CLA-2 OT:RR:CTF:TCM H011951 KSH
TARRIFF NO.: 7307.21.50
Robert G. Kreklewetz, Esq.
Millar Kreklewetz LLP
24 Duncan Street
Third Floor
Toronto, Ontario M5V 2B8
RE: Classification and country of origin under NAFTA for stainless steel flanges
Dear Mr. Kreklewetz:
This is in response to your letter of May 23, 2007 and supplemental letter
dated January 15, 2009, on behalf of your client, Pro-Flange Limited, requesting a binding ruling concerning the country of origin marking under the North American Free Trade Agreement (NAFTA) of stainless steel flanges. (See Title 19 Code of Federal Regulations Part 181). Samples have been received and reviewed in conjunction with your request.
FACTS:
The merchandise at issue is stainless steel flanges. Your client imports rough forgings or de-scaled rough forgings into Canada from India. The forgings are subjected to primary hot rolling or rough shaping by forging. The forgings do not meet the American Society for Testing Materials (ASTM) standard for “flanges.” You state the process of producing the forgings begins with cutting a billet into a piece of roughly the same weight as the desired forging. The cut billet is heated in a furnace until it reaches an appropriate level of malleability. It is then forged by open die or closed die hammer or press creating a rough forging. The rough forging is heat treated in a furnace to improve its physical characteristics. It is then cooled. The rough forgings are descaled by roughly turning the rough forgings to remove the oxidation scale. The descaled rough forgings are then packed for shipment to Canada. You state that the forgings may be used to manufacture hubs for automotive purposes; heat exchanger segments; gear plates; valve components; instrumentation and; special fittings.
Once imported into Canada the forgings will undergo processing operations to create finished flanges. These processes consist of a lathing process necessary to cut and remove excess metal and otherwise shape the forgings into proper specifications and tolerances, a threading process to ensure proper connection, a cutting process to add sockets, a drilling process to add bolt holes for connection purposes, boring, facing, spot facing, tapering, beveling and final inspection. The aforementioned processes are designed to lathe, cut, shape, drill and score the forgings into ASTM B16.5 specifications and tolerances.
ISSUES:
I. Whether the forgings are classified in heading 7218, HTSUS, as semi-finished products of stainless steel or heading 7307, HTSUS, as tube or pipe fittings of steel.
II. Whether the proper country of origin marking under the NAFTA for the stainless steel flanges is Canada.
LAW AND ANALYSIS:
I. 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 GRI may then be applied.
The Harmonized Commodity Description and Coding System ENs, constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the EN provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of the headings. It is CBPs practice to follow, whenever possible, the terms of the ENs when interpreting the HTSUS. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
The HTSUS provisions under consideration are the following:
Stainless steel in ingots or other primary forms; semi-finished
products of stainless steel
Tube or pipe fittings (for example, couplings, elbows, sleeves), of
iron or steel
Legal note 1(ij), Chapter 72, HTSUS, defines "semifinished products" as
follows: 1. In this chapter * * * the following expressions have the meanings hereby assigned to them:
* * * * *
(ij) Semifinished products
Continuous cast products of solid section, whether or not subjected to primary hot-rolling; and
Other products of solid section, which have not been further worked than subjected to primary hot-rolling or rough shaped by forging, including blanks for angles, shapes or sections. These products are not presented in coils.
Additional U.S. Note 2 to Chapter 72, HTSUS, provides:
For the purposes of this chapter, unless the context provides otherwise, the term "further worked" refers to products subjected to any of the following surface treatments: polishing and burnishing; artificial oxidation; chemical surface treatments such as phosphatizing, oxalating and borating; coating with metal; coating with nonmetallic substances (e.g., enameling, varnishing, lacquering, painting, coating with plastics materials); or cladding.
The General Explanatory Note (EN) to Chapter 72, HTSUS, provides in relevant part:
This Chapter covers the ferrous metals, i.e., pig iron, spiegeleisen, ferro-alloys and other primary materials (sub-Chapter I), as well as certain products of the iron and steel industry (ingots and other primary forms, semi-finished products and the principal products derived directly therefrom) of iron or non-alloy steel (sub-Chapter III) and of other alloy steel (sub-Chapter IV).
Further worked articles, such as castings, forgings, etc., and sheet piling, welded angles, shapes and sections, railway or tramway track construction material and tubes are classified in Chapter 73 or, in certain cases, other Chapters.
* * * *
(C) Subsequent manufacture and finishing
The finished products may be subjected to further finishing treatments or converted into other articles by a series of operations such as:
Mechanical working, i.e., turning, milling, grinding, perforation or punching, folding, sizing, peeling, etc.; however, it should be noted that rough turning merely to eliminate the oxidation scale and crust and rough trimming are not regarded as finishing operations leading to a change in classification.
