CLA-2-84:OT:RR:NC:N1:102
Ms. Paula Degenaars
Watts Regulator Company
815 Chestnut Street
North Andover, MA 08145-6098
RE: The classification and country of origin of a ball valve and the applicability of certain trade remedies under Section 301
Dear Ms. Degenaars:
In your letter dated October 30, 2019, you requested a ruling on the country of origin on a ball valve. A detailed description of the manufacturing and assembly processes was submitted for our review.
Item number 88005701, is a full port ball valve used to control the flow of liquids and gas in hydraulic and pneumatic systems. The ball valve is used in commercial, residential and industrial environments and is manually actuated using a handle.
In your letter, you suggest the ball valve is classified under subheading 8481.80.1085, Harmonized Tariff Schedule of the United States (HTSUS), which provides for Taps, cocks, valves and similar appliances, for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves; parts thereof: Other appliances: Hand-operated: Of copper: Having a pressure rating of 850 kPa or over: Ball type. We disagree.
Subheading Note 3 to Chapter 84, in relevance, states for the purposes of subheading 8481.20 the expression “valves for oleohydraulic and pneumatic transmissions”, means valves which are used specifically in the transmission of “fluid power” in a hydraulic or pneumatic system. Subheading 8481.20 takes precedence over all other subheadings of heading 8481. In this instance, the subject ball valve is used in hydraulic and pneumatic systems.
Accordingly, the applicable subheading for the ball valve, item number 88005701, will be 8481.20.0080, HTSUS, which provides for Taps, cocks, valves and similar appliances, for pipes, boiler shells, tanks, vats or the like, including pressure-reducing valves and thermostatically controlled valves; parts thereof: Valves for oleohydraulic or pneumatic transmissions: Other: Other. The general rate of duty is 2 percent ad valorem.
In regards to country of origin, you describe the assembly processes for the subject ball valve and suggest the country of origin for the ball valve is Canada. The valve’s subassembly body and handles are imported in bulk from China. The subassembly body, which is described as the pressure containing housing that consists of a seat, a stem, a ball, an adapter, a thrust washer, and O-ring, is imported from China. The handle rotates the ball within the subassembly body. The assembly process in Canada consists of the handle being installed and bolted onto the stem portion of the valve subassembly using a locknut. The lock nut is tightened using a torque nut. The assembled ball valve is then tested, date stamped and packaged.
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.
With regard to your request for the appropriate country of origin of the ball valve, 19 C.F.R. § 134.1(b) provides in pertinent part as follows: Country of origin means the 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 the good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. Since Canada is a NAFTA country, the NAFTA Marking Rules must be applied in determining the country of origin of the subject ball valve for marking purposes.
Part 102, Customs and Border Protection Regulations (19 C.F.R. Part 102), sets forth the NAFTA Marking Rules. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes. See 19 C.F.R. § 102.11. 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;
(a)(2) The good is produced exclusively from domestic materials; or
(a)(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 to the facts presented in this case because the ball valve is neither wholly obtained nor produced exclusively from “domestic” materials. Because the analysis of sections 102.11(a)(1) and 102.11(a)(2) does not yield a country of origin determination, we look to section 102.11(a)(3). “Foreign material” is defined in 19 C.F.R. § 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.” The applicable rule for subheading 8481.20.0080, HTSUS, in section 102.20 requires: 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 this instance, the foreign materials, which are imported into China are all classified from any other heading or from subheading 8481.90. However, the rule specifies that the change from any other heading or from subheading 8481.90 must not result from a simple assembly. “Simple assembly” means the fitting together of five or fewer parts all of which are foreign (excluding fasteners such as screws, bolts, etc.) by bolting, gluing, soldering, sewing or by other means without more than minor processing. In this case, the ball valve results from a simple assembly. Accordingly, the next step in the hierarchy must be considered. Pursuant to 19 CFR 102.11(b) and 102.18, we find the essential character of the ball valve is imparted by the Chinese origin subassembly body, and the country of origin of the ball valve for marking purposes will be China.
It is noted that substantial transformation test is also used to determine the country of origin for purposes of the Section 301 measures. See, e.g., Headquarters Ruling Letter (“HQ”) H301619, dated November 6, 2018. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character and 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). In order to determine whether a substantial transformation occurs when components of various origins are assembled into completed products, all factors such as the components used to create the product and the manufacturing processes that these components undergo are considered in order to determine whether a product with a new name, character and use has been produced. No one factor is decisive, and assembly operations that are minimal will generally not result in a substantial transformation.
In our view, the valve’s subassembly body, which is referred to as the pressure housing of the valve that when actuated controls the flow of fluid or gas, is not substantially changed by the addition of the Chinese handle. Furthermore, the assembly operations performed in Canada do not render a new and different article. In your letter, you reference NY ruling N186157, dated October 26, 2011 and NY ruling N187775, dated October 28, 2011. However, the products in these rulings pertain to various components that will be assembled into complete ball valves. In this instance, the assembly process consists of the handle being assembled onto the valve’s subassembly body. As such, the scenario in this case differs from the scenarios in the referenced rulings.
Therefore, since the valve’s subassembly body, which imparts the essence of the finished ball valve, is of Chinese origin and no substantial transformation takes place, the country of origin of the complete ball valve for purposes of section 301 is China.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8481.20.0080, HTSUS, unless specifically excluded, are subject to an additional 25 percent ad valorem rate of duty. At the time of importation, you must report the Chapter 99 subheading, i.e., 9903.88.01, in addition to subheading 8481.20.0080, HTSUS, listed above. The HTSUS is subject to periodic amendment so you should exercise reasonable care in monitoring the status of goods covered by the Note cited above and the applicable Chapter 99 subheading. For background information regarding the trade remedy initiated pursuant to Section 301 of the Trade Act of 1974, you may refer to the relevant parts of the USTR and CBP websites, which are available at https://ustr.gov/issue-areas/enforcement/section-301-investigations/tariff-actions and https://www.cbp.gov/trade/remedies/301-certain-products-china, respectively.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. §177).
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 Sandra Martinez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division