CLA-2 CO:R:C:M 956211 KCC
District Director
U.S. Customs Service
111 W. Huron Street
Room 603
Buffalo, New York 14202-2378
RE: Protest 0901-93-101705; ceramic insulators; non-originating
material; Japanese origin porcelain; CFTA; 8547; General
Note 3(c)(vii)(B)(2); change in tariff classification;
General Note 3(c)(vii)(R)(16)(bb); EN 85.46; GRI 2(a);
incomplete or unfinished article; essential character; EN
Rule 3(b)
Dear District Director:
This pertains to Protest 0901-93-101705, concerning the
applicability of the United States-Canada Free Trade Agreement
(CFTA), to ceramic insulators.
FACTS:
The ceramic insulators under consideration are Type A-2812 C
Base Insulators, Type A-S 4006M Radio Tower Guy Strain
Insulators, and Type A-4722B Radio Tower Base Insulators. The
information submitted by the protestant, Racal-Decca Canada Ltd.,
describes the ceramic insulators as follows:
Type A-4722B Radio Tower Base Insulator is an "oil filled
porcelain cylinder cemented between two metal plates."
Type A-S 4006M Radio Tower Guy Strain Insulator is installed
in the guy ropes supporting the tower and sustain a tensile
load. The load element within the insulator taking this
tensile load is a fibreglass loop. This loop is enclosed
within the porcelain cylinder which is oil filled to provide
a protective environment for the loop."
Although the protestant does not describe the Type A-2812 C Base
Insulators, we note that technical specifications for each of the
ceramic insulators was provided.
The protestant manufactures the ceramic insulators in Canada
from non-originating parts which are Japanese origin porcelain
tubes. The only description of the operations performed in
Canada is the following statement provided by the protestant:
We had to undertake work on the porcelains such as cutting
and grinding...More importantly the value of the porcelain
is very low by comparison with the work undertaken in Canada
in producing the rest of the insulators....
Upon importation into the U.S. from Canada, the entries of
the ceramic insulators were liquidated on July 16, 1993, under
subheading 8546.20.00, HTSUS, as electrical insulations of
ceramic. The ceramic insulators were not granted CFTA
preferential tariff treatment.
In a protest timely filed on October 14, 1993, the
protestant states that the ceramic insulators are eligible for
CFTA preferential tariff treatment. The protestant states that,
when imported into Canada, Canadian Customs classified the
Japanese origin porcelain tubes, under subheading 8547.10.80,
Harmonized Tariff Schedule (HTS), as parts of porcelain
insulators. Therefore, the protestant contends that the ceramic
insulators undergo the applicable CFTA tariff shift and are
eligible for preferential tariff treatment.
ISSUE:
Are the ceramic insulators eligible for preferential tariff
treatment under the CFTA?
LAW AND ANALYSIS:
To be eligible for tariff preference under the CFTA, goods
must be "originating goods" within the rule of origin in General
Note 3(c)(vii)(B), Harmonized Tariff Schedule of the United
States (HTSUS). There are two primary means in General Note
3(c)(vii)(B), HTSUS, by which articles imported into the U.S. may
be "goods originating in the territory of Canada." The first
method is if the goods are "wholly obtained or produced in the
territory of Canada and/or the United States." General Note
3(c)(vii)(B)(1), HTSUS. The ceramic insulators are manufactured
from Japanese origin porcelain, so they are not "wholly obtained
or produced in the territory of Canada."
The second method is if the goods are "transformed in the
territory of Canada and/or the United States." General Note
3(c)(vii)(B)(2), HTSUS. A transformation is evident when a
change in tariff classification occurs that is authorized by
General Note 3(c)(vii)(R), HTSUS. General Note
3(c)(vii)(R)(16)(bb), HTSUS, states that for chapters 84 through
85 "[a] change from one heading (other than a parts heading) to
another heading, other than heading 8528 or 8529" is acceptable.
There is no dispute that, upon importation into the U.S.,
the ceramic insulators under consideration are classified under
subheading 8546.20.00, HTSUS, which provides for "Electrical
insulators of any material...Of ceramics." Therefore, to be
entitled to preferential tariff treatment under the CFTA pursuant
to General Note 3(c)(vii)(R)(16)(bb), HTSUS, the non-originating
(Japanese) porcelain material imported into Canada must be
classified in a heading other than heading 8546, HTSUS.
