CLA-2 CO:R:C:G 084831 JMH
District Director
Buffalo District
111 West Huron St.
Buffalo, New York 14202
RE: I/A 17/89, steel pipes and tubes to be
used in knocked down piping system for
hydraulic fiber board press
Dear Sir:
This is in response to your request of April 11, 1989, for
internal advice on certain knocked down piping systems to be used
with hydraulic fiber board presses. You also request
information regarding the requirements of an export certificate
for pipes from Germany used in the systems.
FACTS:
The materials in question are seamless carbon steel pipes
and tubes with outside diameters of 1/2 inch to 16 inches. The
pipes and tubes are to be used in a knocked down piping system
for installation in a hydraulic fiber board press. Some of the
pipes and tubes originate in West Germany. The West German items
are shipped to Canada where they are flared and grooved and
combined with other steel pipe of Canadian origin. The flared
and grooved pipes are then exported to the United States where
they are assembled into a piping system. The piping system was
imported to the United States in four separate shipments.
The importer contends that the piping system is an entirety,
designed for use with a specific machine, the hydraulic fiber
board press. The goods should be classified as parts. The
importer also argues that the flaring and grooving of the West
German pipe in Canada substantially transforms the German pipe
into Canadian pipe. Thus, for Voluntary Restraint Arrangement
(VRA) purposes, it is claimed that the pipe's country of origin
is Canada.
-2-
Your district believes that the pipes and tubes are not part
of the fiber board press. The articles should be classified
within Chapter 73 of the HTSUSA as pipes and tubes. You disagree
that the flaring and flanging of the pipes and tubes
substantially transform the articles. Therefore, in your opinion
the pipes and tubes remain products of West Germany and are
subject to the VRA with the European Community (EC).
ISSUE:
Issue 1: Whether the steel pipes and tubes are properly
classified within heading 8479.90.80, HTSUSA, as "Machines and
mechanical appliances having individual functions, not specified
or included elsewhere in this chapter; parts thereof...", or in
the appropriate subheading for pipes and tubes in heading 7304,
HTSUSA, as "Tubes, pipes and hollow profiles, seamless, or iron
(other than cast iron) or steel..."
Issue 2: Whether the pipes and tubes originating in West Germany
remain a product of West Germany, and therefore, subject to the
Voluntary Restraint Arrangement (VRA) with West Germany, or
whether the pipes and tubes are substantially transformed by the
flanging and grooving so that they are products of Canada.
LAW AND ANALYSIS:
Issue 1:
The classification of merchandise under the HTSUSA is
governed by the General Rules of Interpretation (GRI's). GRI 1,
HTSUSA, states in part that "for legal purposes, classification
shall be determined according to the terms of the headings and
any relative section or chapter notes..." The proper
classification for the steel tubes and pipes is within heading
7304, HTSUSA. Heading 7304 describes:
7304 Tubes, pipes and hollow profiles, seamless,
of iron (other than cast iron) or steel...
The importer contends that heading 8479, HTSUSA, the
classification for the fiber board press, governs the
classification of the steel pipes and tubes. It is argued that
the piping system and the hydraulic fiber board press are an
entirety. The notion of an entirety does not exist within the
HTSUSA. A similar concept for mechanical appliances is found
within Section XVI, Note 4, HTSUSA, which describes a "functional
unit". However, to utilize this note, the unit must be imported
together. The steel pipes and tubes were imported separately.
Therefore, the piping system is ineligible for "functional unit"
status.
-3-
The importer also claims that the pipes and tubes are "parts
thereof..." within heading 8479, HTSUSA. Section XVI, Note 2,
HTSUSA, directs the classification of parts of machines.
However, this note only applies if the item being classified is a
"part" of a machine. However, for the pipes to be "parts" in
this case, they must be an integral, constituent or component
article, without which the fiber board press would not be
complete. We understand that the steel pipes and tubes in
question are meant to connect the fiber board press to a separate
off-line hydraulic pump located on another level of the
manufacturing plant. The subject pipes and tubes in this case
are not integral, constituent or component articles of the fiber
board press. The fiber board press is a complete article without
the steel pipes and tubes. Therefore, the pipes and tubes are
not "parts" of the fiber board press.
Issue 2:
The determination of whether the steel pipes and tubes from
West Germany are subject to the VRA with West Germany depends
upon whether the steel pipes and tubes have been substantially
transformed while in Canada. Ferrostaal Metal Corp. v. United
States, 664 F. Supp. 535, 537 (CIT 1987). If a substantial
transformation occurs from the operations performed in Canada,
then Canada becomes the country of origin for the steel plates
and angles.
A substantial transformation occurs when the articles "lose
their identity as such, and become new articles having...a new
name, character, and use..." Koru North America v. United
States, 701 F.Supp 229, 234 (CIT 1988), citing United States v.
Gibson-Thomson Co., 27 CCPA 267, 270, C.A.D. 98 (1940). See also
Anheuser-Busch Brewing Ass'n v. United States, 207 U.S. 556, 562,
28 S.Ct. 204, 206, 52 L.Ed. 336 (1907). The name, character and
use test has been adhered to by the courts. Ferrostaal Metals
Corp. v. United States, 664 F.Supp. 535, 538 (CIT 1987), National
Juice Products Association et al. v.United States, 682 F. Supp.
678 (CIT 1986), Torrington Co. v. United States, 764 F.2d 1563
(3rd Cir. 1985), Uniroyal, Inc. v. United States, 542 F. Supp.
1026 (CIT 1982).
In the present situation, the steel tubes and pipes arrive
in Canada from West Germany. While in Canada, the articles are
flared and grooved. It is the opinion of this office that these
operations do not substantially transform the steel tubes and
pipes. The flaring and grooving processes do not produce a
product with a new name, character and use. The articles remain
steel pipes and tubes. Since no substantial transformation
occurs, West Germany remains the country of origin.
-4-
Merchandise, the country of origin of which is West Germany,
is subject to the VRA with the EC. For further information
regarding the importation from West Germany contact:
Nicholas Tolerico, Director
Office of Agreements Compliance
International Trade Administration
Room 7866
Department of Commerce
14th and Constitution Streets, N.W.
Washington, D.C. 20230
The above substantial transformation analysis also applies
to the Tariff Schedule of the United States.
HOLDING:
The steel tubes and pipes, from West Germany, to be used in
knocked down piping assembly for installation in hydraulic fiber
board presses are properly classified within heading 7304 to
7306, HTSUSA.
The steel tubes and pipes imported to Canada from West
Germany are not substantially transformed by the flaring and
grooving which occurs in Canada. West Germany remains the
country of origin.
You should advise the internal advice applicant of the
outcome of this ruling.
Sincerely,
John Durant, Director
Commercial Rulings Division