After a notice-and-comment period, CBP published Headquarters ruling (HQ) H074136 (Jan. 21, 2010) in which CBP modified the portion of HQ H027696 (July 2, 2008) pertaining to eligibility for preferential duty treatment under the North American Free Trade Agreement (NAFTA) and country of origin marking of certain automatic data processing (ADP) systems, and determined whether the merchandise was exempt from merchandise processing fees. In HQ H074136, CBP determined that an ADP machine assembled in Mexico from components originating in China, Taiwan and Malaysia was eligible for preferential treatment under the NAFTA, should be marked as of Mexican origin, and was exempt from merchandise processing fees.

Under NAFTA, a good qualifies for preferential duty treatment if it constitutes an originating good. General Note (GN) 12(b)(v) to the Harmonized Tariff Schedule of the United States (HTSUS) provides that goods expressly listed in GN 12(u) constitute originating goods for NAFTA purposes, whether or not the goods are wholly obtained or produced in a NAFTA country, and whether or not they satisfy a requisite tariff shift. Because the ADP machine— classified within HTSUS subheading 8471.49.00—is expressly listed in GN 12(u) to the HTSUS, CPB determined in HQ H074136 that the ADP machine at issue was eligible for NAFTA treatment.

With regard to country of origin marking, CBP applied the NAFTA preference override, which provides that the country of origin of an originating good that cannot be determined to be a good of a single NAFTA country under sections 102.11(a) or (b) of CBP regulation is “the last NAFTA country in which that good underwent production other than minor processing.” CBP concluded that the country of origin of the ADP machine—assembled and packaged together with various input and output units for retail sale in Mexico—was Mexico because it was the last country where the system underwent production beyond minor processing. Accordingly, CBP determined that the ADP system should be marked as a product of Mexico, so long as a properly completed Certificate of Origin was included with the good at the time of importation.

Because the ADP machine was deemed an originating good under GN 12(u) and qualified to be marked as a good of Mexico, CBP determined it was exempt from merchandise processing fees.

Substantially identical merchandise entered on or after April 12, 2010 will be treated according to the analysis set forth in HQ H074136.