OT:RR:CTF:VS H322922 ARU
Jeremy Ross Page
Page Fura, P.C.
939 W. North Avenue, Suite 750
Chicago, IL 60642
RE: Country of Origin; USMCA; Propylene Elastomers
Dear Mr. Page,
This is in response to your correspondence dated October 8, 2021, in which you request a ruling on behalf of your client, [X], regarding United States Mexico Canada Agreement (USMCA) eligibility and the country of origin for marking purposes of propylene elastomers. Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for response.
You have asked that certain information submitted in connection with this request be treated as confidential. Inasmuch as this request conforms to the requirements of 19 C.F.R. § 177.2(b)(7), the request for confidentiality is approved. The information designated as confidential in your request and contained within brackets in the ruling will not be released to the public and will be withheld from published versions of this ruling.
FACTS:
According to your submission, your request relates to various propylene elastomers that will be produced in China, Taiwan or Mexico through a melting, mixing/blending and pelletizing operation from almost exclusively Japanese origin raw materials. The principal material involved in the processing operation is a thermoplastic vulcanizate (TPV), which you state is considered a form of thermoplastic elastomer polymer. You explain that TPV is not a chemical, but rather is a form of thermoplastic for which a CAS number does not apply.
As a common and commercial meaning of TPV, your submission references the following Wikipedia entry:
TPV are part of the thermoplastic elastomer (TPE) family of polymers, but are closest in elastomeric properties to EPDM thermoset rubber, combining the characteristics of vulcanized rubber with the processing properties of thermoplastics. TPV is a dynamically vulcanized alloy consisting mostly of fully cured EPDM rubber particles encapsulated in a polypropylene (PP) matrix. There are almost 100 grades in the S portfolio which are used globally in the automotive, household appliance, electrical, construction and healthcare markets. The name Santopreme was trademarked in 1977 by Monsanto and the trademark is now owned by ExxonMobil. Similar material is available from Elastron and others.
You state that the proposed processing will be the same whether performed in China, Taiwan or Mexico. You describe the inputs as Japanese origin TPV, mineral oil of Japanese origin and light stabilizers, a mold release agent (magnesium stearate) and a colorant (titanium dioxide) of Chinese origin. You state that three slightly different compositions of TPV will be used, ranging from a low of 63.31% by final weight of TPV to a high of 63.82% by final weight of TPV. You identify TPV as the most-critical ingredient because it provides the base thermoplastic that is needed to form the finished propylene elastomer. You state that the second component, mineral oil, comprises an additional 35% by weight of the finished propylene elastomer and is used to establish viscosity to allow the combined materials to undergo the required melting, mixing/blending and pelletizing operation. Light stabilizers are added to protect the final product against degradation from UV radiation exposure. Magnesium stearate is added to facilitate consistent melting, mixing/blending and pelletizing. Finally, titanium dioxide is added to support the brightness of the resulting propylene elastomer. These inputs will be melted, mixed/blended and pelletized in China, Taiwan or Mexico to produce the finished propylene elastomer.
In response to a request for additional information, you provided that the styrene butadiene copolymer, polypropylene, propylene copolymer, ethylene copolymer and mineral oil are sourced in Country A [X]. The remaining inputs – light stabilizers, magnesium stearate and titanium dioxide – are sourced in Country B [X].
You state that the processing begins with the initial melting of the base TPV before it is mixed/blended with the remaining inputs through an extrusion process. Once fully combined, the resulting blend is re-solidified and molded into a final, pelletized state. You note that neither the melting, mixing/blending nor the pelletizing results in a chemical reaction. Instead, these processes result in a physical change into a consistent, shelf-stable, pelletized product. You claim that the propylene elastomers produced offer a number of desirable properties, such as being lightweight, heat resistant, elastic and temperature resistant. You describe possible uses of the propylene elastomers to include automotive moldings, seals and trims; automotive interior panels and covers; speaker edge dampers; toothbrush grips; architectural gaskets; and drainpipe joints and hoses. In the instant case, the propylene elastomer pellets will be converted into the “skin” of an automotive dashboard through an injection mold process following importation to the United States.
