H316545

HQ H316545 March 18, 2021 OT:RR:CTF:VS H316545 EE CATEGORY: Classification Ms. Rachael Goding International Automated Brokers 1655 St. Andrews Cove San Diego, CA 92154 RE: Custom Battery Packs; USMCA Dear Ms. Goding: This is in response to your correspondence, dated February 1, 2021, in which you request a ruling on behalf of your client, Inventus Power (“Inventus”), concerning the eligibility of certain custom order battery packs for duty-free treatment under the United States-Mexico-Canada Agreement. FACTS: The subject merchandise is described as custom battery packs for a radiology injection machine used in medical settings. The battery packs incorporate a main board assembly, wiring/wiring harnesses, fasteners, plastic housing, and twelve lithium-ion cells. You submitted confidential diagrams and photographs of the production of the battery packs as well as the bill of materials. You state that the custom battery packs are classified under subheading 8507.60.00, Harmonized Tariff Schedule of the United States (“HTSUS”). You state that the battery packs are manufactured in Mexico with the majority of components of Mexican and U.S. origin. The non-originating materials of the custom battery packs are the insulating material from Korea classified under subheading 3917.32, HTSUS; the fuse from the Philippines classified under subheading 8533.40, HTSUS, and lithium-ion cells from China classified under subheading 8507.90, HTSUS. You state that the production of the battery packs begins with testing the printed circuit board assembly (“PCBA”). Further processing on the PCBA is then performed such as attaching thermistors, wires, and cables with harness. Wires are then soldered with nickel in order for the energy from the cell to be accessible. The cells undergo a complex welding and soldering process where all wires and cables are attached to appropriate places so that the cell can function as an energy source. The package of batteries is wrapped in insulation to protect the cells from exploding. Lastly, the PCBA board is attached to the new battery pack, cables, and thermistors. You claim that the regional value content (“RVC”) of the custom battery packs using the transaction value method is 73 percent. ISSUE: Whether the custom order battery packs classified under subheading 8507.60.00, HTSUS, imported into the United States from Mexico, are eligible for duty-free treatment under the United States-Mexico-Canada Agreement. LAW AND ANALYSIS: The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). GN 11 of the HTSUS implements the USMCA. GN 11(a)(i) provides: Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and Goods that originate in the territory of a USMCA country under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S+” in parentheses, or under a subheading whose article description provides for originating goods of one or more USMCA countries, as the case may be, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states: For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if— the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries; the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials; the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or … Since the custom order battery packs contain non-originating materials, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and they do not qualify under GN 11(b)(ii). We must next determine whether the custom order battery packs qualify under GN 11(b)(iii). The custom order battery packs are classified under subheading 8507.60.00, HTSUS. The applicable rule of origin for the custom order battery packs classified under subheading 8507.60.00, HTSUS, is in GN 11(o)/85.17, HTSUS. The subheading rule which provides that “[t]he underscoring of the designations in subdivision 17 pertain to goods provided for in subheading 8507.60 for use in a motor vehicle of chapter 87” does not apply since the custom battery packs at issue are not for use in motor vehicles of chapter 87. Rather, they are for use in radiology injection machines. GN 11(o)/85.17, HTSUS, provides: (A) A change to a battery of subheading 8507.60, of a kind used as the primary source of electrical power for the propulsion of an electric passenger vehicle or light truck from any other subheading, excluding battery cells of 8507.90; (B) No change in tariff classification to a battery of subheading 8507.60, used as the primary source of electrical power for the propulsion of an electric passenger vehicle or light truck provided that the regional value content is: (1) 85 percent where the transaction value method is used; or (2) 75 percent where the net cost method is used; (C) A change to any other good of subheading 8507.60 from any other heading; or (D) A change to any other good of subheading 8507.60 from subheading 8507.90, whether or not there is also a change from any other heading, provided there is a regional value content of not less than: (1) 60 percent where the transaction value method is used; or (2) 50 percent where the net cost method is used. Since GN 11(o)/85.17(A) and (B) apply to batteries of a kind used as the primary source of electrical power for the propulsion of an electric passenger vehicle or light truck, they are not applicable. GN 11(o)/85.17(C) requires a change to any other good of subheading 8507.60 from any other heading. Since the non-originating lithium-ion cells from China are classified under heading 8507, HTSUS, GN 11(o)/85.17(C) is not met. As the non-originating lithium-ion cells from China are classified under the same heading as the custom battery packs, GN 11(o)/85.17(D) will be satisfied if the applicable RVC requirement is met. GN 11(c), HTSUS, provides the methods for calculating RVC for purposes of USMCA. You utilized the transaction value in your calculations. The transaction value method is set forth in GN 11(c)(ii), HTSUS

The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). GN 11 of the HTSUS implements the USMCA. GN 11(a)(i) provides: Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; andGoods that originate in the territory of a USMCA country under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S+” in parentheses, or under a subheading whose article description provides for originating goods of one or more USMCA countries, as the case may be, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act.GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:For the purposes of this note, a good imported into the customs territory of the Unit