MAR 2-05 CO:R:C:S 558831 BLS
Frederick P. Waite, Esq.
Pophaim Haik
655 Fifteenth Street, N.W
Washington, D.C. 20005-5701
RE: Country of origin marking; steel rod; steel wire; substantial
transformation; Superior Wire; 19 CFR 134.25; 19 CFR 134.26; J-list; essential character; Article 509
Dear Mr. Waite:
This is in reference to your letters dated October 14 and November
23, 1994, on behalf of the American Wire Producers Association and
four of its members, requesting a ruling regarding the country of
origin marking requirements in connection with imported wire rod.
FACTS:
The four U.S. processors of wire rod from Canada and other
countries, purchase the wire rod in most cases on a duty-paid basis,
from the importer of record, which also may be the exporter, or a
subsidiary thereof, or a trading company. At other times the
processor may act as the importer, entering the merchandise and
paying applicable duties and other fees. In the U.S., the processor
draws the steel rod into wire, repacks it, and then resells the
product to its customers. In turn, the customers may fabricate the
wire into a variety of products, including nails, other fasteners,
fencing, springs, wire rope and strand, mesh, and other items. The
drawing process is as follows:
Bekaert Corporation
1) Imported rod (5.5 to 8.0 mm. or 0.218 to 0.315 inch in
diameter) is chemically descaled (cleaned) to remove rust and
hot-rolled scale.
2) Imported rod is coated with zinc phosphate and/or borax as a
lubricant.
3) Imported rod is uncoiled.
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4) Imported rod is cold drawn through a series of mechanical dies.
5) For wire with a diameter of 0.0625 inch or larger,
finished wire is coiled into tubular carriers or
reels. This stage completes the manufacturing process for this
wire (i.e., diameter of 0.0625 inch or larger).
5a) For wire with a diameter less than 0.0625 inch, wire is
"patented" or heat-treated in order to restore completely the
original structure of the material.
6a) Wire is coated with a lubricant.
7a) Wire is cold drawn through a further series of mechanical dies.
8a) Finished wire is coiled onto tubular carriers or reels. This
stage completes the
manufacturing process for this wire (diameter less than 0.0625
inch).
Merit Steel .(Division of Leggett & Platt. Inc.)
1) Imported rod (5.5 to 14.3 mm. or 0.218 to 0.563 inch in diameter)
is chemically descaled to remove rust and mill scale.
2) Imported rod is uncoiled;
3) Imported rod is coated with a lubricant.
4) Imported rod is cold drawn through a series of mechanical
dies to diameters of 1.6 to 12.7 mm. or 0.063 to 0.500
inch.
5) Finished wire is cleaned and coiled on tubular carriers.
6) Coils of finished wire are packaged.
National-Standard Company
Welding Wire
1) Imported rod (5.5 ram. or 0.218 inch in diameter) is
mechanically descaled or cleaned.
2) Imported rod is cold drawn through a series of mechanical
dies to an intermediate
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size (wire diameter of O. 130 inch).
3) Wire is patented or annealed to restore the original
structure and to prepare the wire for further
processing.
4) Wire is cleaned and coated with a lubricant.
5) Wire is further cold drawn through a series of mechanical dies
to its finished size
(diameter of 0.035, 0.045, or 0.052 inch).
6) Wire is cleaned.
7) Wire is copper or bronze coated, or coated with a lubricant.
8) Wire is spooled into smaller packages.
Bead Wire
1) Imported rod (5.5 ram. or 0.218 inch in diameter) is
mechanically descaled or cleaned.
2) Imported rod is cold drawn through a series of mechanical dies
to an intermediate size (wire diameter of O. 130 inch).
3) Wire is patented or annealed to restore the original
structure and to prepare the wire for further
processing.
4) Wire is cleaned and coated with a lubricant.
5) Wire is further cold drawn through a series of
mechanical dies to its finished size
(diameter of 0.038 or 0.072 inch).
6) Wire is further heat-treated.
7) Wire is cleaned.
8) Wire is plated with bronze.
9) Wire is spooled and packaged.
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Walker Wire & Steel Corporation
Direct Drawn Wire
1) Imported wire is descaled (cleaned) to remove rust and mill
scale.
2) Imported rod is coated with a lubricant.
3) Imported rod is uncoiled.
4) Imported wire is cold drawn through a series of mechanical
dies.
5) Finished wire is recoiled on tubular carriers.
6) Coils of finished wire are packaged.
Direct Drawn, Straightened and Cut Wire
1) Imported wire is descaled (cleaned) to remove rust and
scale.
