CLA-2 OT:RR:CTF:TCM H242034 LWF
Ms. Sandra L. Friedman
Barnes, Richardson & Colburn, LLP
475 Park Avenue South
New York, NY 10016
RE: Country of origin of cold finished seamless pipe from Japan
Dear Ms. Friedman:
This is in reply to your letter, dated April 9, 2013, requesting a ruling on behalf of your client, Mitsui (U.S.A.), Inc. (hereafter “Mitsui”), concerning the country of origin of cold finished seamless pipe from Japan.
FACTS:
Mitsui intends to import cold finished seamless pipe that is manufactured in China and Japan. In the first step of Mitsui’s procurement process, seamless stainless pipe without heat treatment—often referred to as “green pipe”—is purchased by a third-party in China and readied for shipment to the third-party’s factory in Japan. The green pipe is created through a process known as cold drawing and is characterized by high yield strength and tensile strength. In its condition as purchased in China, the green pipe is regarded by the industry as a semi-manufactured product, as it is not yet suitable for any specific end-user application and does not comply with any industry performance standards.
In Japan, the green pipe undergoes a number of manufacturing operations to reduce the yield strength and tensile strength of the pipe, thereby rendering the merchandise more suitable for further processing by end-users. Operations performed in Japan consist of the following:
Initial heat treatment: The green pipe is heated to a minimum temperature of 1,040 degrees Centigrade and subsequently quenched in water or rapidly cooled by other means. This process, otherwise known as “annealing,” restores the softness (ductility) of the steel that is otherwise lost as result of the cold rolling process performed in China, making the pipe easier to be further processed.
Cold drawing: Following the initial heat treatment, the pipe is subjected to an additional cold drawing operation, wherein the pipe is pulled through a small-diameter hollow die to meet Mitsui’s dimensional requirements of the finished article.
Final heat treatment: As a result the second cold drawing process, the pipe is once again characterized by a high yield strength and tensile strength that are too hard and brittle to be suitable for end use applications. Consequently, the pipe is passed through a final heat treatment in which it is heated and rapidly cooled in accordance with the steps taken in the initial heat treatment. This process has a similar effect of softening the steel and decreasing the yield strength and tensile strength of the finished pipe.
Straightening and pickling processes: Prior to finishing, the pipe is subject to a straightening process to ensure uniform measurement of the article. Finally, a pickling process is used to eliminate the scale on the surface of the pipe and protect the steel against corrosion.
As a result of the processing operations described above, it is claimed that the mechanical and physical properties of the finished pipe are materially changed. The finished pipe exhibits significantly lower yield strength and tensile strength, and is much more ductile than the green pipe originally manufactured in China. Upon export from Japan, the cold finished stainless steel pipe meets the specification requirements of ASTM A312 for “Standard Specification for Seamless, Welded, and Heavily Cold Worked Austenitic Stainless Steel Pipes.” See ASTM Standard A312/A312M - 13a, ASTM International, 2013, DOI: 10.1520/A0312_A0312M-13A, http://www.astm.org.
ISSUE:
What is the country of origin of the cold finished seamless pipe?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides that unless excepted, every article of foreign origin 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 a manner as to indicate to the ultimate purchaser in the United States, the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. § 1304 was “that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will.” See United States v. Friedlander & Co., 27 C.C.P.A. 297, 302 (1940).
Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. § 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. Section 134.1(b), CBP Regulations (19 C.F.R. § 134.1(b)), defines “country of origin” 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 [the marking laws and regulations].” A substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character or use, which is different from that originally possessed by the article or material before being subjected to the manufacturing process. See Texas Instruments, Inc. v. United States, 69 C.C.P.A. 142, 681 F.2d 778 (1982).
In Ferrostaal Metals Corp. v. United States, 664 F. Supp. 535 (Ct. Intl. Trade 1987), the Court of International Trade (CIT) ruled that the process of annealing steel—whereby the ductility of an article of steel is restored after cold rolling operations by heating the steel to a high temperature, then rapidly cooling the article with water or by other means—substantially transformed articles of cold rolled steel. The annealing relieved the deformation energy in cold rolled steel and made the steel less strong, but more ductile, or formable. Id. at 539. Although the process affected the distribution of carbon and nitrogen in the steel, annealing did not change the actual chemical composition and dimensions of the steel. Id. Nonetheless, the CIT in Ferrostaal found that strength and ductility constituted important characteristics of steel and that annealing significantly affected the character of an article of steel by dedicating the article to uses compatible with the strength and ductility of the steel imparted by the annealing process. Id. at 540. Similarly, the CIT has held that the process of heating and rapidly cooling sheet glass to increase the strength of the glass (a process commonly known as “tempering”) resulted in a new commercial article that was distinct “in name, use, performance characteristics, and tariff classification.” Id. at 540 (citing Guardian Industries Corp. v. United States, 3 CIT 9, 16 (1982)).
In the instant case, green pipe from China is exported to Japan, where it twice undergoes an annealing process. In each of the annealing operations, the green pipe is heated to a minimum temperature of 1,040 degrees Centigrade and subsequently quenched in water or rapidly cooled by other means. The pipe is also subjected to a cold drawing operation, wherein the pipe is pulled through a small-diameter hollow die to meet Mitsui’s dimensional requirements of the finished article. Finally, straightening and pickling operations are performed on the pipe to ensure that the merchandise meets uniform measurement requirements and to protect the steel against corrosion.
Whereas the green pipe from China is regarded by the industry as a semi-manufactured product prior to the operations performed in Japan, the finished pipe exhibits significantly lower yield strength and tensile strength, and is much more ductile than the green pipe originally manufactured in China. Additionally, upon export from Japan, the cold finished stainless steel pipe meets the specification requirements of ASTM A312. Consistent with the prior decisions of the CIT in Ferrostaal Metals and Guardian Industries Corp., we find that the manufacturing operations performed in Japan substantially transform the green pipe into a new article of merchandise—cold finished stainless steel pipe—possessing a new name, character, and use. See New York Ruling Letter (“NY”) N118180, dated September 3, 2010 (finding that applying heat treatment to green pipes “imparts the critical high yield strength required by” industry standards and “substantially transform[s] green tubes into oil well tubing”).
HOLDING:
The green pipe from China is substantially transformed by the annealing operations and other manufacturing processes performed in Japan. As such, the country of origin on the cold finished stainless steel pipe for marking purposes is Japan.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is 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,
Ieva K. O’Rourke, Chief
Tariff Classification and Marking Branch