CLA-2 CO:R:C:S 555763 KCC
Mr. Alex Romero, Jr.
A. F. Romero & Co., Inc.
477 Railroad Blvd.
P.O. Box 989
Calexico, California 92231-0989
RE: Tariff treatment and country of origin marking requirements
applicable to double walled pipe sections created by
pressing, forming and welding in Mexico.Further fabrication;
assembly; substantial transformation; 555532; 055684 ; T.D.
86-15; 087434 modified
Dear Mr. Romero:
This is in response to your letters dated June 19, and
October 29, 1990, on behalf of American Metal Products,
requesting a ruling concerning the applicability of subheading
9802.00.80, Harmonized Tariff Schedule of the United States
(HTSUS), and the country of origin marking requirements for
double walled pipe sections. Your request for the tariff
classification of this merchandise was answered in Headquarters
Ruling Letter (HRL) 087434 dated October 18, 1990.
FACTS:
American Metal will manufacture double walled pipe sections
in Mexico from U.S.-cut galvanized steel and aluminum sheet
blanks. The double walled pipe sections will be 3 to 6 inches in
diameter and will have various lengths of 6, 12, or 24 inches and
3, 4, or 5 feet. The inner pipe is made of aluminum and the
outer pipe is made from galvanized steel. Each section of pipe
has snap-lock coupling ends.
In Mexico, the U.S.-cut steel and aluminum sheet is rolled
into the form of pipe; the rolled pipe length edges are seamed
together on a horn press; a male and a female end are formed by a
jig onto opposing ends of the pipe; the inner pipe is placed
inside the outer pipe; and the two pipes are welded together in
six spots on the outer male end.
After inspection and packaging, the double walled pipe
sections are shipped to the U.S.
In HRL 087434, we stated that for purposes of the U.S.-
Mexico steel arrangement, the double walled pipes will not be
considered products of Mexico upon their return to the U.S.
This conclusion was predicated on the assumption that the double
walled pipes are merely assembled in Mexico from pipe sections
of U.S. origin. However, the additional information provided in
your October 29, 1990, letter indicates that the assembly
operations are performed only after aluminum and galvanized steel
sheets of U.S. origin are processed in Mexico, as described
above, into inner and outer pipe sections. Therefore, as the
facts provided in your October 29, 1990, letter are materially
different from those upon which HRL 087434 was based, the
statement in HRL 087434 concerning the country of origin of the
double walled pipes is modified to conform with the country of
origin determination set forth below. See section 177.9(d),
Customs Regulations (19 CFR 177.9(d)).
The U.S. Department of Commerce is responsible for the
administration of steel voluntary restraint agreements (VRAs),
including the U.S.-Mexico steel VRA. Therefore, to determine the
applicability of VRA certification requirements to the double
walled pipe sections to be imported from Mexico, we recommend
that you contact the Office of Agreements Compliance,
International Trade Administration, Department of Commerce,
Washington, D.C. 20230.
ISSUE:
I. Whether the pipe sections will be eligible for the partial
duty exemption available under subheading 9802.00.80, HTSUS, when
imported into the U.S.
II. Whether country of origin marking requirements are
applicable to the imported pipe sections.
LAW AND ANALYSIS:
I. Applicability of subheading 9802.00.80, HTSUS
HTSUS subheading 9802.00.80 provides a partial duty
exemption for:
[a]rticles assembled abroad in whole or in part of
fabricated components, the product of the United States,
which (a) were exported in condition ready for assembly
without further fabrication, (b) have not lost their
physical identity in such articles by change in form, shape,
or otherwise, and (c) have not been advanced in value or
improved in condition abroad except by being assembled and
except by operations incidental to the assembly process,
such as cleaning, lubrication, and painting.
All three requirements of subheading 9802.00.80, HTSUS, must be
satisfied before a component may receive a duty allowance. An
article entered under this tariff provision is subject to duty
upon the full cost or value of the imported assembled article,
less the cost or value of the U.S. components assembled therein,
upon compliance with the documentary requirements of section
10.24, Customs Regulations (19 CFR 10.24).
Section 10.14(a), Customs Regulations (19 CFR 10.14(a)),
states in part that:
[t]he components must be in condition ready for assembly
without further fabrication at the time of their exportation
from the United States to qualify for the exemption.
Components will not loose their entitlement to the exemption
by being subjected to operations incidental to the assembly
either before, during, or after their assembly with other
components.
Operations incidental to the assembly process are not
considered further fabrication operations, as they are of a minor
nature and cannot always be provided for in advance of the
assembly operations. However, any significant process, operation
or treatment whose primary purpose is the fabrication,
completion, physical or chemical improvement of a component
precludes the application of the exemption under subheading
9802.00.80, HTSUS, to that component. See, 19 CFR 10.16(c).
We are of the opinion that the pipes are not ready to enter
into the assembly process without further fabrication. The pipes
which will be welded together do not exist until they are first
manufactured in Mexico. The U.S.-cut steel and aluminum blanks
are rolled into pipe shapes and then seamed to manufacture the
pipe sections. Thereafter, the male and female ends of the pipe
are formed with a jig. Only after these manufacturing operations
are performed will the assembly operation (welding) be performed.
