December 10, 2009 CBP Bulletin Notice on NAFTA Eligibility and Marking of ADP Systems

Proposed revocation of ruling; proposed revocation of treatment. CBP is proposing to modify one ruling on NAFTA eligibility, country of origin marking and the merchandise processing fee. Additionally, CBP proposes that this notice covers any rulings on these issues that may exist but have not been specifically identified. CBP is also proposing to revoke any treatment it has previously accorded to substantially identical transactions.

CBP states that any party who has received an interpretive ruling or decision on the merchandise that is subject to the proposed modification, or any party involved with a substantially identical transaction, should advise CBP by January 11, 2010, the date that written comments on the proposed ruling are due. Furthermore, CBP states that an importer's failure to advise CBP of such rulings, decisions, or substantially identical transactions may raise issues of reasonable care on the part of the importer or its agent for importations subsequent to the effective date of the final decision in this notice.

Automatic data processing systems. The merchandise at issue is described as an ADP machine, a keyboard, a mouse, and a monitor, all imported from Mexico, and packaged together for retail sale. The keyboard and the mouse are imported into Mexico from various vendors in China, Taiwan and Malaysia, and the monitor is imported into Mexico from Taiwan.

The ADP machine is assembled in Mexico by skilled and trained workers from components originating in China, Taiwan, and Malaysia. The ADP's motherboard is shipped to Mexico in a box with all its components except for the memory (a BIOS ROM chip) and the central processing unit. All of the ADP machines use Windows Vista as their operating system and all the models perform data processing functions.

CBP is proposing to issue HQ H074136 in order to modify HQ H027696 relating to the NAFTA eligibility and country of origin marking of certain automatic data processing systems. Also CBP will be addressing whether the goods are subject to the merchandise processing fee under 19 USC 58c(a).

(HQ H074136 is the second attempt to modify HQ H027696. Initially CBP issued HQ H037540, but based on comments received as a result of the notice, the notice was withdrawn.)

In this notice, CBP is proposing to resolve:

(1) Whether an ADP system comprised of an ADP machine assembled in Mexico, a monitor made in Taiwan, and a keyboard and mouse made in China, Taiwan or Malaysia, is eligible for preferential tariff treatment under NAFTA?

(2) How an ADP system that has components originating in different countries should be marked for country of origin marking purposes?

(3) Whether the ADP system is exempt from the merchandise processing fee?

Because the NAFTA rules of origin have not been updated to reflect the 2007 changes to the Harmonized System, the pre-2007 classification for the ADP system must be used to ascertain the rule of origin under NAFTA.

Eligibility for NAFTA preferential treatment: CBP had determined that the ADP system as defined in Subheading Note 1 to Chapter 84 was correctly classified in subheading 8471.49.00, when imported from the territory of Mexico into the U.S., based on the NAFTA rules, HTS General Note 12(u), which states that ADP machines, ADP processing units and parts of the foregoing that are classified in the enumerated listing (which includes HTSUS 8471.49.00, ADP machines), are deemed to be originating goods when imported into the U.S. from Mexico. CBP proposes the ADP system assembled in Mexico from components from various countries is eligible for NAFTA Preferential Treatment.

Marking for country of origin purposes: CBP determined that 19 C.F.R. 102.11 (a) (General Rules of Origin), is not applicable. Specifically, paragraphs (a) 1 and (a) 2 are not applicable, because the ADP system is not either wholly obtained or produced in any one country or produced exclusively from domestic materials of any one country. Paragraph a (3) (the "tariff shift" rules) is not applicable because the foreign goods (e.g. the monitor, keyboard and mouse) are simply re-packed with the ADP machine which is a non-qualifying operation under 19 CFR 102.17.

Since this ADP System meets the terms of a ADP system as defined in Subheading 1 to Chapter 84, CBP finds that the system constitutes a GRI 1 set in the HTS under 19 CFR 102.11. Therefore, CBP finds 19 C.F.R. 102.11(b) is also not applicable. In the cases where 102.11(a) and (b) do not apply, 19 C.F.R. 102.19 (the NAFTA preference override) may be considered. In this case, the system is considered to qualify for NAFTA under General Note 12 and originating within the meaning of 19 CFR 181.1(q). Therefore, since the system was assembled and packaged in Mexico, which is the last NAFTA country in which the ADP system underwent production other than minor processing, based on the NAFTA override, the ADP system should be marked as a product of Mexico.

Merchandise processing fee: Since CBP determined the ADP system is classifiable in a tariff provision is listed in General Note 12(u), the ADP system qualifies as an originating good under NAFTA for duty preferential treatment and to be marked as Mexico for the purpose of country origin. As such, the ADP system qualifies under 19 USC 58c (b)(10)(B)(ii) as being exempt from the merchandise processing fees.

Proposed NAFTA eligible, duty-free, and marked made in Mexico Current: Duty-free and marked with various countries

(SeeITT's Online Archives or 08/24/09 news, 09082445, for BP summary of the withdrawal of HQ H037540, the first HQ's letter proposing modifying HQ H027696.)

December 10, 2009 CBP Bulletin (Vol. 43 No. 50) available at: http://www.cbp.gov/xp/cgov/trade/legal/bulletins_decisions/bulletins_2009/