Article 509; advance ruling; NAFTA; de minimis

HQ 546055 July 14, 1995 VAL R:C:V 546055 CRS CATEGORY: Valuation Mr. Walt Koppelaar Curtainsider, Inc. 1318 Rymal Road East Hamilton, Ontario L8W 3N1 RE: Article 509; advance ruling; NAFTA; de minimis Dear Mr. Koppelaar: This is in reply to your letter of July 6, 1995, under cover of which you requested an advance ruling as to whether a "Tautliner" tarpaulin system for trailers and semi-trailers, assembled in Canada from originating and non-originating materials, qualifies as an originating good under the North American Free Trade Agreement (NAFTA). In Headquarters Ruling Letter (HRL) 956604, dated September 26, 1994, we held that the tarpaulin system qualified for NAFTA preference under the de minims rule. However, we subsequently determined that this ruling was based on incorrect information; accordingly, HRL 956604 was modified by HRL 545891 dated June 29, 1995. See, 29:20 Cust. B. & Dec. 25. You have now submitted revised information in respect of the de minimis calculation and on this basis have asked that we revisit the issue of whether the tarpaulin system qualifies as an originating good under NAFTA. FACTS: The "Tautliner" tarpaulin system is classified in subheading 8716.90.50, Harmonized Tariff Schedule of the United States (HTSUS). The system is made from originating and non-originating materials and is imported into the United States either separately, or as part of, and permanently mounted onto, a trailer or semi-trailer. Some of the materials used in the production of the tarpaulin system do not undergo the required change in tariff classification; accordingly, the system does not qualify as an originating good under the tariff shift rule. You have submitted information in respect of the transaction value of the good, and the value of non-originating materials used in the production of the tarpaulin system. Based on this information, you have determined that the regional value content of the tarpaulin system is 98.10 percent under the transaction value method. Correspondingly, the value of non-originating materials used in the production of the good that do not undergo a change in classification as the result of production occurring entirely in the territory of one or more of the NAFTA countries is 1.90 percent. ISSUE: The issue presented is whether the tarpaulin system qualifies as an originating good pursuant to the de minimis rule. LAW AND ANALYSIS: The Appendix to part 181, Customs Regulations (19 C.F.R. pt. 181 app.; the NAFTA Rules of Origin Regulations (the "ROR")), provides in relevant part at section 5: (1) Except as otherwise provided in subsection (4), a good shall be considered to originate in the territory of a NAFTA country where the value of all non-originating materials that are used in the production of the good and that do not undergo an applicable change in tariff classification as a result of production occurring entirely in the territory of one or more of the NAFTA countries is not more than seven percent (a) of the transaction value of the good determined in accordance with Schedule II with respect to the transaction in which the producer of the good sold the good, adjusted to an F.O.B. basis, . . . 19 C.F.R. pt. 181 app., § 5(1)(a). Thus in order for the tarpaulin system (the "good"), whether imported separately or as part of trailer, to qualify as an originating good under section 5(1)(a), it is necessary to determine the transaction value of the good in accordance with Schedule II, then determine in accordance with Schedule VIII whether the value of the non-originating materials used in the production of the good is not more than seven percent of the good's transaction value. Based on the information submitted, the value of the non-originating materials used in the production of the good is 1.90 percent of the transaction value of the good determined in accordance with Schedule II with respect to the transaction in which the producer sold the good. HOLDING In conformity with the foregoing, the good qualifies as an originating good under section 5(1)(a) of the ROR. This holding applies only to the specific factual situation and merchandise identified in the ruling request. This position is clearly set forth in section 19 C.F.R. § 181.100(a)(2), which states that a NAFTA ruling letter is issued on the assumption that all the information furnished in connection with the ruling request and incorporated therein, directly, by reference, or by implication, is accurate and complete in every respect. In addition, please note that the application of an advance ruling letter by a Customs field office to the transaction to which it purports to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and if the facts are materially different, the treatment specified in the ruling letter will not be applied to the actual transaction. If it is subsequently determined that the information furnished is not complete and/or does not comply with 19 C.F.R. § 181.100(a)(2), this ruling will be subject to modification or revocation. In addition, any change in the facts furnished in connection with this ruling may affect the outcome of the regional value content determination. In such a case, it is recommended that a new ruling request be submitted in accordance with 19 C.F.R. § 181.93. Sincerely, John Durant, Director Commercial Rulings Division