CLA-2 RR:CR:SM 561272 BLS
TARIFF NOS.: Subheadings 7208.27 and 7217.90.5060
Mr. Jim Wickstead
PBB Global Logistics
434 Delaware Avenue
Buffalo, New York 14202
RE: Eligibility of steel strapping for NAFTA preference; originating good; country of origin marking; substantial transformation; subheading 7208.27, HTSUS
Dear Mr. Wickstead:
This is in reference to your letter dated January 7, 1999, on behalf of Gibralter Steel Corporation (“Gibralter”), concerning the eligibility for NAFTA preference and country of origin marking requirements of certain steel products produced in the United States.
FACTS:
You state the following:
The product is steel strapping made from hot-rolled processed steel coil. Although you state that the product is imported, you do not identify the country of origin of such product. Accordingly, we will assume that the country of origin is neither Canada nor Mexico, and thus is not a country which is a party to the North American Free Trade Implementation Agreement (NAFTA).
The imported product measures .071" x 36.812" and comes in various lengths. It is composed of carbon, .27/.33%; magnesium, 1.30/1.55%; phosphorous, .025%; sulfur, .012%; aluminum, .025/.060%; and is aluminum killed. It is minimal ferrite and micro-fine pearlitic. The coil is made in a hot rolling process where the material is rolled at 1,125 degrees Fahrenheit. The steel is pickled dry. It is made for a uniform, rapid austempering to ASTM D3953-91 properties: 5,000 pounds minimum breakload, 6.5% minimum elongation in 6", minimum yield strength to 80% of 125,000 tensile strength. It is made primarily for cold-rolled conversion-austempering strapping.
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In Gibralter’s facility in the U.S., the product is slit to designated widths. The next
step is a “cold reduction" process where the strip is reduced in thickness at room
temperature. Cold reduction improves the surface quality and reduces variation and gauge, wedge and mechanical properties. During the reduction process, the crystalline structure or arrangement of atoms is severely distorted, resulting in high strength and low ductility.
The steel is slit again in a process called “oscillate slit.” This is a re-slit operation that can hold tighter width tolerances (plus or minus .003"), reduce chamber variation and reduce burr in the product. This process is capable of transversing the material to produce a 6,000 pound coil that is oscillate-wound like a spool of thread.
The final stages are austempering and painting. Austempering is a heat treatment for ferrous alloys in which a part is quenched from the austempering temperature at a rate fast enough to avoid formation of ferrite or pearlite and then held at a temperature just above M, until transformation to bainite is complete. During this process, the
crystalline structure or arrangement of atoms in the steel is first converted into a face-centered cubic (FCC) pattern or austinite and later transformed into a body-centered tetragonal (BCT) arrangement or bainite.
In your opinion, the imported product is classifiable under subheading 7802.27.0060, Harmonized Tariff Schedule of the United States (HTSUS), and that after processing in the U.S., the completed product is properly classifiable under subheading 7217.20. As a result, you believe that the “oscillated wound steel strapping” produced in the United States is eligible for preferential tariff treatment under the NAFTA since under the specific rule for the good (General Note 12(t), Chapter 72.8) there is a tariff shift from subheading 7802.27.0060 to subheading 7217.20.
LAW AND ANALYSIS:
NAFTA Preference
General Note 12(a), HTSUS, provides as follows:
(a) Goods originating in the territory of a NAFTA party to the North American Free Trade Agreement (NAFTA) are subject to duty as provided herein. For the purposes of this note --
(i) Goods that originate in the territory of a NAFTA party ......... and that qualify to be marked as goods of Canada under the terms of the marking rules set
forth in regulations issued by the Secretary of the Treasury ......, when such - 3 -
goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "CA"....... are eligible for such duty rate....
(Emphasis added.)
(ii) Goods that originate in the territory of a NAFTA party ......... and that qualify to be marked as goods of Mexico under the terms of the marking rules set
forth in regulations issued by the Secretary of the Treasury ......, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the "Special" subcolumn followed by the symbol "MX"....... are eligible for such duty rate....
(Emphasis added.)
Accordingly, to be eligible for NAFTA preferential treatment, the determination of a good as "originating" must be made upon its importation into the United States. In the instant case, subsequent processing in the U.S. which may effect a tariff shift of the imported product will be immaterial in determining whether the imported good is eligible for NAFTA preferential treatment. Therefore, assuming the good is not "originating" upon importation into the U.S., it will not be eligible for NAFTA preferential treatment upon entry.
Country of Origin Marking
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 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 the exceptions of 19 U.S.C. 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 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 the marking laws and regulations. The case of United States v. Gibson Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940), provides that an article used in manufacture in the U.S. which results in an article having a name, character or use differing from that of the imported constituent article will be considered substantially transformed. In such circumstances, the U.S. manufacturer will be considered the ultimate purchaser. The imported article will be excepted from the
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marking requirements and only the outermost container is required to be marked. (See 19 CFR 134.35.)
In the instant case, we find that the processing in the U.S. which includes slitting into specified widths, cold reduction, heat treating and re-slitting results in a substantial transformation of the imported product. Therefore, Gibralter will be considered the ultimate purchaser and the imported product will be excepted from the individual marking requirements. However, the outermost container in which the steel coil is imported is required to be marked with its country of origin, which we assume is a non-
NAFTA country. The Federal Trade Commission ("FTC") has jurisdiction concerning the use of the phrase "Made in the U.S.A.", or similar words denoting U.S. origin. Consequently, any inquiries regarding the use of such phrases reflecting U.S. origin should be directed to the FTC, at the following address: Federal Trade Commission, Division of Enforcement, 6th & Pennsylvania Avenue, N.W., Washington, D.C. 20508.
Classification
Classification of merchandise under the Harmonized Tariff Schedule of the United States (HTSUS) is in accordance with the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes.
We find that the imported product is classifiable under subheading 7208.27.00, HTSUS, "Flat-rolled products of iron or nonalloy steel, of a width of 600 mm or more, hot-rolled, not clad plated or coated." As noted above, classification of the product after processing in the U.S. is not material to a determination as to whether it is eligible for NAFTA preference upon importation, and has no other Customs significance.
HOLDING:
1) As the imported steel product will not be "originating" upon importation into the U.S., it will not be eligible for NAFTA preferential treatment upon entry.
2) The processing in the U.S. results in a substantial transformation of the imported product. Therefore, Gibralter will be considered the ultimate purchaser and the imported product will be excepted from the individual marking requirements. However, the outermost container in which the steel coil is imported is required to be marked with its country of origin. (See 19 CFR 134.35.) The Federal Trade Commission ("FTC") has jurisdiction concerning the use of the phrase "Made in the U.S.A.", or similar words
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denoting U.S. origin. Therefore, inquiries regarding the use of such phrases should be directed to the FTC.
3) The imported product is properly classifiable under subheading 7208.27.00, HTSUS, "Flat-rolled products of iron or nonalloy steel, of a width of 600 mm or more, hot-rolled, not clad plated or coated."
A copy of this ruling 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,
John Durant, Director
Commercial Rulings Division