The U.S.-cut blanks are further fabricated in the manufacturing
process to create the pipes that will be subjected to the
assembly operation. Thus, the complete change in shape of the
U.S.-cut blanks into pipe is a significant process and cannot be
considered an operation incidental to the assembly. As the U.S.-
cut blanks do not meet the requirement of clause (a) of
subheading 9802.00.80, HTSUS, no allowance in duty can be made
for the cost or value of the U.S.-cut steel and aluminum blanks.
II. Applicability of country of origin marking requirements
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 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 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. Section 134.1(b), Customs Regulations (19 CFR
134.1(b)), provides that "country of origin" means the country of
manufacture, production, or growth of any article of foreign
origin entering the U.S. 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." The term "foreign origin" is defined in section
134.1(c), Customs Regulations (19 CFR 134.1(c)), as a country of
origin other than the U.S., as defined in 19 CFR 134.1(e), or its
possessions and territories.
As provided in section 134.32(m), Customs Regulations (19
CFR 134.32(m)), products of the U.S. exported and returned are
specifically excepted from country of origin marking
requirements. If a U.S. product is sent abroad for processing,
the article remains a product of the U.S. excepted from the
country of origin marking requirements unless, prior to its
return, it is substantially transformed into an article of
foreign origin. This exception from country of origin marking
does not apply to articles assembled abroad in whole or in part
from U.S.-made components and eligible for entry under subheading
9802.00.80, HTSUS. See, section 10.22, Customs Regulations (19
CFR 10.22). Such assembled articles are considered products of
the country of assembly for purposes of 19 U.S.C. 1304, whether
or not the assembly constitutes a substantial transformation.
If the U.S. product is substantially transformed abroad, it
becomes an article of foreign origin and must be marked with its
country of origin. In order for a substantial transformation to
be found, a new and different article having a distinctive name,
character, or use must emerge from the processing. See,
Anheuser-Bush Brewing Ass'n v, United States, 207 U.S. 556, 28
S.Ct. 204 (1908).
In general, cutting or bending materials to defined shapes
or patterns suitable for use in making finished articles, as
opposed to mere cutting to length or width which does not render
the article suitable for a particular use, constitutes a
substantial transformation. See, HRL 055684 dated August 14,
1979, (components of a water cooler gas absorption refrigeration
unit which were formed by cutting to length, cleaning, and
bending imported steel tubes into the components' shapes and
configurations, or cutting to length, flattening, and drilling
holes into imported tubing, were substantially transformed into
constituent materials for GSP purposes), and HRL 555532 dated
September 18, 1990, (straightening, shearing to a rectangular
shape, blanking, grit blasting, rolling to form in a tubular
shape and seam welding to form a tube constitutes a substantial
transformation).
We are of the opinion that the operations performed in
Mexico result in a substantial transformation. The steel and
aluminum sheet will undergo rolling, seaming, welding and forming
operations that create a double walled pipe. The result of the
processing in Mexico is to create a new and different article, a
double walled pipe section, with a distinct character and use
that is not inherent in the sheet imported into Mexico.
Accordingly, the country of origin of the imported pipe is
Mexico.
Specified methods for marking steel pipe are set forth in 19
U.S.C. 1304(c). Specifically, 19 U.S.C. 1304(c)(1) provides that
"except as provided in paragraph (2), . . . (Such articles) shall
be marked with the English name of the country of origin by means
of die stamping, cast-in-mold lettering, etching, or engraving."
If, because of the nature of the article, it is technically or
commercially infeasible to mark by these methods, an equally
permanent method, such as paint stencilling is permitted. See, 19
U.S.C. 1304(c)(2).
According to T.D. 86-15, 20 Cust.Bull. 29 (1986), certain
categories of articles cannot be marked with the country of
origin by any of the methods prescribed in 19 U.S.C. 1304(c)(1),
without rendering such articles unfit for the purpose for which
they are intended or violating industry standards. One of the
categories specified is coated pipe, which includes galvanized
pipe. Although T.D. 86-15 states that such category of pipe
should be marked with an alternative marking method of either
paint stencilling, or tagging of bundles or containers, the
latter method is not an equally permanent method of marking the
pipe within the meaning of 19 U.S.C. 1304(c)(2). Thus, in order
to comply with the requirements of 19 U.S.C. 1304(c)(2), the
imported pipe should be marked with the country of origin by
means of paint stencilling, or another equally permanent method.
We intend to recommend that T.D. 86-15 be modified to conform to
the requirements of 19 U.S.C. 1304(c)(2).
Therefore, as the U.S.-cut steel is substantially
transformed into double walled pipe sections, it is considered a
product of Mexico, and, therefore, must be marked "Made in
Mexico". The pipe section must be marked by means of paint
stencilling or an equally permanent method.
HOLDING:
On the basis of the information submitted, we conclude that
the formation of the U.S.-cut steel and aluminum blanks into pipe
sections is not an acceptable assembly operation or operation
incidental to the assembly process, but rather is further
fabrication of the exported blanks. Therefore, the pipe
sections will not qualify for the partial duty exemption
available under subheading 9802.00.80, HTSUS.
The processing of the U.S.-cut steel and aluminum blanks as
described above into double walled steel pipe sections in Mexico
is considered a substantial transformation. Therefore, upon
importation, the double walled pipe sections are considered a
product of Mexico and should be marked accordingly.
Sincerely,
John Durant, Director
Commercial Rulings Division
cc: Ass't Area Dir, NIS
087434