MAR-2-05 RR:CR:SM 561103 KSG
Carl K. McLaughlin
Vice President & General Manager
Rossborough Manufacturing Co. L.P.
P.O. Box 38
33565 Pin Oak Parkway
Avon Lake, Ohio 44012-0038
RE: Magnesium; substantial transformation; granules; Article
509; NAFTA
Dear Mr. McLaughlin:
This is in response to your letter dated July 30, 1998,
on behalf of Rossborough Manufacturing Co. L.P., requesting
a binding ruling
concerning the country of origin of imported magnesium
granules.
FACTS:
Rossborough Manufacturing Co. L.P. is involved in the
steel desulferization industry. Desulfurization is the
process whereby sulfur is removed from molten iron prior to
being further refined into steel. This process yields steel
of higher strength that can be used at thinner gauges with
greater formability. Desulfurization reagents are injected
into molten iron in integrated steel making facilities that
have blast furnaces and basic oxygen furnaces. The active
ingredient in these reagents is magnesium granules that are
blended with other raw materials to create finished reagent
products. All products are custom blended to exact
proprietary customer specifications. These blends are made
up of finely divided powders and granules suitable for
injection, typically -18 Mesh., which is a standard U.S.
sieve size.
Magnesium ingot produced in Russia, Brazil, China or
France would be made into granules in a second country. The
magnesium would be ground in the second country and imported
into the U.S. as granules. The grinding operation would
include: 1) chipping the magnesium ingot down to a 3/8" x
1/8" x .020" pieces on custom built machines called
chippers;
2) hammer milling the magnesium chips to the desired size on
a common hammer mill; 3) running the pieces through a shaper
that gives the granules their geometric configuration; 4)
screening the shaped granules to size with vibratory
screeners; and then packaging the granules according to DOT
specifications.
You state that magnesium ingot is classified at
subheading 8104.11.00, of the Harmonized Tariff Schedule of
the United States ("HTSUS"), and that magnesium granules are
classified at subheading 8104.30.00, HTSUS. You also state
that magnesium ingot is not suitable for desulfurization and
must be made into granules in order to be used. If the
magnesium granules are mixed with other raw materials, this
would occur in the U.S.
You have asked (1) whether processing magnesium ingot
into granules in a non-NAFTA country constitutes a
substantial transformation, thereby rendering that country
the country of origin of the granules; and (2)) if the
magnesium is granulated in Canada or Mexico, whether the
granules would be considered a product of such country under
NAFTA.
ISSUES:
1. What is the country of origin of imported magnesium
granules processed as described above in a non-NAFTA country
from ingot produced in another non-NAFTA country?
2. If the magnesium is granulated in Canada or Mexico from
ingot produced in a non-NAFTA country, what is the country
of origin of the imported magnesium granules under the NAFTA
Marking Rules?
LAW AND ANALYSIS:
1. Granulation in a non-NAFTA country
Section 304 of the Tariff Act of 1930, as amended, 19
U.S.C. 1304, provides that, unless excepted, every article
of foreign origin (or its container) imported into the U.S.
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 U.S. the English name of
the country of origin of the article.
Part 134, Customs Regulations (19 CFR Part 134)
implements the country of origin marking requirements and
exceptions of 19 U.S.C. 1304. Pursuant to 19 CFR 134.1(b),
"country of origin" means 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. See 19 CFR 134.35(a). A substantial
transformation results when a new and different article
emerges from the processing having a distinctive name,
character and use. U.S. v. Gibson-Thomsen Co., Inc., 27
CCPA 269 (1940). The question of when a substantial
transformation occurs for marking purposes is a question of
fact to be determined on a case-by-case basis.
Customs ruled in HRL 557046, dated May 17, 1993, that
pure magnesium blended with other metals and made into
magnesium alloy ingots are substantially transformed into a
new and different article of commerce for the purposes of
the GSP. The ruling noted that the Customs Office of
Laboratories & Scientific Services indicated that the ingots
are commercially different products than the pure magnesium.
