CLA-2-84:OT:RR:NC:N1:105
Kim Caywood-Pierce
Senior Trade Advisor
AN Deringer, Inc.
173 West Service Road
Champlain, New York 12919
RE: The tariff classification and country of origin of the Rhino Wet Waste Interceptor Filtration System
Dear Ms. Caywood-Pierce:
In your letter dated December 7, 2021, on behalf of your client, Rhinocan Filtration Inc., you requested a tariff classification and country of origin ruling.
The merchandise under consideration is described as the Rhino Wet Waste Interceptor Filtration System, which will be used in the food service industry to capture fats, oils, and grease from wastewater before entering the grease trap and flowing into municipal drains. In operation, the Rhino Wet Waste Interceptor Filtration System will be connected to the drain, allowing water and wet waste to enter the unit, where it will then pass through the filter, trapping the wet waste. Liquids that are free from wet waste are then able to pass through the unit where they are directed to the grease trap.
The Rhino Wet Waste Interceptor Filtration System will be assembled in Canada with components from both Canada and China. The Chinese components include the steel Rhino tub, stainless steel legs, and the plastic rim (used to connect the clear lid). The Canadian components include the plastic trays, plastic leg covers, Rhino wet waste filter (constructed from 100% polyester single knit fabric with a plastic fitting), clear plastic lid with rubber gasket and plastic inlet spout with rubber gasket. The Rhino tub will come from China complete with the final shape and all of the necessary holes predrilled. In Canada, the Chinese and Canadian parts are assembled by screwing and gluing the components into place. The assembly process can be completed by hand and requires no sophisticated machines or complex actions.
The applicable subheading for the Rhino Wet Waste Interceptor Filtration System will be 8421.21.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Centrifuges, including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for liquids: For filtering or purifying water.” The general rate of duty will be free.
When determining the country of origin for purposes of applying trade remedies under Section 301, the substantial transformation analysis is applicable. Headquarters ruling 735009, dated July 30, 1993, in relevance, states that “The country of origin is the country where the article last underwent a “substantial transformation,” that is, processing which results in a change in the article's name, character, or use”.
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 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 the scenario described above, the components from China and Canada are screwed and glued to each other during the final assembly in Canada. In our view, the Rhino Wet Waste Interceptor Filtration System is not subjected to any further operations other than simple assembly and is not transformed in Canada into a new and different article of commerce with a name, character, and use distinct from the article exported. Furthermore, we believe the Chinese Rhino tub, which houses the entire system, imparts the essence of the Rhino Wet Waste Interceptor Filtration System. Therefore, the country of origin of the Rhino Wet Waste Interceptor Filtration System will be China for the purpose of applying current 301 trade remedies.
Pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, products of China classified under subheading 8421.21.0000, 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 8421.21.0000, 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.
In regards to marking, 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 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 a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. Part 134 of the U.S. Customs and Border Protection (“CBP”) Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304.
According to Section 102.0, interim regulations, related to the marking rules, tariff-rate quotas, and other USMCA provisions, published in the Federal Register on July 6, 2021 (86 FR 35566), the rules set forth in § 102.1 through 102.18 and 102.20 determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Title 19, C.F.R. § 102.11(a) provides that the country of origin of a good is the country in which:
The good is wholly obtained or produced;
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 § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
“Foreign material” is defined in Section 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 Rhino Wet Waste Interceptor Filtration System is neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine the country of origin of the Rhino Wet Waste Interceptor Filtration System, and paragraph (a)(3) must be applied next to determine the origin of the finished article. The tariff shift requirement in Section 102.20 for the Rhino Wet Waste Interceptor Filtration System at issue states:
A change to subheadings 8421.19 through 8421.39 from any other heading
The foreign material in this case is the steel Rhino tub (classified in subheading 8421.99.0040), stainless steel legs (classified in Chapter 73), and the plastic rim (classified in Chapter 39). The steel Rhino tub, which imparts the essential character of the Rhino Wet Waste Interceptor Filtration System, does not meet the tariff shift requirement of section 102.11(a)(3). Since Section 102.11(a) has not produced a country of origin determination, we turn to section 102.11(b) of the regulations. Section 102.11(b) provides: Except for a good that is specifically described in the Harmonized System 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 to the good, or
(2) If the material that imparts the essential character to the good is fungible, has been commingled, and direct physical identification of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method. When determining the essential character of a good under 19 C.F.R. § 102.11, 19 C.F.R. § 102.18(b)(1) provides that only domestic and foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under the § 102.20 specific rule or other requirements applicable to the good shall be taken into consideration. In this case, the material that does not undergo the applicable tariff shift is the Rhino tub of Chinese origin. Section 102.18(b)(2), Customs Regulations (19 C.F.R. § 102.18(b)(2)), provides: For purposes of determining which one of two or more materials described in paragraph (b)(1) of this section imparts the essential character to a good under § 102.11, various factors may be examined depending upon the type of good involved. These factors include, but are not limited to, the following: (i) The nature of each material, such as its bulk, quantity, weight or value; and (ii) The role of each material in relation to the use of the good.
In this instance we find that the Chinese Rhino tub provides the essential character of the Rhino Wet Waste Interceptor Filtration System as the item houses the complete filtration system and contains all of the necessary cutouts for the filtration system to operate. The Rhino tub also has the largest value and weight of any item used to make the Rhino Wet Waste Interceptor Filtration System. Furthermore, the Rhino tub does not change shape or construction during the assembly process in Canada. Therefore, in accordance with 19 C.F.R. § 102.11(b), Rule (1), the country of origin of Rhino Wet Waste Interceptor Filtration System for origin and marking purposes is China.
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 the World Wide Web at https://hts.usitc.gov/current.
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 Jason Christie at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division