2) Imported rod is coated with a lubricant.
3) Imported rod is uncoiled.
4) Imported rod is cold drawn through a series of mechanical
dies.
5) Finished wire is uncoiled and straightened.
6) Finished wire is cut into lengths.
Spheroidize Annealed at Finished Size
1) Imported rod is descaled (cleaned) to remove rust and mill
scale.
2) Imported rod is coated with a lubricant.
3) Imported rod is uncoiled.
4) Imported rod is cold drawn through a series of mechanical
dies.
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5) Finished wire is coiled.
6) Finished wire is spheroidize annealed (heat treated) in
order to restore the
original structure of the material, and cleaned.
7) Finished wire is coated with a lubricant.
8) Finished wire is coiled and packaged.
You advise that the U.S. Customs district office in Detroit is of
the opinion that Walker Wire must comply with the marking
notification and certification requirements of
sections 134.25 and 134.26, Customs Regulations ( 19 CFR 134.25 and
134.26), in connection with its purchases of wire rod and processing
of such rod into wire. The company has since implemented procedures to
conform to the district's request. The three other companies, also
purchasers of wire rod, have received requests for information from
the district regarding the processing which occurs in the U.S., and
current method of country of origin marking on the repacked articles.
You believe that these requirements are inapplicable to the
processors, and request our opinion in this matter.
ISSUE:
1 ) What are the country of origin marking requirements in
connection with the imported steel rod and U. S .-processed wire under
the fact situations presented?
2) What are the obligations of the processors of wire rod in
connection with the certification requirements set forth under 19 CFR
134.25 and 134.26?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C.
1304), requires that, unless excepted, every article of foreign
origin (or its container) 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
manner as to indicate to the ultimate purchaser the English name of
the country of origin of the article. The regulations implementing
the requirements and exceptions to 19 U.S.C. 1304 are set forth in
Part 134, Customs Regulations (19 CFR 134).
Since we are dealing with both NAFTA and non-NAFTA goods, we
will treat each class of goods separately, as different rules may be
applicable in determining who is the ultimate purchaser, and in
making other determinations pertinent to the application of
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the marking requirements under Part 134.
Goods of Non-NAFTA Countries (Other than Canada. Mexico. or the
U.S..)
Articles of a class or kind listed in section 134.33, Customs
Regulations (19 CFR 134.33), are on the so-called "J-list" and are
excepted from individual marking requirements in accordance with the
provisions of 19 U.S.C. 1304(a)(3)(J). Metal bars, except concrete
reinforcement bars; billets, blocks, blooms; ingots; pigs; plates;
sheets, except galvanized sheets; shafting; slabs; and metal in
similar forms, are among the classes of articles which are included
on the "J-list". We find that the imported steel rods fall within
this class of articles. In addition, "Wire, except barbed", is also
on the "J-list". Therefore, neither the subject steel rods nor the
U. S .-processed wire are required to be individually marked with
the country of origin.
However, 19 CFR 134.33 further provides that if articles
included on the "J-list" are imported in containers, the outermost
container in which the article ordinarily reaches the ultimate
purchaser is required to be marked to indicate the origin of its
contents. In addition, if a "J-list article will be repacked into
new containers after leaving Customs custody, the importer must
certify to Customs that the new container will be marked to indicate
the country of origin of the contents. See 19 CFR 134.25. The
certification procedures, which are for the purpose of ensuring that
the ultimate purchaser will be advised of the country of origin,
apply to imported J-list articles processed and repacked after
importation unless the articles are substantially transformed prior
to repacking. Absent a substantial transformation, the consumer or
other recipient of the wire is considered the ultimate purchaser and
must be advised of its country of origin. In this regard, 19 CFR
134. l(d) provides that if the manufacturing process is merely a
minor one which leaves the identity of the article intact, the
consumer or user of the article who acquires it after the processing
will be regarded as the ultimate purchaser.
Therefore, as applied to the instant case, whether the
importer/repacker of J-list articles is subject to the requirements
of 19 CFR 134.25 is dependent upon a determination of the identity
of the ultimate purchaser, which in turn requires a determination as
to whether the processing of the wire rod in the U.S. results in a
substantial transformation.
