OT:RR:CTF:VS H314560 UBB
Georgi N. Mifodjev
1101 Prospect Ave
Westbury, NY 11590
RE: Country of Origin, and Application of USMCA to certain metal powders.
Dear Mr. Mifodjev:
This is in response to your September 22, 2020 ruling requests, filed on behalf of Oerlikon Metco (US), Inc. (“Oerlikon” or “importer”), regarding the country of origin, and application of the United States Mexico Canada Agreement (USMCA) of certain metal powders, which will be prepared in Canada, for purposes of marking and preferential duty treatment under the USMCA.
FACTS:
Oerlikon is a materials and surface solutions provider that offers specialized coating services, coating equipment and materials. The subject goods are various metal powders that are identified by internal product numbers with Harmonized Tariff Schedule of the United States (“HTSUS”) classification subheadings provided in the ruling requests, as set forth below:
HMBAM040 is a metal powder consisting of non-agglomerated tungsten carbides and nickel, and functions as a metallic binder. The metal powder is used in thermal spray surface coatings. You state that this metal powder is 58% tungsten carbides (subheading 2849.90.00, HTSUS) from China, 40% tungsten carbide (subheading 2849.90.00, HTSUS) from the United States, and 2% nickel (subheading 7504.00.00, HTSUS) from Canada. Therefore, the end-product metal powder is made from partially non-originating material. The materials are blended at your facility in Fort Saskatchewan in Alberta, Canada. You state that all raw materials are tested, then gathered and blended for 45 minutes. Blended samples are then sent to a lab for testing and certification. In your submission, you provide the specific percentage content of each component that is blended to produce the end-product, as well as the time it takes to test, blend, and retest the materials. You claim the end-product is classified under subheading 3824.30.00, HTSUS, and that, having undergone a tariff shift, is a product of Canada.
Metco 51019A is a metal powder consisting of non-agglomerated tungsten carbides and nickel. The powder is used as a thermal spray coating. You state that the end-product metal powder is 60% tungsten carbides (subheading 2849.90.00, HTSUS) from China and 40% nickel alloy (subheading 7504.00.00, HTSUS) from Belgium. Therefore, the end-product metal powder is made from partially non-originating material. You state that all raw materials have some testing to release material, that material is typically added to bottles one at a time with no blend, and that one bottle is sent to the lab for certification. In your submission, you provide the specific percentage content of each component that makes up the end-product, as well as the time it takes to test and package the product. You claim the end-product is classified under subheading 3824.30.00, HTSUS, and that, having undergone a tariff shift, is a product of Canada.
Metco 54122A-0 is a metal powder consisting of non-agglomerated tungsten carbides (subheading 2849.90.00, HTSUS) from China and nickel (subheading 7504.00.00, HTSUS) from Canada. You state that the end-product metal powder is 98% tungsten carbides from China and 2% nickel from Canada. Therefore, the end-product metal powder is made from partially non-originating material. The materials are blended at your facility in Fort Saskatchewan in Alberta, Canada. You state that all raw materials have some testing to release material, that the materials are blended for four hours and then discharged and analyzed by a lab. In your submission, you provide the specific percentage content of each component that is blended to produce the end-product, as well as the time it takes to test and blend the materials. You claim the end-product is classified under subheading 3824.30.00, HTSUS, and that, having undergone a tariff shift, is a product of Canada.
In your ruling requests, you note that you are looking for a binding ruling for subheading 3824.30.00, HTSUS for each of the end-products, an origin ruling for labeling these products “Made in Canada”, as well as to deem these products eligible for preferential duty treatment under USMCA.
ISSUE:
Whether the subject metal powder is eligible for preferential tariff treatment pursuant to the USMCA and may be marked as a product of Canada.
LAW AND ANALYSIS:
Eligibility for Preferential Tariff Treatment under USCMA
The United States-Mexico-Canada Agreement (“USMCA”) was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). GN 11 of the HTSUS implements the USMCA. GN 11(a) provides:
Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) 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 “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and
Goods that originate in the territory of a USMCA country under the terms of subdivision (b) of this note and 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 “S+” in parentheses, or under a subheading whose article description provides for originating goods of one or more USMCA countries, as the case may be, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act.
GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA. GN 11(b) states:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a "good originating in the territory of a USMCA country" only if—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
…
We note that the input materials for all three end-product metal powders consist of various tungsten carbides, nickel powder, and nickel alloy powder. You classify the input tungsten carbides in subheading 2849.90.00, HTSUS, and the nickel power and nickel alloy as subheading 7504.00.00, HTSUS. Based on the information provided, we agree that the input tungsten carbides are classifiable under subheading 2849.90.00, HTSUS, and the nickel and nickel alloy powders are classifiable under subheading 7504.00.00, HTSUS. Based on the documentation provided, we also concur that the proper classification of the end-product metal carbide powders is subheading 3824.30.00, HTSUS.
Since the end-product metal powders all contain non-originating materials, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and they do not qualify under GN 11(b)(ii).
We must next determine whether the metal powders qualify under GN 11(b)(iii). The applicable rule of origin for the metal powders classified under subheading 3824.30.00, HTSUS, is in GN 11(o)/38.5(A), HTSUS, which provides “a change to subheadings 3823.11 through 3826.00 from any other subheading, including another subheading within that group.” GN 11(n) provides for specific product interpretations for determination of country of origin. Specifically, GN 11(n)(iv)(E) provides:
(iv) A good of any heading in chapters 28 through 38, inclusive, that satisfies one or more of the provisions enumerated in this subdivision shall be treated as an originating good, except as otherwise specified in those rules. Notwithstanding the preceding sentence, a good is an originating good if it meets the applicable change in tariff classification or satisfies the applicable value content requirement specified in subdivision (o) of this note.
(E) A good of chapters 28 through 38, except for a good of chapters 28, 29, or 32, headings 3301 or 3808, or subheadings 3502.11 through 3502.19 is an originating good if the deliberate and proportionally controlled mixing or blending (including dispersing) of materials other than the addition of diluents, to conform to predetermined specifications occurs in the territory of one or more of the USMCA countries, resulting in the production of a good having essential physical or chemical characteristics that are relevant to the purposes or uses of the good and are different from the input materials.
HMBAM040: Based upon the information provided in the ruling request, to produce HMBAM040, tungsten carbide (subheading 2849.90.00, HTSUS) and nickel (subheading 7504.00.00, HTSUS) are blended together in precise specific measured quantities. A different product, classifiable under subheading 3824.30.00, HTSUS emerges, indicating a tariff shift has occurred.
Metco 51019A: Based upon the information provided in the ruling request, to produce Metco 51019A, tungsten carbide (subheading 2849.90.00, HTSUS) and nickel (subheading 7504.00.00, HTSUS) are added to bottles together in precise specific measured quantities, however there is no blend. Placing materials in a bottle together is not deliberate mixing or blending and therefore this end-product does not meet the criteria for the requisite tariff shift under the USMCA GN 11(n)(iv)(E).
Metco 54122A-0: Based upon the information provided in the ruling request, to produce Metco 54122A-0, tungsten carbide (subheading 2849.90.00, HTSUS) and nickel (subheading 7504.00.00, HTSUS) are blended together in precise specific measured quantities. A different product, classifiable under subheading 3824.30.00, HTSUS emerges, indicating a tariff shift has occurred.
Marking
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 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. Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304.
To provide a more seamless transition to the USMCA for Canadian and Mexican traders, at this time, CBP continues to utilize the marking rules in 19 C.F.R. Part 102, with the exception of 19 C.F.R. § 102.19, for purposes of country of origin marking with respect to goods of those countries. Title 19, C.F.R. § 102.11(a) provides that the country of origin of a good is the country in which:
The good is wholly obtained or produced;
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 § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Material” means a good that is incorporated into another good as a result of production with respect to that other good, and includes parts, ingredients, subassemblies, and components.” 19 C.F.R. § 102.1(l).
“Foreign material” is defined in Section 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 metal powders are neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin, and paragraph (a)(3) must be applied next to determine the origin of the finished articles. The tariff shift requirement in Section 102.20 for the metal powders at issue states:
A change to subheading 3824.30 from any other subheading, except from heading 2849.
This tariff shift rule requires a shift to subheading 3824.30, HTSUS, from any other subheading except heading 2849, HTSUS. Certain of the metal powder components, specifically the tungsten carbides, are classified in heading 2849, HTSUS, and therefore do not undergo the change in tariff classification set out in 19 C.F.R. § 102.20(f). Since no country of origin determination can be made applying Section 102.11(a), the analysis continues with Section 102.11(b), which instructs us to examine each metal powder’s “essential character” to determine its country of origin.
Section 102.11(b) states, in relevant part:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation [(“GRI”)] 3, where the country of origin cannot be determined under paragraph (a) of this section:
The country of origin of the good is the country or countries of origin of the single material that imparts the essential character to the good ….
