RR:CR:SM MAR-2-05 561074 RSD

Ms. Karen MacGilivray
Tower Group International
128 Dearborn Street
Buffalo, New York 14207

Dear Ms. MacGilivray:

RE: Country of origin of road wheels imported from Canada; NAFTA Marking Rules; Essential Character; 19 CFR Part 102

This is in response to a letter dated June 4, 1998, from your firm on behalf of Kuntz Electroplating (Kuntz) concerning the country of origin of road wheels imported from Canada. In a telephone conversation with a member of my staff , you indicated that Kuntz is seeking a ruling only with respect to the country of origin of the road wheels and that no ruling regarding the dutiable status of merchandise is sought. We have received a report concerning the classification of this article from the National Commodity Specialist Division. As you have requested, the cost information you have provided will be accorded confidential treatment.

FACTS:

To make the imported road wheels, Kuntz uses raw aluminum castings which are produced in Ohio. Kuntz ships the aluminum castings to Kitchener, Ontario, where they are electroplated. The electroplating process converts the aluminum castings into road wheels which are sent to the United States for use in motor vehicles. In Canada, Kuntz performs three processes on the castings before they are shipped back to the United States. The first process performed in Canada is a metal finishing process which removes manufacturing defects from the castings and develops a smooth surface. The second process is an electrochemical process during which a thin layer of metal is deposited on a metallic base. A steady direct current of low voltage is required for this process. The object to be coated is placed in a solution called a "bath" which consists of "a salt of the coating metal" and is connected to the negative terminal of an external source of electricity. Another conductor is connected to the positive terminal of the electric source. When the current is passed through the solution, atoms of the plating metal deposit out of solution onto the cathode (the negative electrode). These atoms in the bath are replaced by atoms from the anode (positive electrode), if it is composed of the

same metal. Otherwise, they are replaced by periodic additions of the salt to the bath. In either case, an equilibrium between the metal coming out of solution and metal entering is maintained until the object is plated.

The bonding of the metallic layers increases corrosion resistance and upgrades the cosmetic quality of the road wheels. The metallic layers that Kuntz uses to plate the road wheels include copper, semi-bright nickel, high sulfur nickel, bright nickel, and chrome.

The third process is a coating operation in which an organic based anti-corrosion coating is applied to the brake side of the wheel as well as to selected areas of the face of the wheel. The primary purpose of the coating is for corrosion resistance and cosmetic appearance.

You advise that before the electroplating process, the aluminum castings do not satisfy the standards for road wheels used by the United States automotive industry. Critical industry standards such as corrosion resistance and cosmetic appearance are not met until the electroplating process is completed in Canada.

ISSUE:

What is the country of origin of the road wheels imported from Canada?

LAW AND ANALYSIS:

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 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 a manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article. Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 1304.

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 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 country, the NAFTA Marking Rules will determine the country of origin. (Emphasis added). The country of origin marking requirements for a "good of a NAFTA country" are determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), as implemented by section 207 of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057) (December 8, 1993). Section 134.1(g), Customs Regulations (19 CFR 134.1(g)), defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico, or the U.S. as determined under the NAFTA Marking Rules set out in Part 102, Customs Regulations (19 CFR Part 102).

Section 102.11, Customs Regulations (19 CFR 102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. That section states 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 section 102.20 and satisfies any other applicable requirements of that section, and all other applicable 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."

Accordingly, we must determine the country of origin of the road wheels, which you indicate are processed in Canada from aluminum castings of U.S. origin. Because the road wheels are made with U.S. materials, they are neither wholly obtained or produced nor produced in Canada exclusively from domestic materials, as those terms are defined in section 102.1, Customs Regulations (19 CFR 102.1). Accordingly, following the hierarchy, we must apply section 102.11(a)(3), Customs Regulations (19 CFR 102.11(a)(3)), to see if the country of origin of the road wheels can be determined under that provision.

Pursuant to section 102.11(a)(3), 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, Customs Regulations (19 CFR 102.20). Section 102.20 sets forth the specific tariff classification changes and/or other operations which are specifically required for the country of origin to be determined on the basis of operations performed on the foreign materials contained in a good.

According to the National Commodity Specialist Division, the finished road wheels imported from Canada are classified in subheading 8708.70.4545, HTSUS. We will assume for the purposes of this ruling that this classification is correct. The applicable rule under 19 CFR 102.20(p), section XVI, Chapters 86 through 89, is as follows:

8708.70--A change to subheading 8708.70 from any other subheading.

The National Commodity Specialist Division has also indicated that the raw aluminum castings that are processed in Canada to make the finished road wheels also are classified in subheading 8708.70.4545, HTSUS. Thus, both the finished road wheels and the U.S. origin aluminum castings are classified in the same subheading of the HTSUS. Consequently, the processing performed in Canada does not result in the aluminum castings undergoing the applicable shift in tariff classification set forth in 19 CFR 102.20. Thus, the origin of the road wheels cannot be determined under 19 CFR 102.11(a).

Since a country of origin determination cannot be made by applying section 102.11(a), the analysis continues with section 102.11(b) which instructs us to examine the article's essential character to determine its country of origin. Section 102.11(b) provides that where the country of origin cannot be determined under section 102.11(a), and the good is not specifically described in the Harmonized System as a set nor classified as a set under General Rule of Interpretation 3, HTSUS, the country of origin of the article is "the country or countries of origin of the single material that imparts the essential character of the good. . .."

In regard to determining the "essential character" of the road wheels, section 102.18(b)(1) of the regulations provides as follows:

For purposes of identifying the material that imparts the essential character to a good under  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.

In this case, the material in the road wheels that does not undergo the applicable tariff shift or meet other requirements applicable to the good are the aluminum castings which are classified in the same subheading as the finished road wheels. We find that the U.S.-origin aluminum castings clearly constitute the material that imparts the essential character of the finished good. Therefore, the country of origin of the road wheels is the United States.

19 CFR 134.32(m) provides that products of the United States exported and returned to the United States are excepted from the country of origin marking requirements of 19 U.S.C. 1304. Because the road wheels are products of the United States, they need not be marked to indicate their country of origin.

HOLDING:

Under the NAFTA Marking Rules, the country of origin of the electroplated road wheels imported from Canada is the United States. As such, the imported articles are not subject to the country of origin marking requirements of 19 U.S.C. 1304.

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