California Agricultural Aircraft Services,Inc.(CAAS)is a California corporation headquartered in Sacramento.CAAS leases aircraft to crop dusting businesses through California.On October 6,2006,CAAS entered into a contract with Jinshan Export Company (JEC),a private Chinese enterprise engaged in the businesses of export facilitation and sales agency,and Shànghai Aircraft Company (SAC),a state-owned enterprise organized pursuant to the laws of the People's Republic of China.The contract provided for the manufacture by SAC and purchase by CAAS of ten crop dusting aircraft at a price of U.S.$2.1 million,a savings of approximately $200,000 compared to crop dusting aircraft available from other manufacturers.In order to avoid problems arising from the sale of Chinese aircraft in the United States,JEC and SAC agreed to fabricate the aircraft parts at SAC's Chinese manufacturing facility but perform the actual assembly at its facility in Mexico.SAC would then export the aircraft to CAAS claiming they were products of Mexico subject to duty-free treatment pursuant to the North American Free Trade Agreement.Unfortunately,U.S.Customs classified the aircraft as products of China,denied the request for duty-free treatment pursuant to NAFTA and assessed the applicable tariff on aircraft originating from China.How will U.S.Customs Service and Border Protection determine the country of origin of the aircraft? What factors may Customs utilize in making this determination? Applying these factors to the above-stated facts,are the aircraft products of China or Mexico? Applying these factors,are JEC,SAC and CAAS likely to prevail if they challenge Customs' decision?

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The Answer of California Agricultural Aircraft Services,Inc.(CAAS)is a California corporation headquartered in Sacramento.CAAS leases aircraft to crop dusting businesses through California.On October 6,2006,CAAS entered into a contract with Jinshan Export Company (JEC),a private Chinese enterprise engaged in the businesses of export facilitation and sales agency,and Shànghai Aircraft Company (SAC),a state-owned enterprise organized pursuant to the laws of the People's Republic of China.The contract provided for the manufacture by SAC and purchase by CAAS of ten crop dusting aircraft at a price of U.S.$2.1 million,a savings of approximately $200,000 compared to crop dusting aircraft available from other manufacturers.In order to avoid problems arising from the sale of Chinese aircraft in the United States,JEC and SAC agreed to fabricate the aircraft parts at SAC's Chinese manufacturing facility but perform the actual assembly at its facility in Mexico.SAC would then export the aircraft to CAAS claiming they were products of Mexico subject to duty-free treatment pursuant to the North American Free Trade Agreement.Unfortunately,U.S.Customs classified the aircraft as products of China,denied the request for duty-free treatment pursuant to NAFTA and assessed the applicable tariff on aircraft originating from China.How will U.S.Customs Service and Border Protection determine the country of origin of the aircraft? What factors may Customs utilize in making this determination? Applying these factors to the above-stated facts,are the aircraft products of China or Mexico? Applying these factors,are JEC,SAC and CAAS likely to prevail if they challenge Customs' decision?