HQ 084856: U.S.-Canada FTA origin status of motherboard assembled in Canada with power supply and cabinet

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 084856

                                     August 31, 1989

             CLA-2 CO:R:CV:G:  084856 JLV

             CATEGORY:  Classification

             TARIFF NO.:

             Mr. William J. LeClair
             Trans-Border Customs Services
             One Trans-Border Drive, P.O. Box 800
             Champlain, New York 12919

             RE:  U.S.-Canada FTA origin status of motherboard assembled in
                  Canada with power supply and cabinet

             Dear Mr. LeClair:

                  In a letter of May 8, 1989, on behalf of your client
             Philips Electronics Ltd. of Montreal, Quebec, Canada, you
             request a ruling on the origin status of certain motherboards
             exported to Canada from the United States and assembled with a
             power supply and cabinet of Canadian origin.  Your client
             intends to export the assembly to the United States.

             FACTS:

                  The facts submitted and forwarded for consideration
             require that certain statements be accepted as presented.
             First, the article assembled in the United States and exported
             to Canada is described as a "motherboard" that consists of
             third country components and U.S. components.  At the time of
             entry into Canada, the importer states that it would be
             classified in Canadian tariff item 8471.91.00, pursuant to
             Canadian Customs Notice of October 28, 1988.

                  The motherboard will be assembled with a power supply and
             a cabinet in Canada.  Both of these components are said to be
             of Canadian origin.  No facts were submitted to document or
             support this statement.  The completed assembly would then be
             exported to the United States.

                  Although the completed assembly consists of components
             that are stated to be originating materials for purposes of
             the U.S.-Canada Free-Trade Agreement (FTA), it is not "wholly
             obtained or produced" as defined in the FTA.
















                                          - 2 -

             ISSUE:

                  Does the completed assembly qualify for the benefits of
             the FTA as an originating good, and what rule under the FTA
             applies to such goods that consist solely of originating
             materials but are not wholly obtained or produced in the
             territory of Canada and/or the United States?

             LAW AND ANALYSIS:

                  The FTA rules for determining whether goods, when
             imported into the United States, are originating in the
             territory of Canada are set forth in General Note 3(c)(vii),
             Harmonized Tariff Schedule of the United States Annotated
             (HTSUSA).  Because the completed assembly includes a
             motherboard that contains both U.S. and third country
             components, it is not a good that is wholly obtained or
             produced in the territory of Canada and/or the United States
             within General Notes 3(c)(vii)(B)(1) and 3(c)(vii)(L).

                  General Note 3(c)(vii)(B)(2) provides for the only other
             means by which goods may be considered "originating" under the
             FTA:  the goods must be transformed so as to be subject to a
             change in tariff classification described in 3(c)(vii)(R) or,
             if no change in classification, the goods must meet certain
             conditions set out in various other specific rules.  None of
             the specific rules (for situations in which no change in
             tariff classification occurs) apply in this case.

                  The sole question, therefore, is whether the good
             assembled in Canada has undergone a change in tariff
             classification.  For the reasons that follow, we conclude that
             the assembled good does not satisfy the rule that requires an
             originating good to be transformed in the territory of Canada
             within the meaning of General Note 3(c)(vii)(B)(2)(I).

                  Although the proposed operation, which only involves
             components that are "originating materials," appears to
             satisfy the intent of the FTA, we interpret the requirement of
             a change in tariff classification as a requirement that
             applies only to third country materials and is satisfied only
             with reference to such materials.  This interpretation is
             necessary for two reasons.  First, it gives the intended
             tariff preference to the broadest range of goods which might
             otherwise be denied the benefits of the FTA simply by virtue
             of the fact that an originating material did not change
             classification during the manufacturing process.  Second, it
             is consistent in its treatment of originating materials.














                                          - 3 -

                  To be selective at this point and say that a change in
             tariff classification of one or two originating materials will
             satisfy the requirement, and at the same time to ignore the
             fact that one of the originating materials does not undergo a
             change in tariff classification would be arbitrary and
             capricious.  To be consistent with our interpretation that a
             change in tariff classification of originating materials is
             not relevant to the requirement of General Note
             3(c)(vii)(B)(I), we must conclude that certain originating
             materials, such as the power supply and cabinet in this case,
             cannot be arbitrarily selected to justify the requirement of
             change in tariff classification when, at the same time, a
             third originating material, the motherboard, does not change
             tariff classification and is arbitrarily precluded from
             consideration.

             HOLDING:

                  The assembled article, consisting solely of originating
             materials as described in the FACTS, is not an originating
             good for purposes of the FTA.

                                          Sincerely,




                                          John Durant, Director
                                          Commercial Rulings Division

































             6cc:  AD NY Seaport
             1cc:  Bylle Patterson (RM 1114)
             1cc:  Durant
             1cc:  AC, CO
             1cc:  Reading File