTC regarding the descriptions, identification and origin of various transmissions and components, including transmission cases. Mascot has submitted for our review information that matches the TTC model numbers for original equipment to the transmission cases used in its own remanufactured transmissions. Depending on the type of transmission, the cases of interest are the main case, the rear case, and the clutch (bell) housing. In particular, Mascot emphasizes that the matching is highly accurate because each TTC/Spicer case is identified by a number that is cast into the case, as shown in information submitted. This data is offered in the Mascot submission to show that if a TTC part is originating, the same part when used in rebuilding operations by Mascot can be reliably designated as originating. Moreover, Mascot notes that only TTC cases can be used to rebuild TTC transmissions.

More particularly, TTC has provided Mascot with a NAFTA Certificate of Origin covering current production that is NAFTA originating. We note that the Certificate covers the calendar year 2005 for both complete transmissions and for parts used to produce them. The relevant data fields (HS tariff classification; preference criterion; indication of producer or exporter status and basis for issuance of the certificate; regional value content method, if any; and NAFTA country of origin) appear to have been properly completed. The Certificate indicates that TTC is executing the Certificate with respect to complete transmissions as the exporter based on TTC’s reliance on written representations by the producer other than certificates of origin that the goods qualify as originating goods. The Certificate declares that Mexico is the NAFTA country of origin for the complete transmissions, apparently reflecting that TTC assembles complete transmissions in Pedro Escobedo, Mexico. With respect to transmission parts, the Certificate indicates (with one exception) that TTC is executing as both producer and exporter, and that the NAFTA country of origin of the enumerated transmission parts is either Mexico or the U.S.

Mascot proposes to rely upon Certificates executed in this manner as the basis for treating transmission cases removed from used TTC transmissions as NAFTA originating materials. Taking the certified origin of the used cases together with its own origin assessments of other materials used to produce rebuilt transmissions, Mascot will determine whether the rebuilt transmissions are NAFTA originating goods. If it determines they are originating, Mascot will prepare NAFTA Certificates of origin as both producer and exporter and supply them to its U.S. customer, International Truck and Engine Corporation (ITEC).

The submission originally also sought a ruling concerning Mascot’s basis for determining the origin of TTC transmissions and parts whose production has been discontinued. The dates of production were from 1982 to 2002. TTC has not provided Mascot with NAFTA Certificates of Origin for these transmissions and parts. On July 27, 2005, Mascot withdrew its request for a ruling concerning proof of NAFTA origin for these goods.

Mascot also asked, in the alternative, for a ruling that the cases could qualify as NAFTA originating goods by reason of being goods wholly obtained given that they are derived from used goods, collected within the territory, that are fit only for the recovery of raw materials. Our ruling regarding this issue is set out below.


May Mascot rely on a Certificate of Origin issued by TTC for the purpose of determining the NAFTA originating status of transmissions that are rebuilt with recovered used TTC transmission cases? May transmission cases recovered from used TTC transmissions be considered NAFTA originating goods on the basis that they are “wholly obtained” materials taken from used goods?


Under the NAFTA, goods produced in Canada or Mexico are eligible for tariff preference if they satisfy certain rules. For goods imported into the United States, the statutory requirements are set out in General Note 12, HTSUS. The corresponding regulations are set out in Part 181 of the CBP Regulations (19 CFR Part 181).

Pursuant to Subpart C of Part 181, an importer who claims NAFTA preference must make a declaration of that claim, and the declaration must be based on a complete and properly executed original Certificate of Origin, or copy thereof which covers the goods being imported. See 19 CFR 181.21(a). It is further provided in 19 CFR 181.22(b) that the Certificate of Origin shall be on Customs Form (CF) 434 (or other approved format), signed by the exporter or authorized agent having knowledge of the relevant facts. In Field 8 of the CF 434 it is required that the certifier indicate whether or not the exporter is also the producer. If not the producer, the exporter is required to indicate in Field 8, by the numbers (1), (2) or (3), the basis for signing the Certificate of Origin. As noted in the instructions on CF 434, these Field 8 indicators refer to the following:

FIELD 8: For each good described in Field #5, state “YES” if you are the producer of the good. If you are not the producer of the good, state “NO” followed by (1), (2), or (3), depending on whether this certificate was based upon: (1) your knowledge of whether the good qualifies as an originating good, (2) your reliance on the producer’s written representation (other than a Certificate of Origin) that the good qualifies as an originating good; or (3) a completed and signed Certificate for the good, voluntarily provided to the exporter by the producer.

The three bases set out in Article 501 of the (NAFTA) are as follows:

Article 501: Certificate of Origin

3. Each Party shall:
require an exporter in its territory to complete and sign a Certificate of Origin for any exportation of a good for which an importer may claim preferential tariff treatment on importation of the good into the territory of another Party; and
provide that where an exporter in its territory is not the producer of the good, the exporter may complete and sign a Certificate on the basis of
its knowledge of whether the good qualifies as an originating good,
its reasonable reliance on the producer's written representation that the good qualifies as an originating good, or
a completed and signed Certificate for the good voluntarily provided to the exporter by the producer.

