NAFTA Certificate of Origin; Producer; Shelter Program; Mexico

HQ H024567 April 18, 2008 OT-RR:CTF:VS H024567 GOB CATEGORY: Classification Edward R. Saavedra Director of Import & Export Offshore International, Inc. 8350 East Old Vail Road Tucson, AZ 85747 RE: NAFTA Certificate of Origin; Producer; Shelter Program; Mexico Dear Mr. Saavedra: This is in response to correspondence of February 19, 2008, submitted on behalf of The Offshore Group, concerning who is considered to be the “producer” for the purpose of completing the North American Free Trade Agreement (“NAFTA”) Certificate of Origin. Our ruling follows. FACTS: The Offshore Group is a provider of outsourced manufacturing support or “shelter” services in Mexico. Client firms that wish to manufacture under the Maquiladora regime in Mexico contract with Offshore International, Inc. (an Arizona corporation) or Offshore International, LLC (a Texas limited liability company). The Offshore Group offers two Mexican production facilities, Maquilas Teta Kawi S.A. de C.V. in Guyamas/Emplame, Sonora and Manufacturas Zapaliname S.A. de C.V. in Saltillo, Coahuila. The Offshore Group’s manufacturing support services permit the contracting party or client firm (here, the U.S. importer) to focus on manufacturing while the Offshore Group handles functions such as human resources, payroll management, accounting services, Mexico import and export assistance, facilities management, park management, procurement services, environmental services, government and community affairs, industrial safety compliance measurement, labor relations management, worker transportation, and information services. According to the Offshore Group website, the logistics management services offered by it include the following: creation of commercial invoices for imports; maintenance of commercial invoice records for imports; certificate of origin maintenance for imports; creation of commercial invoices for exports; maintenance of commercial invoice records for exports; certificate of origin maintenance for exports; and U.S. Customs and Border Protection audit assistance. The client firms pay the Offshore Group a facilities fee for building space and a shelter plan fee for personnel and support services. Third-party Mexican suppliers bill the client firm pass-through costs for items such as electricity and fees associated with the movement of freight into Mexico. The client firms are directly responsible for costs associated with an on-site manager and all tools, machines, equipment, materials, and parts used in the Mexico plant. The client firm is also responsible for the screening, acceptance, and training of all employees hired by the Offshore Group. The client firm has the sole responsibility and authority for assuring that the manufacturing process and manufactured products meet their own standards for product quality. According to the contract between Offshore Group and its client firms, the client firms retain title to all of its materials, products, machinery and equipment used in connection with its operations. The client firm will be the importer and exporter of record with respect to transactions on the U.S. side of the border, and will be responsible for all U.S. duties, brokerage, and related charges. You state that the Offshore Group’s Mexico production facilities provide labor and physical space to produce, assemble or otherwise manufacture the merchandise covered by NAFTA Certificates of Origin and that they are indicated as the Mexican exporter (Maquilas Teta Kawi S.A. de C.V. or Manufacturas Zapaliname S.A. de C.V.) on the NAFTA Certificate of Origin. ISSUE: Under the above-described facts, who is considered the “producer” for purposes of completing the NAFTA Certificate of Origin? LAW AND ANALYSIS: The requirements governing the execution and validity of NAFTA Certificates of Origin are set out in Article 501 of the NAFTA and §181.21 et seq., Customs and Border Protection (“CBP”) Regulations (19 CFR 181.21 et seq.). Article 501 of the NAFTA provides that 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 in another NAFTA country. With respect to Certificates of Origin submitted for goods imported into the United States, §181.22(b)(2) CBP Regulations (19 CFR §181.22(b)(2)) states that the Certificate of Origin “shall be signed by the exporter or by the exporter’s authorized agent having knowledge of the relevant facts.” Pursuant to section 181.1(f), CBP Regulations (19 CFR § 181.1(f)), “exporter means an exporter located and required under this part to maintain records regarding exportations of a good, in the United States, Canada or Mexico.” The Certificate of Origin is used by the exporter to certify that a good qualifies as an originating good for purposes of preferential tariff treatment under the NAFTA. The form includes fields for, among other things: the name and address of the producer, importer and exporter; the shipment or blanket period for which preferential treatment is claimed; a description of goods; the preference criterion; the Harmonized System tariff classification number; the country of origin; the authorized signature; and the date of signature. The instructions for the CF 434 also call for the exporter, if he is not the producer, to provide in Field 8 the basis for his knowledge or reliance that the good qualifies as originating. You indicate that Maquilas Teta Kawi S.A. de C.V. and Manufacturas Zapaliname S.A. de C.V. are listed as the exporters. We note that the Offshore Group provides various logistics management services such as the creation and maintenance of commercial invoices and commercial invoice records for imports and exports, certificate of origin maintenance, and CBP audit assistance. Therefore, the Offshore Group has control over the records and would properly be characterized as the exporters. Section 181.1(t), CBP Regulations (19 CFR § 181.1(t)) provides that “producer means a producer as defined in the appendix to this part.” Section 2 of Part I, Appendix to Part 181, CBP Regulations (19 CFR Part 181, Appendix (cited as the “NAFTA Rules of Origin Regulations”)) provides in pertinent part as follows: “ ‘producer’ means a person who grows, mines, harvests, fishes, traps, hunts, manufactures, processes or assembles a good.” Based upon the information presented, we find that the two Mexican firms (Maquilas Teta Kawi S.A. de C.V. and Manufacturas Zapaliname S.A. de C.V.) are engaged in the assembly, processing, and/or manufacture of the goods. Therefore, pursuant to the definition of “producer” for this purpose in the NAFTA Rules of Origin Regulations, we find that these Mexican entities are the producers of the goods exported from Mexico. HOLDING: Based upon the facts presented, the two Mexican entities (Maquilas Teta Kawi S.A. de C.V. and Manufacturas Zapaliname S.A. de C.V.) are engaged in the assembly, processing, and/or manufacture of the goods. Therefore, pursuant to the NAFTA Rules of Origin Regulations, these firms are the “producers” of the goods exported from Mexico. A copy of this ruling letter should be attached to the entry documents filed at the time the subject goods are entered. If the documents have been filed without a copy, this ruling letter should be brought to the attention of CBP. Sincerely, Monika R. Brenner Chief Valuation & Special Programs Branch