CLA-2 OT:RR:CTF:TCM H132675 JRB
James H. Hunt
President
Hunt Oil Tool Company
1030 East Saint Mary Boulevard, Building 3
Lafayette, Louisiana 70503
RE: Country of Origin Marking for Drill Pipe
Dear Mr. Hunt:
This is in response to your ruling request, dated April 16, 2010, to U.S. Customs and Border Protection (“CBP”) Office of International Trade, Regulations and Rulings, National Commodity Specialist Division for a binding ruling on the appropriate country of origin marking for your company’s (Hunt Oil) drill pipe. The request was forwarded to this office for a response. In addition to the information contained within that request we also took into account further information that you submitted on July 12, 2010. Our response to your ruling request is below.
FACTS:
In your request you indicated that Hunt Oil sources its steel pipe from three different companies but that all of the pipes are sent to China to have a tapered extension, which will eventually become a tool joint, inertia welded onto the pipe. As such we will outline the three sources of your pipe and explain the manufacturing process below.
Drill Pipe A: Hunt Oil purchases 2.75 or 3.5 inch diameter steel pipe produced in Pennsylvania that is heat treated and upset in Ohio. The pipe is then shipped to China where a tapered extension is inertia welded onto the ends of the pipes. The pipe is then returned to the United States where it is threaded to the specifications necessary for tool joints. The tool joints are then phosphated and hard banded. Finally, you apply an internal coating to protect the pipe.
Drill Pipe B: Hunt Oil purchases 4, 4.5, or 5 inch diameter steel pipes that are made in Germany. These pipes are heat treated and upset in Germany and then shipped to China to have the tapered extensions inertia welded onto the ends of the pipe. The pipes are then shipped to the United States and undergo the same processing in the United States as Drill Pipe A.
Drill Pipe C: Hunt Oil purchases 4, 5, and 5.5 inch diameter steel pipe that is produced in Ohio. The pipes are heat treated, quenched and tempered in Ohio before being shipped to China. In China, the tapered extensions are inertia welded onto the pipes. The pipes are then shipped back to the United States where they undergo the same process as Drill Pipes A and B.
ISSUE:
What is the country of origin for purposes of the marking statute, 19 U.S.C. §1304?
LAW AND ANALYSIS:
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 United States 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 United States, the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. §1304 was "that the ultimate purchaser should be able to know by an inspection of the marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United
States v. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940). Part 134, U.S. Customs and Border Protection (CBP) Regulations (19 C.F.R. §134) implement the country of origin marking requirements and exceptions of 19 U.S.C. §1304. Section 134.1(b), CBP Regulations (19 C.F.R. §134.1(b)), defines “country of origin” as:
[T]he 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 [the marking regulations]…
A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use that differs from the original material subjected to the process. M.B.I. Merchandise Industries, Inc. v. United States, 16 C.I.T. 495, 502 (1992) (citing United States v. Gibson-Thomsen Co., C.C.P.A. 267, 270 (C.A.D. 98) (1940)) The question of whether a substantial transformation occurs for marking purposes is a question of fact; to be determined on a case-by-case basis. National Hand Tool Corp. v. United States, 16 C.I.T. 308, 311 (1992) (quoting Uniroyal Inc. United States, 3 C.I.T. 220, 542 F.Supp. 1026 (1982), aff’d, 1 Fed.Cir. 21, 702 F.2d 1022 (1983)).
The United States Customs Court, in Midwood Industries, Inc. v. United States, 64 Cust. Ct. 499 (1970) addressed the issue of the substantial transformation of various steel forgings that were being imported and then manufactured into steel flanges used to connect two pipes. Id. at 507. The court determined that rough steel forgings underwent significant manufacturing processes such that the imported products were substantially transformed into a new and different product which could be used to connect pipes together. Id.
Since Drill Pipes A and C are both made from U.S. pipe and follow the same process we will analyze the two together. The issue with respect to these two pipes is whether or not a substantial transformation has occurred in China such that the merchandise is no longer of U.S. origin but is instead of Chinese origin. In this case, the American pipe is still pipe and does not have a tool joint attached to it such that it can be considered part of a drill string used to drill oil. The name, use, and function of the product does not change when a tapered end is added to the pipe. The product is still unable to perform its function as a unit of a drill string until after it undergoes further processing (including threading, coating, and hard banding) in the United States. Therefore, we find that with respect to the U.S. origin pipe, no country of origin marking is required for the pipe returning from China.
In addition to the two pipes sourced from the United States, you also indicated that some of the pipes would be sourced from Germany. In particular the pipes described as Drill Pipe B are steel pipes that are being sent from Germany to China to have the tapered extensions inertia welded onto them just like the U.S. pipe described above. The pipes are then shipped to the United States to undergo further processing, including threading, phosphating, and hard banding, to make the product into drill pipes fitted with tool joints. Since, the pipe has not undergone a substantial transformation in China, the pipe is still considered to be products of Germany. However, this product undergoes further processing including threading, phosphating, and hard banding, in the United States to make the tapered extensions into tool joints; allowing the pipes to be connected together to form the drill string necessary for drilling for oil or gas.
The additional processing in the United States is a substantial transformation because the specialized threading and coating of the pipe turns the pipe into what is generally referred to as a joint. Similar to the flanges in Midwood, the pipe goes from being unable to be a part of a drill string used in drilling for oil, to a pipe that is now capable of being used in the drill string and as such it has changed its character and use to a specialized product due to the special threading, phosphating, coating, and hard banding. Therefore you are not required to mark the completed drill pipe as a product of Germany.
Finally, the merchandise in question may be subject to antidumping duties or countervailing duties. Written decisions regarding the scope of AD/CVD orders are issued by the Import Administration in the Department of Commerce and are separate from tariff classification and origin rulings issued by CBP. You can contact them at http://www.trade.gov/ia/ (click on "Contact Us"). For your information, you can view a list of current AD/CVD cases at the United States International Trade Commission website at http://www.usitc.gov (under the “Import Injury” tab click on "AD/CVD Investigations”) and you can search AD/CVD deposit and liquidation messages using the AD/CVD Search tool at http://addcvd.cbp.gov/.
We would also note that the pipe being sourced from the United States contains the marking “Made in the U.S.A.”. CBP does not make determinations on the appropriateness of markings such as “Made in the U.S.A.” In order to determine whether or not a good can be marked with that marking or similar markings indicating U.S. origin, you must submit a request to the Federal Trade Commission (FTC), Division of Enforcement, 6th and Pennsylvania Avenue, N.W., Washington, D.C., 20580.
HOLDING:
Pursuant to 19 U.S.C. §1304, we find that the pipes originating from the United States that are then shipped to China to have tapered extensions welded onto them have not undergone a substantial transformation such that they would be considered foreign products and thus subject to the country of origin marking requirements provided for in the marking statute. With respect to the pipe originating in Germany we find that pursuant to 19 U.S.C. §1304 those products do not have to be marked as a product of Germany because they undergo a substantial transformation in the United States.
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 transactions.
Sincerely,
Ieva K. O’Rourke, Chief
Tariff Classification and Marking Branch