CLA-2-39:OT:RR:NC:N:5: 137
Lynlee Brown
Ernst & Young LLP
4365 Executive Drive, Suite 1600 San Diego, CA 92122
RE: The tariff classification, country of origin and eligibility of the United States-Mexico-Canada Agreement (USMCA) for a polyurethane prepolymer from Canada
Dear Ms. Brown:
In your letter dated March 8, 2024, you requested a binding ruling on the tariff classification, country of origin and eligibility of a polyurethane prepolymer under the United States-Mexico-Canada Agreement (USMCA).
The product under consideration is referred to as Wannate 9134. It is a polyurethane prepolymer that is characterized by its easy dispersion in water. It demonstrates excellent bonding strength and water resistance and is highly suitable for spray foam applications.
Polymeric methylene diphenyl diisocyanate (Polymeric MDI or PMDI) of Chinese origin and Poly(ethylene glycol) monomethyl ether (polyol) of U.S. origin are imported to Canada. The Batch Reaction process at Wanhua's plant in Canada consists of the following steps:
1)Preparation: PMDI added to reactor previously purged with Nitrogen to remove moisture; 2)Preparation: PMDI heated to optimum temperature to lower viscosity and increase the reaction rateof step 3; 3) Reaction: Polyol added to reactor slowly to ensure uniform reaction of PMDI and polyol. PMDI reacts rapidly with polyol resulting in the formation of new urethane bonds resulting in the formation of the polyurethane prepolymer; 4) Reaction: Maintain the temperature of the reactor and stirring until the reaction is complete; 5) Packaging: Cool down the prepolymer to appropriate temperature and pack; 6) Quality Assurance: Collect representative sample for Quality Assurance Testing.
Classification:
The applicable subheading for the Wannate 9134, polyurethane prepolymer will be 3909.50.5050, Harmonized Tariff Schedule of the United States (HTSUS), which provides for amino-resins, phenolic resins and polyurethanes, in primary forms: polyurethanes: other. The general rate of duty will be 6.3 percent ad valorem.
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.
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 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));
GN 11 (n) (v) (A) provides that:
(A) A good of chapters 39 through 40 that results from a chemical reaction in the territory of one or more of the USMCA countries shall be treated as an originating good.
GN 11 (n) (v) (B) states:
For the purposes of this rule, a chemical reaction is a process (including a biochemical process) that results in a molecule with a new structure by breaking intramolecular bonds and by forming new intramolecular bonds, or by altering the spatial arrangement of atoms n a molecule.
It is the opinion of this office that the batch reaction process used to process the polymeric MDI and polyethylene glycol into Wannate 9134, polyurethane prepolymer is defined as a chemical reaction per GN 11(n) (v) (A). Therefore, the Wannate 9134, polyurethane prepolymer is considered to be an originating good under USMCA.
Regarding the applicability of Section 301 trade remedies to the Wannate 9134, polyurethane prepolymer under consideration, CBP 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).
The PMDI and Polyol undergo a Batch Reaction process that results in a chemical reaction forming new urethane bonds and resulting in Wannate 9134, a new polyurethane prepolymer.
Regarding the applicability of Section 301 remedies, it is the decision of this office that the manufacturing and/or assembly operations described, in sum, do substantially transform the individual components into a new and different article of commerce with a changed name, character, and use. Therefore, 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 Wannate 9134, polyurethane prepolymer is a product of Canada. Therefore, the Wannate 9134, polyurethane prepolymer will not be subject to the additional duties under Section 301 of the Trade Act of 1974, as amended, upon importation.
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 Christina Allen at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division