MAR-2:OT:RR:NC:N5:113
Ms. Angela Herbert
A. N. Deringer Inc.
173 West Service Road Champlain, NY 12919
RE: The country of origin marking, status under the United States-Mexico-Canada Trade Agreement
(USMCA), and applicability of Section 301 trade remedy for the Vortex Stainless Flex Liner Kit.
Dear Ms. Herbert:
This is in response to your letter dated July 20, 2023, submitted on behalf of your client Stove Builder International Inc., requesting a country of origin marking ruling for the Vortex Stainless Flex Liner Kit. Also, you inquire whether the flex liner kit is eligible for duty free treatment under the USMCA, and if Section 301 additional duties are applicable. Photographs, product descriptions, manufacturing processes, and a value and weight breakdown for the subject kit were provided for our review.
The product under consideration is identified as the Vortex Stainless Flex Liner Kit (VOLKI-635). According to your submission, the flex liner kit is “intended for use with heating appliances burning solid fuels (pellet, wood) vented through a masonry chimney. The kit includes a flexible liner, a no leak top plate, an insert connector and a quick cap with no screen.”
The Vortex Stainless Flex Liner Kit is comprised of two types of stainless steel from China that include rolls of thin stainless steel used to make flexible tubing and thin sheets used for chimney parts (caps, connections and solid parts). You described the components that comprise the flex liner kit as flexible tubing made from braided stainless steel (VOLKI-635), a 13'' x 13'' stainless steel top plate with a connector welded with a stainless steel clamp for a 6'' flex liner (SE67479), a 6'' liner end chimney cap with a connector welded with a stainless steel clamp (SE67443), and a 6" assembled connector for flexible tubing welded with a stainless steel clamp (SE67283). You indicated that “All of the components in the kit help to perform a single function which is to safely evacuate the smoke from solid fuel combustion in the user stove or fireplace.” The final/assembled kit will be exported from Canada to the United States, the Czech Republic, and Australia.
Regarding the Production Cycle/Product Transformation for the final kit in condition as exported from Canada, you stated in your letter dated July 17, 2023:
Rolls and flat sheets of thin stainless steel (Harmonized Tariff Schedule of the United States, HTSUS, 7219.32) from China are shipped to Canada to be used in the production of flexible tubing, chimney caps, connections, and other chimney parts…The sheets are stored in an automated machine until they are assigned to a laser cutting machine to fill an order. When dispatched to the laser cutting machine, the sheets are cut based on part requirements and then sent to triage for quality inspection. Once through triage, the chimney caps and connections are molded mechanically to required specifications by using a TrueBlend 7050 machine and solid chimney parts are molded using an automated rolling machine. To assure quality, solid chimney parts are welded on an automated machine and smaller parts such as chimney caps and connections are spot welded manually if necessary. The parts are then stamped to facilitate the assembly.
You indicated that the “Rolls of thin flat stainless steel sheets are imported from China and further processed in Canada using an automated machine that unrolls the stainless steel sheets and feeds them to another machine to braid it into flexible tubing. The flexible tubing is composed of shaped strip rolled spirally. Once the production of the chimney parts and flexible tubing is complete, the parts are combined and assembled into a Vortex Stainless Flex Liner Kit (HTSUS 8307.10).”
We note that both the USMCA and country of origin marking analyses require classification of the subject merchandise. Based on the information submitted, you proposed classification of the of the non-originating stainless steel rolls and sheets in subheading 7219.32, HTSUS, which provides for Flat-rolled products of stainless steel, of a width of 600 mm or more: Not further worked than cold-rolled (cold-reduced): Of a thickness of 3 mm or more but less than 4.75 mm. However, the thickness stated on the mill certificates included with your submission ranges from 0.44 mm to 2.57 mm. We find that the subject stainless steel rolls will be classified in either subheading 7219.33, 7219.34 or 7219.35, HTSUS, depending on the thickness. We agree with the proposed classification for the Vortex Stainless Flex Liner Kit under 8307.10, HTSUS, which provides for Flexible tubing of base metal, with or without fittings: Of iron or steel.
Eligibility for preferential treatment under the USMCA:
You inquire whether the Vortex Stainless Flex Liner Kit is eligible for preferential treatment under the USMCA. The USMCA was signed by the Governments of the United States, Mexico, and Canada on November 30, 2018. The USMCA was approved by the U.S. Congress with the enactment on January 29, 2020, of the USMCA Implementation Act, Pub. L. 116-113, 134 Stat. 11, 14 (19 U.S.C. § 4511(a)). General Note (“GN”) 11, HTSUS, implements the USMCA. GN 11(b) sets forth the criteria for determining whether a good is an originating good for purposes of the USMCA.
GN 11(b) states, in relevant part:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country…is eligible for the preferential tariff treatment provided for in the applicable subheading and quantitative limitations set forth in the tariff schedule as a “good originating in the territory of a USMCA country” only if -
(i) the good is a good wholly obtained or produced entirely in the territory of one or more USMCA countries;
(ii) the good is a good produced entirely in the territory of one or more USMCA countries, exclusively from originating materials;
(iii) the good is a good produced entirely in the territory of one or more USMCA countries using non-originating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); ….
