CLA-2-84:OT:RR:NC:N1:105
Ralph Sheppard Meeks, Sheppard, Leo & Pillsbury LLP 570 Lexington Ave., 24th floor New York, NY 10022
RE: The tariff classification and country of origin of a gas particulate filter
Dear Mr. Sheppard:
In your letter dated July 6, 2023, on behalf of your client, Corning Incorporated, you requested a tariff classification and country of origin determination ruling.
The item under consideration is described as a gas particulate filter, which is a device designed for filtering particulates in motor vehicle exhaust flows. The particulate filtering capability is imparted by a precision “plugging” of adjacent channels to direct the gas flow and particulate filtering through the walls of the substrate. This capability occurs when the substrate is plugged and is enhanced by the application of an Accelerated Purification Technology (APT) coating. The base filter is a ceramic composition with inherent properties that make the cell walls porous and permeable to allow exhaust gases to pass through. The plugs are made of a non-porous cement composition designed to obstruct airflow and force exhaust into the open filter cells. In the condition as exported, the porosity of the walls of the substrate channels and of the filter after plugging would provide filtration of particles down to the range of 7 to 8 microns, filtering approximately 70-80% of all particulates. After application of the APT coating, the filtration efficiency is improved, providing almost 100% filtration of particulates.
In operation, the exhaust gas enters one channel, which is plugged on its opposite end. The exhaust gas then passes through the semipermeable wall of the adjacent channel, and exits through the opening of the adjacent channel, whose exit opening has not been plugged. The particulates are filtered (captured) as the gas passes through the wall between the channels.
As you suggest in your letter, the applicable subheading for the gas particulate filter will be 8421.32.0000, 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 gases: Catalytic converters or particulate filters, whether or not combined, for purifying or filtering exhaust gases from internal combustion engines.” The general rate of duty will be free.
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 at https://hts.usitc.gov/current.
Regarding the country of origin, the production of the gas particulate filter involves six steps. The first step involves the extrusion of the ceramic precursor material, which is a clay-like composition, into the desired shape and honeycomb configuration, regarded by the industry as “greenware.” The second step involves firing of the greenware, which converts the greenware into the finished ceramic composition, regarded by the industry as a substrate. In the third step, a masking template is placed over each end and each of the channels is plugged so that adjacent channels are sealed on opposite sides of the “substrate.” This converts the substrate into a filter (i.e., open channels at the inlet side of the substrate are sealed on the opposite side of the substrate, closed channels on the inlet side of the substrate are open on the opposite side of the substrate). The plugging operation requires use of a proprietary process including complex machines and skilled labor. In general, plugging consists of a multi-step process which includes the mixing of wet batch cement compound, masking of non-plugged cells on a ceramic substrate, plugging of alternating substrate channels, drying, performance measurement, and quality assurance. The fourth step is the application of the proprietary APT coating to the open channels on the inlet side of the substrate channels. This is followed by the fifth step, which involves curing of the proprietary coating, creating what is regarded by the industry as a “next generation filter” or “high performance filter.” Finally, in the sixth step, the coated filter is returned to the U.S. for “canning” by a separate 3rd-party company that will enable attachment to a vehicle exhaust system.
In your letter, you requested we review three scenarios. In the first scenario, the fired substrate is plugged in the United States and the resulting filter is exported for APT coating in either Germany or China. In the second scenario, the substrate is exported from the U.S. and plugged in either Germany or China to create the finished filter, then returned to the U.S. for application of the APT coating. In the third scenario, the substrate is exported from the U.S., plugged in Germany to create the filter, and the filter is sent for APT coating in China.
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.
The “country of origin” is defined in 19 CFR 134.1(b) as “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.”
The courts have held that a substantial transformation occurs when an article emerges from a process with a new name, character or use different from that possessed by the article prior to processing. United States v. Gibson-Thomsen Co., Inc., 27 CCPA 267, C.A.D. 98 (1940); National Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff'd, 989 F. 2d 1201 (Fed. Cir. 1993); Anheuser Busch Brewing Association v. The United States, 207 U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F. Supp. 1026 (1982).
However, if the manufacturing or combining process is merely a minor one that leaves the identity of the article intact, a substantial transformation has not occurred. Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, 1029 (1982), aff'd, 702 F.2d 1022 (Fed. Cir. 1983). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, dated January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
Regarding the country of origin of the gas particulate filter, in our view, the particulate filtering capability and use of the fired substrate is imparted by the precision “plugging” of adjacent channels to direct the gas flow and particulate filtering through the walls of the substrate. This capability exists once the substrate is plugged and is enhanced by the application of the APT coating. The plugging process provides substantial added value and creates a new name, character and use different from the bare substrate, which can have several uses including functioning as a catalytic converter. Accordingly, the country of origin for marking purposes for the first scenario would be the United States since the plugging operation occurs in the U.S. For the second scenario the country of origin will be Germany or China depending on which country you choose to perform the plugging operation in. Finally, in the third scenario the country of origin would be Germany.
This ruling is being issued under the provisions of Part 177 of the Customs and Border Protection 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, please contact National Import Specialist Jason Christie at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division