CBP Proposes to Modify Rulings on NAFTA Regional Value Content from Maquiladoras
In the July 5 issue of the U.S. Customs and Border Protection Bulletin (Vol. 46, No. 28), CBP published a notice that proposes to modify rulings and similar treatment regarding the regional value content calculations of lighting fixtures produced in Mexico. The proposed modification would likely significantly affect other products produced by Mexican factories known as maquiladoras, according to an industry lawyer.
The proposed ruling stems from a request from Hubbell Lighting, a U.S. company that in 2008 requested a CBP ruling on the tariff treatment of lighting fixtures under NAFTA. The fixtures are assembled from materials from China and Mexico in a Mexican maquiladora, with essentially all assembly costs at the maquiladora paid by Hubbell, and imported to customers in the U.S. CBP previously ruled in 2009 that the U.S. clients maquiladora were the "producer" and the U.S. customer were the "buyer" for NAFTA regulations, meaning Hubbell could choose to use the transaction value Regional Value Content (RVC) calculation, which sets the threshold at 60 percent RVC. CBP now proposes to require a net cost RVC calculation, which requires 50 percent RVC, because the the role of the U.S. importer wasn't examined and the only "viable transaction for export" was the transaction between the maquiladora and the U.S. customers.
The transaction value formula generally meant it was easier to meet the certificate of origin, said the lawyer. While the NAFTA Certificate of Origin rules are product specific, many products have similar requirements to lighting fixtures, he said.
Transaction Value Formula
Transaction Value (TV) - Value of Non-originating Material (VNM) X 100 = RVC
TV
Net Cost Formula
Net Cost (NC) - VNM x 100 = RVC
NC
Lighting Fixtures Produced in Mexico
| Item: Lighting Fixtures produced in Mexico through a maquiladora. Three-light bath bracket lighting fixtures used in commercial or residential homes. |
| Current: 9405.10, (Free) (Chandeliers and other electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares.) |
| Proposed: 9405.10, (Free) (Chandeliers and other electric ceiling or wall lighting fittings, excluding those of a kind used for lighting public open spaces or thoroughfares.) The proposed ruling would change the RVC requirement from 60 percent under a transaction value method, to 50 percent under the net cost method. |
| Reason: CBP said the lighting fixtures are classified in subheading 9405.10, HTSUS. According to General Note 12, HTSUS, and Chapter 4 of the NAFTA, in order to be originating a good it must undergo a change in classification, satisfy a regional value content requirement, or both. Previously CBP found the U.S. clients of a maquiladora operation in Mexico were "producers" for NAFTA Certificate of Origin Purpose and therefor the importer could choose to satisfy the 60 percent transaction value RVC on the basis of that domestic sale. Now, though, CBP said because there is no sale between the maquiladora in Mexico and the U.S. importer, transaction value is not applicable in this case and the net cost method must be used to calculate the RVC. |
| Proposed for modification: HRL H064378 (2009) |
| Proposed new ruling: HQ H092539 |
Comments on Proposed Modifications Due August 6
CBP said that before taking this action, consideration will be given to any written comments received by Aug. 6. In addition, any party who has received a ruling or decision on the merchandise that is subject to the proposed revocations, or any party involved with a substantially identical transaction, should advise CBP by the date that written comments on the proposed ruling are due. (An importer's failure to advise CBP of such rulings, decisions, or substantially identical transactions may raise issues of reasonable care on the part of the importer or its agents for importations subsequent to the effective date of the final decision in this notice.)
Proposed Modifications
CBP is proposing to modify the ruling and any rulings on these products that may exist but have not been specifically identified. CBP is also proposing to modify any treatment it has previously accorded to substantially identical transactions.