OT:RR:CTF:VS H335509 AP
Center Director
Base Metals CEE
U.S. Customs and Border Protection
610 S. Canal St.
Chicago, IL 60607
Attn: Christopher Koon, CBP Import Specialist
RE: Internal Advice; Application for Further Review of Protest No. 5203-23-100456; Coated and Embossed Aluminum Coils; U.S.-Jordan Free Trade Agreement
Dear Center Director:
This is in response to your November 29, 2023 request for an internal advice with regard to Protest No. 5203-23-100456, and the Application for Further Review (“AFR”), concerning the eligibility of certain finished aluminum coils, which were imported by FCC Metals LLC (“importer”) into the United States from Jordan, for duty-free treatment under the United States-Jordan Free Trade Agreement (“JFTA”). Our response follows.
FACTS:
The subject aluminum alloy 3003 series, temper H44 and H444 (3003-H44 and 3003-H444) coated and embossed aluminum coils, described as “pre-painted aluminum coils” on the bills of lading, were imported into the United States from Jordan under subheadings 7606.12.30, Harmonized Tariff Schedule of the United States (“HTSUS”) and 9903.85.01, HTSUS, claiming preferential tariff treatment under the JFTA. The product is further described as “common alloy aluminum sheet for use as sheet metal roofing products installed on buildings and houses. These products are imported on spools and measure approximately 50” in width by 0.56 millimeters in thickness (sizes vary depending on end U.S. customer specifications).” The finished aluminum coils were produced from 3003-H14 aluminum alloy coils in rolls (“raw aluminum coil” or “mother coil”) described as “aluminum coil mill finish, gauge 0.5600 mm x width 1266.80 mm coil” originating from Bahrain and exported to Jordan from Bahrain for further processing.
In Jordan, the raw aluminum coils from Bahrain are placed in a coating line and unwound. The coils are cleaned to remove oxide layers, residual lubricant, and fine particles by passing the coil through two alkaline spray cleaning tanks with a brush-scrubbing unit in between. This cleaning process removes 0.2 to 0.3g per square meter of the surface coil. The coil is then chemically treated with a thin coating to prevent the metal surface from re-oxidizing and provide a stable layer for adhesion of subsequent coatings. A vertical coater applies the pre-treatment, a thin coating, less than a tenth of a micrometer. This coating is then cured by oven-drying at 90 degrees Celsius. For primer, there is one coating per head side. The topcoats require three coating heads on the top and two heads on the bottom. In addition to applying coatings, the supplier applies color pigments to the top coating to meet customer specifications. Finally, the slitting and embossing line cuts the coils to the customer’s desired width and trims the edges of the coil. Certain sheets require embossing to make the sheets less susceptible to warping. The coils then pass between two engraved rolls with a special design and structure to press the design of the rolls into the metal coils. These processes create the final coated and painted aluminum coils imported into the United States from Jordan.
On June 3, 2022, the CEE issued a Notice of Action (CBP Form 28) to the importer requesting additional supporting documentation such as detailed explanation of the manufacturing process, production records, and commercial invoices, as part of its origin verification on the JFTA preferential tariff treatment claimed by the importer. On March 9, 2023, the CEE issued a Notice of Action (CBP Form 29) notifying the importer that the finished aluminum coils did not qualify for preferential tariff treatment under the JFTA. Specifically, the CEE noted that the processes on the aluminum coils that occurred in Jordan were considered finishing processes and did not result in new or different articles of commerce. Since the merchandise originated from Bahrain, it was subject to Department of Commerce (“DOC”) antidumping (“ADD”) order number A-525-001 and countervailing duty (“CVD”) order number C-525-002 for common alloy aluminum sheet from Bahrain.
On March 9, 2023, CBP liquidated the 13 entries of finished aluminum coils filed from November 6, 2021 through December 23, 2021, as type “03” entries originating from Bahrain and subject to the DOC ADD/CVD orders.
ISSUE:
Whether the imported finished aluminum coils are eligible for duty-free treatment under the JFTA.
LAW AND ANALYSIS:
On October 24, 2000, the United States and the Hashemite Kingdom of Jordan signed the JFTA. The provisions of the JFTA were adopted by the United States with the enactment on September 28, 2001 of the United States-Jordan Free Trade Area Implementation Act (the “JFTA Act”), Public Law 107–43, 115 Stat. 243 (19 U.S.C. 2112 note). On December 7, 2001, the President signed Proclamation 7512 to implement the provisions of the JFTA. The Proclamation, published in the Federal Register on December 13, 2001 (66 F.R. 64497), modified the HTSUS as set forth in Annexes I and II of the Proclamation. The modifications to the HTSUS included the addition of General Note (“GN”) 18, incorporating the relevant JFTA rules of origin as set forth in the JFTA Act, and the insertion throughout the HTSUS of the preferential duty rates applicable to individual products under the JFTA designated by the special program indicator “JO” in the “Special” rate of duty subcolumn. CBP Regulations implementing the JFTA are set forth in Volume 19 of the Code of Federal Regulations at Part 10, Subpart K,
§§ 10.701 through 10.712 (19 C.F.R. §§ 10.701 through 10.712).
