RR:CR:SM MAR-2-05 561074 RSD
Ms. Karen MacGilivray
Tower Group International
128 Dearborn Street
Buffalo, New York 14207
Dear Ms. MacGilivray:
RE: Country of origin of road wheels imported from Canada; NAFTA
Marking Rules;
Essential Character; 19 CFR Part 102
This is in response to a letter dated June 4, 1998, from
your firm on behalf of Kuntz Electroplating (Kuntz) concerning
the country of origin of road wheels imported from Canada. In a
telephone conversation with a member of my staff , you indicated
that Kuntz is seeking a ruling only with respect to the country
of origin of the road wheels and that no ruling regarding the
dutiable status of merchandise is sought. We have received a
report concerning the classification of this article from the
National Commodity Specialist Division. As you have requested,
the cost information you have provided will be accorded
confidential treatment.
FACTS:
To make the imported road wheels, Kuntz uses raw aluminum
castings which are produced in Ohio. Kuntz ships the aluminum
castings to Kitchener, Ontario, where they are electroplated.
The electroplating process converts the aluminum castings into
road wheels which are sent to the United States for use in motor
vehicles. In Canada, Kuntz performs three processes on the
castings before they are shipped back to the United States.
The first process performed in Canada is a metal finishing
process which removes manufacturing defects from the castings and
develops a smooth surface. The second process is an
electrochemical process during which a thin layer of metal is
deposited on a metallic base. A steady direct current of low
voltage is required for this process. The object to be coated is
placed in a solution called a "bath" which consists of "a salt
of the coating metal" and is connected to the negative terminal
of an external source of electricity. Another conductor is
connected to the positive terminal of the electric source. When
the current is passed through the solution, atoms of the plating
metal deposit out of solution onto the cathode (the negative
electrode). These atoms in the bath are replaced by atoms from
the anode (positive electrode), if it is composed of the
same metal. Otherwise, they are replaced by periodic additions
of the salt to the bath. In either case, an equilibrium between
the metal coming out of solution and metal entering is maintained
until the object is plated.
The bonding of the metallic layers increases corrosion
resistance and upgrades the cosmetic quality of the road wheels.
The metallic layers that Kuntz uses to plate the road wheels
include copper, semi-bright nickel, high sulfur nickel, bright
nickel, and chrome.
The third process is a coating operation in which an organic
based anti-corrosion
coating is applied to the brake side of the wheel as well as to
selected areas of the face of the wheel. The primary purpose of
the coating is for corrosion resistance and cosmetic appearance.
You advise that before the electroplating process, the
aluminum castings do not satisfy the standards for road wheels
used by the United States automotive industry. Critical industry
standards such as corrosion resistance and cosmetic appearance
are not met until the electroplating process is completed in
Canada.
ISSUE:
What is the country of origin of the road wheels imported
from 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 1304.
Section 134.1(b), Customs Regulations (19 CFR 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
this part;
however for a good of a NAFTA country, the NAFTA
Marking
Rules will determine the country of origin. (Emphasis
added).
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. 103-182, 107 Stat. 2057) (December 8,
1993). Section 134.1(g),
Customs Regulations (19 CFR 134.1(g)), defines a "good of a
NAFTA country" 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 in Part 102, Customs Regulations (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. That 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 section 102.1(e), Customs
Regulations (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."
Accordingly, we must determine the country of origin of the
road wheels, which you indicate are processed in Canada from
aluminum castings of U.S. origin. Because the road wheels are
made with U.S. materials, they are neither wholly obtained or
produced nor produced in Canada exclusively from domestic
materials, as those terms are defined in section 102.1, Customs
Regulations (19 CFR 102.1). Accordingly, following the
hierarchy, we must apply section 102.11(a)(3), Customs
Regulations (19 CFR 102.11(a)(3)), to see if the country of
origin of the road wheels can be determined under that provision.
Pursuant to section 102.11(a)(3), the country of origin of
a good is the country in which each foreign material incorporated
in that good undergoes an applicable change in tariff
classification set out in section 102.20, Customs Regulations (19
CFR 102.20). Section 102.20
sets forth the specific tariff classification changes and/or
other operations which are specifically required for the country
of origin to be determined on the basis of operations performed
on the foreign materials contained in a good.
According to the National Commodity Specialist Division, the
finished road wheels imported from Canada are classified in
subheading 8708.70.4545, HTSUS. We will assume for the purposes
of this ruling that this classification is correct. The
applicable rule under 19 CFR 102.20(p), section XVI, Chapters 86
through 89, is as follows:
8708.70--A change to subheading 8708.70 from any other
subheading.
The National Commodity Specialist Division has also
indicated that the raw aluminum castings that are processed in
Canada to make the finished road wheels also are classified in
subheading 8708.70.4545, HTSUS. Thus, both the finished road
wheels and the U.S. origin aluminum castings are classified in
the same subheading of the HTSUS. Consequently, the processing
performed in Canada does not result in the aluminum castings
undergoing the applicable shift in tariff classification set
forth in 19 CFR 102.20. Thus, the origin of the road wheels
cannot be determined under 19 CFR 102.11(a).
Since a country of origin determination cannot be made by
applying section 102.11(a), the analysis continues with section
102.11(b) which instructs us to examine the article's essential
character to determine its country of origin. Section 102.11(b)
provides that where the country of origin cannot be determined
under section 102.11(a), and the good is not specifically
described in the Harmonized System as a set nor classified as a
set under General Rule of Interpretation 3, HTSUS, the country of
origin of the article is "the country or countries of origin of
the single material that imparts the essential character of the
good. . .."
In regard to determining the "essential character" of the
road wheels, section 102.18(b)(1) of the regulations provides as
follows:
For purposes of identifying the material that imparts
the essential character to a good under 102.11, the
only materials that shall be taken into consideration
are those domestic or foreign materials that are
classified in a tariff provision from which a change in
tariff classification is not allowed under the section
102.20 specific rule or other requirements applicable
to the good.
In this case, the material in the road wheels that does not
undergo the applicable tariff shift or meet other requirements
applicable to the good are the aluminum castings which are
classified in the same subheading as the finished road wheels.
We find that the U.S.-origin aluminum castings clearly constitute
the material that imparts the essential character of the finished
good. Therefore, the country of origin of the road wheels is the
United States.
19 CFR 134.32(m) provides that products of the United States
exported and returned to the United States are excepted from the
country of origin marking requirements of 19 U.S.C. 1304.
Because the road wheels are products of the United States, they
need not be marked to indicate their country of origin.
HOLDING:
Under the NAFTA Marking Rules, the country of origin of the
electroplated road wheels imported from Canada is the United
States. As such, the imported articles are not subject to the
country of origin marking requirements of 19 U.S.C. 1304.
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
Commercial Rulings Division