N343418

N343418 November 15, 2024 CLA-2-73:OT:RR:NC:N5:116 CATEGORY: Country of Origin Mr. Andrew K. McAllister Holland & Knight, LLP 800 17th Street, N.W. Washington, District of Columbia 20006 RE: A country of origin determination for purposes of eligibility under USMCA, for purposes of applicability of Trade Remedy Section 301, and for marking purposes of flanges and fittings from China, Italy, and India Dear Mr. McAllister: In your letter dated October 18, 2024, you requested a country of origin determination for purposes of eligibility under the United States-Mexico-Canada Agreement (USMCA), for purposes of applicability of Trade Remedy Section 301, and for marking purposes of flanges and fittings for your client, Gulf Manufacturing, Inc. (“GMI”). According to your submission, GMI plans to import “raw carbon steel forgings in the shape of flanges (weld-neck and threaded), crosses, and tees” from China, Italy, and India. The forgings are then sent to Mexico to be manufactured into finished products. The flanges are described as “a forged ring of steel designed to connect mechanically sections of pipe or join pipe to a pressure vessel, pump, value (sic), or any other piece of equipment.” The weld-neck flange is a flange with a long-tapered hub that provides an important reinforcement for use in several applications involving high pressure, sub-zero and/or elevated temperatures and enables a smooth transition from flange to pipe. The threaded flange is a flange with threaded grooves in the bore that can be attached to a steel pipe or fitting without welding, although a seal weld can be used in connection with the threaded connection. The cross is used to connect, via welding, interacting steel pipes or fittings in an industrial pipeline. The cushioned end provides structural support and is designed to absorb pressure. The cross is often used in high-pressure pumping equipment and must be able to withstand demanding conditions. The tee connects, via welding, to three steel pipes or fittings at 90 degree angles to form a T shape. It has one inlet and two outlets and is used to direct fluid, gas, or power flow in different directions. GMI states the raw forgings from China, Italy, and India are manufactured in the following manner. A steel billet is cut into pieces that are roughly the same weight as the desired forging. The cut billet is then heated and forged by an open die or closed die hammer or press to create a rough forging. The rough forging is then heat treated to improve its physical characteristics and then packaged for shipment to Mexico. After importation into Mexico, the forgings undergo descaling, CNC machining, trimming, milling, beveling, boring, drilling, deburring, smoothing, lathing, chamfering, dipping, painting, stamping, and inspection before they are considered to be finished products ready for shipment into the United States (U.S.) A country of origin determination will use different criteria to reach a decision, based on the purpose of the request. For example, a country of origin determination for purposes of eligibility under USMCA will use the tariff shift rules set forth in General Note 11 of the Harmonized Tariff Schedule of the United States (HTSUS). A country of origin determination for marking purposes, for goods from a NAFTA or USMCA country, will use the marking rules set forth in Section 102. A country of origin determination for purposes of applicability of Trade Remedy Sections 232 and/or 301 will use the substantial transformation test. As you have requested a country of origin determination for all three of these purposes, we will address each request individually. USMCA Regarding the request for a country of origin determination for purposes of eligibility under USMCA, 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(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— the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries; the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials; the good is a good produced entirely in the territory of one or more USMCA countries using non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); Since the articles are 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), we must determine whether the product qualifies under GN 11(b)(iii). As previously noted, the fittings are classified under headings 7307, HTSUS, at the time of importation into the U.S. The applicable rule of origin for goods classified under heading 7307, HTSUS, is in GN 11(o), HTSUS, which provides in relevant part: Heading rule: Beginning on July 1, 2023, and thereafter, the following rules of origin shall apply to headings 7305 through 7307: (a) A change to headings 7305 through 7307 from any other heading, except from headings 7208 through 7229 or 7301 through 7326; or (b) A change to headings 7305 through 7307 from headings 7208 through 7229 or 7301 through 7326, provided that at least 70 percent by weight of the materials of headings 7208 through 7229 or headings 7301 through 7326 is originating; or (c) No change in tariff classification to a good of headings 7305 through 7307, provided there is a regional value content of not less than: (i) 75 percent where the transaction value method is used In your request you suggest that the raw forgings (flanges, crosses, and tees) are properly classified in subheading 7207.20.0075, HTSUS, which provides for “Semifinished products of iron or nonalloy steel: Containing by weight 0.25 percent or more of carbon: Of circular cross section,” prior to the finishing operations performed in Mexico. This office disagrees and is of the opinion that the forgings are not semifinished products of subheading 7207.20.0075, HTSUS, and are more specifically provided for elsewhere in the tariff schedule. We turn to the Explanatory Notes for guidance. In understanding the language of the HTSUS, the Harmonized Commodity Description and Coding System Explanatory Notes may be utilized. The Explanatory Notes (ENs), although not dispositive nor legally binding, provide a commentary on the scope of each heading of the HTSUS, and are the official interpretation of the Harmonized System at the international level. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989). Subpart B of the ENs to heading 7207, HTUS, states in pertinent part, that: These are semi-finished products of rough appearance and large dimensional tolerances, produced from blocks or ingots by the action of power hammers or forging presses. They may take the form of crude recognisable shapes in order that the final article can be fabricated without excessive waste, but the heading covers only those pieces which require considerable further shaping in the forge, press, lathe, etc. The heading would, for example, cover an ingot roughly hammered into the shape of a flattened zig-zag and requiring further shaping to produce a marine crankshaft, bu

is applicable. The "country of origin" is defined in 19 CFR 134.1(b) 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 this part.”The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982).However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).In HQ 557346, dated September 3, 1993, unfinished flanges were bored, faced, back-faced, spot-faced, cut, and drilled. HQ found the additional processing substantially transformed the flanges. In Midwood Industries, Inc. v United States, 64 cust. Ct. 499, 313 F. Supp. 951 (1970), rough steel forgings were subjected to the additional processing of boring, facing, spot facing, drilling, tapering, threading, beveling and heating and compression. The court found the forgings had no commercial use until further processing and that this additional processing substantially t