OT:RR:CTF:VS H316570 AP
Peter A. Quinter, Shareholder
Gray Robinson Attorneys at Law
333 S.E. 2nd Avenue Suite 3200
Miami, Florida 33131
RE: USMCA Eligibility; Hydraulic Hose Assemblies; Country of Origin; Marking
Dear Mr. Quinter:
This is in response to your February 2, 2021 ruling request, filed on behalf of Ryco Hydraulics, Inc. (“importer”) concerning the eligibility of certain hydraulic hose assemblies for preferential tariff treatment under the U.S.-Mexico-Canada Agreement (“USMCA”) and their country of origin for marking purposes.
FACTS:
The importer designs, manufactures, and distributes hydraulic couplings and hoses. The importer will import into Canada or Mexico couplings from China made in Poland and/or China, and hoses from Malaysia made in Malaysia to fabricate hydraulic hose assemblies for transport of energy via high pressure fluid.
The couplings are of carbon steel or stainless steel, and are classified in subheading 8412.90.90, Harmonized Tariff Schedule of the United States (“HTSUS”). The hoses are reinforced with steel wire or textile cord. Approximately 95 percent of the hoses are constructed of one of four of the following rubbers: nitrile butadiene rubber (“NBR”), styrene butadiene rubber (“SBR”), ethylene propylene diene monomer (“EPDM”), and polybutadiene rubber (“BR”). The rubber hoses are classified in subheadings 4009.21.00 (steel reinforced without fittings) and 4009.31.00, HTSUS (textile reinforced without fittings).
In addition, there are two types of hoses constructed of either plastic or a rubber/plastic combination. The plastic hoses reinforced with either steel or textile are classified in subheading 8412.90.90, HTSUS. The classification of the rubber/plastic combination hoses is dependent on which component (plastic or rubber) makes up the greatest percentage of each hose.
To fabricate the couplings and hoses into assemblies, the importer will cut the bulk hose to measured length and clean it, and hydraulic couplings will be inserted into the hydraulic hose. The hose and the couplings will be cold formed together. Then the hydraulic couplings will be checked to confirm correct insertion length into the hydraulic hose end. The final hose assemblies are classifiable in subheading 8412.90.90, HTSUS.
Below are images of the couplings, hoses, and the finished hose assemblies:
ISSUES:
Whether the final hydraulic hose assemblies made in Canada or Mexico from nonoriginating materials are eligible for preferential tariff treatment under the USMCA.
What is the country of origin for marking purposes of the hose assemblies fabricated in Canada?
LAW AND ANALYSIS:
USMCA eligibility
The 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)). General Note (“GN”) 11, HTSUS, implements the USMCA. 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, in relevant part:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country … 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 –
(i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
(ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
(iii) 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)); ….
Since the assemblies contain nonoriginating materials, they are not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and (ii). We must next determine whether the assemblies qualify under GN 11(b)(iii). The couplings are classified under subheading 8412.90, HTSUS. The hoses are classified under subheadings 4009.21 and 4009.31 (rubber hoses), and 8412.90 (plastic hoses). The final assemblies are classified in subheading 8412.90, HTSUS. The applicable rule of origin for merchandise under subheading 8412.90, HTSUS, is in GN 11(o)/Chapter 40, Rule 39, HTSUS, which states:
39. A change to subheading 8412.90 from any other heading.
Since the couplings and the plastic hoses are classified in heading 8412, HTSUS, the tariff shift rule is not met and the hydraulic assemblies of subheading 8412.90.90 do not qualify for USMCA preferential tariff treatment pursuant to GNs 11(b)(iii) and 11(o)/Chapter 40, Rule 39, HTSUS.
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 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 assemblies are neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine their country of origin and we must apply paragraph (a)(3). The tariff shift requirement in 19 C.F.R. § 102.20 for the assemblies at issue states:
A change to subheading 8412.90 from any other heading.
This tariff shift rule requires a shift to subheading 8412.90, HTSUS, from any other heading. The couplings are classified in heading 8412 and the hoses are classified in headings 4009 and 8412. As a result, the assemblies do not undergo the change in tariff classification set out in 19 C.F.R. § 102.20, and we must continue the analysis with Section 102.11(b), which instructs us to examine the assemblies’ “essential character” to determine their 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, the individual components of the assemblies do not undergo the applicable tariff shift in 19 C.F.R. § 102.20, and consistent with Sections 102.11(b) and 102.18(b)(1) and (2), the hose is the component that imparts the “essential character” to the finished assembly. See Headquarters’ Ruling Letter (“HQ”) H024320, dated June 28, 2012 (determining that the hose imparts the essential character to a hose assembly); New York Ruling Letter (“NY”) N246926, dated Nov. 14, 2013 (concluding that the hose is “the single material that imparts the essential character” to an air conditioner hose assembly under 19 C.F.R. § 102.11(b)(1)). Therefore, considering that the assemblies are assembled in Mexico or Canada, and are classified in a tariff provision from which a change in tariff classification is not allowed, we find that the single material imparting the essential character of the finished hydraulic assembly is imparted by the hose, and the country of origin of the finished hydraulic assembly will be the country of origin of the hose.
Accordingly, the country of origin of the hydraulic assemblies for marking purposes is Malaysia and the hose assemblies need to be marked as “Made in Malaysia.”
HOLDING:
Based on the information provided, the hydraulic hose assemblies do not qualify for preferential tariff treatment under the USMCA when imported into the United States from Canada or Mexico.
Pursuant to 19 C.F.R. § 102.11(b), the country of origin of the hydraulic hose assemblies for marking purposes is Malaysia (the country of origin of the hoses). The hose assemblies must be marked “Made in Malaysia” under 19 U.S.C. § 1304.
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