MAR-2:OT:RR:NC:N2:206
Keith Roth
Vice President of Operations
SilverbackHD Inc.
5600 Timberlea Blvd.
Mississauga, L4W 4M6
Canada
RE: The country of origin of a lined brake shoe.
Dear Mr. Roth:
This is in response to your letter, dated February 2, 2022, requesting a ruling on the country of origin of a lined brake shoe for marking purposes and for purposes of applying trade remedies under Section 301 of the Trade Act of 1974, as amended, from China.
The article under review is a motor vehicle Lined Brake Shoe (Part Number LS4707Q-23KW), which was the subject merchandise in NY Ruling N322988, dated December 29, 2021. However, in the current request you state that the material sourcing and manufacturing process has been altered as follows: the brake lining FMSI block segments (friction material) are from India, the bare steel shoe core is from China, and the rivets are from Canada. The components are further manufactured in Canada by affixing the friction material to the steel shoe.
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:
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 Part 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.
The brake shoe 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 brake shoe, and paragraph (a)(3) must be applied next to determine the origin of the finished article. The brake shoe is classified under subheading 8708.30, Harmonized Tariff Schedule of the United States (HTSUS). The tariff shift requirement in Part 102.20 for the brake shoe at issue states:
A change to mounted brake linings and pads from any other heading, except from brake linings and pads of subheading 6813.20 or 6813.81.
The brake lining FMSI block segments from India do not meet the tariff shift. As a result, Part 102.11(a) does not apply.
Section 102.11(b) states, in relevant part:
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 [(“GRI”)] 3, where the country of origin cannot be determined under paragraph (a) of this section:
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….
In determining the “essential character” of the finished good, Section 102.18(b)(1) provides, in relevant part:
(b) (1) For purposes of identifying the material that imparts the essential character to a good under Part 102.11, the only materials that shall be taken into consideration are those domestic or foreign materials that are classified in a tariff provision from which a change in tariff classification is not allowed under Part 102.20 specific rule or other requirements applicable to the good … (ii) Materials that may be considered include materials produced by the producer of the good and incorporated in the good. For example, if a producer of a good purchases raw materials and converts those raw materials into a component that is incorporated in the good, that component is a material that may be considered for purposes of identifying the materials that impart the essential character to the good, provided that the component is classified in a tariff provision from which a change in tariff classification is not allowed under the specific rule…
The friction material from India is the single component classified in a tariff provision from which a change in tariff classification is not allowed. Accordingly, the country of origin of the lined brake shoe for marking purposes is India.
Regarding the applicability of Section 301 trade remedies to the product 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).
You provided pictorial diagrams showing the friction material and the steel shoe in the condition they are imported into Canada. It appears that both articles are intact and do not need any further manufacturing. In NY Ruling N322988, this office stated that since the cores are of secondary importance to the lining, the country of origin of the entire brake shoe will be the country of origin of the lining. Therefore, the lined brake shoe is considered a product of India and will not be subject to the additional duties under Section 301, of the Trade Act of 1974, as amended.
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 Liana Alvarez at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division