OT:RR:CTF:VS H334088 AM
Michael Dahm
Cole International USA Inc.
1775 Baseline Road #280
Grand Island, NY 14072
RE: USMCA Eligibility of Lubrigel L; Country of Origin Marking
Dear Mr. Dahm:
This is in response to your request, dated August 9, 2023, filed on behalf of Canadian Energy Services LP. ("Canadian Energy Services"). In your letter, you request a binding ruling on the country of origin for purposes of marking and tariff classification of Lubrigel L imported from Canada. You also inquire about the eligibility of Lubrigel L for preferential tariff treatment under the United States-Mexico-Canada Agreement ("USMCA"). Your request, submitted as an electronic ruling request, was forwarded to this office from the National Commodity Specialist Division for response. Along with your ruling request, you submitted a process flow diagram of Lubrigel L, and documents detailing the ingredients that compromise Lubrigel L, including the certificate of origin of each ingredient.
FACTS:
Lubrigel L is a complexed polysaccharide gel forming polymer with rheological and viscoelastic properties. It exhibits both viscous (liquid-like) and elastic (solid-like) properties. Lubrigel L is imported in a liquid form in pails that are palletized and shrink wrapped. It may be used in conventional drilling operation, workover operations, and certain completion operations.
You state that the process of making Lubrigel L occurs entirely within Canada. The ingredients processed in Canada are sourced from a variety of suppliers, both United States and foreign, as follows:
|Material |Country of Origin |Weight |HTS |
|CAS Premium Mineral Oil |USA |50.75% |2710.19.30 |
|Parasur 628 |India |2.00% |3402.90 |
|Bentone 155 |USA |2.25% |6806.20 |
|Xanthan Gum |China |27.00% |3913.90.2015 |
|Guar Powder |USA |18.00% |1302.32.0020 |
The production process that occurs in Canada is described as follows:
1. Raw materials are set out for 24 hours prior to blending to reach room temperature.
2. The vessel and lines are checked to ensure they are cleaned with mineral oil.
3. The required amount of mineral oil is placed in the vessel and ensured it is at a temperature of 10 C before blending.
4. The surfactant is added and mixed for 15 minutes.
5. The ingredients are mixed while the required powdered products are added via the Auger.
6. The ingredients are mixed for one hour until the last raw material is added.
7. A sample of the product is taken to the lab for testing and quality control. Adjustments are made if required.
8. Once quality control is passed, labels are attached with corresponding lot number and the product is packaged.
9. The product is then sealed and stored ready for shipping.
ISSUE:
1. Whether Lubrigel L is eligible for preferential tariff treatment under the USMCA when it is imported from Canada into the United States.
2. What is the country of origin of Lubrigel L for marking purpose?
LAW & ANALYSIS:
1. Eligibility for USMCA Preferential Tariff Treatment
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 of the HTSUS implements the USMCA.
GN 11(a)(i) 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-
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)); or
...
Since Lubrigel L contains non-originating materials, it is not considered a good wholly obtained or produced entirely in a USMCA country under GN 11(b)(i), nor is the product produced exclusively from originating materials per GN 11(b)(ii). Thus, we must determine whether the product qualifies under GN 11(b)(iii).
Based on the description of Lubrigel L included in your submission, we agree that the applicable subheading for the subject merchandise is 3824.99.4900, Harmonized Tariff Schedule of the United States Annotated ("HTSUSA"), which provides for: "Prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included: Other: Other: Other: Other: Mixtures that are in whole or in part of hydrocarbons derived in whole or in part from petroleum, shale oil or natural gas."
The applicable rule of origin for goods classified under subheading 3824.99.4900, HTSUS is in GN 11(o)/38.5 which provides, in relevant part:
5. (A) A change to subheadings 3823.11 through 3826.00 from any other subheading, including another subheading within that group; or
(B) No change in tariff classification to a good of subheadings 3823.11 through 3826.00, provided there is a regional value content of not less than:
(1) 40 percent where the transaction value method is used; or
(2) 30 percent where the net cost method is used.
