## Facts

- Cummins imported partially processed crankshaft forgings made from alloy steel in Brazil into Mexico for additional machining and finishing, then imported the finished crankshafts into the United States.
- In Brazil, a supplier produced closed-die forged articles in the general shape of crankshafts, removed excess “flash,” coined the forgings, and performed additional machining such as milling ends and machining locator centers.
- Cummins performed substantial further processing in Mexico (at least 14 steps), including machining journals, drilling oil passages, heat treatment, and balancing, yielding finished crankshafts.
- The finished goods were classifiable as crankshafts under HTSUS subheading 8483.10.30.
- Cummins sought NAFTA preferential duty treatment, asserting the goods “originated” in Mexico because Mexican processing caused a qualifying change in tariff classification to subheading 8483.10 “from any other heading.”
- Customs denied NAFTA preferential treatment, and the Court of International Trade granted summary judgment for the United States.
- Cummins appealed to the Federal Circuit.

## Issues

1. Whether the processing performed in Mexico caused a qualifying NAFTA tariff shift so the imported crankshafts “originated” in Mexico and were eligible for preferential duty treatment.
2. Whether, for applying the NAFTA tariff-shift rule, the Brazilian forgings should be treated as steel products under heading 7224 or as unfinished crankshafts under heading 8483.

## Decision

- The Federal Circuit affirmed summary judgment for the United States.
- The court held the Brazilian forgings were properly treated as crankshafts (unfinished crankshafts) classifiable under HTSUS heading 8483, not as steel products under heading 7224, for NAFTA tariff-shift analysis.
- Because the goods were already within heading 8483 before entering Mexico, Mexican operations did not produce a change “to subheading 8483.10 from any other heading.”
- The crankshafts therefore did not “originate” in Mexico under General Note 12 and were not entitled to NAFTA preferential duty treatment.

## Legal Principles

- NAFTA preferential duty treatment under General Note 12 depends on satisfaction of specified rules of origin, including tariff-shift requirements.
- A tariff-shift rule requiring a change “to [a subheading] from any other heading” is not met when the input good is already classifiable within the same heading before processing in the NAFTA country.
- HTSUS classification turns on the article’s objective characteristics; an unfinished article that has the essential character of the finished article may be classified as the finished article.
- The amount or complexity of processing performed in a NAFTA country is not controlling if it does not result in the required tariff classification change.

## Conclusion

Because the Brazilian forgings already possessed the essential character of crankshafts and were classifiable under heading 8483 before Mexican processing, the subsequent finishing in Mexico did not satisfy the NAFTA tariff-shift rule, and Customs properly denied preferential duty treatment.


Cummins Inc. v. United States, 454 F.3d 1361 (Fed. Cir. 2006)