Subpart B of the ENs to heading 7207, which applies mutatis mutandis to heading 7218 defines "pieces roughly shaped by forging" as follows:
These are semi-finished products of rough appearance and large dimensional tolerances, produced from blocks or ingots by the action of power hammers or forging presses. They may take the form of crude recognisable shapes in order that the final article can be fabricated without excessive waste, but the heading covers only those pieces which require considerable further shaping in the forge, press, lathe, etc. The heading would, for example, cover an ingot roughly hammered into the shape of a flattened zig-zag and requiring further shaping to produce a marine crankshaft, but it would not cover a crankshaft forging ready for final machining. The heading similarly excludes drop forgings and pressings produced by forging between matrices since the articles produced by these operations are ready for final machining.
The EN to heading 7307, HTSUS, provides in part:
This heading covers fittings of iron or steel, mainly used for connecting the bores of two tubes together, or for connecting a tube to some other apparatus, or for closing the tube aperture. The heading does not however cover articles used for installing pipes and tubes but which do not form an integral part of the bore (e.g., hangers, stays and similar supports which merely fix or support the tubes and pipes on walls, clamping or tightening bands or collars (hose clips) used for clamping flexible tubing or hose to rigid piping, taps, connecting pieces, etc.) (heading 73.25 or 73.26).
As imported into Canada the forgings do not meet ASTM standards. Generally, only finished steel products are made to ASTM standards. Further, the forgings merely undergo a descaling process to remove oxidation scale. As such, the forgings have not been worked beyond the point of roughly shaping by forging and are not finished products. Therefore, upon importation into Canada, the forgings are not “further worked” and are classified in heading 7218, HTSUS, as a semi-finished product. See General EN (C) to Chapter 72, HTSUS.
Upon importation into the United States, the forgings are not rough in appearance and are not of large dimensional tolerances. The forgings are the same diameter and approximately the same height as the finished flange. The forgings are only ¼” larger in diameter than the finished flange. Both have close dimensional tolerances to the finished flanges. As such a determination whether the subject forgings are classifiable as incomplete or unfinished articles in accordance with GRI 2(a), HTSUS, is necessary.
Under GRI 2(a), "[a]ny reference to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article." EN (II) to GRI 2(a) further defines a "blank" as "an article, not ready for direct use, having the approximate shape or outline of the finished article or part, and which can only be used, other than in exceptional cases, for completion into the finished article or part." The EN establishes two criteria for articles that are "blanks" for GRI 2(a) purposes: approximate shape or outline and sole use for completion into the finished article or part. The EN instructs that irrespective of the degree of processing a good has undergone, its specific size and shape and dedication to use can dictate whether it has assumed the essential character of the article or part it will become after importation.
The subject forgings do not satisfy the definition of a blank under EN (II) to GRI 2(a). They are not ready for direct use and are capable of being manufactured into hubs for automotive purposes; heat exchanger segments; gear plates; valve components; instrumentation and; special fittings. Consequently, the finished flanges are classified in heading 7307, HTSUS.
II. Country of Origin
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, CBP Regulations (19 CFR Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304.
In 19 CFR 134.1(b), "country of origin" is defined 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 the meaning of this part; however for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.
Section 134.1(j), CBP Regulations (19 CFR 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. A "good of a NAFTA country" is defined in 19 CFR 134.1(g) 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 at 19 CFR Part 102.
Section 102.11, CBP 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. The following provisions must be applied sequentially, beginning with part (a)(1):
The following rules shall apply for purposes of determining the country of origin of imported goods other than textile and apparel products covered by §102.21:
(a) 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.
* * *
Sections 102.11(a)(1) and 102.11(a)(2) do not apply because the stainless steel flanges are neither wholly obtained, nor produced exclusively from domestic materials. It is therefore necessary to apply §102.11(a)(3). The relevant §102.20 rules for this heading provides:
HTSUS Tariff shift and/or other requirements
A change to heading 7301 through 7307 from any other heading, including another heading within that group.
As stated above, the applicable heading for the forgings imported into Canada is heading 7218, HTSUS. The finished flanges are classified in heading 7307, HTSUS. Therefore, the forging imported into Canada undergo the requisite tariff shift. Accordingly, the country of origin of the finished stainless steel flanges is Canada.
HOLDING:
The finished steel flanges are classified in heading 7307, HTSUS. They are provided for in subheading 7307.21.50, HTSUS, which provides for “Tube or pipe fittings (for example, couplings, elbows, sleeves), of iron or steel: Other, of stainless steel: Flanges: Other.”
Based on the information provided, the stainless steel flanges are originating under the NAFTA and the special “CA” duty applies. The country of origin of the stainless steel flanges is Canada.
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,
Gail A. Hamill, Chief
Tariff Classification and Marking Branch