GN 11(n) provides for specific product interpretations for determination of country of origin. Specifically, GN 11(n)(iv)(D) 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.
(D) 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 Lubrigel L, non-originating materials including Xanthan Gum (3913.90.2105, HTSUSA), Guar (1302.32.0020, HTSUSA), and Parasur (3402.90, HTSUS) are blended together in measured quantities. You describe the process by which the input materials are combined to create the final good, and we agree that the process meets the criteria for "deliberate and proportionally controlled mixing or blending." A different product, classifiable under 3824.99.4900, HTSUSA emerges, indicating a tariff shift has occurred. As Lubrigel L satisfies the alternate rule of origin set forth in GN 11(n)(iv)(D), we do not need to consider whether the chapter specific rule of origin in GN 11(o) is also satisfied.
Therefore, based on the facts provided, the Lubrigel L will qualify for USMCA preferential tariff treatment, because it will meet the requirements of HTSUS General Note 11(b)(iii). The good will therefore be entitled to a free rate of duty under the USMCA upon compliance with all applicable laws, regulations, and agreements.
2. 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.
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 35566I), 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 that the country of origin of a good is the country in which:
(a)(1) The good is wholly obtained or produced
(a)(2) The good is produced exclusively from domestic materials; or
(a)(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 Lubrigel L is neither "wholly obtained or produced" nor "produced exclusively from domestic materials." Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine its country of origin, and we need to apply paragraph (a)(3). With respect to the Lubrigel L, which is classified in subheading 3824.99.49, HTSUS, the current edition of the Code of Federal Regulations (C.F.R.) has omitted the rule in 19 C.F.R. 102.20 for 3824.99 due to a technical error. Until a technical correction is made, reference to the 2021 version of the C.F.R. needs to be made where the rules for this subheading last appeared. Furthermore, since the 19 C.F.R. Part 102.20 rules have not all been updated to reflect more recent changes made to the classification of certain articles, reference to the prior classification of this article needs to be made. In 2017, the classification was changed from 3824.90.48 to 3824.99.48, and in 2023, the classification was changed to 3824.99.49, HTSUS.
The 19 C.F.R. 102.20(f), Customs Regulation (19 C.F.R. 102.20(f) (2021)) rules for subheading 3824.90, provides:
A change to naphthenic acids, their water-insoluble salts or their esters of subheading 3824.90 from any other good of subheading 3824.90 or from any other subheading; or
A change to any other good of subheading 3824.90 from naphthenic acids, their water-insoluble salts or their esters of subheading 3824.90 or from any other subheading, provided that no more than 60 percent by weight of the good classified in this subheading is attributable to one substance or compound, except from other chemical products or preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included, of subheading 3824.71, or 3824.73 through 3824.79; or
A change to any other good of subheading 3824.71 through 3824.90 from any other subheading, including another subheading within that group, provided that no more than 60 percent by weight of the good classified in this subheading is attributable to one substance or compound.
In order to determine which of these rules will be used, we must note that Lubrigel L is a complexed polysaccharide gel forming polymer. As such, we use the third rule stated above.
Based on the facts presented, none of the originating or non-originating inputs of Lubrigel L would cross the 60 percent threshold listed in the provision. Accordingly, since Lubrigel L undergoes the applicable tariff shift, the country of origin of Lubrigel L for marking purposes is Canada under 19 C.F.R. 102.11(a)(3).
HOLDING:
Lubrigel L is classified under subheading 3824.99.4900, HTSUSA, which provides for: "Prepared binders for foundry molds or cores; chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included: Other: Other: Other: Other: Mixtures that are in whole or in part of hydrocarbons derived in whole or in part from petroleum, shale oil or natural gas." Based on the information provided, Lubrigel L is eligible for preferential tariff treatment under USMCA. Pursuant to 19 C.F.R. 102.11(a)(3), its country of origin for marking purposes is Canada.
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 [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