In the instant case, rolls and flat sheets of thin stainless steel (HTSUS 7219.33, 7219.34 or 7219.35) are imported from China and shipped to Canada to be used in the production of flexible tubing, chimney caps, connections, and other chimney parts as described below:
/
Once the production of the flexible tubing and chimney parts is complete, the parts are combined and assembled into the Vortex Stainless Flex Liner Kit (HTSUS 8307.10). Hence, the flex liner kit is comprised of non-originating material and the kit is not considered goods wholly obtained or produced entirely in a USMCA country under GN 11(b)(i) and (ii). We must next determine whether the Vortex Stainless Flex Liner Kit qualifies under GN 11(b)(iii). The final flex liner kit is classified in heading 8307, HTSUS. The applicable rule of origin for merchandise classified in heading 8307, HTSUS, is in GN 11(o), HTSUS, which provides, in relevant part:
Chapter 83
…(6) A change to headings 8306 through 8307 from any other chapter.
Noting the rolls and flat sheets of thin stainless steel classified in subheading 7219.33, 7219.34 or 7219.35, HTSUS, are sent from China to Canada where they are manufactured into Vortex Stainless Flex Liner Kits classified in heading 8307, HTSUS, the tariff shift requirement is met, and the flex liner kits would be considered originating goods and eligible for preferential treatment under the USMCA.
Country of Origin Marking:
In addition to USMCA eligibility, you are requesting a country of origin determination for the Vortex Stainless Flex Liner Kit for marking purposes. 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; however, for a good of a NAFTA or USMCA country, the marking rules set forth in part 102 of this chapter (hereinafter referred to as the part 102 Rules) will determine the country of origin.”
Pursuant 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. Section 102.11 provides a required hierarchy for determining the country of origin of a good for marking purposes, with the exception of textile goods which are subject to the provisions of 19 C.F.R. § 102.21. See 19 C.F.R. § 102.11.
Applied in sequential order, 19 CFR Part 102.11(a) provides that 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 Part 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 the case described above because the imported flex liner kit is neither wholly obtained or produced, or produced exclusively from domestic materials. Since 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). Pursuant to 19 C.F.R. §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 C.F.R. §102.20 and satisfies any other applicable requirements of that section.
Based on the facts presented, since the Vortex Stainless Flex Liner Kit imported into the U.S. from Canada is classified in heading 8307, HTSUS, the change in tariff classification must be made in accordance with Section 102.20(n), Section XV: Chapters 72 through 83, headings 8306 - 8307, HTSUS, which requires “A change to heading 8306 through 8307 from any other heading, including another heading within that group.” The subject rolls and flat sheets of thin stainless steel that are shipped from China to Canada are classified in heading 7219, HTSUS. In Canada, the rolls and flat sheets of stainless steel are manufactured into Vortex Stainless Flex Liner Kits classified in heading 8307, HTSUS. As such, the tariff shift requirement of section 102.11(a)(3) is met. The country of origin of the Vortex Stainless Flex Liner Kit for marking purposes is Canada.
Applicability of Section 301 Duties:
Regarding the applicability of Section 301 trade remedies to the Vortex Stainless Flex Liner Kit under consideration, Customs and Border Protection relies on the substantial transformation analysis when determining the country of origin for purposes of applying Section 301 trade remedies. 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) (Uniroyal). Substantial transformation determinations are based on the totality of the evidence. See Headquarters Ruling (HQ) W968434, date January 17, 2007, citing Ferrostaal Metals Corp. v. United States, 11 CIT 470, 478, 664 F. Supp. 535, 541 (1987).
In the instant case, the non-originating material of stainless steel rolls and sheets are sent from China to Canada. The transformation occurs in Canada during the molding and rolling stages where the stainless steel rolls and sheets produce flexible tubing and chimney parts including caps, connections, and solid parts. Therefore, the stainless steel rolls and sheets are significantly changed by the processing performed in Canada. The parts are assembled in Canada into a final kit. Based on the information provided, the stainless steel rolls and sheets are made into a new product in Canada, namely a Vortex Stainless Steel Flex Liner Kit.
Regarding the applicability of Section 301 remedies for the Vortex Stainless Flex Liner Kit, it is the decision this office that the manufacturing and assembly operations performed in Canada substantially transform the stainless steel rolls and sheets into a new and different article of commerce with a changed name, character, and use. Thus, it is the opinion of this office that the manufacturing and assembly processes performed in Canada result in a substantial transformation of the non-Canadian components, and the Vortex Stainless Flex Liner Kit is a product of Canada. Therefore, the Vortex Stainless Flex Liner Kit will not be subject to the additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation.
Please note that 19 C.F.R. § 177.9(b)(1) provides that "[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a Customs and Border Protection field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based."
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 Ann Taub at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division