OT:RR:CTF:VS H314561 UBB
Georgi N. Mifodjev
1101 Prospect Ave
Westbury, NY 11590
RE: Country of Origin, and Application of USMCA to a certain metal powder
Dear Mr. Mifodjev:
This is in response to your September 22, 2020 ruling request, 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 a metal powder, 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 good is a metal powder identified by its internal product number with relevant Harmonized Tariff Schedule of the United States (“HTSUS”) classification subheadings provided in the ruling request.
According to the ruling request, Angular W/Ni 60/40/50 HRC is a metal powder consisting of non-agglomerated tungsten carbide and nickel alloy powder; it is used as a thermal spray coating from Oerlikon’s proprietary machines. You state that this metal powder is 60% tungsten carbide (subheading 2849.90.00, HTSUS) from China, and 40% nickel alloy (subheading 7504.00.00, HTSUS) from Great Britain. Therefore, the end-product metal powder is made from non-originating material. You state that all raw materials are tested, then gathered and blended for 45 minutes at your facility in Fort Saskatchewan in Alberta, Canada. 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 and blend.
In your ruling request, you note that you are looking for a binding ruling for classification under subheading 3824.30.00, HTSUS for the end-products, an origin ruling for labeling the product “Made in Canada”, as well as to deem the product eligible for preferential duty treatment under the USMCA.
ISSUE:
Whether the Angular W/Ni 60/40/50 HRC 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 the metal powder consists of tungsten carbide and nickel alloy powder. You classify the input tungsten carbide in subheading 2849.90.00, HTSUS, and the nickel alloy as subheading 7504.00.00, HTSUS. Based on the information provided, we agree that the input tungsten carbide is classifiable under subheading 2849.90.00, HTSUS, and the nickel alloy is 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 powder is subheading 3824.30.00, HTSUS.
Since the end-product metal powder contains non-originating materials, it is not considered to be a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and does not qualify under GN 11(b)(ii).
We must next determine whether the metal powder qualifies under GN 11(b)(iii). The applicable rule of origin for 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.
Based on the information provided in the ruling request, to produce Angular W/Ni 60/40/50 HRC, tungsten carbide (subheading 2849.90.00, HTSUS) and nickel alloy (subheading 7504.00.00, HTSUS) are blended together in precise measured quantities. A different product, classifiable under 3824.30.00, HTSUS emerges, indicating a tariff shift has occurred. Therefore, the metal powder Angular W/Ni 60/40/50 HRC is eligible for preferential tariff treatment under the USMCA.
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. One of the end-product metal powder components, specifically the tungsten carbide, is classified in heading 2849, HTSUS, and therefore does 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 …
Here, the only material that does not undergo the applicable tariff shift in 19 C.F.R. § 102.20(f) is the tungsten carbide powder from China, and consistent with Sections 102.11(b) and 102.18(b)(1), it is the material that imparts the “essential character” unto the finished metal powder.
Hence, for marking purposes the country of origin of the metal powder Angular W/Ni 60/40/50 HRC is China.
HOLDING:
Based on the information provided, we concur that the end-product metal powder Angular W/Ni 60/40/50 HRC is classified under subheading 3824.30.00, HTSUS, which provides, in pertinent part for “Nonagglomerated metal carbides mixed together or with metallic binders.”
The metal powder Angular W/Ni 60/40/50 HRC qualifies for preferential tariff treatment under the USMCA as it undergoes the necessary tariff shift set forth in GN 11(o)/38.5(A) and GN 11(n)(iv)(E).
Pursuant to 19 C.F.R. § 102.11(b), the country of origin of the end-product metal powders Angular W/Ni 60/40/50 HRC is China for marking purposes.
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