CBP Says Pens Satisfy NAFTA Requirements Based on Net Cost Method

Ink pens assembled in Mexico using both NAFTA-originating and non-NAFTA-originating goods may receive NAFTA preferential treatment based on the net cost method at the time of import, CBP said in a Oct. 17 ruling (here). Zebra Pen-Mexico, a Mexican subsidiary of Zebra Pen Corp., asked CBP whether the pen, known as a J-roller pen, is eligible under NAFTA preferential treatment provisions.

There are four stages in the assembly process, the company said. First, the “refill assembly” is made by a machine that injects ink into a polypropylene refill tube and a centrifuge operation that ensures the ink flows to the tip. Then the cap is printed and after that a "seal gum" is manually inserted into the cap to protect the tip. Finally, the cap is added and assembled into the body with the refill, it said. The company provided unit costs and classification of the goods involved, though the information was redacted in the ruling.

Some of non-originating material used in the assembly does not go through a tariff shift that alone would qualify it as originating, said CBP. As a result, the agency must consider whether the pens satisfy an applicable regional value content requirement, CBP said. The company asked that CBP use the net cost method, which considers the value of non-originating materials as a percentage of the net cost of the good.

CBP found that the regional value content exceeds 50 percent, as required for NAFTA treatment, the agency said. "This calculation would be subject to appropriate review upon importation into the United States based upon the final appraised value of the merchandise, and assumes that all product costs, including labor and overhead, will be considered as well," said CBP in the ruling. The pens also qualify for NAFTA marking as a good of Mexico, the agency said.