H341787

H341787 May 13, 2025 OT:RR:CTF:VS H341787 AM CATEGORY: Origin; Marking Joe Trulik Cole International USA Inc. 441 Peace Portal Drive Blaine, Washington 98230 RE: Enerzan L (20); United States-Mexico-Canada Agreement; Country of Origin; Marking Dear Mr. Trulik: This is in response to your request, dated August 26, 2024, filed on behalf of Canadian Energy Services, Inc. (“Canadian Energy”). In your letter, you inquire about the eligibility of Enerzan L (20) for preferential tariff treatment under the United States-Mexico-Canada Agreement (“USMCA”), and the country of origin for purposes of marking and Section 301 trade remedies. Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division (“NCSD”) for response. Our ruling is set forth below. FACTS: You state that Enerzan L (20) is used as a viscosifier added to water-based drilling fluids in ground drilling activities, particularly in oil and natural gas drilling. Enerzan L (20) is a mix of predominantly premium mineral oil and xanthan gum. The blending production of Enerzan L (20)takes place in Canada. According to your request, and confirmed by the NCSD, Enerzan L (20) is classified under subheading 3824.99.49, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for: “Prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural product), not elsewhere specified or included: Other: Cultured crystals (other than optical elements of chapter 90), weighing not less than 2.5g each: Other:” The components of Enerzan L (20) are as follows: 2 Product Non-Trade Weight (%) Cost ($) Country of HTS Breakdown Name Origin Ces Premium Mineral Oil 73.40% $0.99 United States 2710.19.30 Mineral Oil BYK GO 8730 Stability 2.00% $0.50 Germany 3824.99 Enhancer Xanthan Gum Xanthan Gum 24.00% $1.95 China 3913.90.50 Water Water 0.06% $0 Canada 2853.90 Labor N/A N/A $0.08 Canada N/A The manufacturing process for Enerzan L (20) is as follows: 1. Charge the vessel with Mineral Oil. 2. Pump in Stability Enhancer through hose into the vessel and allow 15 minutes to mix. 3. Pump in water through the hose into the vessel and allow 15 minutes to mix. 4. Add the Xanthan Gum bags through auger while mixing. 5. Circulate and mix for one hour. 6. Take samples to the lab for quality control, make any adjustments as required, and package when ready. You describe the role of mineral oil in Enerzan L (20) as a base solvent. When hydrated in the application fluids, xanthan gum is the functional additive that enhances the rheological properties to facilitate cleaning of the wellbore. The water serves as a polar activator for the stability enhancer. Additionally, the stability enhancer provides anti-settling properties to enhance stability during transportation and storage. ISSUES: 1. Whether Enerzan L (20) is eligible for preferential tariff treatment under the USMCA when imported from Canada into the United States. 2. What is the country of origin of Enerzan L (20) for marking purposes? 3. What is the country of origin of Enerzan L (20) for purposes of Section 301 trade remedies? LAW & ANALYSIS: 1. Eligibility of USMCA Preferential Tariff Treatment The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the HTSUS implements the USMCA. GN 11(a)(i) provides: 3 Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and . . . GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states: For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l)of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if— (i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries; (ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials; (iii) the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or … Here, Enerzan L (20) contains nonoriginating materials. As such, it is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i), nor are the products produced exclusively from originating materials per GN 11(b)(ii). Thus, we must determine whether the products qualify under GN 11(b)(iii). The applicable rule of origin for goods classified under subheadings 3824.99.49, HTSUS, is in GN 11(o)/38.5, HTSUS, which provides, in relevant part: 5. (A) A change to subheadings 3823.11 through 3826.00 from any other subheading, including another subheading within that group; or (B)No change in tariff classification to a good of subheadings 3823.11 through 3826.00, provided there is a regional value content of not less than: 4 (1) 40 percent where the transaction value method is used; or (2)30 percent where the net cost method is used. According to the facts presented, the German-origin stability enhancer (BYK GO 8730) does not undergo a tariff shift as its six-digit subheading classification 3824.99, HTSUS, is the same as Enerzan L (20). Thus, GN 11(o)/ 38.5(A) is inapplicable, and we apply GN 11(o)/ 38.5(B). You have provided us with information pertaining to the cost of the materials, and you utilized the net cost in your calculations to calculate the regional value content (“RVC”) of the originating materials. Under GN 11(c)(iii), the net cost method is set forth as follows: Net cost method. – An importer, exporter or producer of a good may calculate the regional value content of a good on the basis of the following net cost method: RVC = ((NC - VNM)/NC) x 100 where NC means the net cost of the good; RVC means the regional value content, expressed as a percentage; and VNM is the value of nonoriginating materials, including materials of undetermined origin, used by the producer in the production of the good. You provided a product breakdown of Enerzan L (20) which includes the total costs of the originating and nonoriginating components, as well as the production costs. Based on the table provided, the net cost of the Enerzan L (20) is $3.52. The costed bill of materials indicates that the value of the non-originating materials is $2.45. As such, the RVC is (($3.52 - $2.45) /$3.52) * 100] = 30.40%. This is above the 30% minimum required by GN 11(o)/ 38.5(B)(2). Accordingly, Enerzan L (20) qualifies as a USMCA originating good and will be eligible for preferential tariff treatment under the USMCA when imported into the United States from Canada. 2. Country of Ori

1. Eligibility of USMCA Preferential Tariff Treatment The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11 of the HTSUS implements the USMCA. GN 11(a)(i) provides: 

3 Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and . . . GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states: For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l)of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if— (i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries; (ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials; (iii) the good is a good produced entirely