HQ 545693: Looseleaf binders; regional value content; net cost method; NAFTA

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 545693

                        September 29, 1994


VAL CO:R:C:V 545693 CRS

CATEGORY:  Valuation

Mr. Edgar Thomas
President
Tabbing Sales Limited
1551 Merrow Road
Mississauga, L5J 3C4, Ontario

RE:  Looseleaf binders; regional value content; net cost method; NAFTA

Dear Mr. Thomas:

     This is in reply to your letter dated June 14, 1994, in which you requested an advance ruling
on the regional value content of certain looseleaf binders under the North American Free Trade
Agreement (NAFTA).

FACTS:

     Your company (the "producer") produces looseleaf binders in Canada and sells them to
customers in the United States.  In connection with the ruling request you have provided certain
information relating to the per unit cost of the materials used in the production of five styles of
binders, identified for the purposes of this ruling as styles A, B,C, D and E; however, no
documentation or evidence was submitted to support these cost figures.  The binders differ principally
in the size of the back panel which ranges from one inch to three inches in width.  The binders
(hereinafter referred to as the "good") are produced entirely from originating materials with the
exception of metal imported into Canada from a non-NAFTA party.  Based on this information you
state that the value of non-originating materials is as follows:  style A, approximately 16.1 percent;
style B, approximately 26.6 percent; style C, approximately 24.1 percent; style D, approximately 23.9
percent; and style E, approximately 31.6 percent.

ISSUE:

     The issue presented is whether the good described above satisfies the regional value content
required under the net cost method.

LAW AND ANALYSIS:

     The Appendix to section 181.131, Customs Regulations, (19 C.F.R.  181.131; the NAFTA
Rules of Origin Regulations (ROR)), provides at Part III, Section 6(1), that at the choice of the
producer, and except as otherwise required, the regional value content of a good shall be determined
on the basis of the net cost method or the transaction value method.  Your ruling request does not
indicate a preference for either of these methods.  Accordingly, in light of the information set forth
in your letter we have based our determination on the net cost method.

     Pursuant to Part III, section 6(3) of the NAFTA ROR, the regional value content of a good
under the net cost method is equal to the net cost of the good less the value of non-originating
materials, divided by the net cost.  The quotient is then multiplied by one hundred in order to express
the regional value content as a percentage.  The net cost is determined in accordance with section
6(11); the value of non-originating materials used by the producer in the production of the good is
determined in accordance with Part III, section 7, except as otherwise provided in sections 9 and 10. 
Based on the cost information submitted, the five styles of the good in question have a regional value
content in excess of fifty percent.  Accordingly, the good qualifies as an originating good under
NAFTA.

HOLDING:

     The regional value content of the good in question, determined in accordance with the net
cost method, exceeds fifty percent.  The good qualifies as originating under NAFTA.

     This holding applies only to the specific factual situation and merchandise identified in the
ruling request.  This position is clearly set forth in section 181.100(a)(2), Customs Regulations, 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.  Should it subsequently be 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