CLA-2 OT:RR:CTF:VS H303279 EGJ
Mr. Jason Waite
Alston & Bird
950 F Street NW
Washington, D.C 20004-1404
RE: Country of origin of super fine mica flake; Section 301 trade remedy;
Dear Mr. Waite:
This is in response to your request, dated March 21, 2019, on behalf of your client, Imerys Performance Additives - North America (“Imerys”), regarding the country of origin of super fine mica flake. In your letter, you request a binding ruling on the applicability of subheading 9903.88.03 of the Harmonized Tariff Schedule of the United States (“HTSUS”), a Section 301 trade remedy provision, to proposed transactions involving super fine mica flake.
Crude muscovite is mined and then processed in China. The crude muscovite is broken down into coarse mica to an extent that 10% of the coarse mica flakes (by mass) will not pass a 10 mesh screen, and 10% of the coarse mica flakes will pass a 60 mesh screen. Imerys plans to import the coarse mica flakes into Canada for further processing. At importation, the coarse mica has a physical structure which consists of layers, or plates, as shown in the magnified picture below:
In Canada, Imerys processes the coarse mica flakes in a dedicated process line.
The coarse mica is transferred to a jet mill, where a jet of air is used to impact the coarse flakes into each other. Jet milling continues until the flakes are milled to 92 to
95% -325 mesh size fraction (i.e., between 92% and 95% of the mica, by mass, will pass through a 325 mesh screen). Imerys refers to this process as delamination, as the layers of coarse mica are divided up into much thinner flakes of super fine mica. The milled mica is then screened and packaged for shipment to customers, including customers in the United States. A magnified picture of the super fine mica is provided below:
Imerys follows customer specifications for its super fine mica in order to prepare it for its relevant applications. Specifically, Imerys' milling and screening processes significantly reduce the particle size of the coarse mica flakes, reduce their bulk density, and increase their brightness. The Canadian manufacturing changes the physical properties of the mica, including its particle size distribution, particle shape, and brightness. These processes yield a finished product which meets lmerys’ and its customers' specifications for high brightness, low yellowness, defined steepness in particle size distribution, low defined bulk density, high aspect ratio, and high purity.
As a result of the processing conducted by Imerys, the resulting super fine mica is capable of use in specialized industrial applications. It is most commonly used in the paint and polymer industries, and it has applications in the rubber and sealants industry. In the paint industry, super fine mica improves exterior durability and increases barrier properties such as moisture resistance, flexibility, and adhesion. In plastics applications, super fine mica improves thermal and dielectric properties, impact strength, and stiffness. In rubber applications, it prevents undesirable adhesion of rubber compounds during the vulcanization process. In adhesives and sealants, it provides crack resistance and reduces shrinkage.
In contrast, you stated that coarse mica flakes are not fit for use in any of these applications. In addition to their utility as a starting material for super fine mica and other mica products, coarse mica flakes are a distinct, finished, commercially viable product, as they are used to prevent loss of circulation and seepage in drilling applications. Specifically, coarse mica flakes are added to drilling fluids to prevent or correct loss of drilling fluids through porous formations.
Due to its significantly smaller particle size, super fine mica is not fit for use in drilling applications. Also, super fine mica cannot be used as a starting material for other mica products with a coarseness between that of coarse mica flakes and super fine mica. Finally, Imerys notes that the price point per metric ton of super fine mica is more than three times greater than the price point per metric ton of coarse mica.
What is the country of origin of the imported super fine mica for the purpose of applying the Section 301 trade remedy under subheading 9903.88.03, HTSUS?
LAW AND ANALYSIS:
Effective July 6, 2018, the Office of the United States Trade Representative imposed an additional tariff on certain products of China classified in the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(b), HTSUS. See Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 28710 (June 20, 2018). Later, the USTR imposed additional tariffs on products classified under the subheadings enumerated in Section XXII, Chapter 99, Subchapter III U.S. Note 20(d), U.S. Note 20(f) and U.S. Note 20(g), HTSUS. The corresponding products of China that are provided for in subheadings 9903.88.01, 9903.88.02, 9903.88.03, or 9903.88.04, and are classified in one of the subheadings enumerated in U.S. Note 20(b), U.S. Note 20(d), U.S. Note 20(f) or U.S. Note 20(g) to Subchapter III, shall continue to be subject to antidumping, countervailing, or other duties, fees and charges that apply to such products, as well as to those imposed by the aforementioned Chapter 99 subheadings. Products of China classifiable in subheading 6810.99.00, HTSUS, are subject to the applicable duty rate plus an additional 10 percent under subheading 9903.88.03, HTSUS.
