H325936

HQ H325936 August 10, 2023 OT:RR:CTF:VS H325936 UBB CATEGORY: Origin Center Director, Joanne Colonnello CEE – Pharmaceuticals, Health and Chemicals OFO Administration 1100 Raymond Blvd Newark, NJ RE: Country of Origin of imported ink base; Section 301 measures; Application for Further Review of Protest 3802-22-105086 Dear Center Director Colonnello: This is in reference to Protest No. 3802-22-105086 and the Application for Further Review, dated January 24, 2022, timely submitted by Faegre, Drinker, Biddle and Reath, LLP, on behalf of Sun Chemical Corporation (“SCC”, “the importer” or “protestant”), contesting the liquidation-as-entered of an entry made in 2021. The merchandise in question is imported ink base, which was entered as Chinese-origin and Section 301 duties were assessed. The protestant is challenging the liquidation, arguing that the ink base was substantially transformed in Canada and is therefore a good of Canadian origin for the purpose of Section 301 duties. The protestant requests a refund of Section 301 duties paid. On January 21, 2022, CBP liquidated a single entry from 2021 for which SCC was the importer of record. One item on the entry, “Gen III Carb. Violet” had been entered with a country of origin (“COO”) of China and Section 301 duties were assessed. Supporting documents submitted with the entry, including commercial invoices and the bill of lading, corroborate that the Gen III Carb. Violet was of Chinese origin. CBP liquidated the merchandise as entered. On January 24, 2022, SCC filed a protest challenging the liquidation, arguing that the Gen III Carb. Violet had been substantially transformed in Canada prior to its importation into the United States, and requesting a refund of Section 301 duties paid. FACTS: SCC is a manufacturer and distributor of printing inks, coatings and supplies. The product subject to this protest/AFR is an ink base product classified and entered under subheading 3204.17 of the Harmonized Tariff Schedule of the United States (“HTSUS”). The protestant states that the ink base products are imported into the United States for final processing into ink that is used by the commercial printing industry. Prior to importation, the ink base undergoes processing in Canada. According to the protestant, the Canadian production process is as follows: refined powder pigment is imported from China (or elsewhere). This refined powder pigment can be used in a wide array of applications, including coloring for pencils, plastics, rubber, paint, pellets, textiles and ink. The refined pigment is also suitable for further processing. A varnish or grinding vehicle is prepared in the United States by combining solvents, resins and additives. Formulation of the varnish/vehicle requires specific knowledge of the end use of the product and knowledge of the chemistry required to generate inks with the proper application properties, such as shear stability, viscosity stability and color uniformity, as well as the ability to adhere to the printed surface. In Canada, the U.S. origin varnish/vehicle and the China origin powder pigment (a dry powder) are combined and subjected to a dispersion process that uses physical energy to transform heavily aggregated and agglomerated particles into the finely dispersed discrete particles required to produce high performance ink bases. The mixture of pigment and varnish/vehicle are first mixed in a high rotary shear mixer. The mixer homogenizes the pigment and varnish/vehicle, and a rotor stator generates a shear to break down the resin and pigment particles. The substance is then passed through a media mill that de-aggregates and disperses the pigment particles and reduces particle size. This ensures uniform coating of the particles by the varnish/vehicle and generates smaller, stabilized discrete pigment particles. Once the process is complete, the resulting substance is an ink base with a pre-determined use for printing applications. The ink base can no longer be used in plastic, rubber, or in textile fibers. Once the pigment is converted into an ink base the particle cannot be returned to its original pure pigment state. The new composition and particle size irreversibly dictate the applications in which the ink base can be used. The protestant notes that there are many types of printing inks and the subject merchandise can only be used for one or two of the many types of inks. As such, the generic pigment imported into Canada is transformed into a specialty product. According to the importer, after the Canadian processing, the resulting ink base can no longer be used for the same applications as the refined pigment; the resulting base is dedicated for use only as ink. The ink base is imported into the U.S., where it is combined with a blending varnish (made up of solvents, resins and additives) to produce the finished ink. ISSUE: Whether the country of origin of the subject ink base is Canada. LAW AND ANALYSIS: The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20, Harmonized Tariff Schedule of the United States (“HTSUS”). When determining the country of origin for purposes of applying Section 301 measures, the substantial transformation analysis is applicable. The test is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. Texas Instruments, Inc. v. United States, 681 F.2d 778 (C.C.P.A. 1982). This determination is based on the totality of the evidence. See Nat’l Hand Tool Corp. v. United States, 16 Ct. Int’l Trade 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). In order to determine whether a substantial transformation has occurred, CBP looks at the totality of the circumstances and makes such decisions on a case-by-case basis. The country of origin of the article’s components, the extent of the processing that occurs within a given country, and whether such processing renders a product with a new name, character, and use are primary considerations. For instance, in National Juice Products Ass’n v. United States, 10 CIT 48, 628 F. Supp. 978 (Ct. Int’l Trade 1986), the United States Court of International Trade (“CIT”) upheld CBP’s decision in Headquarters Ruling Letter (“HQ”) 728557, dated September 4, 1985, that imported orange juice concentrate was not substantially transformed when it was mixed with water, essential oils, flavoring ingredients and domestic fresh juice in order to produce frozen concentrated orange juice and reconstituted orange juice. CBP found that the manufacturing process did not create an article with a new name, character or use. The CIT agreed that the manufacturing process did not change the “fundamental character of the product” as “it was still essentially the juice of oranges”. See HQ H237605 dated June 25, 2014. In the pharmaceutical context, CBP has consistently examined the complexity of the processing and whether the final article retains the essential identity and character of the raw material. HQ H299717 (August 27, 2018). For example, when various ingredients from different countries of origin are mixed together based on a specific formula to make dietary supplement tablets, and the combination of ingredients results in a product with a synergistic effect that promotes benefits that otherwise would only be possible by taking the individual ingredients separately, CBP has found that a substantial transformation has occurred. Id. This is because the combination of the various ingredients results in a product that has an identity, character and use that is different and more convenient than taking the individual raw materials. Id. Protesta

The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). TheSection 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20, Harmonized Tariff Schedule of the United States (“HTSUS”).When determining the country of origin for purposes of applying Section 301 measures, the substantial transformation analysis is applicable. The test is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. Texas Instruments, Inc. v. United States, 681 F.2d 778 (C.C.P.A. 1982). This determination is based on the totality of the evidence. See Nat’l Hand Tool Corp. v. United States, 16 Ct. Int’l Trade 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). In order to determine whether a substantial transformation has occurred, CBP looks at the totality of the circumstances and makes such decisions on a case-by-case basis. The country of origin of the article’s components, the extent of the processing that occurs within a given country, and whether such processing renders a product with a new name, character, and use are primary considerations. For instance, in National Juice Products Ass’n v. United States, 10 CIT 48, 628 F. Supp. 978 (Ct. Int’l Trade 1986), the United States Court of International Trade (“CIT”) upheld CBP’s decision in Headquarters Ruling Letter (“HQ”) 728557, dated September 4, 1985, that imported orange juice concentrate was not substantially transformed when it was mixed with water, essential oils, flavoring ingredients and domestic fresh juice in order to produce frozen concentrated orange juice and reconstituted orange juice. CBP found that the manufacturing process did not create an article with a new name, character or use. The CIT