MAR-2:OT:RR:NC:N:5: 137
Helen Xiao
Ernst & Young
155 N Wacker Drive Chicago, IL 60606
RE: The country of origin and eligibility of the United States-Mexico-Canada Agreement (USMCA) for a polyurethane prepolymer from Canada.
Dear Ms. Xiao:
This is in response to your letter, dated December 26, 2024, requesting a ruling on the country of origin of a polyurethane prepolymer for purposes of applying trade remedies under Section 301 of the Trade Act of 1974, as amended, from China as well as the eligibility of the USMCA.
The product under consideration is referred to as Wannate 9134. It is a polyurethane prepolymer that is characterized by its easy dispersion in water. It demonstrates excellent bonding strength and water resistance and is highly suitable for spray foam applications. The classification of this product was ruled on in New York Ruling N338752 dated April 4, 2024. The current ruling addresses whether two new production processes for the Wannate 9134 result in a substantial transformation and eligibility of USMCA.
Polymeric methylene diphenyl diisocyanate (Polymeric MDI or PMDI) of Chinese origin and Poly(ethylene glycol) monomethyl ether (polyol) of U.S. origin are imported to Canada. There the products can undergo three separate manufacturing processes in Wanhua’s plant in Canada: the Batch Reaction process (previously ruled on in N338752), the In-line Reaction process or the Drum or Tote Reaction process.
The In-Line Reaction process consists of the following steps:
1) Preparation: Heat the PMDI in the supply tank and connect to the metering pump before the in-line reactor.
2) Preparation: Connect the polyol tote to the metering pump before the in-line connector.
3) Reaction: Meter PMDI and polyol at separate rates into the in-line reactor which allows each reactant to be metered precisely at independent rates. The reactor also includes a static reactor element that forces rapid mixing and reaction while moving the two components through the reactor. When an in-line reactor is used, the chemical reaction occurs in the static mixing portion of the in-line reactor. The reaction occurs rapidly, and as such, it is alternately possible to return the reacted prepolymer product back to the original tank after is has undergone the reaction. In this case, the contents of the road tank or rail tank are fully cycled two to three times to ensure a complete prepolymer reaction and homogeneity of the product.
4) After all polyol and MDI are metered through the in-line reactor, disconnect all chemical lines.
5) Quality Assurance: Collect representative sample for Quality Assurance Testing.
The Drum or Tote Reaction process consists of the following steps:
1) Preparation: Place a new MDI drum or tote on a suitable containment pallet. MDI drums and totes must be stored at a standard temperature prior to completing the pre-polymerization reaction.
2) Preparation: Open the drum or tote. Insert a funnel into the threaded hole on the drum or in the opening on the top of the tote. Add a specified amount of polyol to the drum or tote.
3) Preparation: Place a compressed air-driven (or electric-driven) drum mixer in the open hole of the drum or tote and ensure that the mixer is safely fixed in place.
4) Reaction: Start agitating the contents of the drum or tote at a moderate speed for a set amount of time. In this step, the polyol disperses quickly, and the MDI reacts rapidly with polyol. At the end of reaction, all polyol (OH functional groups) will have reacted with MDI to result in a polyurethane prepolymer.
5) Preparation: Stop the agitator and remove the agitator and clamp assembly from the drum or tote. Close the drum or tote.
6) Quality Assurance: Collect representative sample(s) for Quality Assurance Testing.
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));
GN 11 (n) (v) (A) provides that:
(A) A good of chapters 39 through 40 that results from a chemical reaction in the territory of one or more of the USMCA countries shall be treated as an originating good.
GN 11 (n) (v) (B) states:
For the purposes of this rule, a “chemical reaction” is a process (including a biochemical process) that results in a molecule with a new structure by breaking intramolecular bonds and by forming new intramolecular bonds, or by altering the spatial arrangement of atoms in a molecule.
It is the opinion of this office that both the In-line reaction process and Drum or Tote reaction process, used to process the polymeric MDI and polyethylene glycol into Wannate 9134, polyurethane prepolymer are defined as chemical reactions per GN 11(n) (v) (A). Therefore, the Wannate 9134, polyurethane prepolymer is considered to be an originating good under USMCA.
Regarding the applicability of Section 301 trade remedies to the Wannate 9134 under consideration, CBP relies on the 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. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982).
However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983) (Uniroyal). 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).
The PMDI and Polyol undergo either an In-liner Reaction process or a Drum or Tote Reaction process that results in a chemical reaction forming new urethane bonds and resulting in Wannate 9134, a new polyurethane prepolymer.
Regarding the applicability of Section 301 remedies, it is the decision of this office that the manufacturing and/or assembly operations described, in sum, do substantially transform the individual components into a new and different article of commerce with a changed name, character, and use. Therefore, it is the opinion of this office that the manufacturing and assembly processes performed in Canada result in a substantial transformation of the non-Canadian components and the Wannate 9134 is a product of Canada. Therefore, the Wannate 9134 will not be subject to the additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation.
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 Christina Allen at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division