GN 18, HTSUS, sets forth the criteria for determining whether a good is an originating good for purposes of the JFTA as follows:
… (b) For purposes of this note, subject to the provisions of subdivisions (d) and (e), goods imported into the customs territory of the United States are eligible for treatment as “products of Jordan” only if– (i) such goods are imported directly from Jordan into the customs territory of the United States, and (ii) they are– (A) wholly the growth, product or manufacture of Jordan, or (B) new or different articles of commerce that have been grown, produced or manufactured in Jordan and meet the requirements of subdivision (c) of this note.
(c) (i) For purposes of subdivision (b)(ii)(A) of this note, … the expression “ wholly the growth, product or manufacture of Jordan” refers both to-- (A) an article which has been entirely grown, produced or manufactured in Jordan, and (B) all materials incorporated in an article which have been entirely grown, produced or manufactured in Jordan, but does not include articles or materials imported into Jordan from another country, whether or not such articles or materials were substantially transformed into new or different articles of commerce after their importation into Jordan.
(ii) For purposes of subdivision (b)(ii)(B), goods are eligible for the tariff treatment provided in this note if the sum of– (A) the cost or value of the materials produced in Jordan, plus (B) the direct costs of processing operations performed in Jordan, is not less than 35 percent of the appraised value of such article at the time it is entered. If the cost or value of materials produced in the customs territory of the United States is included with respect to an article to which this subdivision applies, an amount not to exceed 15 percent of the appraised value of the article at the time it is entered that is attributable to such United States cost or value may be applied toward determining the percentage referred to in this subdivision ….
We also refer to the CBP Regulations applicable to the JFTA. Pursuant to 19 C.F.R.
§ 10.709:
(a) General. Except as otherwise provided in paragraph (b) of this section, a good imported directly from Jordan into the customs territory of the United States will be eligible for preferential tariff treatment under the US–JFTA only if: (1) The good is either: (i) Wholly the growth, product, or manufacture of Jordan; or (ii) A new or different article of commerce that has been grown, produced, or manufactured in Jordan; and 2) With respect to a good described in paragraph (a)(1)(ii) of this section, the good satisfies the value-content requirement specified in § 10.710 of this subpart ….
It is not disputed that the coil was imported directly into the United States from Aqaba, Jordan. Since the finished aluminum coils are comprised of materials from Bahrain, they are not considered “wholly the growth, product or manufacture” of Jordan. Therefore, we need to determine whether the raw aluminum coil from Bahrain was substantially transformed in Jordan when processed into finished aluminum coil.
A substantial transformation occurs when an article emerges from a process with a new name, character, or use different from that possessed by the article prior to the processing. See Texas Instruments v. United States, 69 CCPA 152 (1982). This determination is based on the totality of the evidence. National Hand Tool v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). The name criterion is the least compelling of the substantial transformation factors and the courts focus on the use and character criteria. See Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308 (CIT 2016).
The courts have held that when the properties and uses of a product are predetermined by the material from which it was made, no substantial transformation occurs. In Superior Wire v. United States, 867 F.2d 1409 (Fed. Cir. 1989), wire rod in coils was shipped to Canada where it was drawn into finished wire. The tensile strength of the final product was increased by approximately 30 to 40 percent as the rod was reduced in cross-sectional area by about 30 percent and was elongated. The court determined that the drawing operation did not result in a substantial transformation, pointing out that the properties of the wire rod and its uses were determined by the chemical content of the rod and the cooling processes used in its manufacture, and that the wire rod dictated the final form of the finished wire. The court noted that the “end use of the wire rod is generally known before the rolling stage and the specifications are frequently determined by reference to the end product for which the drawing wire will be used.” While the wire rod and processed rod had different names and identities in the industry, they were essentially different stages of the same product.
In Nat’l Hand Tool, supra, a country of origin marking case, hand tool components used to make flex sockets, speeder handles, and flex handles, were imported from Taiwan. The imported components were either cold-formed or hot-forged into their final shape before importation, with the exception of the speeder handle bars, which were reshaped by a power press after importation. In the United States, the components were subject to heat treatment, which increased the strength of the components, sand-blasting (a cleaning process), and electroplating (enabling the components to resist rust and corrosion). After these processes were complete, the components were assembled into the final products, which were used to loosen and tighten nuts and bolts. The court found that the name of the components did not change after the post-importation processing, and the character of the articles similarly remained substantially unchanged after the heat treatment, electroplating and assembly, as this process did not change the form of the components as imported. The use of the articles was predetermined at the time of importation as each component was intended to be incorporated in a particular finished mechanic’s hand tool. As a result, the U.S. processing did not substantially transform the foreign hand tool components.