The test for determining whether a substantial transformation
has occurred is whether an article emerges from a process with a new
name, character and use, different from that possessed by the
article prior to the processing. See United States v. Gibsen-Thomsen
Co., 27 CCPA 267 (C.AD. 98). In Superior Wire v, United States, 11
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C.I.T. 608, 669 F. Supp. 472 (C.I.T. 1987), aff'd,867 F.2d 1409
(Fed. Cir. 1989), the court held that the drawing of wire rod into
wire through a multi-stage process did not constitute a substantial
transformation of the wire rod, since there was no significant
change in use or character of the imported material. The court found
that while the wire rod and processed wire had different names and
identities in the industry, they were essentially different stages
of the same product.
We believe that the holding in Superior Wire is controlling as
to whether a substantial transformation occurs in the drawing of the
wire rod with respect to each of the four manufacturing processes.
Thus, as in Superior Wire, the wire rod dictates the final form of
the finished wire, as the basic properties of the wire are
predetermined by the wire rod. Further, no substantial change in the
composition of the wire occurs between the initial stage of the wire
rod as imported and after processing in the U.S. It is our position
that the products in final form do not possess a significantly
different character or use in comparison to the wire rod imported
into the U.S. Accordingly, we find that the drawing and other
processing of the wire rod in the U.S. in each of the four scenarios
does not result in a substantial transformation of the imported
product. Therefore, for wire rod purchased from a non-NAFTA country,
the "ultimate purchaser" will be considered to be the consumer of
the wire, who purchases it from the U.S. processor of the wire rod,
and subsequently fabricates the product into nails and other
fasteners, and other products. This person is the last person in the
U.S. who will receive the wire rod in essentially the same form in
which it was imported.
In summary, although the wire rod and wire are excepted from
individual marking requirements, the outermost container in which
the finished article (wire) reaches the ultimate purchaser must be
marked to indicate the origin of its contents. The certification
requirements under 19 CFR 134.25 are applicable only to an importer
of the goods. Thus, a processor of the wire rod into wire must
certify to Customs that it will properly mark the re-packaged wire
only when this person is also the importer. Section 134.25 also
requires, however, that the importer notify any subsequent purchaser
or repacker in writing at the time of sale, of the marking
requirements.
Good of a NAFTA Country.
The country of origin marking requirements for a "good of a
NAFTA country" are determined in accordance with Annex 311 of the
North American Free Trade Agreement ("NAFTA"), as implemented by
section 207 of the North American Free Trade Agreement
Implementation Act (Pub. L. 103-82, 107 Stat. 2057) (December 8,
1993) and the interim amendments to the Customs Regulations
published as T.D. 94-4
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(59 Fed. Reg. 109, January 3, 1994) with corrections (59 Fed Reg.
5082, February 3, 1994) and T.D. 94-1 (59 Fed. Reg. 69460, December
30, 1993). These interim amendments took effect on January 1, 1994,
to coincide with the effective date of the NAFTA. The Marking Rules
used for determining whether a good is a good of a NAFTA country are
contained in T.D. 94-4 (adding a new part 102, Customs Regulations).
The marking requirements of these goods are set forth in T.D. 94-1
(interim amendments to various provisions of Part 134, Customs
Regulations).
Section 134.1 (j) of the interim regulations, provides that the
"NAFTA Marking Rules" are the rules promulgated for purposes of
determining whether a good is a good of a NAFTA country. Section
134.1 (g) of the interim regulations, defines a "good of a NAFTA
country" as an article for which the country of origin is Canada,
Mexico or the United States as determined under the NAFTA Marking
Rules. Section 134.45(a)(2) of the interim regulations, provides
that a "good of a NAFTA country" may be marked with the name of the
country of origin in English, French or Spanish. For purposes of
this ruling, we are assuming that the imported wire rod is of
Canadian origin. Under 19 CFR 134.25, if the imported "J-list"
article, wire rod, will be repacked prior to sale to the ultimate
purchaser, the importer must certify to Customs that he will
properly remark the new package or alternatively, notify the
repacker of its obligation to remark the new package. However, if
the importer is considered to be the ultimate purchaser, then the
certification requirements are not applicable.
Section 134. l(d), Customs Regulations (19 CFR 134. l(d),
provides that for a good of a NAFTA country, the "ultimate
purchaser" is generally the last person in the U.S. who purchases
the good in the form in which it was imported. If an imported
article will be used in manufacture, the manufacturer may be the
"ultimate purchaser" if the process results in one of the changes
prescribed in the NAFTA Marking Rules as effecting a change in the
article's country of origin. If the manufacturing process does not
result in one of the changes prescribed in the NAFTA Marking Rules
as effecting a change in the article's country of origin, the
consumer who purchases the article after processing will be regarded
as the ultimate purchaser.