When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 C.C.P.A. 151 (1982). This determination is based on the totality of the evidence. See National Hand Tool Corp. v. United States, 16 C.I.T. 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). Applying the name, character and use test to the instant merchandise, we find no significant changes in the name when coarse mica flakes are processed into super fine mica. Both products have the name “mica.”
Turning next to character and use, we note that the courts have held that when the properties and uses of a product are predetermined by the material from which it was made, no substantial transformation occurs. For example, in Superior Wire v. United States, 669 F. Supp. 472 (Ct. Int’l Trade 1987) (“Superior Wire”), aff’d 867 F.2d 1409 (Fed. Cir. 1989), wire rod in coils was shipped to Canada where it was drawn into finished wire. The tensile strength of the final product was increased by approximately 30 to 40 percent as the rod was reduced in cross-sectional area by about 30 percent and was elongated. The court determined that the drawing operation did not result in a substantial transformation, pointing out that the properties of the wire rod and its uses were determined by the chemical content of the rod and the cooling processes used in its manufacture, and that the wire rod dictated the final form of the finished wire.
Examining the character of the instant merchandise, we note that both products have the same chemical composition. Physically, the coarse mica flakes are made up of layers of finer flakes. They undergo a jet milling process which results in thinner flakes of super fine mica. In Superior Wire, the court did not find that drawing wire rod into wire was a change in character. 669 F. Supp. 472. Similarly, we do not find that jet milling coarse mica into super fine mica results in a change in character. See also, New York Ruling Letter (“NY”) N011170, dated June 5, 2007 (grinding manganese flake into manganese powder does not constitute a substantial transformation).
As we are not persuaded that the name or character of the product has changed, we now turn to use. The two main physical properties of the instant mica flakes which dictate its applications are: a) its plated or flakey structure, and b) its sheen. The plated and flakey structure makes mica ideal as a reinforcement material. The coarse mica flakes have two uses: to prevent seepage in oil drilling applications and to be milled into finer mica. The plated structure of the coarse mica makes it a good material to seal up pores as holes are drilled. Similarly, the structure of the super fine mica flakes makes them ideal for use in exterior paints to prevent water penetration and weathering, and the sheen brightens the pigment. In plastics, the structure works as a filler and an extender. In adhesives, the structure contributes as a sealant.
We find that the properties of the super fine mica flakes which make them appropriate for different applications are already present in the coarse mica flakes. Much like the wire rod and thin wire in Superior Wire, the uses of the super fine mica are predetermined by the properties of the coarse mica. 669 F. Supp. 472. Generally when the end use is predetermined, the courts have found that the use criterion does not constitute a substantial transformation. See Energizer Battery, Inc. v. United States, 190 F. Supp. 3d 1308, 1319 (Ct. Int’l Trade 2016). For all of these reasons, we do not find that jet milling coarse mica flakes into super fine mica flakes constitutes a substantial transformation.
Imerys cites to numerous rulings in support of its substantial transformation arguments. These rulings relate to plastic products (polyethereketone powder in NY N111878, dated July 14, 2010), petroleum products (processed crude oil in Headquarters Ruling Letter (“HQ”) 56303, dated September 30, 2005), and food (broccoli cuts in HQ 228508, dated September 9, 1999). However, these rulings cover products which are markedly different than the mica flakes at issue here. Therefore, we do not find Imerys’ citations to these rulings to be persuasive.
Imerys does cite to cases involving metal which could be compared to the instant processing of mica flakes. In HQ 561103, dated January 20, 1999, we found chipping, hammer milling, and shaping a magnesium ingot into granules of a specific geometric shape constituted a substantial transformation. We noted that the magnesium ingot had many uses whereas the geometric granules had a specific use in desulfurization reagents. However, in NY N011170, we found that grinding manganese flake into manganese powder did not constitute a substantial transformation because neither the chemical composition nor the physical properties changed. We find that jet milling coarse mica flakes into super fine mica powder is more similar to the manganese flake processing than to the magnesium ingot processing. Therefore, we still do not find that the coarse mica is substantially transformed after jet milling.
Finally, Imerys cites to the purchase price of the super fine mica, which is more than three times the price of the coarse mica. Imerys also notes the high cost of overhead and processing the coarse mica into super fine mica. We note that while costs are additional factors which may be considered in a substantial transformation analysis, the primary test remains the name, character and use test. We do not believe that the instant processing constitutes a substantial transformation under the name, character and use test.
The country of origin of the super fine mica, for purposes of the application of subheading 9903.88.03, HTSUS, is China. As the merchandise will be a product of the China, Section 301 measures will apply.
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 of this ruling, it should be brought to the attention of the CBP officer handling the transaction.
Monika R. Brenner, Chief
Valuation and Special Programs Branch