CLA-2-84:OT:RR:NC:N1:102
Mr. Michael J. Theodore
Livingston Consulting
1925 – 18th Avenue NE, Suite 320
Calgary, Alberta T2E 7T8
RE: The tariff classification, country of origin and country of origin marking under the North American Free Trade Agreement (NAFTA) of relief valves; Article 509; Eligibility under 9802.00.5060
Dear Mr. Theodore:
In your letter dated July 28, 2011, on behalf of your client, Mercer Valve Co., Inc., you requested a ruling on the tariff classification of relief valves, eligibility of the valves for a duty exemption under subheading 9802.00.5060, Harmonized Tariff Schedule of the United States (HTSUS), and country of origin and country of origin marking of the relief valves under the NAFTA.
The articles in question are described as Mercer 8100 Series Direct Spring Operated Orifice Pressure Relief Valves and Mercer 9100 Series Direct Spring Operated Threaded Pressure Relief Valves. In your request, you indicate that the subject valves are manufactured in the United States and exported to Canada for testing, setting and certification (affixing a label) by Mercer Canada Ltd. and then returned to the United States for sale and distribution.
The applicable subheading for the pressure relief valves will be 8481.40.0000, HTSUS, which provides for safety or relief valves. The general rate of duty will be 2 percent ad valorem.
You state in your letter that you believe that the operations performed in Canada do not destroy the essential characteristics of the valves nor create new or commercially different goods and inquire as to the applicability of HTSUS subheading 9802.00.5060 to the valves when re-imported into the United States. Under HTSUS subheading 9802.00.5060 articles exported from and returned to the U.S., after having been advanced in value or improved in condition by repairs or alterations outside the U.S., may qualify for a duty exemption, provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture.
Based on our review of the detailed description of the operations performed in Canada that you have made available, we find those operations (testing, setting and certification) to be repairs and/or alterations within the meaning of subheading 9802.00.5060, HTSUS. Provided the documentary requirements of Section 181.64 of the Customs Regulations (19 CFR 181.64) are satisfied, the processed valves will qualify for a duty exemption under HTSUS subheading 9802.00.5060 when returned to the U.S.
Please note, if the relief valves are entered under subheading 9802.00.5060, HTSUS, then by application of the chapter notes relevant to that subheading, the relief valves will be dutiable at the rate applicable to goods of Canadian origin. Note 3(d) to chapter 98, subchapter II of the HTSUS provides that for the purposes of subheading 9802.00.50, the rates of duty in the "Special" subcolumn of column 1 followed by the symbol "CA" in parentheses shall apply to any goods which are returned to the United States after having been repaired or altered in Canada, whether or not such goods are goods of Canada under the terms of general note 12 to the tariff schedule.
With regard to the country of origin and country of origin marking of the relief valves, the marking statute, section 304, Tariff Act of 1930, as amended (19 USC 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. Section 134.1(g) of the regulations, 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 set forth in Part 102 of the Customs Regulations (19 CFR Part 102).
Section 102.11 of the regulations, sets forth the required hierarchy for determining country of origin for marking purposes. “Foreign material” is defined in section 102.1(e), Customs Regulations (19 CFR 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.” Based on the information submitted, the valves are processed in Canada from U.S. components. Thus, the valves are neither wholly obtained or produced, nor produced exclusively from domestic materials as those terms are defined under section 102.1 of the Customs Regulations (19 CFR 102.1).
Pursuant to section 102.11(a)(3), Customs Regulations (19 CFR 102.11(a)(3)), the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in 19 CFR 102.20, and satisfies any other applicable requirements of that section. In this case because the valves imported into the U.S. from Canada are classified under subheading 8481.40.0000, HTSUS, the change in tariff classification must be made in accordance with section 102.20(o), Section XVI, Chapters 84-85 which provides:
A change to subheading 8481.10 through 8481.80 from any other heading, or from subheading 8481.90 except when resulting from a simple assembly.
In the case before us, the valves which are exported to Canada are initially classified under subheading 8481.40, HTSUS, and remain classified under subheading 8481.40, HTSUS, subsequent to the setting, testing and certification in Canada. Thus there is no applicable change in tariff classification within the requirements of section 102.20, and the country of origin of the good may not be determined in accordance with this provision.
Because 19 CFR 102.11(a) is not determinative of origin, the next step is section 102.11(b), Customs Regulations, which states, in part: Except for a good that is specifically described in the Harmonized Tariff Schedule 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: (1) The country of origin of the good is the country or countries of origin of the single material that imparts the essential character of the good, ... When determining the essential character of a good under section 102.11, Customs Regulations, section 102.18 is consulted. The valve consists of only one material, and because that material is classifiable in a tariff provision from which a change in tariff classification is not allowed under the applicable rule in 19 CFR 102.20(o), the valve of U.S. origin is the single material which imparts the essential character to the finished good pursuant to section 102.18(b) (iii). Therefore, in accordance with section 102.11(b) (1) the country of origin of the pressure relief valves for the purpose of marking is the United States.
Inasmuch as the marking requirements of 19 USC 1304 are applicable only to articles of "foreign origin," the valves referenced here, need not be marked upon entry into the U.S. Please note that the question of whether the goods may be marked with a phrase such as “Made in the U.S.A.” is under the jurisdiction of the Federal Trade Commission, which may be contacted for advice at 6th & Pennsylvania Avenue, N.W., Washington, D.C. 20580.
In your request you aver that by application of the NAFTA Preference Override set forth in 19 CFR 102.19(b) the country of origin of the pressure relief valves for duty purposes is Canada.
The rule set forth in CFR 102.19(b) provides:
If, under any other provision of this part, the country of origin of a good which is originating within the meaning of Part 181.1(q) of this chapter is determined to be the United States and that good has been exported from, and returned to, the United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin of such good for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the United States.
Within the context of NAFTA "advanced in value" is defined in 19 CFR 102.1(a) as "an increase in the value of a good as a result of production with respect to that good, other than by means of those "minor processing" operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section." Similarly, "improved in Condition" is defined in 19 CFR 102.1(i) as "the enhancement of the physical condition of a good as a result of production with respect to that good, other than by means of those "minor processing" operations described in paragraphs (m)(5), (m)(6) and (m)(7) of this section." The minor processing operations described in paragraphs (m)(5), (m)(6) and (m)(7) of 19 CFR 102.1, include unloading, reloading or any other operation necessary to maintain the good in good condition; putting up in measured doses, packing, repacking, packaging, repackaging, testing, marking, sorting, or grading.
Based on the information made available the operations to which the relief valves are subjected to in Canada appear to be minor processing and do not rise to the level of production necessary to invoke the NAFTA Preference Override. Additional information is needed in order to issue a ruling on the applicability of the NAFTA Preference Override.
Please provide a more detailed description of the “setting” operation performed in Canada. Does the setting operation establish the working pressure of the relief valve or merely adjust the setting spring to a pre-established operating pressure?
If you decide to resubmit your request, please include all of the material that we have returned to you and mail your request to U.S. Customs and Border Protection, Customs Information Exchange, 10th Floor, One Penn Plaza, New York, NY 10119, attn: Binding Rulings Section. If the information required does not involve sending a sample, you can re-submit your request and the additional information electronically.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.
This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 CFR 181).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Kenneth T. Brock at (646) 733-3009.
Sincerely,
Robert B. Swierupski
Director
National Commodity Specialist Division