HQ 000116: United States-Canada Free-Trade Agreement; CFTA; parts heading; rule of origin; Harmonized System as document for determining change in classification; APTA

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 000116

                        November 14, 1991

CLA-2 CO:R:C:M  000116 JLV

CATEGORY:  Classification

Regional Director
Regulatory Audit Division
U.S. Customs Service
Northeast Region
10 Causeway Street
Boston, Massachusetts 02222-1059

RE:  United States-Canada Free-Trade Agreement; CFTA; parts
     heading; rule of origin; Harmonized System as document for
     determining change in classification; APTA

Dear Sir:

     In a memorandum of October 25, 1991, you requested advice
under section 177.11 of the Customs Regulations (19 CFR 177.11)
on the meaning of the term "parts heading" as used in the rules
which specify the changes in tariff classification that may
confer status as "originating goods" under the United States-
Canada Free-Trade Agreement (CFTA).  You set forth the facts
concerning the production of a blower assembly which has been
claimed as an originating material, the value of which has been
used by a manufacturer in its claim that motor vehicles qualify
as Canadian articles under the Automotive Products Trade Act of
1965 (APTA), as amended.  This ruling is our decision.

FACTS:

     You state that a manufacturer of motor vehicles in Canada
is claiming that its vehicles qualify as Canadian articles under
the APTA requirements in General Note 3(c)(iii)(A)(1), Harmonized
Tariff Schedule (HTS), because they satisfy the origin rules of
the CFTA in General Note 3(c)(vii), HTS.  The specific rule for
the motor vehicles is (R)(17)(dd) and it requires a value-content
test in addition to the change in classification test.  The
manufacturer has included, in its value-content calculation for
the motor vehicles, the price paid for certain blower assemblies
as a territorial value.  The blower assemblies, purchased from a
supplier in the United States, were exported to Canada by the
U.S. supplier as "originating goods."

                              - 2 -

     The supplier, when exporting the blower assemblies, issued
an Exporter's Certificate of Origin and stated that the blower
assemblies qualified as originating goods under the CFTA because
the assembly of foreign and territorial components satisfied the
change in classification as required by the CFTA origin rule at
General Note 3(c)(vii)(R)(17)(bb).  The blower assembly was
exported from the United States to Canada under subheading
8708.99.  The blower assembly consists of third-country (foreign)
and territorial components.  Six of the foreign components were
classifiable in subheadings of headings 8415 and 8533.  For
purposes of this ruling, we assume that the classifications for
the blower assembly and the third-country components are correct.

     You disagree with the exporter (supplier of the blower
assemblies) on the applicable rule of origin.  Because headings
8415 and 8533, in the HTS, provide for certain articles and parts
thereof, you conclude that these headings are "parts headings"
for purpose of the CFTA rules of origin.  Therefore, you conclude
that the applicable rule is found at General Note
3(c)(vii)(R)(17)(cc).  Under this rule, the blower assembly must
satisfy the change in classification and a value-content test.
Inasmuch as the exporter has not or cannot verify that the
territorial content of each blower assembly constitutes not less
that 50 percent of its value when exported to Canada, you would
disallow this value claimed by the motor vehicle manufacturer as
a territorial value.

     Counsel for the supplier of the blower assemblies claims
that these headings are not parts headings within the Harmonized
Commodity Description and Coding System (Harmonized System),
approved by the Customs Co-operation Council.  Counsel claims
that the rules of origin in the CFTA are based on the Harmonized
System rather than the Harmonized Tariff Schedule (HTS), which
was enacted into the law of the United States, Sec. 1204, Pub. L.
100-418, 102 Stat. 1148, August 23, 1988.

ISSUE:

     Under the facts as presented, what is the meaning of the
term "parts heading" as used in Rule (R)(17)(bb) of General Note
3(c)(vii) within the rules of origin for the CFTA?

LAW AND ANALYSIS:

     Chapter 3 of the CFTA sets forth the rules of origin for
determining whether goods qualify for the tariff preferences
under the CFTA which was approved and implemented in the
Implementation Act of 1988, Pub. L. 190-449, 101 Stat. 1851,
September 28, 1988 (the Act).  Sec. 202 of the Act contains the
                              - 3 -

rules of Chapter 3 of the CFTA (and includes the specific rules
set out in Annex 301.2 of the CFTA).  These rules, as
implemented by the President in Proclamation 5923, December 14,
1988, were added as General Note 3(c)(vii), HTS.  Rule
(R)(17)(bb), claimed by the supplier as the applicable rule in
General Note 3(c)(vii) for the blower assemblies which were
produced in part from components of headings 8415 and 8533,
states as follows:

          (R)  Change in Tariff Classification Rules.

                    *     *     *     *     *     *

               (17)  Section XVII:  Chapters 86 through 89.

                    *     *     *     *     *     *

                    (bb) A change to any heading of this
                         section (other than a heading
                         within the groups 8701 through 8705
                         or 8901 through 8905) from another
                         heading other than a parts heading.

     The CFTA rules of origin are based on specific changes in
tariff classification.  The nomenclature used as the basis for
determining the specific changes in tariff classification is the
international system known as the "Harmonized System."  In
Chapter 2 of the CFTA, "Harmonized System" is defined, for
purposes of the Agreement, as follows:  "Harmonized System means
the Harmonized Commodity Description and Coding System, as
amended from time to time, published by the Customs Cooperation
Council."

     In the Harmonized System, the legal texts of Headings 8415
and 8533 are as follows:

     8415      Air conditioning machines, comprising a
               motor-driven fan and elements for changing
               the temperature and humidity, including those
               machines in which the humidity cannot be
               separately regulated.

     8533      Electrical resistors (including rheostats and
               potentiometers), other than heating
               resistors.

The legal texts of these headings in the Harmonized System do not
refer to "parts."  Therefore, because the rule of origin in the
CFTA is based on the text of the Harmonized System and not the
text of the HTS, we conclude that these headings cannot be
considered as "parts headings" for purposes of the CFTA rule of
origin.
                              - 4 -

HOLDING:

     The changes in tariff classification required by the CFTA
rule of origin are based on the Harmonized System.  The legal
texts in headings 8415 and 8533 in the Harmonized System do not
refer to "parts."  Therefore, these headings are not "parts
headings" for purposes of the CFTA rule of origin.


                              Sincerely,




                              Harvey Fox,
                              Director
                              Office of Regulations and Rulings