OT:RR:CTF:VS H322367 CMR
Robert T. Givens, Esq.
Givens & Johnston, PLLC
950 Echo Lane
Suite 360
Houston, TX 77024-2788
RE: Classification, Country of Origin, and Eligibility for Preferential Tariff Treatment under the United States – Mexico – Canada Free Trade Agreement of Air Brake Hoses
Dear Mr. Givens:
This is in response to your request on behalf of your client, Strato Inc., for a ruling on the classification, eligibility for preferential tariff treatment under the United States – Mexico – Canada Free Trade Agreement (USMCA), and country of origin of air brake hoses assembled in Mexico.
FACTS:
The air brake hoses at issue consist of hose and fittings. As you state, “[t]he hose is constructed of two layers of rubber with steel wire reinforcements between these layers.” You describe the hose as reinforced hose of vulcanized rubber. It will be imported into Mexico on reels from the United States, Vietnam or the Philippines. The fittings are sourced from India, China or Vietnam.
The air brake hose is produced by feeding the imported bulk length hose into a machine that cuts the hose to the required length. The cut lengths of hose are taken to another station where an employee adds the specified fittings along with two crimp rings. The employee applies an adhesive to the fittings to ensure the bond which seals the fittings to the hose. You state:
These fittings are then inserted into the ends of the cut length of hose and pressed into position with a pneumatic press with a specially designed ram. The ram seats the fitting to the correct depth. The crimp ring is then slid into position and the assembly is then inserted into a machine to crimp the crimp ring, making the bond between the hose and fitting permanent. The hose is then inspected to ensure all the dimensions and tolerances are to specification. [Footnote omitted.]
You submit that the air brake hoses are classified as parts of railway cars in subheading 8607.21, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Parts of railway or tramway locomotives or rolling stock: Brakes and parts thereof: Airbrakes and parts thereof[.]” Further you submit that the air brake hoses qualify for preferential tariff treatment under the USMCA.
ISSUES:
Whether the air brake hoses are classified in subheading 8607.22, HTSUS, as parts of railway cars or in subheading 4009.22, HTSUS, which provides for “Tubes, pipes, and hoses, of vulcanized rubber other than hard rubber, with or without fittings: Reinforced or otherwise combined only with metal: With fittings”
Whether the air brake hoses qualify for preferential tariff treatment under the USMCA.
Whether the country of origin of the air brake hoses is Mexico or another country for purposes of country of origin marking.
LAW AND ANALYSIS:
Classification
Classification of goods under the HTSUS is governed by the General Rules of Interpretation (GRI). GRI 1 provides that classification shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
You believe that the air brake hoses should be classified in subheading 8607.21, HTSUS, as parts of railway cars. We disagree.
Note 2(a), Section XVII, HTSUS, provides:
The expressions "parts" and "parts and accessories" do not apply to the following articles, whether or not they are identifiable as for the goods of this section:
Joints, washers or the like of any material (classified according to their
constituent material or in heading 8484) or other articles of vulcanized rubber
other than hard rubber (heading 4016);
As Chapter 86 falls within Section XVII, Note 2(a) applies to preclude classification of the finished air brake hoses as parts in subheading 8607.21, HTSUS. Thus, the finished air brake hoses which are imported into the United States are classified in subheading 4009.22, HTSUS, as hoses of vulcanized rubber, other than hard rubber, reinforced or otherwise combined only with metal, with fittings.
USMCA Preferential Eligibility
The United States-Mexico-Canada Agreement (“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)). GN 11 of the HTSUS implements the USMCA. GN 11(a)(i) provides:
Goods that originate in the territory of Mexico, Canada or the United States (hereinafter referred to as “USMCA country” or “USMCA countries” as further defined in subdivision (l)(xxiv) of this note) under the terms of subdivision (b) of this note and regulations issued by the Secretary of the Treasury (including Uniform Regulations provided for in the USMCA), and goods enumerated in subdivision (p) of this note, when such goods are imported into the customs territory of the United States and are entered under a subheading for which a rate of duty appears in the “Special” subcolumn, followed by the symbol “S” in parentheses, are eligible for such duty rate, in accordance with section 202 of the United States-Mexico-Canada Agreement Implementation Act; and . . .
