CLA-2-38:OT:RR:NC:N3:139
Paul Fudacz
Braumiller Law Group, PLLC
5220 Spring Valley Road, Suite 200 Dallas, TX 75254
RE: The tariff classification, country of origin and eligibility of the United States-Mexico-Canada Agreement (USMCA) of a flame retardant
Dear Mr. Fudacz:
In your letter made on behalf of your client Pur Innovations Inc., dated December 19, 2024 and an earlier submission, you requested a tariff classification, country of origin, and eligibility of a flame retardant under the United States-Mexico-Canada Agreement (USMCA) determination ruling.
The item in question has the product name of Pur Guard-2000 Flame Retardant (PG2000) It is described as a homogeneous liquid substance of various ingredients that is brought about by mixing and heating. You state that PG2000 is added to materials like polyurethane foam, where it acts as a flame retardant and smoke suppressant during combustion. You suggest a classification of 3824.99.9397 Harmonized Tariff Schedule of the United States (HTSUS), 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: Other: Other: Other. We concur.
The applicable subheading for PG2000 will be 3824.99.9397, The rate of duty will be 5 percent ad valorem.
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/.
When determining the country of origin for purposes of applying current trade remedies under Section 301 (insert Section 301, Section 201, or Section 232, as appropriate), the substantial transformation analysis is applicable. See, e.g., Headquarters Ruling Letter (“HQ”) H301619, dated November 6, 2018. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 681 F.2d 778 (C.C.P.A. 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).
CBP has generally held that mere mixing of two substances in another country, not involving a chemical reaction and without additional processing, does not result in a product of such other country. See HQ 561986. However, as discussed in HQ 562468, certain types of blending operations where the finished product could be considered to have a new name, character, or use over its constituent inputs could lead to a finding of substantial transformation.
In your submission you state that the proprietary ingredients of PG2000, which are different from other similar use fire retardant/smoke suppressant products give it a superior performance over those products. You provide evidence of product testing the superiority of PG2000 over its comparators in the areas of flame spread, smoke generation, burn temperature, and mass loss. As there appears to be a change in character and use of the completed product, it is our opinion that there is a substantial transformation of the starting materials. Therefore, PG2000 will have a country of origin identity of Canada.
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));
Since the substance contains non-originating ingredients, 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). As previously noted, PG2000 is classified under subheading 3824.99.9397 HTSUS. The applicable rule of origin for goods classified under subheading 3824.99.9397, HTSUS, is in GN 11(o)/38(5), HTSUS, which provides
(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.
Based on the facts provided, PG2000 will qualify for USMCA preferential tariff treatment, because it will meet the requirements of HTSUS General Note 11(b)(iii). This good will therefore be entitled to a free rate of duty under the 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 John Bobel at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division