Consequently, we must examine the tariff classification of
the Japanese origin porcelain when imported into Canada. The
protestant argues that Canadian Customs classified the Japanese
origin porcelain under heading 8547, HTS. Therefore, the ceramic
insulators imported into the U.S. meet the change in tariff
classification requirement of General Note 3(c)(vii)(R)(16)(bb),
HTSUS, and are eligible for CFTA tariff preference. While, in
principle, all countries that use the Harmonized System should
give the same classification to identical merchandise through the
six-digit subheading level, no country is bound to abide by
another country's ruling. The foreign country's ruling is, at
best, merely instructive of how others may classify like goods.
See, T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
However, in this situation the protestant submitted an
"Adjustment Request" to Canadian Customs requesting a "re-determination of tariff classification" which stated that
"[i]nsulator components of porcelain were imported incorrectly as
complete insulators." Canadian Customs re-appraised the
merchandise and issued refunds. No legal or factual explanation
accompied Canadian Customs re-appraisal to demonstrate their
posisiton regarding this issue. Therefore, we do not find the
re-apprasisal by Canadian Customs persuasive.
We are of the opinion that the proper classification of the
Japanese origin porcelain when imported into Canada is under
heading 8546, HTSUS, as electrical insulators. In understanding
the language of the HTS, the Harmonized Commodity Description and
Coding System (HCDCS) Explanatory Notes (ENs) may be consulted.
See, T.D. 89-80. EN 85.46 (pgs. 1406-1407) states that:
Insulators of this heading are used for the fixing,
supporting, or guiding of electric current conductors while
at the same time insulating them electrically from each
other, from earth, etc....
...Insulators are often given bell, accordion, petticoat,
grooved, cylinder or other shapes. Certain types are
constructed in such a way that when in position they may
contain oil to prevent contamination of the surface by
conducting materials....
...They may contain fixing devices (e.g., metal brackets,
screws, bolts, clips, laces....
GRI 2(a), HTS, states that:
Any reference in a heading to an article shall be taken to
include a reference to that article incomplete or
unfinished, provided that, as entered, the incomplete or
unfinished article has the essential character of the
complete or finished article....
In general, essential character has been construed to mean
the attribute which strongly marks or serves to distinguish what
an article is; that which is indispensable to the structure, core
or condition of the article. In addition, EN Rule 3(b) (pg. 4),
provides further factors which help determine the essential
character of goods. Factors such as bulk, quantity, weight or
value, or the role of a constituent material in relation to the
use of the goods are to be utilized, though the importance of
certain factors will vary between different kinds of goods.
We are of the opinion that the essential character of the
ceramic insulators is the ceramic insulating material, i.e., the
Japanese origin porcelain. The ceramic material is the component
which serves to distinguish the ceramic insulators. It performs
the insulating function. Moreover, it appears that the work
performed by the protestant in Canada, which involves attaching
fixing devices to the non-originating Japanese porcelain and
filling the ceramic with oil, are operations which merely finish
the ceramic insulators. EN 85.46 states that ceramic insulators
of heading 8546, HTS, may include fixing devices and can be
filled with oil.
The Japanese origin porcelain entering Canada has the
essential character of an electrical insulator of ceramic and is,
therefore, classified as an unfinished ceramic insulator pursuant
to GRI 2(a), HTSUS. As the Japanese origin porcelain and
completed ceramic insulators are both classified under the
heading 8546, HTS, the ceramic insulators imported into the U.S.
do not meet the tariff shift requirement of General Note
3(c)(vii)(R)(16)(bb), HTSUS, and, therefore, are not eligible for
preferential tariff treatment under the CFTA.
HOLDING:
The ceramic insulators are not subject to the change in
tariff classification pursuant to General Note
3(c)(vii)(R)(16)(bb), HTSUS, and, therefore, are not eligible for
preferential tariff treatment under the CFTA.
The protest should be DENIED. In accordance with Section
3A(11)(b) of Customs Directive 099 3550-065, dated August 4,
1993, Subject: Revised Protest Directive, this decision should
be mailed, with the Customs Form 19, by your office to the
protestant no later than 60 days from the date of this letter.
Any reliquidation of the entry in accordance with the decision
must be accomplished prior to mailing of the decision. Sixty
days from the date of the decision the Office of Regulations and
Rulings will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS and the public
via the Diskette Subscription Service, Freedom of Information
Act, and other public access channels.
Sincerely,
John Durant, Director
Commercial Rulings Division