OT:RR:CTF:TCM HQ 131777 AMM
Mr. Rick McQueary
Applied Magnesium USA, Inc.
12015 E. 46th Ave, Suite 200
Denver, CO 80239
RE: Advance Ruling Request; Classification and Country of Origin Marking of Magnesium Granules and Turnings
Dear Mr. McQueary:
This is in response to your North American Free Trade Agreement (NAFTA) advance ruling request, dated February 24, 2010, filed on behalf of Applied Magnesium USA, Inc. (Applied Magnesium), regarding the classification and country of origin marking of certain magnesium granules and turnings.
FACTS:
Applied Magnesium is a U.S. manufacturer of magnesium granules and turnings which are used in the production of pharmaceuticals, agrochemicals, food additives, and polymers, headquartered in Colorado. Applied Magnesium is the sole owner of Timminco de Mexico S.D. de C.V. (Timminco), a company in Mexico which reduces magnesium ingots to turnings and granules.
The products in question are described as Magnesium ASTM 99.95% Granules (magnesium granules) and Magnesium ASTM 99.95% Turnings (magnesium turnings). The production in Mexico consists of a reduction process, whereby Magnesium ASTM 99.95% Grinding Ingots (magnesium ingots), imported to Mexico from China, are transformed into magnesium turnings and granules. The reduction process described in your letter essentially consists of feeding the magnesium ingots into a machine which either chops or grinds the ingots into smaller pieces. The finished products are then packaged and imported into the United States.
You state that the magnesium ingots are classified under subheading 8104.11.00, of the Harmonized Tariff Schedule of the United States (HTSUS), and that magnesium granules and turnings are classified under subheading 8104.30.00, HTSUS. You have asked whether the granules and turnings would be considered a product of Mexico for country of origin marking purposes.
ISSUES:
What is the correct tariff classification of the magnesium granules and turnings upon importation into the United States?
Do the magnesium granules and turnings qualify for NAFTA duty preference for country of origin marking purposes?
LAW AND ANALYSIS:
I. Classification
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied.
The 2011 HTSUS provisions at issue are as follows:
8104 Magnesium and articles thereof, including waste and scrap:
Unwrought magnesium:
8104.11.00 Containing at least 99.8 percent by weight of magnesium
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8104.30.00 Raspings, turnings and granules, graded according to size; powders
Note 3 to Section XV, HTSUS, states: “Throughout the schedule, the expression ‘base metals’ means: …, magnesium, …”.
Additional U.S. Note 1 to Section XV, HTSUS, states:
For the purposes of this section, the term "unwrought” refers to metal, whether or not refined, in the form of ingots, blocks, lumps, billets, cakes, slabs, pigs, cathodes, anodes, briquettes, cubes, sticks, grains, sponge, pellets, flattened pellets, rounds, rondelles, shot and similar manufactured primary forms, but does not cover rolled, forged, drawn or extruded products, tubular products or cast or sintered forms which have been machined or processed otherwise than by simple trimming, scalping or descaling.
There is no dispute that the magnesium turnings, granules, and ingots are classified in heading 8104, HTSUS, which covers “magnesium and articles thereof…”. Rather, the issue is the proper 8-digit subheading that is applicable. As a result, GRI 6 applies.
GRI 6 states: For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.
The magnesium ingots imported from China are “unwrought” pursuant to Additional U.S. Note 1 to Section XV. As such, they would be properly classified under subheading 8104.11.00, HTSUS, which provides for “Magnesium and articles thereof, including waste and scrap: Unwrought magnesium: Containing at least 99.8 percent by weight of magnesium”.
The magnesium turnings and granules do not meet the definition of “unwrought,” because they are not manufactured primary forms of the type described in this Note. Instead, the magnesium turnings and granules are properly classified under subheading 8104.30.00, HTSUS, which provides for “Magnesium and articles thereof, including waste and scrap: Raspings, turnings and granules, graded according to size; powders”.
II. Country of Origin Marking
General Note 12, HTSUS, incorporates Article 401 of the NAFTA into the HTSUS. General Note 12 (a)(ii), HTSUS, provides, in pertinent part, that:
Goods that originate in the territory of a NAFTA party under the terms of subdivision (b) of this note 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 (without regard to whether the goods are marked), and goods enumerated in subdivision (u) of this note, 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" in parentheses, are eligible for such duty rate, in accordance with section 201 of the North American Free Trade Agreement Implementation Act.
