CBP: Recovered Automotive Components Don't Have Preferential Treatment Under USMCA
Automotive components recovered from used vehicles, if they have not undergone further remanufacturing, don't qualify for preferential treatment under USMCA, according to a recent CBP ruling.
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The ruling, HQ H342177, came in response to a request filed in September by New England Auto Parts, seeking clarification from CBP on whether used automotive components from salvage yards in Canada and disassembled used vehicles in Canada would qualify under preferential treatment under USMCA since CBP had ruled they were eligible for preferential treatment under NAFTA in HQ H004446, issued in April 2007.
New England Auto Parts purchases automotive components in Canada from operators of salvage yards and then sells these used parts to retail customers in the U.S., according to CBP. The company had submitted to CBP two recent invoices that represent its transactions, one dated Oct. 3 and another dated Oct. 19. New England Auto Parts argued that the auto parts undergo a prescribed change in tariff classification when dissembled from used vehicles classified in different tariff provisions.
In response to the company, CBP noted that the USMCA differs from NAFTA in how it treats recovered automotive components that will be imported into the U.S. for retail sale. USMCA looks at how the “recovered goods” and “remanufactured goods” will be modified after disassembly, per USMCA’s General Note (GN) 11.
“In the case of ‘recovered goods’ and ‘remanufactured goods,’ the language of GN 11 makes clear that a good may be considered to be originating if it is first recovered, and then used to make certain remanufactured goods in specific classifications. Here, the various automotive components are recovered from used cars in Canada by disassembly. Once disassembled in Canada, the recovered components will be imported into the United States for retail sale to customers,” CBP said in the Nov. 26 ruling, which was released to the public Dec. 6.
“Unlike NAFTA, the USMCA does not provide for recovered goods to be considered originating at the disassembly stage, but only after undergoing further steps to become remanufactured goods,” the agency said.
If the recovered automotive component didn't initially originate in North America when it was first produced, then the recovered component will not fall under USMCA now, CBP said.
“The recovered, disassembled parts, which are not used in the remanufacture of a good, will only qualify for preference if they meet all other applicable requirements for originating goods under the USMCA,” CBP said. “Thus, in order for the recovered, disassembled parts to be considered originating for purposes of USMCA preference, the parts must undergo a ‘production’ other than disassembly that effects a qualifying tariff change under subdivision (o) of GN 11. Otherwise, to consider any tariff shift under these rules to render the goods originating would make the recovered and remanufactured goods provisions of the USMCA to be superfluous and meaningless.”
CBP concluded: "While NAFTA accounted for disassembly as a qualifying production operation via 19 C.F.R § 181.132, this regulation is limited to GN 12 and Chapter Four of NAFTA, and is not applicable to the USMCA. In sum, even if there are any qualifying changes in tariff classification of the parts when they are removed from used vehicles in Canada, these tariff shifts are not a result of “production” under the terms of the USMCA and therefore, are not sufficient to render the parts as originating under the USMCA.”