In Ferrostaal Metals Corp. v. United States, 11 CIT 470 (1987), the court considered whether the country of origin of cold-rolled steel sheet manufactured in one country was changed by annealing and galvanizing it (i.e., coating with zinc) in another. The court found that strength and ductility constituted important characteristics of the steel and that annealing significantly affected the character by dedicating the sheet to uses compatible with the strength and ductility of the steel. The court also found that substantial changes in the use of the steel sheet occurred as a result of the continuous hot-dip galvanizing process. The annealing and galvanizing processes resulted in a change in character by significantly altering the mechanical properties and chemical composition of the steel sheet. Since the continuous hot-dip galvanizing process effected changes in the name, character and use of the processed steel sheet, the country in which the processes were performed became the country of origin of the processed sheet. It should be noted that the court did not hold that either the annealing or the galvanizing process alone caused the substantial transformation of the steel sheet, but determined that the multiple manufacturing processes effected the requisite changes necessary for a finding of a substantial transformation.
Whether annealing results in a substantial transformation generally depends upon the extent of the heat treatment, in terms of the effect on the metal’s mechanical properties and uses. CBP has ruled that if the heat treatment alters the article’s mechanical properties to a significant extent (i.e., transforming a multifunctional article into one suited for specific uses, or transforming an article suitable for one use into one suitable for another) then the product is substantially transformed. In Headquarters Ruling Letter (“HQ”) 555736, dated July 2, 1991, hot-rolled steel coils were subjected to a pickling process and the pickled hot bands were processed through a cold reversing mill to reduce the thickness from 50 to 80 percent to create a surface finish that could be processed successfully on a hot-dip metallic coating line. The steel then proceeded to a continuous hot-dip coating line where the steel was annealed and hot-dipped into a protective anti-corrosive metal coating such as zinc or an aluminum-zinc alloy. The galvanized steel strip proceeded to an organic coating or prepaint line capable of applying a two-coat paint system. Upon completion of all these operations, the steel strip met ASTM standards A792 and A792M. A substantial transformation was found because the steel was subjected to a continuous hot-dip galvanizing operation which made it less strong but more ductile, the distribution of carbon and nitrogen was affected, and the steel was protected against corrosion.
Similarly, in HQ H065721, dated August 26, 2009, black plate cold-roll steel produced in Japan was shipped to Thailand in coils to be electrolytically coated with chromium and a protective enamel lacquer, baked, and cut into rectangular sheets with scroll or jagged edges. This process transformed the original rust-prone steel product used mostly to manufacture other types of steel into tin-free steel sheet, which was more resistant to corrosion, heat, and sulfide stains; and was widely used for making food and beverage cans. The resulting tin-free steel product was also substantially more expensive. Thus, the black plate cold-roll steel was substantially transformed into tin-free steel sheets as a result of the processes in Thailand.
Conversely, a heat treatment which is not extensive or complex, and does not transform or narrow the uses of the article does not effect a substantial transformation. In HQ 555103, dated February 2, 1989, solution (water) quenching and annealing stainless steel bars and wire rod, which maximized softness, ductility, and corrosion resistance in the steel, did not constitute a substantial transformation, where the steel retained its multifunctional utility.
Here, the raw aluminum coil from Bahrain and the embossed and coated aluminum coil processed in Jordan and imported into the United States are both 3003 aluminum alloy for moderate strength application. As such, both are found in a range of applications from roofing to cans, appliances, electronics, and general sheet metal fabrication. The final product retains its multifunctional utility and is not substantially more expensive. According to the submitted invoices, the unit price (USD per kg) of the raw aluminum coils exported from Bahrain to Jordan is $[x] and the unit price (USD per kg) of the finished aluminum coils imported into the United States from Jordan ranges from $[x] to $[x] (the average unit price being $[x]).
As in National Hand Tool and Superior Wire, supra, the character and use of the finished aluminum coil are predetermined by the raw aluminum coil. The mechanical properties of the raw aluminum coil dictate the final form of the finished aluminum coil. The unwinding of the raw aluminum coil, cleaning, treating the coil with two coatings, slitting to custom width, and embossing in Jordan do not alter the mechanical properties of the raw aluminum coil to a significant extent to effect a substantial transformation. See HQ 563113, dated December 8, 2004 (finishing operations such as painting, engraving, polishing, or cleaning do not result in a substantial transformation); HQ 561493, dated March 9, 2000 (finished dog tags were not substantially transformed as a result of embossing); HQ 558831, dated January 31, 1995 (wire that was mechanically descaled, cold drawn through a series of dies, annealed to restore its original structure, and cleaned and coated with a lubricant was not substantially transformed);
HQ H734062, dated April 22, 1991 (bank keys were not substantially transformed when cut to customers’ specifications); New York Ruling (“NY”) N311391, dated May 7, 2020 (cutting-to-size and embossing does not effect a substantial transformation).
In sum, we find that the processing operations in Jordan did not substantially transform the raw aluminum coil into a new and different article, but rather constitute a continuation of the production process leading to the completion of the raw aluminum coil as finished and embossed coil. Therefore, the finished aluminum coil is not considered a “product of” Jordan and does not meet the criteria for JFTA preferential tariff treatment.
HOLDING:
The aluminum coil imported into the United States is not eligible for preferential tariff treatment under the JFTA.
This decision should be mailed by your office to the importer, through its counsel, no later than 60 days from the date of this letter. On that date, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel and the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/home, or other methods of public distribution.
Sincerely,
Elif Eroglu, Acting Chief
Valuation and Special Programs Branch