CLA-2-84:OT:RR:NC:N1:103
Misty Gibbins
Pacific Customs Brokers Inc.
1400 A St. Blaine, WA 98230
RE: The tariff classification, country of origin, and United States-Mexico-Canada Agreement (USMCA) eligibility of wireline drill rods
Dear Ms. Gibbins:
In your letter dated August 22, 2023, you requested a binding ruling on behalf of your client, Premier Mining Products, Inc., concerning the tariff classification, the country of origin, and the eligibility under the USMCA of wireline drill rods.
The first item is the B-Rod, used in diamond core exploration drilling. It is described as a threaded drill rod with an approximate outside diameter of 55.56 mm, an inside diameter of 46.20 mm, a length between 3060 mm to 3200 mm, and is made from grade 1541 steel. The drill rods will have one male threaded end and one female threaded end.
The second item is the N-Rod, used in diamond core exploration drilling. It is described as a threaded drill rod with an outside diameter of 69.85 mm, an inside diameter of 60.5 mm, a length between 3060 mm to 3200 mm, and made from grade 1541 steel. The drill rods will have one male threaded end and one female threaded end.
The third item is the H-Rod, used in diamond core exploration drilling. It is described as a threaded drill rod with an approximate outside diameter of 88.90 mm, an inside diameter of 78.00 mm, a length between 3060 mm to 3200 mm, and made from grade 4130 steel. The drill rods will have one male threaded end and one female threaded end.
The fourth item is the P-Rod, used in diamond core exploration drilling. It is described as a threaded drill rod with an approximate outside diameter of 114.30 mm, an inside diameter of 101.60 mm, and a length between 3060 mm to 3200 mm. The P-Rod is made from either grade 1541 or 4130 steel. The drill rods will have one male threaded end and one female threaded end.
In your submission, you suggest the drill rods are classifiable in heading 7304, Harmonized Tariff Schedule of the United States (“HTSUS”), which provides for “Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel.” We disagree. The subject drill rods are identifiable parts of drilling machinery, which you have indicated as surface coring drill rigs and diamond core drill rigs.
As such, the applicable subheading for the B-Rod, N-Rod, H-Rod, and P-Rod, will be 8431.43.8090, HTSUS, which provides for “Parts suitable for use solely or principally with the machinery of headings 8425 to 8430: Of machinery of heading 8426, 8429 or 8430: Parts for boring or sinking machinery of subheading 8430.41 or 8430.49: Other: Of other boring or sinking machinery.” The rate of duty will be free.
In your submission, you requested a country of origin determination for the purposes of applying certain trade remedies. In Canada, all of the subject wireline drill rods follow the same manufacturing process, using raw steel tubing sourced from Argentina, Italy, Germany, or South Korea. The process begins with annealing the raw tubes, which involves heat treating and quenching the ends of the tubes to change its properties. Next, the tubes are checked for straightness, and any tubes that do not meet the required specifications are straightened using a hydraulic press. Afterwards, the ends of each drill rod are threaded with either male or female threads, and then visually inspected. To increase the performance and longevity of the product, the male threaded end is subjected to a second heat treatment. Lastly, a worker rolls each rod in a rust inhibiting oil, applies grease to the threaded ends, and bundles the rods for shipment.
When determining the country of origin for purposes of applying trade remedies, the substantial transformation analysis is applicable. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 681 F.2d 778 (CCPA 1982). In deciding whether the combining of parts or materials constitutes a substantial transformation, the determinative issue is the extent of operations performed and whether the parts lose their identity and become an integral part of the new article. See Belcrest Linens v. United States, 6 CIT 204, 573 F. Supp. 1149 (1983), aff’d, 741 F.2d 1368 (Fed. Cir. 1984). Assembly operations that are minimal or simple, as opposed to complex or meaningful, will generally not result in a substantial transformation. Factors which may be relevant in this evaluation may include the nature of the operation (including the number of components assembled), the number of different operations involved, and whether a significant period of time, skill, detail, and quality control are necessary for the assembly operation. See C.S.D. 80-111, C.S.D. 85-25, C.S.D. 89-110, C.S.D. 89-118, C.S.D. 90-51, and C.S.D. 90-97. If the manufacturing or combining process is a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. See Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff’d, 702 F.2d 1022 (Fed. Cir. 1983).
Based on the information provided, the processing that occurs in Canada results in a substantial transformation of the raw tubes from Argentina, Italy, Germany, or South Korea. The raw tubing changes from a good incapable of being used as a part in a drill string, to a drill rod that is suitable for use in a drill string used in diamond core exploration drilling. The processing in Canada, consisting of annealing and threading, results in a specialized product, a drill rod, with a name, character, and use distinct from the parts from which it was made. Therefore, the country of origin of the B-Rod, N-Rod, H-Rod, and P-Rod, for the purposes of applying certain trade remedies, is Canada.
In your submission, you also requested a country of origin determination 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 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 Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304.
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, 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 § 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
The wireline drill rods are neither “wholly obtained or produced” nor “produced exclusively from domestic materials.” Therefore, paragraphs (a)(1) and (a)(2) cannot be used to determine their country of origin, and we need to apply paragraph (a)(3).
Under 19 C.F.R. § 102.11(a)(3), any foreign materials of the wireline drill rods must satisfy the tariff shift requirements of 19 C.F.R. § 102.20. "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.”
As previously noted, the wireline drill rods are classified in heading 8431, HTSUS. The tariff shift requirement in Section 102.20 for a good of heading 8431, HTSUS, requires “a change to heading 8431 from any other heading, except from heading 8501 when resulting from a simple assembly.”
The foreign material, namely the raw tubing, used during production is classified outside of heading 8431, HTSUS. Since all the foreign components satisfy the tariff shift rules set forth in 19 C.F.R. § 102.20, the country of origin of the B-Rod, N-Rod, H-Rod, and P-Rod, for marking purposes is Canada.
You also inquire whether the wireline drill rods are 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 of the 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:
For the purposes of this note, a good imported into the customs territory of the United States from the territory of a USMCA country, as defined in subdivision (l) of this note, 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 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));
Since the wireline drill rods contain non-originating materials, they are not considered goods “wholly obtained” nor “produced entirely in a USMCA country” under GN 11(b)(i) and GN 11(b)(ii). We must next determine whether the wireline drill rods qualify under GN 11(b)(iii). Since the finished wireline drill rods are classified under subheading 8431.43, HTSUS, the applicable rule of origin is in GN 11(o)/84.90(A), HTSUS, which provides for “a change to subheadings 8431.10 through 8431.49 from any other heading.” Based on the facts presented, the non-originating materials are classified outside of heading 8431, HTSUS. As such, all foreign materials meet the tariff shift requirement. Accordingly, the B-Rod, N-Rod, H-Rod, and P-Rod are eligible for preferential tariff treatment under the USMCA.
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.
The holding set forth above applies only to the specific factual situation and merchandise description as identified in the ruling request. This position is clearly set forth in Title 19, Code of Federal Regulations (CFR), Section 177.9(b)(1). This section states that a ruling letter is issued on the assumption that all of the information furnished in the ruling letter, whether directly, by reference, or by implication, is accurate and complete in every material respect. In the event that the facts are modified in any way, or if the goods do not conform to these facts at time of importation, you should bring this to the attention of U.S. Customs and Border Protection (CBP) and submit a request for a new ruling in accordance with 19 CFR 177.2. Additionally, we note that the material facts described in the foregoing ruling may be subject to periodic verification by CBP.
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 Paul Huang at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division