In your original submission, you assert that the proper classification of these propylene elastomers, imported into the United States is 3902.30.00, Harmonized Tariff Schedule of the United States (HTSUS) which provides for polymers of propylene or of other olefins, in primary forms: propylene copolymers. The general rate of duty will be 6.5 percent ad valorem.
ISSUE:
Whether the propylene elastomers are eligible for USMCA preferential tariff treatment and what the country of origin is for marking purposes.
LAW & ANALYSIS:
Country of Origin Marking
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. § 1304), provides, in relevant part:
(a) Marking of articles. Except as hereinafter provided, 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 container) will permit in such manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article.
Part 134, U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R.
Part 134), implements the country of origin marking requirements of 19 U.S.C. § 1304. Title 19, Section 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 the meaning of this part; ….”
The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character, or use, different from that possessed by the articles prior to processing. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). In Nat’l Hand Tool, the Court of International Trade determined that hand tool components, which were cold-formed and hot-forged in Taiwan into their final shape, with post-importation processing such as heat treatment and electroplating, and assembly occurring in the United States, did not undergo substantial transformation in the United States. There was no change in name because each article as imported had the same name in the completed tool. There was no change in character because the articles remained the same after heat treatment, electroplating, and assembly in the United States. The use of the imported articles was predetermined at the time of entry – each component was intended to be incorporated in a particular finished mechanics’ hand tool, except for one exhibit with a dual use. The court rejected the importer’s claim that the value added in the United States was relatively significant to the operation in Taiwan so that substantial transformation should be found, determining that such a finding could lead to inconsistent marking requirements for importers who perform exactly the same processes on imported merchandise but sell at different prices.
Here the inputs include TPV, mineral oil, light stabilizers, a mold release agent (magnesium stearate) and a colorant (titanium dioxide). Through the manufacturing process these inputs are melted, mixed/blended and pelletized to produce the finished propylene elastomer. TPV, the principal material in the processing operation, is considered a propylene elastomer. Therefore, the final product has not undergone a change in name, character, or use, and no substantial transformation has taken place. Based on the facts presented, the country of origin of the propylene elastomer produced in China or Taiwan for marking purposes will be Japan.
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a hierarchy for determining the country of origin of a good for marking purposes. See 19 C.F.R. § 102.11.
Applied in sequential order, the hierarchy establishes 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).
The propylene elastomer is neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” In this case, you claim the classification for the propylene elastomers at issue is 3902.30.00, HTSUS. The product-specific rule of origin for goods classified within heading 3902 states:
3901-3915 A change to heading 3901 through 3915 from any other heading, including another heading within that group, except a change to 3907 from other polyethers of subheading 3002.12 through 3002.15, subheading 3822.11 through 3822.12 or subheading 3822.19, provided that the domestic polymer content is no less than 40 percent by weight of the total polymer content.
Since the product specific rule is not met, we turn to section 102.11(b) of the regulations. Section 102.11(b)(1) provides as follows:
(b) 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 Part 102.20
specific rule or other requirements applicable to the good …
In this case, the TPV imparts the essential character of the propylene elastomer.
Accordingly, based on the facts presented, the country of origin of the propylene elastomer produced in Mexico for marking purposes will be Japan.
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
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 …
Here, the merchandise will be produced in Mexico using nonoriginating materials. Therefore, the merchandise will not qualify as originating pursuant to GN 11(b)(i) or (ii). We must therefore consider whether the merchandise qualifies as originating pursuant to GN 11(b)(iii).
As indicated, the classification for the propylene elastomers at issue is 3902.30.00, HTSUS. For goods of any heading in chapter 39, GN 11(n)(v)(D) provides the following product-specific rule of origin:
“A good of chapter 39 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 facts presented, the propylene elastomers at issue undergo a deliberate and proportionally-controlled mixing or blending of materials in a USMCA country as described in paragraph (D). As such, the propylene elastomers are originating, and therefore, eligible for preferential tariff treatment under the USMCA when produced in Mexico.
HOLDING:
Based on the information provided regarding the proposed manufacturing processes in China and Taiwan, the country of origin for the propylene elastomers for marking purposes is Japan. Further, specific to the proposed manufacturing processes in Mexico, the country of origin for the propylene elastomers for marking purposes is Japan. When produced in Mexico, the propylene elastomers are eligible for preferential tariff treatment under the USMCA when produced in Mexico.
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