MAR-2-05 RR:TC:SM 560031 MLR
Mr. Gerry Groen
Tri-Lad Inc.
P.O. Box 430
220 Park Road North
Brantford, Ontario
Canada N3T 5P3
RE: Country of origin marking for flanges; forgings;
Canada; Midwood; NAFTA; Article 509
Dear Mr. Groen:
This is in reference to your letter of August 15,
1996, requesting a ruling concerning the country of origin
marking of flanges.
FACTS:
It is stated that Tri-Lad Inc. manufactures flanges in
Canada. The article processed in Canada is stated to be a
rough forging produced on either a roll ring, or a forging
press. It may be forged in Canada, but it is stated that
it is usually imported into Canada under subheading
7307.91.10, Harmonized Tariff Schedule of the United States
(HTSUS). If the rough forging is imported into Canada, it
is stated that the following processes are performed in
Canada:
1. A significant majority of forgings are heat treated
which consists of heating and cooling the forging under
specified and controlled conditions to achieve the desired
physical properties.
2. Lathing is performed which consists of two metal
machining operations to achieve the shape and dimensional
requirements. It is stated that many of the dimensional
requirements are to industry standards, but large flanges
often have weld end preparation dimensions that are a
custom requirement specified by the end user. Ends must
always be machined to permit either welding or threading
attachment to the mating pipe.
3. Drilling is performed which removes material in a
circular bolt hole pattern to provide holes necessary for
bolt and fastener clearance. For smaller solid forgings,
it may also include drilling the middle of the forging to
produce a bore that is subsequently lathed.
4. The next operation is threading which consists of
threading the bore for threaded flanges, to permit
attachment of the flange to the mating pipe. Specialty
flanges may require additional threading for the attachment
of instrumentation piping (orifice flanges).
5. A minority of heat treated flanges are shot blasted
which consists of the removal of mill scale to facilitate
machining or to clean surfaces that remain unmachined at
the end of production.
6. Material testing and certification captures changes
in physical properties.
7. Die stamping identifies Tri-Lad as the manufacturer
and Canada as the country of origin.
8. Painting is done in a traditional green color.
9. Quality assurance confirms that all standards are
met.
10. Lastly, the flanges are packaged.
It is stated that the processes described above are
comparable to those described in Midwood Industries, Inc.
v. United States, 313 F. Supp. 951 (Cust. Ct. 1970), and
the finished flange exported from Canada to the U.S. is
stated to be classifiable under subheading 7307.91, HTSUS.
ISSUE:
Whether the flanges exported to the U.S. may be marked
"Made in Canada."
LAW AND ANALYSIS:
The marking statute, section 304, 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.
You refer to the American Society of Mechanical
Engineers' definition of a manufacturer as a party that
affects the mechanical properties of the material through
heat treatment and the physical dimensions of the material
by machining. Despite this definition, in 19 CFR 134.1(b),
"country of origin" is defined as:
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" within the meaning of this
part; however for a good of a NAFTA country, the NAFTA
Marking Rules will determine the country of origin.
(Emphasis added.)
Section 134.1(j), Customs Regulations (19 CFR
134.1(j)), provides that the "NAFTA Marking Rules" are the
rules promulgated for purposes of determining whether a
good is a good of a NAFTA country. 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 U.S.
as determined under the NAFTA Marking Rules set out at 19
CFR Part 102.
Section 102.11, Customs Regulations (19 CFR 102.11),
sets forth the required hierarchy for determining whether a
good is a good of a NAFTA country for marking purposes.
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.
In this case, the applicable rule is 19 CFR
102.11(a)(3). The finished flanges are stated to be
classifiable under subheading 7307.91, HTSUS. The
applicable change in tariff classification for headings
7301-7307 set out in section 102.20(n), Section XV,
Chapters 72 through 83, provides:
7301-7307 ... A change to heading 7301 through 7307
from any other heading, including another heading
within that group.
It is stated that the forgings imported into Canada
are classifiable under subheading 7307.91.10, HTSUS.
Therefore, the forging imported into Canada will not
undergo the requisite tariff shift, and 19 CFR 102.11(b) of
the hierarchial rules must be applied, which in pertinent
part provides that:
Except for a good that is specifically described in
the Harmonized System as a set, or is classified as a
set pursuant to General Rule of Interpretation 3,
where the country of origin cannot be determined under
paragraph (a), the country of origin of the good:
(1) Is the country or countries of origin of the
single material that imparts the essential
character of the good ...
When determining the essential character of a good under 19
CFR 102.11, 19 CFR 102.18(b)(1) provides that only domestic
and foreign materials that are classified in a tariff
provision from which a change is not allowed shall be taken
into consideration. Section 102.18(b)(1)(iii), Customs
Regulations (19 CFR 102.18(b)(1)(iii)), provides that if
there is only one material that is classified in a tariff
provision from which a change in tariff classification is
not allowed, then that material will represent the single
material that imparts the essential character to the good
under 19 CFR 102.11.
Pursuant to 19 CFR 102.18(b)(1)(iii), the single
material that imparts the essential character of the finished
flange is the forging. Accordingly, the country of origin of
the finished stainless steel flange is the country of origin
of the forging imported into Canada, which is not specified
in this ruling request.
It is claimed that Midwood should be applicable in this
instance because of the recent decision by the Court of
International Trade (CIT) in CPC International Inc. v. United
States, 933 F. Supp. 1093 (CIT July 8, 1996), which you state
did not find that the NAFTA Marking Rules replace the
principles and rules already in the law, i.e., the rules of
substantial transformation. Please note that CPC
International is still in litigation. Nevertheless, assuming
arguendo that the court's decision in that case becomes the
final disposition in that litigation, the issues presented in
CPC International are distinguished from those in this case.
The CIT in CPC International stated that Congress intended
the interpretation of the ultimate purchaser provision of
section 1304(a), as codified in 19 CFR 134.35(a), to remain
in effect. On the other hand, the CIT specifically concluded
that Congress authorized the issuance of regulations,
necessary to implement the North American Free Trade
Agreement Implementation Act of 1993 [codified at 19 U.S.C.
3311], which include the establishment of the Marking Rules.
Since this case does not involve processing in the U.S., 19
CFR 134.35, the regulation which was the subject of CPC
International, is not applicable. Accordingly, the NAFTA
Marking Rules are clearly applicable in this case. Pursuant
to 19 CFR 102.18(b)(1)(iii), the single material that imparts
the essential character to the flanges imported into the U.S.
is the forging. Pursuant to 19 CFR 102.11(b), the country of
origin of the flanges is the country of origin of the
forgings.
HOLDING:
Based upon the information provided, pursuant to 19 CFR
102.11(b), the country of origin of the finished flanges
processed in Canada as described above is the country of
origin of the forgings.
A copy of this ruling letter should be attached to the
entry documents filed at the time the goods are 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
Tariff Classification Appeals
Division