MAR-2-05 RR:CTF:VS 563312 EAC
Mr. Frederick P. Waite
Ms. Kimberly R. Young
Vorys, Sater, Seymour and Pease LLP
1828 L Street, NW
Eleventh Floor
Washington, DC 20036-5109
RE: Country of origin marking requirements applicable to magnesium-based scrap from Canada; J-List exceptions
Dear Mr. Waite and Ms. Young:
This is in response to your letter, dated July 13, 2005, requesting a ruling on behalf of Magnesium Products of America, Inc. (hereinafter “MPA”), concerning the country of origin marking requirements for magnesium-based scrap that MPA imports from Canada.
FACTS:
MPA is located in Eaton Rapids, Michigan, where it manufactures various die cast parts used in the automotive industry (instrument panels and steering column brackets, for example). The die cast parts are produced by melting ingots of alloy magnesium of various specifications and pouring the molten metal into a die to cast the part. The chemistry requirement of the automotive part determines the type of alloy ingot that is used.
MPA is wholly-owned by Meridian Technologies, Inc., of Etobicoke, Ontario, Canada. MPA’s parent also operates Magnesium Products Division (hereinafter “MPD”) in Strathroy, Ontario, Canada. MPD manufactures die cast automotive parts such as instrument panels, steering column brackets, housings, transfer cases, and support brackets. Both MPA and MPD purchase primary alloy magnesium ingots and recycled alloy magnesium as the principal input for their die casting operations.
MPD purchases alloy magnesium ingots from sources in Canada, China, Russia, and other countries abroad for use in the production of the aforementioned die cast components. MPD’s manufacturing process results in finished die-cast parts, and “scrap” referred to as “gates and runners.” MPD sorts and inventories the scrap on the basis of its alloy specification regardless of whether the alloy magnesium ingots are sourced from Canada, China, Russia, or other countries abroad.
Both MPD in Canada and MPA in the United States recycle magnesium scrap in-house and produce alloy magnesium ingots that are used in further die-casting operations. Over 50 million pounds of magnesium scrap are recycled annually. MPD has one recycling cell at its plant in Canada whereas MPA operates three such recycling cells in Michigan. As MPA’s recycling capacity is greater, MPA imports scrap from MPD’s die casting facility in Canada, recycles it in the United States, and uses the recycled material in subsequent die casting operations. We have been informed by electronic message dated September 15, 2005, that MPA’s recycling operations involve melting the scrap, testing the melt to confirm the alloy chemistry, and pouring the melt into ingot molds to form recycled alloy ingots. The recycled ingots are then sent to die-casting operations where they are melted in a holding furnace and poured into steel dies contained within casting machines. These operations result in the die cast parts sold by the company as well as additional scrap. The scrap generated from this process is sent to be recycled where the process is repeated.
ISSUES:
What is the country of origin of the magnesium-based scrap that MPA imports from Canada?
Whether the imported magnesium-based scrap may be excepted from the country of origin marking requirements of 19 U.S.C. §1304.
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. §1304), requires that, unless excepted, every article of foreign origin (or its container) 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 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).
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. Consistent with the foregoing, the country of origin of the imported magnesium-based scrap in this case will be determined pursuant to the NAFTA Marking Rules.
Part 102, Customs Regulations (19 CFR Part 102), 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 provides a required hierarchy for determining the country of origin of a good for marking purposes. 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;
The good is produced exclusively from domestic materials; or
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.
The imported magnesium-based scrap is neither wholly obtained or produced or produced exclusively from “domestic” (Canadian, in this case) materials. Therefore, we must consider whether the foreign materials undergo an applicable change in tariff classification (or other applicable requirement) under section 102.20.
We are informed that the magnesium-based scrap imported from Canada is classified under subheading 8104.20, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for: “Magnesium and articles thereof, including waste and scrap: Unwrought magnesium: Waste and scrap”. We are further informed that the foreign (non-Canadian) magnesium ingots used in Canada are classified under subheading 8104.19, HTSUS, which provides for: “Magnesium and articles thereof, including waste and scrap: Unwrought magnesium: Other”.
Section 102.20 contains a “Chapter 81 Note” which states that “[w]aste and scrap are products of the country in which they are collected.” In the die casting industry, a “gate” is defined as the passage connecting a runner or overflow with a die cavity and a “runner” is defined as a channel through which molten metal is conducted from the sprue (hot-chamber) or biscuit (cold-chamber) to the cavity. See, “Die-Cast Terms and Definitions” available at: http://www.simalex.com/qa/Quality%20Department/Miscellaneous/DIE-CAST%20TERMS%20and%DEFS.PDF. We note that new clean die casting scrap is the largest source of magnesium scrap available for recycling and may consist of gates, runners, and drippings. See, “Scrap Metal Recycling Archives Articles – Magnesium Recycling” available at: http://www.nrcan.gc.ca/mms/canmet-mtb/mmsl-lmsm/rnet/scrapare.htm. As applied, the magnesium-based scrap in the instant case is collected in Canada. Therefore, the country of origin of the scrap for marking purposes is Canada.
The next issue you have presented for consideration is whether the imported magnesium-based scrap (and containers used to ship the scrap) may be excepted from the individual marking requirements pursuant to section 134.32(f), Customs Regulations (19 CFR 134.32(f)). Under section 134.32(f), articles imported for use by the importer and not intended for sale in their imported or any other form are excepted from the country of origin marking requirements. In general, this exception applies only to articles imported for the importer’s personal use. For example, acceptable uses under section 134.32(f) have included using samples for sales presentations, articles for testing, articles for showroom display, and machines, equipment, and supplies in carrying on a business. See, for example, Headquarters Ruling Letter (“HRL”) 734121 dated August 12, 1991. As applied, the magnesium-based scrap in the instant case may not be excepted from marking pursuant to section 134.32(f) because the scrap is melted, subsumed into new die cast parts, and ultimately sold in another form to separate parties.
However, we direct your attention to section 134.32(g), Customs Regulations (19 CFR 134.32(g)), which provides an exception to the marking requirements if the imported article is to be processed in the United States by the importer or for his account otherwise than for the purpose of concealing the origin of such article and in such manner that any mark contemplated by this section would necessarily be obliterated, destroyed, or permanently concealed. In this case, it appears as if any marking on the imported scrap would be obliterated when processed in the United States. Therefore, the imported scrap will be excepted from marking under 19 CFR 134.32(g). See, for example, HRL 561774 dated January 29, 2001. The import containers will also be excepted from marking at the time of importation pursuant to section 134.22(e)(1), Customs Regulations (19 CFR 134.22(e)(1)). See, Id. However, please be advised that the invoice, or other pertinent document, for each entry should reference 19 CFR 134.32(g).
HOLDING:
Based upon the facts of this case, we find that the country of origin of the imported magnesium-based scrap for marking purposes is Canada. The imported scrap and the outermost containers in which the scrap is imported may be excepted from the individual 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 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