Accordingly, the magnesium granules and turnings will be eligible for the “Special” “MX” rate of duty provided: (1) they are deemed to be NAFTA originating under the provisions of General Note 12(b), HTSUS; and, (2) qualify to be marked as products of Mexico under the NAFTA Marking Rules that are set forth in Part 102 of the Code of Federal Regulations (19 CFR 102).
A. NAFTA Eligibility
In order to determine whether the magnesium granules and turnings are NAFTA-originating, we must consult General Note 12(b), HTSUS, which provides, in pertinent part, as follows:
For the purposes of this note, goods imported into the Customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as "goods originating in the territory of a NAFTA party" only if—
(i) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or
(ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that—
(A) except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein, or
(B) the goods otherwise satisfy the applicable requirements of subdivisions (r), (s) and (t) where no change in tariff classification is required, and the goods satisfy all other requirements of this note; or
(iii) they are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.
Because the magnesium granules and turnings are comprised of non-originating materials from China, General Notes 12(b)(i) and 12(b)(iii), HTSUS, do not apply. Therefore, we must determine whether the non-originating materials undergo the requisite tariff shift (or other applicable requirement) prescribed under General Note 12(b)(ii), HTSUS. The applicable rule in this case regarding the requisite change of tariff classification is set forth in General Note 12(t)/(81)(1B), HTSUS, which requires: “A change to subheadings 8102.10 through 8110.90 from any other subheading, including another subheading within that group.”
As discussed above, the magnesium ingots which are imported to Mexico from China would be classified under subheading 8104.11, HTSUS. Timminco’s manufacturing process converts the ingots to granules and turnings, which are both classified under 8104.30, HTSUS. Therefore, the materials undergo the requisite tariff shift defined in General Note 12(b)(ii)(A) and 12(t)/(81)(1B), HTSUS, and the first part of the test is satisfied.
B. Marking
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), requires 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 manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. The regulations implementing the requirements and exceptions to 19 U.S.C. §1304 are set forth in Part 134, CBP Regulations (19 C.F.R. Part 134).
Section 134.1(b), CBP Regulations (19 C.F.R. §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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
In addition to being a good that originates in the territory of a NAFTA party, General Note 12(a)(ii), HTSUS, establishes that NAFTA-originating goods must also qualify to be marked as goods of Mexico under the NAFTA Marking Rules before the tariff preferential treatment is granted. In this regard, section 134.1(j) of the Customs and Border Protection 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. Section 134.1(g) defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico or the United States, as determined under the NAFTA Marking Rules.
Part 102, Customs and Border Protection Regulations (19 CFR Part 102), sets forth the NAFTA Marking Rules. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes. See 19 CFR 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:
(a)(1) The good is wholly obtained or produced;
(a)(2) The good is produced exclusively from domestic materials; or
(a)(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.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the imported magnesium turnings and granules are neither wholly obtained or produced exclusively from “domestic” (Mexican, in this case) materials. Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3). “Foreign material” is defined in 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.” The applicable rule for heading 8104, HTSUS, in section 102.20 requires “a change to any other good of subheading 8103.20 through 8113.00 from any other subheading, including another subheading within that group.”
As discussed above, the magnesium ingots which are imported to Mexico from China would be classified under subheading 8104.11, HTSUS. Timminco’s manufacturing process converts the ingots to granules and turnings, which are both classified under 8104.30, HTSUS. Therefore, the materials undergo an applicable change in tariff classification as set out in 19 CFR 102.20, and thus the magnesium turnings and granules qualify to be marked as a good of Mexico.
HOLDING:
Based upon the information presented, the Magnesium ASTM 99.95% Granules and Magnesium ASTM 99.95% Turnings will be considered as NAFTA originating pursuant to General Note 12(b). Moreover, the country of origin of these products under the NAFTA Marking Rules will be Mexico. Per GRI 1 and GRI 6, both products are properly classified under heading 8104, HTSUS, specifically under subheading 8104.30.00, HTSUS, which provides for “Magnesium and articles thereof, including waste and scrap: Raspings, turnings and granules, graded according to size; powders”. The 2011 column one, special rate of duty is free.
U.S. Customs and Border Protection NAFTA Regulations, 19 CFR 181.100 (a)(2), provide that each NAFTA ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of an advance ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the advance ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the advance ruling was based. If any of the facts are materially different or a condition has not been satisfied, the treatment specified in the advance ruling will not be applied to the actual transaction.
A copy of this ruling letter 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 CBP officer handling the transaction.
Sincerely,
Ieva O’Rourke, Chief
Tariff Classification and Marking Branch