CLA-2-87:OT:RR:NC:N2:206
Jonathan R. Todd
Benesch, Friedlander, Coplan & Aronoff LLP
200 Public Square, Suite 2300
Cleveland, OH 44114
RE: The country of origin of brake rotors.
Dear Mr. Todd:
In your letter dated November 11, 2019, you requested a tariff classification ruling and the country of origin determination for high performance brake rotors imported from Canada on behalf of your client Durotech Automotive Industries, Ltd. Descriptive literature and pictures were provided with your request.
The item under consideration has been identified as a High Performance Brake Rotor, which is designed to be used as Original Equipment Manufacturing (OEM) parts for Chrysler and General Motors, and aftermarket vendors. You state that the principal application of the brake rotors are heavy and special purpose vehicles, including ambulances, because they require brake rotors that can withstand the tremendous friction and heat generated during ordinary use.
The applicable subheading for the High Performance Brake Rotor is 8708.30.5030, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Parts and accessories of the motor vehicles of headings 8701 to 8705: Brakes and servo-brakes; parts thereof: For other vehicles: Brake rotors (discs).” The general rate of duty will be 2.5% ad valorem.
The country of origin marking requirements for a "good of a NAFTA country" are determined in accordance with Annex 311 of the North American Free Trade Agreement, as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat 2057) (December 8, 1993) and the appropriate Customs Regulations. The Marking Rules used for determining whether a good is a good of a NAFTA country are contained in Part 102, Customs Regulations. The marking requirements of these goods are set forth in Part 134, Customs Regulations.
Section 134.1(b) of the regulations, defines "country of origin" as the country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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 this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. Part 102 of the regulations, sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country for marking purposes. Section 102.11 of the regulations, sets forth the required hierarchy for determining country of origin for marking purposes. Applied in sequential order, the required 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 Section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
You state that the raw brake rotor cast is produced in China and imported into Canada for further processing. In Canada, the imported brake cast undergoes certain manufacturing processes, which involve advance testing, CNC machining, milling, and the application of a zinc exoskeleton. Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the imported brake rotor is neither wholly obtained nor produced exclusively from “domestic” (Canadian, in this case) materials. Because the analysis of sections 102.11(a) (1) and 102.11(a) (2) does not yield a country of origin determination, we look to section 102.11(a) (3). “Foreign material” is defined in 19 C.F.R. § 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 applicable rule for subheading 8708.30, HTSUS, in section 102.20 requires, “A change to mounted brake linings and pads from any other heading, except from brake linings and pads of subheading 6813.20 or 6813.81,” or
A change to other brakes or servo-brakes or parts thereof from any other heading.” This office has reviewed the brake rotor cast from China, and determined that although the cast cannot function as designed without the further processes in Canada, it has the essential character of the brake rotor. In its imported condition from China to Canada it has the shape and appearance of a finished brake rotor and is recognizable as such in the automotive industry. Thus, the brake rotor cast will be classified in subheading 8708.30, and as a result, the tariff shift requirement is not met, and the country of origin cannot be determined by under Section 102.11(a)(1), (2), and (3).
Section 102.11(b) states, “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 3, where the country of origin cannot be determined under paragraph (a) of this section: (1) 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.
Section 102.18 (b) (1): For purposes of identifying the material that imparts the essential character to the good under section 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 section 102.20 specific rule or other requirements applicable to the good. As we earlier determined, the brake rotor cast is classified in subheading 8708.30, HTSUS. It is the single component, which is not allowed under the section 102.20 specific rule. Therefore, the country of origin of the brake rotor will be the country of origin of the brake rotor cast. Thus, the country of origin of the high performance brake rotor will be China for marking purposes.
Nevertheless, when determining the country of origin for purposes of applying current trade remedies under Section 301, Section 232, and Section 201, a substantial transformation analysis is applicable. In accordance with 19 C.F.R. § 102.0, the 102 marking rules are applicable for the limited purposes of: “country of origin marking; determining the rate of duty and staging category applicable to originating textile and apparel products as set out in Section 2 (Tariff Elimination) of Annex 300–B (Textile and Apparel Goods); and determining the rate of duty and staging category applicable to an originating good as set out in Annex 302.2 (Tariff Elimination).” See also HQ 563205, dated June 28, 2006; see also Belcrest Linens v. United States, 741 F.2d 1368, 1370-71 (Fed. Cir. 1984) (finding that “the term ‘product of’ at the least includes manufactured articles of such country or area” and that substantial transformation “is essentially the test used…in determining whether an article is a manufacture of a given country”). As stated above, the 102 rules do however continue to be applicable for purposes of country of origin marking of NAFTA goods, as defined in 19 C.F.R. § 134.1.
In National Hand Tool Corp., v. United States, Slip Op. 92-61 (April 27, 1992), aff'd, 989 F.2d 1201 (1993), the Court of International Trade held that imported hand tool components which were used to produce flex sockets, speeder handles and flex handles were not substantially transformed when further processed and assembled in the U.S. One of the factors considered by the court in reaching its conclusion was whether the use of the imported components changed as a result of the processing and assembly operations performed in the U.S. In finding that the use of the imported components did not change, the court stated that the use of the imported articles was predetermined at the time of importation; each component was intended to be incorporated in a particular finished mechanic's hand tool. Although the court recognized that a predetermined use for imported articles does not preclude a finding of substantial transformation (See, Torrington Co., v. United States, 764 F.2d. 1563 (1985)), it went on to say that the determination of substantial transformation must be based on the totality of the evidence.
In the present case, the end-use of the brake rotor cast from China is pre-determined. Based on the analysis above, the country of origin of the high performance brake rotors for tariff purposes will be China.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8708.30.5030, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.03, in addition to subheading 8708.30.5030, HTSUS, listed above.
The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china respectively.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, please contact National Import Specialist Liana Alvarez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division