MAR-2-05 RR:CR:SM 561457 CW
Mr. Charles Powell
C.H. Powell Company
47 Harvard Street
Westwood, MA. 02090
RE: Country of origin marking requirements applicable to ?Borol? imported from Canada;
fungible material; commingling; inventory management method; FIFO
Dear Mr. Powell:
This is in response to your letter of July 20, 1999, requesting a ruling on behalf of Morton International, Inc. regarding the country of origin marking requirments applicable to a chemcal intermediate (?Borol?) to be imported from Canada. Additional information was forwarded to us by letter dated September 20, 1999.
FACTS:
The chemical intermediate to be imported by your client, Morton International, Inc., is marketed under the trade name ?Borol? and is a mixture of sodium borohydride (a reducing agent), sodium hydroxide and water. The three ingredients comprise 12%, 40% and 48% by volume, respectively. The product is used to produce a bleach for use in the paper industry. The Borol will be produced at two facilities--one in the state of Washington, and the other in Delfzil, Netherlands, from which the product will be shipped to a storage tank in Quebec, Canada where the Borol from both facilities will be commingled. We are informed that the ingredients of the Borol produced in the U.S. will be of U.S. origin, while the ingredients of the Borol produced in the Netherlands will be sourced from various European producers.
Withdrawals from the storage tank will be made on a customer demand basis for shipment by tank vehicles to paper-making facilites in Canada and the U.S. You advise that the Borol inventory will be managed on a FIFO basis with detailed records kept as to time and volume of tank product receipt and shipment. Specification measurements of the Borol will also be taken at each delivery and withdrawal. You request a ruling on the proper country of origin of the Boron to be imported into the U.S. on a per-tank vehicle basis.
In a New York Ruling (NY) D88824 dated April 8, 1999, Customs determined that Borol is classified in subheading 3824.90.3900, Harmonized Tariff Schedule of the United States (HTSUS). You state that the sodium borohydride and sodium hydroxide are classified in subheadings 2850.00.5000 and 2815.12.0000, HTSUS, respectively.
ISSUE:
What are the country of origin marking requirements applicable to the Borol to be imported into the U.S. under the above-described circumstances?
LAW AND ANALYSIS:
Section 304 of the 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 U.S. 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 manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. The regulations implementing the requirements and exceptions to 19 U.S.C. 1304 are set forth in Part 134, Customs Regulations (19 CFR Part 134).
According to section 134.1(d), Customs Regulations (19 CFR 134.1(d)), the ?ultimate purchaser? is generally the last person in the U.S. who will receive the article in the form in which it was imported. However, for a good of a NAFTA country, the ultimate purchaser is the last person in the U.S. who purchases the good in the form in which it was imported. In this case, the ultimate purchasers of the imported Borol are the U.S. paper-making companies who consume the chemical during the process of producing paper.
Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), 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.
Section 134.1(j) provides that the ?NAFTA Marking Rules? are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. Section 134.1(g) defines a ?good of a NAFTA country? as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.
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 sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) provides that "[t]he 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 section 102.20 and
satisfies any other applicable requirements of that section, and all
other requirements of these rules are satisfied.
?Foreign material? is defined in section 102.1(e), Customs Regulations (19 CFR 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 imported Borol is neither ?wholly obtained or produced,? nor ?produced exclusively from domestic [Canadian] materials.? Therefore, for purposes of determining the origin of the imported good, section 102.11(a)(3) is the applicable rule that first must be applied. Under this rule, the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20. Borol is classified in subheading 3824.90.3900, HTSUS. The applicable change in tariff classification set forth in section 102.20 provides as follows:
3824.71-3824.90 ......... A change to subheading 3824.71 through 3824.90 from any
other subheading, including another subheading within that group,
provided that no more than 60 percent by weight of the good
classified in this subheading is attributable to one substance or
compound.
In this case, combining the Borol of U.S. origin with the Borol of Dutch origin in a storage tank in Canada will not result in a change in the tariff classification of either material. Therefore, as the requisite tariff shift rule is not met, 19 CFR 102.11(b) of the hierarchal rules must be applied next to determine the origin of the blended Borol. This provision states the following:
Except for a good that is specifically described in the Harmonized Tariff
Schedule as a set, or is classified as a set pursuant to General Rule of
Interpretation 2, where the country of origin cannot be determined under
paragraph (a), the country of origin of the good:
(1) Is the country or countries of origin of the
single material that imparts the essential
character of the good, or
(2) If the material that imparts the essential
character of the good is fungible, has been
commingled, and direct physical identification of
the origin of the commingled material is not
practical, the country or countries of origin may
be determined on the basis of an inventory
management method provided under the appendix to
part 181 of this chapter.
"Fungible" goods or materials are defined as "goods or materials that are interchangeable for commercial purposes and whose properties are essentially identical." See section 102.1(f), Customs Regulations (19 C.F.R. ?102.1(f)).
Section 102.18(b)(1), provides as follows:
For purposes of identifying the material that imparts the essential character to a 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.
Applying section 102.18(b), we find that the material that imparts the essential character to the imported Borol is the Borol itself. Therefore, the countries of origin of the imported commingled Borol are the U.S. and the Netherlands. Goods of U.S. origin are excepted from the country of origin marking requirements of 19 U.S.C. 1304 pursuant to 19 CFR 134.32(m). Thus, it would be acceptable for the containers (tank vehicles) in which the commingled Borol is imported and shipped to the ultimate purchasers to be marked to indicate only that the chemical is a product of the Netherlands. However, if your client also wishes to identify the U.S. origin of the imported commingled chemical, Customs would have no objection to a marking such as ?Product of the U.S.A. and the Netherlands.? It should be noted in this regard that the marking of articles in whole or in part as ?Made in the U.S.? is a matter within the jurisdication of the Federal Trade Commission.
Alternatively, as the Borol of U.S. and Dutch origin is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, pursuant to 19 CFR 102.11(b)(2), the country of origin of the imported Borol may be determined on the basis of an inventory management method provided under the Appendix to Part 181 of the Customs Regulations (19 CFR Part 181, Appendix). See Schedule X, Part II, "Fungible Goods." The inventory management method which your client proposes to use, FIFO (First In, First Out), is an acceptable method which may be used to determine the country of origin of the imported Borol. (See also 19 C.F.R. 102.12.)
HOLDING:
Based on the information provided, the countries of origin of the imported Borol, consisting of Borol of U.S. and Dutch origin which is commingled in Canada, are the U.S. and the Netherlands. It would be acceptable to mark the imported commingled chemical as a product of the Netherlands or as a ?Product of the U.S.A. and the Netherlands.? Alternatively, pursuant to 19 CFR 102.11(b)(2), the origin of the imported commingled Borol may be determined on the basis of an inventory management method provided for in the Appendix to Part 181, Customs Regulations (e.g., FIFO).
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.
Sincerely,
John Durant, Director
Commercial Rulings Division