The certification requirement is central to the implementation of the NAFTA preference and gives effect to the understanding by all three Parties to the NAFTA that a claim for tariff preference must be based on knowledge that a good originates. This “knowledge” must be actual knowledge of factual information that, under the post-entry verification procedures of the NAFTA, is sufficient to demonstrate that the specific rule of origin is satisfied, e.g., that the change in tariff and the regional value content requirements are in fact satisfied.

Article 501 provides for an exporter’s certification under 3(a) and 3(b). Article 501(3)(a) provides for the situation (the usual situation) in which the exporter is also the producer of the good for which preferential tariff treatment is claimed. Article 501(3)(b) provides for all other situations in which the exporter is not the producer. The first provision is based on an assumption that the knowledge required for completion of a Certificate of Origin is the knowledge that is available to a producer. For situations in which the exporter is not the producer, the second provision sets forth very specific requirements for the valid execution of a Certificate of Origin: the exporter must either have received from the producer a written representation or a Certificate of Origin that the goods are originating, or the exporter must have knowledge of facts that independently demonstrate that the NAFTA rules are satisfied. In other words, certification under Article 501(3)(b) must be based on a degree of knowledge that is either voluntarily provided by the producer to the exporter or is equally sufficient to demonstrate that the goods satisfy the NAFTA rules of origin.

Pursuant to NAFTA Article 415 and Part 181, CBP Regulations, a “producer” means “a person who grows, mines, harvests, fishes, traps hunts, manufactures, processes or assembles a good”. The processing, manufacturing and assembling that Mascot performs in rebuilding the TTC transmissions mean that Mascot is a “producer” within the NAFTA definition of that term. Thus, when executing a NAFTA Certificate of Origin in Canada for goods imported into the U.S. Mascot is doing so pursuant to NAFTA Article 501(3)(a) as an exporter that also is a producer. As a producer, Mascot is considered to have direct knowledge of the originating status of the materials it uses to produce the goods. In this case, Mascot’s direct knowledge with regard to the TTC recovered transmission cases is based on the preparation and maintenance of records (Exhibits 1-11) showing that certain TTC transmission cases are those identified by TTC as originating. This is substantiated in TTC’s NAFTA Certificate of Origin, which enumerates the criteria used by TTC for each origin determination.

Based on its submission, Mascot is proposing to prepare its Certificate of Origin based on knowledge of the materials used that it acquires in the course of producing the remanufactured transmissions. The originating status of the TTC transmission cases is a conclusion upon which Mascot may reasonably rely, inasmuch as TTC has executed its own NAFTA Certificate of Origin with respect to them, assuming for its part all of the responsibilities of one who executes such a Certificate. This office finds that Mascot is entitled to rely upon TTC’s Certification as a basis for its own NAFTA Certification. Mascot’s information received from TTC also is consistent with its own knowledge as a producer of the completed remanufactured transmissions.

As to the ultimate question of whether the rebuilt transmissions satisfy the applicable NAFTA rule of origin, no ruling was requested. The only question posed was whether the TTC Certificate may be relied upon with regard to the originating status of the recovered transmission cases, and this office has answered in the affirmative.

It is noted that originating materials, such as these transmission cases, will retain their originating status while in use within the territories of the NAFTA Parties. However NAFTA provisions regarding transshipment specify that subsequent processing in non-Party territory must take place under customs control in such territory and must be limited to: operations related to loading or unloading; operations related to preserving to goods in good condition; or transport operations. See 19 CFR 181 App. Section 16. A good that is withdrawn from customs custody during transshipment through non-Party territory will be considered entirely non-originating. The Mascot transmission cases must, therefore, have been used only within NAFTA territory in order to retain their NAFTA originating status.

The submission also asked whether, in the alternative, the TTC used transmission cases could be considered originating by application of General Note 12(b)(i), which provides for goods that are wholly obtained or produced entirely in the NAFTA territories. In particular, you ask whether the transmission cases would be originating under section (n)(ix) of General Note 12. That section provides originating status for:

(ix) waste and scrap derived from--
(A) production in the territory of one or more of the NAFTA parties; or (B) used goods collected in the territory of one or more of the NAFTA parties, provided such goods are fit only for the recovery of raw materials;

The submission suggests that the transmission cases may be considered as waste and scrap derived from used goods (the used transmissions) that are fit only for the recovery of raw materials. CBP has previously addressed this question, particularly with regard to recovered automotive parts, and answered in the negative. In Headquarters Ruling 558823 (February 6, 1995), CBP ruled that air brake components collected from used air brake systems could be repaired, and therefore could not be considered “scrap” within the meaning of GN 12(n)(ix). Similarly, in HQ 559199 (May 15, 1995), CBP ruled that air conditioning compressor parts recovered in the U.S. and shipped to Mexico for rebuilding could not be considered wholly obtained originating “scrap”. These rulings are fully applicable to the TTC transmission cases. They may be NAFTA originating under one or another origin criteria, but not by application of GN 12(n)(ix).


In preparing a NAFTA Certificate of Origin for rebuilt transmissions, Mascot may rely upon a NAFTA Certificate by the original manufacturer, TTC, that transmission cases are originating materials. Mascot may certify the transmission cases as originating materials provided there has been no violation of the NAFTA transshipment provisions.

The transmission cases are not originating materials by application of General Note 12(n)(ix).

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


Monika R. Brenner, Chief
Valuation & Special Programs Branch

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