OT:RR:CTF:VS H327580 AMW
Juan Moreno
Sandler, Travis & Rosenberg, P.A.
5835 Blue Lagoon Drive
Suite 200
Miami, FL 33126
RE: Country of origin marking for stainless steel flanges; India; United Arab Emirates; Midwood
Dear Mr. Moreno:
This is in response to your request, dated March 2, 2022, on behalf of your client CD Industries, to U.S. Customs and Border Protection (“CBP”) Office of Trade, Regulations and Rulings, National Commodity Specialist Division regarding the country of origin of certain stainless steel flanges. Your request was forwarded to this office for a response.
FACTS:
The products at issue are stainless steel flanges that are designed for use in the oil and gas and water and chemical industries. The flanges are used to connect piping and components in a piping system by use of bolted connections and gaskets.
As outlined in your request, the manufacturing process involves operations performed in both India and the United Arab Emirates (“U.A.E.”).
In India, the manufacturing process includes the following steps:
Raw material, consisting of billets or ingots, is cut into the required weights;
The cut billets/ingots are forged into a flange shape; and
Each flange-shaped item is heat treated and prepared for shipment to the U.A.E.
In the U.A.E., the items undergo further processing, which is described as follows:
The items are machined to achieve a smooth surface, enabling a better seal when in use;
The faces of the flanges are precision drilled to create holes used for bolting purposes (the number of holes will vary depending on the size and specification of the flange; the holes are not threaded);
The flanges are beveled by use of computer numerical control (“CNC”) turning centers;
Punching and marking is performed on the flange’s outer diameter for identification purposes; and
The flanges are packed and prepared for exportation to the United States.
ISSUE:
What is the country of origin for purposes of the marking statute, 19 U.S.C. § 1304?
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 imported into the United States 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 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 marking on the imported goods the country of which the goods is the product. The evident purpose is to mark the goods so that 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. Friedlander & Co., 27 C.C.P.A. 297 at 302; C.A.D. 104 (1940) (emphases added).
Section 134.1(b), CBP Regulations (19 CFR 134.1(b) (2021)), defines “country of origin” as:
[T]he 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 or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin.
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). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434 (Jan. 17, 2007), citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
Of relevance to the present matter, the United States Customs Court, in Midwood Industries, Inc. v. United States, 64 Cust. Ct. 499 (1970) addressed the issue of the substantial transformation of various steel forgings that were being imported and then manufactured into steel flanges used to connect two pipes. Id. at 507. Specifically, after importation to the United States, the forgings underwent several machining processes, including boring, facing, spot facing, drilling, threading, beveling, and heating and compressing. Id. As such, the court determined that rough steel forgings underwent significant manufacturing processes such that the imported products were substantially transformed into a new and different product which could be used to connect pipes together. Id.
Based on the information provided, the stainless steel flanges, which are forged and heat treated in India, undergo further machining into finished flanges in the U.A.E. According to Midwood, such machining of the steel forgings into usable flanges via a process involving, in part, smoothing, boring, beveling was found to be a substantial transformation. See also, Boltex Mfg. Co., L.P. v. United States, 24 C.I.T. 972 (2000). Similar manufacturing operations are undertaken in the U.A.E. As such, it is our determination that the boring, turning, serrating, beveling and precision drilling operations performed in the U.A.E. result in a substantial transformation and the country of origin will be the U.A.E.
HOLDING:
Pursuant to 19 U.S.C. §1304, we find that the United Arab Emirates is the proper country of origin for the subject stainless steel flanges because they undergo a substantial transformation in that country. 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 transactions.
Sincerely,
Monika Brenner, Chief Valuation and Special Programs Branch