CLA-2-32:OT:RR:NC:N3:136
Paul Diamond
Dominion Customs Consultants
1595 16th Avenue, Suite 202 Richmond Hill L4B 3N9 Canada
RE: The country of origin and eligibility of the United States-Mexico-Canada Agreement (USMCA) of Titanium Dioxide Pigment from Canada
Dear Mr. Diamond:
In your letter dated July 9, 2024, on behalf of your client, G & J Resources, Inc., you requested a binding ruling on the country of origin and eligibility of Titanium Dioxide Pigment under the United States-Mexico-Canada Agreement (USMCA).
You describe the manufacturing process as follows:
Stage 1 Egypt: Mining of raw material (Ilmenite).
The first step of the manufacturing process for the Titanium Dioxide Pigment is the mining and extraction of Ilmenite from Egypt. Ilmenite is a titanium-iron oxide mineral. The Ilmenite is further processed by removing sand resulting in Ilmenite which contains approximately 46% to 50% by weight of titanium dioxide.
Stage 2 China: Refinement of Ilmenite to Titanium Dioxide
The Ilmenite is shipped from Egypt to China for refinement where it undergoes chemical chlorination and then oxidation resulting in an intermediate product, Titanium Dioxide. The refinement of the Ilmenite in China separates and removes any unwanted metal components resulting in a metal oxide that has a percentage by weight of titanium dioxide of 98% - 99.9%. At this stage the Titanium Dioxide has industrial applications such as catalysts in the oil and gas industry; however, for the manufacturing of products such as paints and coatings, it requires further processing. The Titanium Dioxide is shipped from China to Canada under tariff classification 2823.00.0000, as a metal oxide named in the Harmonized Tariff Schedule of the United States, (HTSUS), under Section VI, Chapter 28, part IV.
Stage 3 Canada: Transformation into Titanium Dioxide Pigment
In Canada, the Chinese Titanium Dioxide, is an intermediate product that is dispersed in water using mechanical stirring and agitation. Then chemicals are added to breakdown the agglomerations and disperse the individual particles. The purpose of this step is to expose the surface of each titanium dioxide particle to chemical agents that are used for surface treatment which is the critical step in the manufacturing process of Titanium Dioxide Pigment. This critical step, performed in Canada, is called surface treatment. After the excess water is removed, it is dried and then grinded to a fine powder resulting in the finished product, Titanium Dioxide Pigment. The surface treatment of titanium dioxide is the key step in the manufacture of Titanium Dioxide Pigment. The chemicals and methods used in the surface treatment process determine the chemical composition and properties required for the different manufacturing applications.
Stage 4 USA: Importation of Titanium Dioxide Pigment
The finished product, Titanium Dioxide Pigment, is exported from Canada to the United States.
Classification
In your submission, you suggest classification in 3206.11.1100, HTSUS; however, the suggested classification is not part of the 2024 HTSUS.
The applicable subheading for Titanium Dioxide Pigment will be 3206.11.0000, HTSUS, which provides for Other coloring matter; preparations as specified in note 3 to this chapter, other than those of 3203, 3204 or 3205; inorganic products of a kind used as luminophores, whether or not chemically defined: Pigments and preparations based on titanium dioxide: Containing 80 percent or more by weight of titanium dioxide calculated on the dry matter. The general rate of duty will be 6 percent ad valorem.
This merchandise may be subject to the requirements of the Toxic Substances Control Act (TSCA), which are administered by the U.S. Environmental Protection Agency. Information on the TSCA can be obtained by contacting the EPA at 1200 Pennsylvania Avenue, N.W., Mail Code 70480, Washington, D.C., by telephone at (202) 554-1404, or by visiting their website at www.epa.gov.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided at https://hts.usitc.gov/current.
Country of Origin and Marking
The "country of origin" is defined in 19 CFR 134.1(b) 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; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 to this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin."
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 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 required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. 102.21. See 19 C.F.R. 102.11.
Applied in sequential order, 19 CFR Part 102.11(a) provides that the country of origin of a good is the country in which:
(1) The good is wholly obtained or produced;
(2) 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 Part 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the imported products are neither wholly obtained or produced, or produced exclusively from domestic 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) which requires each foreign material incorporated in a good to undergo an applicable change in tariff classification as set out in Part 102.20. The finished titanium dioxide pigment is classified in subheading 3206.11, HTSUS, is imported into the U.S. from Canada, and incorporates foreign materials as defined by 19 CFR 102.1(e), so the rule under 19 CFR 102.11(a)(3) applies. The tariff shift requirement in Part 102.20 for subheading 3206.11 states:
A change to subheading 3206.11 through 3206.19 from any other subheading outside that group.
The Chinese titanium dioxide material, classified in subheading 2823.00.0000, HTSUS, further processed in Canada via a surface treatmentthat determines the chemical composition and properties required for various manufacturing applications, will be classified in subheading 3206.11, HTSUS, as a titanium dioxide pigment, and therefore meets the tariff shift requirement. Accordingly, the country of origin for marking purposes of the finished Titanium Dioxide Pigment is Canada.
Regarding the applicability of Section 301 trade remedies to the Titanium Dioxide Pigment under consideration, CBP relies on a substantial transformation analysis when determining the country of origin for purposes of applying Section 301 trade remedies. The courts have held that 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 processing. A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff'd, 989 F.2d 1201 (Fed. Cir. 1993). As stated in HQ 735009, dated July 30, 1993, The country of origin is the country where the article last underwent a substantial transformation, that is, processing which results in a change in the article's name, character, or use. Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
With respect to the subject product, we have determined that the chemicals and methods used in the surface treatment of the Chinese intermediate titanium dioxide material, performed in Canada, results in a substantial transformation of the Chinese titanium dioxide because the chemical composition and properties of the Chinese titanium dioxide, which is required for various manufacturing applications, will emerge with a new name, characteristics, and use. Therefore the country of origin for the finished Titanium Dioxide Pigment is Canada and will therefore not be subject to the additional duties under Section 301 of the Trade Act of 1974, as amended.
USMCA
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(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 non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o));
The goods described above will qualify for USMCA preferential tariff treatment, because they will meet the requirements of HTSUS General Note 11(b)(iii), Chapter 32, 5. A, A change to subheadings 3206.11 through 3206.42 from any other subheading, including another subheading within that group. Since the intermediate titanium dioxide material, sourced in China, is classified in subheading 2823.00.0000, HTSUS, the applicable tariff shift rule in GN 11 of the HTSUS has been met as there is a change in classification to subheading 3206.11 from any other subheading. Therefore, the products are originating under the USMCA, and are entitled to preferential treatment under USMCA upon compliance with all applicable laws, regulations, and agreements.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection 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 Nuccio Fera at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division