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—
the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
the good is a good produced entirely in the territory of one or more USMCA countries using nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or
In this case, the air brake hoses are assembled in Mexico using non-originating components. Therefore, we apply GN 11(b)(iii) and look to the applicable tariff shift rule set forth in GN 11(o). As these goods are classified in subheading 4009.22, HTSUS, and are used as parts of air brakes for rail cars, the applicable tariff shift rule is:
(C) A change to tubes, pipes, or hoses of subheading 4009.22, other than
those of a kind for use in a motor vehicle of tariff items 8702.10.60, 8702.90.30 or 8702.90.60, subheadings 8703.21 through 8703.90, 8704.21 or 8704.31, or heading 8711, from any other heading, except from headings 4010 through 4017.
As the hose as imported into Mexico is classified in subheading 4009.21, HTSUS, which provides for “Tubes, pipes, and hoses, of vulcanized rubber other than hard rubber, with or without fittings: Reinforced or otherwise combined only with metal: Without fittings,” the requisite tariff shift is not met. The hose imported into Mexico and the air brake hose exported from Mexico to the United States are both classified in the same heading, that is, heading 4009, HTSUS. Thus, the air brake hose does not qualify for preferential tariff treatment under the USMCA.
Marking
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or container) will permit in such a manner as to indicate to an ultimate purchaser in the United States the English name of the country of origin of the article. Congressional intent in enacting 19 U.S.C. 1304 was that the ultimate purchaser should be able to know by an inspection of the markings on the imported goods the country of which the good is the product. "The evident purpose is to mark the goods so at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will." United States v. Friedlaender & Co., 27 C.C.P.A. 297 at 302 (1940).
Part 134, Customs and Border Protection (CBP) Regulations (19 C.F.R. 134), implements the country of origin marking requirements and exceptions of 19 U.S.C.
§ 1304. Section 134.1(b), CBP Regulations (19 C.F.R. 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 [the marking regulations]. . . .” A substantial transformation is said to have occurred when an article emerges from a manufacturing process with a name, character, or use which differs from the original material subjected to the process. United States v. Gibson Thomsen Co., Inc., 27 C.C.P.A. 267 (C.A.D. 98) (1940); Texas Instruments v. United States, 681 F.2d 778, 782 (1982).
Pursuant to section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in §§ 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11. Applied in sequential order, the required hierarchy establishes that the country of origin of a good is the country in which:
(a)(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 § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
* * *
Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the air brake hoses are neither wholly obtained or produced, or produced exclusively from “domestic” (Mexican, in this case) materials. Therefore, we look to the rules set forth in § 102.20 pursuant to § 102.11(a)(3).
“Foreign material” is defined in § 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.” “Production” is defined as “growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good.” See § 102.1(o). As none of the components of the air brake hoses are of Mexican origin, all of the components of these goods which are assembled in Mexico are subject to the rule set forth in § 102.20 for goods of subheading 4009.22. That rule is:
A change to heading 4006 through 4010 from any other heading, including another heading within that group.
As the rubber hoses imported into Mexico are classified in heading 4009, HTSUS, and the finished air brake hoses are classified in heading 4009, HTSUS, the rule set forth in § 102.20 is not met.
Section 102.11(b) provides:
Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a) of this section:
The country of origin of the good is the country or countries of origin of the
single material that imparts the essential character to the good, or
If the material that imparts the essential character to 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.
CBP believes that the essential character of the air brake hoses is imparted by the rubber hoses, and not by the fittings. As the rubber hoses impart the essential character, the air brake hoses should be marked with the countries of origin of the rubber hoses.
Origin
We will not address the country of origin of the air brake hoses for purposes of § 301 duties at this time. You brought to our attention New York Ruling Letter (NY) N302378, dated February 15, 2019, which dealt with a country of origin determination for Teflon and nylon brake hoses produced in a similar manner as the air brake hoses at issue here. As we believe NY N302378 reached an incorrect conclusion, we will propose revocation of the ruling through the revocation process set forth in 19 U.S.C. § 1625. After that process is completed, if you still wish for CBP to issue a ruling on the origin of the air brake hoses at issue, you may resubmit your request.
HOLDING:
The air brake hoses are classified in subheading 4009.22, HTSUS, as hoses of vulcanized rubber, other than hard rubber, reinforced or otherwise combined only with metal, with fittings. They do not qualify for preferential tariff treatment under the USMCA. For purposes of country of origin marking, they should be marked with the country of origin of the rubber hose.
Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.”
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the CBP officer handling the transaction.
Sincerely,
Monika R. Brenner, Chief
Valuation and Special Programs Branch