In determining the “essential character” of the finished good, Section 102.18(b)(1) provides, in relevant part:
(b) (1) 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 § 102.20 specific rule or other requirements applicable to the good … (ii) Materials that may be considered include materials produced by the producer of the good and incorporated in the good. For example, if a producer of a good purchases raw materials and converts those raw materials into a component that is incorporated in the good, that component is a material that may be considered for purposes of identifying the materials that impart the essential character to the good, provided that the component is classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule or other requirements applicable to the good; …
(2) For purposes of determining which one of two or more materials described in paragraph (b)(1) of this section imparts the essential character to a good under § 102.11, various factors may be examined depending upon the type of good involved. These factors include, but are not limited to, the following:
The nature of each material, such as its bulk, quantity, weight or value; and
(ii) The role of each material in relation to the use of the good.
Here, not all of the individual components of the metal powders undergo the applicable tariff shift in 19 C.F.R. § 102.20(f), and consistent with Sections 102.11(b) and 102.18(b)(1) and (2), it is those foreign inputs, the tungsten carbide powders, that are the components that impart the “essential character” unto the finished metal powders. In this case, the tungsten carbide powders are also by quantity the most significant component of each end-product metal powder, as follows:
HMBAM040: Based upon the information provided in the ruling request, 2% of the product HMBAM040 is nickel (subheading 7504.00.00, HTSUS) of Canadian origin, while the remaining 98% is a combination of tungsten carbides (subheading 2849.90.00, HTSUS), with 40% of the tungsten carbide being of U.S. origin and 58% of the tungsten carbides being of Chinese origin.
Metco 51019A: Based upon the information provided in the ruling request, 40% of the product Metco 51019A, is nickel alloy from Belgium (subheading 7504.00.00, HTSUS), while the remaining 60% is a combination of tungsten carbides from China (subheading 2849.90.00, HTSUS).
Metco 54122A-0: Based upon the information provided in the ruling request, 2% of the product Metco 541221-0, is nickel from Canada (subheading 7504.00.00, HTSUS), while the remaining 98% is a combination of tungsten carbides from China (subheading 2849.90.00, HTSUS).
Pursuant to 102.18(b)(2), we find that for the Metco 51019A and Metco 54122A-0, the only foreign material from which a change in tariff classification is not allowed under the 19 CFR 102.20 specific rule is the material from China, i.e. the tungsten carbides. Hence, for marking purposes the country of origin of the metal powders Metco 51019A and Metco 54122A-0 is China. For the HMBAM040, the only foreign materials from which a change in tariff classification is not allowed under the 19 CFR 102.20 specific rule are the materials from China and the United States, i.e. the tungsten carbides. In this case, 58% of the tungsten carbides originate from China, whereas 40% originate from the United States. The end-product metal powder contains more originating material from China than from the United States, however, these non-originating materials are essentially the same material (tungsten carbides). Therefore, for marking purposes the countries of origin of the metal powder HMBAM040 are China and the United States. As U.S. products are not subject to 19 U.S.C. § 1304, only the Chinese origin needs to be indicated.
HOLDING:
Based on the information provided, we concur that the end-product metal powders HMBAM040, Metco 51019A and Metco 54122A-0 are each classified under subheading 3824.30.00, HTSUS, which provides, in pertinent part for “Nonagglomerated metal carbides mixed together or with metallic binders.” The 2020 column one, general rate of duty for merchandise classified in this subheading is 3.6%.
The metal powders HMBAM040 and Metco 54122A-0 qualify for preferential tariff treatment under the USMCA as each undergoes the necessary tariff shift set forth in GN 11(o)/38.5(A) and GN 11(n)(iv)(E).
The metal powder Metco 51019A does not undergo the necessary tariff shift set forth in GN 11(o)/38.5(A) and GN 11(n)(iv)(E) and therefore does not qualify for preferential tariff treatment under the USMCA.
Pursuant to 19 C.F.R. § 102.11(b), the country of origin of the end-product metal powders Metco 51019A and Metco 54122A-0 is China for marking purposes.
Pursuant to 19 C.F.R. § 102.11(b), the countries of origin of the end-product metal powder HMBAM040 are China and the United States, and pursuant to 19 U.S.C. § 1304, only the Chinese origin must be indicated.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach 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 a 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 ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
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,
Monika R. Brenner, Chief
Valuation and Special Programs Branch