H337102

HQ H337102 September 3, 2024 OT:RR:CTF:VS H337102 AMW CATEGORY: Origin Mr. John Gurley, Esq. Mr. Robert E. Shervette IV, Esq. ArentFox Schiff LLP 1717 K Street, NW Washington, DC 20006 RE: Country of Origin; Grain-Oriented Electrical Steel; Substantial Transformation Dear Mr. Gurley and Mr. Shervette: This is in response to your correspondence, dated January 25, 2024, requesting a ruling on behalf of your client, [ ] ([“ ”] or the “requestor”), regarding the country of origin of imported grain-oriented electrical steel. FACTS: The following facts are based on your January 25, 2024, ruling request as well as follow-up information submitted on March 29, 2024, and July 29, 2024. [ ], is part of [ ], a steel company located in the United States, which in turn is part of the [ ], which is headquartered in the [ ] (“Country A”). The product at issue is grain-oriented electrical steel (“GOES” or “GOES strip”) classified under subheading 7225.11.00, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for: “Flat-rolled products of other alloy steel, of a width of 600 mm or more: Of silicon electrical steel: Grain-oriented.” The GOES subject to this ruling is intended for use in the production of electrical transformers. The request states that the production process for the subject GOES may begin in one of several countries, including Country A, China, Germany, or elsewhere before being exported to [ ] (“Country B”) for additional processing. Nevertheless, the requestor only provided information related to the production processes in Country A, which is where the requestor’s parent company is based. As such, this ruling letter assumes the initial GOES production will occur in Country A. During the first phase, the requestor produces what is referred to in the request as GOES “substrate” or “input substrate” (hereinafter “GOES substrate”), which consists of steel strip in coil form and coated with magnesium. In its March 30, 2024, follow-up submission, the requestor clarified that the initial production processes in Country A occurs in two separate stages, referred to as the “hot production” and “cold production” stages, each containing several steps. Specifically, the Country A production involves the following: Hot Production Stage Ironmaking: coke making, preparation of iron ore, production of pig iron, and hot metal tapping into special ladles and/or mixers and transporting it to the basic oxygen furnace; Steel melting, refining and casting: making steel from hot metal and scrap in basic oxygen furnaces, casting and crystallization of metal, and cutting the continuously cast strand into separate parts (slabs); Hot rolling of steel: heating slab to specified temperatures and hot rolling of steel in a mill to reduce steel thickness from 250 mm to 2.5 mm or 2.3 mm, and cooling the hot-rolled strips to a target strip coiling temperature Cold Production Stage Hot-rolled coil preparation: hot-rolled coil is rewound at a special line involving cutting off the hot-rolled coil head and tail, as well as defective sections; Pickling: placing steel in a hydrochloric acid solution to remove scale from the hot-rolled strip surface; First cold rolling: strip thickness reduced from 2.5 mm to 0.60-0.70 mm; Preparation of coils: rewinding coils at a special line, including removing defective sections and welding strips at breakages; Recrystallization and decarbonization annealing: strips are annealed in an intermediate thickness at special continuous lines at a temperature of 850-880 Celsius to effect the recrystallization of cold-rolled steel and the reduction of carbon content; Preparation of coils: strip edge trimming to remove edge defects; Second cold rolling: strip thickness further reduced from 0.60-0.70 mm to 0.23, 0.27, 0.30, or 0.35 mm (the final thicknesses) in a single pass; Preparation of coils after second cold rolling: rewinding coils at special line; Strip degreasing and applying a magnesium oxide (“MgO”)-based coating; High-temperature annealing: annealing in batch furnaces at a temperature of 1150-1200 Celsius to ensure structure and texture of steel, make MG2Si04 ground layer of coating for further creation of electrical insulating coating, and to remove nitrogen and sulfur. The GOES substrate produced in Country A consists of flat-rolled steel coils ranging in thickness from 0.23 mm to 0.30 mm and 1000 mm to 1055 mm in diameter, and is coated with MgO, which prevents sticking of the coils during high-temperature annealing and protects from corrosion. The substrate has oriented grains, but does not have insulating coating, is not completely flat, and may also have defects in its edges (e.g., waviness, micro cracks). And although the Country B processing will add additional electromagnetic properties, the GOES substrate is comprised of electrical steel with much greater magnetic properties than non-electrical steel. As exported from Country A, the GOES substrate is properly classified under subheading 7225.11.00, HTSUS, which is the same tariff classification for the finished GOES. Following the Country A process, the GOES substrate is exported to Country B where it is subject to four additional processing steps: Insulating coating: the substrate is loaded into a coating line and unwound. The MgO coating is stripped with water and brushes and then cleaned, dried, and cooled with the Mg2Si04 coating layer remaining, and placed in a curing oven to dry and harden; Thermoflattening annealing: the coated and cured steel is run through a continuous annealing furnace and is heated to between 800 and 860 Celsius; Laser scribing: the laser heats and cools portions of the substrate, causing decreases in the size of the magnetic domains (in grains) of the substrate; Edge cutting: the edges and end section of the strips are trimmed and the strip is shaped into coils. The finished GOES consists of flattened steel coils with the same thickness and chemical makeup (i.e., carbon, silicon, and aluminum content) as the Country A-produced GOES substrate. Nevertheless, the requestor asserts that the Country B process imparts enhanced electrical properties, including magnetic characteristics, minimal hysteresis, low coercivity (i.e., resistance to changes in magnetization), and maximum magnetic permeability at the required level for use in electromagnetic induction applications. ISSUE: What is the country of origin of the subject grain-oriented electrical steel? LAW AND ANALYSIS: Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States, the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” See United States v. Friedlander & Co., 27 C.C.P.A. 297, 302 (1940). Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” as “the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the country of origin within the mea

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States, the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” See United States v. Friedlander & Co., 27 C.C.P.A. 297, 302 (1940).Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” as “the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the country of origin within the meaning of [the marking laws and regulations].” A substantial transformation occurs when, as a result of manufacturing process, a new and different article emerges, having a distinct name, character or use, which is different from that originally possessed by the article or material before being subjected to the manufacturing process. See United States v. Gibson-Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments, Inc. v. United States, 69 C.C.P.A. 142, 681 F.2d 778 (1982). Ho