Accordingly, since the wire rod is imported from Canada, a NAFTA
country, in order to determine the appropriate marking and
certification requirements we must examine the NAFTA Marking Rules
to ascertain whether or not the imported product undergoes a change
as prescribed under the rules.
Part 102 of the interim regulations, sets forth the "NAFTA
Marking Rules" for purposes of determining whether a good is a good
of a NAFTA country for marking purposes. Section 102.11 of the
interim regulations, sets forth the required hierarchy
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for determining country of origin for marking purposes. Section
102.11 (a) of the interim regulations provides that "[t]he country
of origin of a good is the country in which:
(1) the good is wholly obtained or produced;
(2) the good is produced exclusively from domestic
materials; or
(3) Each foreign material incorporated in that good
undergoes an applicable change in tariff
classification set out in section 102.20 and
satisfies any other applicable requirements of
that section, and all other requirements of these
rules are satisfied."
Since the wire is produced in the U.S. from Canadian wire rod, the
wire is neither wholly obtained or produced nor is it produced
exclusively from domestic materials. Therefore, paragraphs (a)( 1 )
and (a)(2) of section 102.11 cannot be used to determine the country
of origin of the finished article. Thus, paragraph (a)(3) of section
102.1 l is the applicable rule that we must first apply to determine
the origin of the product manufactured by Walker.
From a description of the various types of rod, it appears that
the imported products will be classified under headings 7213-7215. The
wire products resulting from the U.S. processing of the wire rod are
classified under heading 7217. The specific tariff rule set out in
section 102.20(a), Section XV, Chapters 72 through 83, 7217 of the
interim regulations provides:
7217.... A change to heading 7217 from any other heading, except from heading
7213 through 7215.
Under this rule, the imported rod does not undergo the
applicable change in tariff classification set out in section
102.20(a). Therefore, under the hierarchal rules, we must apply the
next applicable rule, section 102.1 l(b), to determine the country
of origin of the wire.
Section 102.11(b) of the interim regulations provides, in
pertinent part, that where the country of origin cannot be
determined under paragraph (a), the country of origin of the good is
the country or countries of origin of the single material that
imparts the essential character of the good. Section 102.18(b)(2)
provides that for purposes of section 102.11 Co), "only domestic and
foreign materials. ..that are classified in a tariff provision from
which a change in tariff classification is not allowed in the
[102.20] rule
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for the good. ..shall be taken into consideration in determining the
parts or materials that determine the essential character of the
good." In the instant case, only the imported Canadian wire rod is
classified under a provision from which a change in tariff
classification is not allowed under the 102.20 rule for the wire.
Therefore, we find that the material that imparts essential
character to the wire is the wire rod. Accordingly, since under the
NAFTA Marking Rules the processing of the wire rod does not effect a
change in its country of origin, the person who purchases the
article after such processing will be regarded as the ultimate
purchaser. As a result, the importer must comply with the
certification requirements of 19 CFR 134.25. However, the
certification rules will be applicable to the producer only where he
is acting in the capacity of an importer.
HOLDING:
1 ) Wire rod imported from non-NAFTA countries and processed
into wire does not undergo a substantial transformation; therefore,
the "ultimate purchaser" will. be the person who purchases the wire
from the U.S. producer. Since the goods are J-list articles, they
are excepted from individual marking requirements under 19 CFR
134.33. However, the outermost container in which the article
reaches the ultimate purchaser is required to be marked to indicate
the country of origin of its contents. Where the processor of the
wire rod is acting as the importer, he must also comply with the
certification requirements of 19 CFR 134.25.
2) Wire rod imported from Canada, a NAFTA country, and processed
into wire, does not undergo the applicable change in tariff
classification setout in 19 CFR 102.20(a) of the NAFTA Marking
Rules. As a result, the next rule under the hierarchal rules, 19 CFR
102.11 (b), must be examined to determine whether it is applicable.
Under this rule, the country of origin of the good is the country of
origin of the material that imparts essential character to the wire.
We find that the wire rod is the material that imparts essential
character.
Therefore, under the NAFTA Marking Rules, since the processing
of the wire rod does not effect a change in its country of origin,
the person who purchases the article after such processing will be
considered the ultimate purchaser. Since the goods are J-list
articles, they are excepted from individual marking requirements
under 19 CFR 134.33. However, the outermost container in which the
article reaches the ultimate
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purchaser is required to be marked to indicate the country of origin
of its contents. Where the processor of the wire rod is acting as
the importer, he must also comply with the certification
requirements of 19 CFR 134.25.
Sincerely,
John
Durant, Director
Tariff
Classification Appeals Division