Customs Brokerage Seeks Clarifications on NAFTA Regional Value Content from Maquiladoras

A.F. Romero asked CBP to clarify its position on its proposed modification to rulings on NAFTA Regional Value Content from maquiladoras. In the July 5 issue of the CBP Bulletin (Vol. 46, No. 28), CBP published a notice that proposes to modify rulings and similar treatment regarding the regional value content calculations of goods produced in Mexico. The proposed modification is expected to affect other products produced by Mexican factories known as maquiladoras. A.F. Romero is at customs brokerage and warehouse that "provides full service to all importers and exporters at the Mexican border whether shipments are under a maquila program and/or NAFTA provision or are merely general importations," according to its Website.

Email documents@brokerpower.com for a copy of the comments. A.F. Romero's comments were the only ones filed on the issue, according to CBP.

Clarification Requested

"In your proposed modification you affirm that the U.S. importer is the 'producer' for NAFTA purposes, not the Mexican maquiladora," said A.F. Romero in its comments filed with CBP. "Therefore, is it CBP's position that 19 CFR 181 Appendix to Part 181, Part III, Section 6 (Regional Value Content, paragraph (c), which states that the Net Cost Method must be used in all circumstances wherein the producer sells 85% of its product to a related person, is in relation of sales from the U.S. importer to U.S. buyers, and not from the Mexican Maquiladora to its U.S. importer?"

The company also requested clarification on accounting requirements. "Since you have affirmed that the U.S. importer is the ''producer'' for NAFTA purposes the Net Cost must be used, is it then acceptable to use the costs reflected on the books of the U.S. importer, as reflecting costs on the 'books of the producer' for calculating Total Cost, and by extension, Net Cost for purposes of calculating NAFTA VC?" the company asked. "For example, heretofore, 'assists' provided to the Mexican Maquiladora were not included in the calculation of Total Cost and Net Cost because those assists were not on the Maquiladora books, heretofore, assumed to be the 'producer.' However, since the U.S. importer is now the 'producer' and those assists are in their U S. books, then the value of these assists can now be included in Total Cost and Net cost, when calculating RVC?"

Transaction Value vs. Net Cost RVC

CBP's 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 was the "producer" and the U.S. customer was 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 only viable transaction was the transaction between the maquiladora and the U.S. customers. The transaction value formula has generally meant it was easier to meet the certificate of origin.

(See ITT's Online Archives 12070616 for summary of CBP proposed modifications.)