Customs has held that cutting or bending materials to
defined shapes or patterns which dedicates the resulting
material to a specific use constitutes a substantial
transformation. See HRL 557066, dated April 26, 1993, and
HRL 559511, dated June 14, 1996. In addition, we have held
that processing which transforms a multi-functional product
into one suitable for more specific uses is indicative of a
substantial transformation. See HRL 555247, dated January
11, 1990, and HRL 556356, dated February 24, 1992.
In this case, based on the information provided, we
find that the processing of the magnesium ingot by chipping,
hammer milling and shaping to give the granules a geometric
configuration results in a substantial transformation. The
processing changes magnesium ingot, which clearly has many
uses, into granules with a specific shapes suitable for use
as the active ingredient in desulferization reagents.
Furthermore, there is little in the character of the
magnesium ingot which suggests the ultimate shape and
purpose of the granules. In our view, the granules are a
separate and distinct article of commerce from the ingot
from which they are made. As a result, the country of
origin of the granules would be the country in which the
ingot is substantially transformed into granules.
2. Granulation in Canada or Mexico
A good of a NAFTA country is defined in 19 CFR 134.1(g)
as an article for which the country of origin is Canada,
Mexico, or the United States as determined under the NAFTA
Marking Rules. The NAFTA Marking Rules are defined in 19
CFR 134.1(j) as the rules promulgated for purposes of
determining whether a good is a good of a NAFTA country.
The NAFTA Marking Rules are set forth at 19 CFR Part
102. Section 102.11, Customs Regulations (19 CFR 102.11),
sets forth the required hierarchy for determining the
country of origin under the Marking Rules. Paragraph (a) of
this section states that the 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 applicable requirements of these
rules are satisfied.
"Foreign material" is defined in 19 CFR 102.1(e) as "a
material whose country of origin as determined under these
rules is not the same country
as the country in which the good is produced." Sections
102.11(a)(1) and 102.11(a)(2) do not apply to the facts
presented in this case because the magnesium ingots are of
non-NAFTA origin. Since an analysis of sections
102.11(a)(1) and 102.11(a)(2) will not yield a country of
origin determination, we look to section 102.11(a)(3).
Section 102.11(a)(3) provides that the country of
origin is the country in which "each foreign material
incorporated in that good undergoes an applicable change in
tariff classification as set forth in 19 CFR 102.20 and
satisfies any other applicable requirements of that
section...."
The magnesium granules appear to be classified at
subheading 8104.30.00, HTSUS. The magnesium ingots appear
to be classified at subheading 8104.11.00, HTSUS. The
applicable tariff shift rule found in section 102.20(n)
provides as follows:
HTSUS Tariff Shift and/or other requirements
8103.10-8113.00 .....A change to
subheading 8103.10 through 8113.00 from
any other subheading, including another
subheading within that group; or
A change to any of the following
goods classified in subheading
8103.10 through 8113.00, including
from materials also classified in
subheading 8103.10 through 8113.00: Matte; unwrought; powder except from flakes; flakes except from powder; bars except from rods or profiles; rods except from bars or
profiles; profiles except from rods or
bars; wire except from rod; plates except
from sheets or strip; sheets except
from plate or strip; strip except from sheets or plate; foil except from sheet or strip; tubes except from pipes; pipes except from tubes;
tube or pipe fittings except from
tubes or pipes; cables/ stranded wire/
plaited bands.
Since the magnesium granules undergo the requisite
tariff shift, pursuant to 19 CFR 102.11(a)(3), the country
of origin of the imported magnesium granules would be Canada
or Mexico-- where the magnesium is granulated.
HOLDING:
We find that the processing of magnesium ingots
produced in a non-NAFTA country into granules in a second
non-NAFTA country results in a substantial transformation.
Pursuant to 19 CFR 134.1(b), the country of origin would be
the country where the magnesium ingots are processed into
granules.
Pursuant to 19 CFR 102.11(a)(3), the country of origin
of the imported magnesium granules for NAFTA Marking
purposes is Canada or Mexico-- the country in which the
magnesium ingot is granulated.
A copy of this ruling letter should be attached to the
entry documents filed at the time this merchandise was
entered. If the documents have been filed without a copy,
this ruling should be brought to the attention of the
Customs officer handling the transaction.
Sincerely,
John Durant
Director,
Commercial Rulings Division