CLA-2:CO:R:C:G 082183 JAS
Kent K. Matsumoto, Esq.
Ober, Kaler, Grimes & Shriver
10 Light Street
Baltimore, Maryland 21202
RE: Country of Origin of Abrasion Resistant Steel Pipe
Processed in Canada From Pipe Sourced in the U.K.
Dear Mr. Matsumoto:
In your letter of April 15, 1988, you inquire as to the
country of origin, for tariff purposes, of steel pipe from the
United Kingdom which is induction heated and water quenched in
Canada to form abrasion resistant steel pipe. Our ruling
follows.
FACTS:
The specialty pipe to be imported from Canada is abrasion
resistant steel pipe for use in hydraulic slurry and pneumatic
conveyance systems. The pipe is processed in Canada from an
"unfinished" high carbon steel pipe (referred to as NASP 40)
produced in the U.K. according to rigid specifications set by
the Canadian processor. The processing operation in Canada,
which results in a product called NASP 600, is a heat treat-
ment consisting of the following:
1. Heating to the austenitizing temperature range
(1,500 degrees fahrenheit) by means of
induction coils.
2. Water-quenching of the inner wall by a system
using a lance fitted with a sprayer head.
3. Quality assurance testing for hardness and
ovality, and for camber and performance under
hydrostatic conditions.
4. Supplementary fabrication, if required.
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The Canadian processing results in a product, NASP 600,
that is worth approximately three and one-half times the cost
of the NASP 40 from the U.K. The heat treatment is very time-
consuming, and takes about eight hours to process 600 feet of
pipe. The process changes the microstructure of the pipe from
ferrite/pearlite to 100% martensitic, which gives it the
mechanical properties necessary for durability and abrasion
resistance in slurry systems.
The mechanical properties of the unfinished pipe and the
heat treated pipe are as follows:
PROPERTY UNFINISHED HEAT TREATED
Yield Strength 40-60 900-125
Ultimate Strength 75-100 300+
Ductility (elongation) App. 20% App. 10%
Hardness 200-240 BHN 600+ BHN
Charpy V-Notch Avg. 15-20 Joule 4 Joule
ISSUE:
Has the described processing substantially transformed the
pipe of U.K. origin into a product of Canada for tariff
purposes?
LAW AND ANALYSIS:
An article is a product of the country in which it was
last subject to a substantial transformation. The record must
establish that the Canadian processing resulted in a product
other than or materially different from the merchandise of
U.K. origin; that is, a new and different article must emerge
from the processing, one having a new name, character or use.
Anheuser-Busch Brewing Association v. United States, 207 U.S.
556 (1908).
The "unfinished" pipe from the U.K., as you state, is made
to rigid specifications for the Canadian processor, and has no
use in the U.K. or Canada as pipe. In fact, it is not used by
anyone in the industry, other than the Canadian processor.
The processing, however, specially adapts the pipe for use in
pneumatic conveyance systems for slurry and other abrasive
materials. In a ruling, dated November 21, 1985 (file
553739), we held that quenching and tempering of multifunc-
tional pipe in order to change it into pipe that meets A.P.I.
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specifications for oil country tubular goods, together with
the end finishing of the pipe, was a substantial transforma-
tion.
The heat treatment you describe results in a product that
has a new character and use. Even though prior to the Cana-
dian heat treatment process the pipe is said to be limited in
use to finishing into special abrasion-resistant pipe, the
actual processing requires significant time and critical con-
trol in order to impart the specific quality of surface hard-
ness that is required for hydraulic slurry pipe systems. The
processing significantly changes the microstructure of the
steel in the pipe. The heat treatment, together with the
existing chemical composition of the pipe, changes the physi-
cal properties of the pipe to meet the specialized require-
ments of a piping system that must withstand the effects of
highly abrasive materials that are pumped in the hydraulic
slurry and pneumatic conveyance systems.
This specialized use is indicative of a change in the
character of the pipe. While there has been no significant
visible change in the dimensions of the pipe, there have been
significant changes in its mechanical properties so as to
identify this pipe as a particular type of limited-use pipe.
There is no indication that this pipe has any other applica-
tion.
HOLDING:
The heat treatment process, as described, results in a new
and different article which is considered a product of Canada
for tariff purposes.
Sincerely,
John Durant
Director, Commercial
Rulings Division