CLA-2:32:OT:RR:NC:N3:136
Sarah Stock
C.H. Robinson International, Inc.
1501 N. Mittel Blvd., Suite A Wood Dale, IL 60191
RE: The country of origin, marking, and applicability of the United States-Mexico-Canada Trade Agreement (USMCA) of two masterbatch products from Canada; Correction to Ruling Number N334326
Dear Ms. Stock:
This letter replaces Ruling Number N334326 dated August 30, 2023, which contained a clerical error. An incorrect citation for marking regulations was indicated. A complete and corrected ruling follows.
In your letter dated July 31, 2023, on behalf of your client, Ampacet Corporation, you requested a country of origin, marking, and applicability of the United States-Mexico-Canada Trade Agreement (USMCA) ruling on two masterbatch products.
You describe the subject products as follows:
Item Description 1. The first product is a finished masterbatch produced in Canada, identified as White PE MB. The finished product is a pelletized colorant that can be used in multiple applications, including but not limited to injection molding, blow molding, extrusions and blown film. This product is comprised of various inputs that are of the following origins: United States, Canada, or China. In some cases, items may be dual-sourced, so inputs may also be sourced from two other countries.
Item Description 2. The second product is also a white masterbatch (White PE MB), but with a different finished product/SKU number. This is a finished masterbatch that is designed for standard film applications. This product is comprised of various inputs that are of United States, Canadian, and Chinese origin.
Both masterbatches are products that are custom formulated by your client in Canada. The inputs are mixed together under heat (to a molten state of the polymer) and high shear to provide the color in the form that is utilized by customers. If these raw materials were to be used without being converted into a masterbatch with proper distribution and dispersion, they would not have the required properties for the intended end use and could cause defects in the customers’ finished products and processes where they are utilized. Examples of such defects include visual imperfections, agglomeration that affects barrier properties, plugging of process screens, die lip build up, streaking, or inconsistent color and opacity. None of the individual inputs could function as an acceptable product without undergoing the full production process.
Some of the production processes described are irreversible; once the production process is complete, the ingredients cannot be separated. Without undergoing the specific production process and using specialized equipment, the masterbatches would not have the properties – i.e., the rheological properties, shape, size, color, dispersion level, and moisture content – required to render them suitable for their intended use. The production process also renders the final products safe for use, including the avoidance of dust explosions or inhalation issues.
The applicable subheading for both masterbatch products will be 3206.19.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for: Other coloring matter; preparations as specified in note 3 to this chapter, other than those of 3203, 3204 or 3205; inorganic products of a kind used as luminophores, whether or not chemically defined: Pigments and preparations based on titanium dioxide: Other. The general rate of duty will be 6.0 percent ad valorem.
Country of Origin and Marking
The "country of origin" is defined in 19 C.F.R. §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 USMCA country, the marking rules set forth in part 102 of this chapter will determine the country of origin.
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 (“CBP”) Regulations (19 C.F.R. Part 134) implements the country of origin marking requirements and exceptions of 19 U.S.C. § 1304. To provide a more seamless transition to the USMCA for Canadian and Mexican traders, at this time, CBP continues to utilize the marking rules in 19 C.F.R. Part 102, with the exception of 19 C.F.R. § 102.19, for purposes of country of origin marking with respect to goods of those countries. Title 19, C.F.R. § 102.11(a) provides 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. Sections 102.11(a)(1) and 102.11(a)(2) do not apply to the facts presented in this case because the imported products are neither wholly obtained or produced or produced exclusively from “domestic” materials. Because 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.
Both masterbatch products, identified as White PE MB, are imported into the U.S. from Canada, both are classified in subheading 3206.19, HTSUS and incorporate foreign materials as defined by 19 CFR §102.1(e), so the rule under 19 CFR § 102.11(a)(3) applies.
The applicable tariff classification rule provided under 19 CFR §102.20 states: “A change to subheading 3206.11 through 3206.19 from any other subheading outside that group.” As one of the sourced foreign substances is classified in subheading 3206.11, HTSUS, that item fails to make the required tariff shift, and we must consult the next available rule of origin.
The rule under CFR § 102.11(b) does not apply because no single material imparts the essential character of the finished products. As no single material can be considered to impart the essential character to the finished masterbatches, we must consult the remaining rules available under 19 CFR §102.11, in sequential order.
As the masterbatches are not specifically described in the Harmonized System as a set or mixture, or classified as a set, mixture or composite good pursuant to General Rule of Interpretation 3, 19 C.F.R. §102.11(c) does not apply.
19 CFR §102.11(d)(1) and §102.11(d)(2) do not apply because the goods are not produced via minor processing or simple assembly as defined within 19 C.F.R. § 102.1. Regarding minor processing, the input materials undergo production processes that are clearly more than dilution with other substances, and the substances are materially altered upon production.
Therefore, in applying 19 C.F.R. §102.11(d)(3), which states that “the country of origin of the good is the last country in which the good underwent production,” we have determined that the country of origin for marking purposes for both finished products is Canada.
Trade Agreement (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 nonoriginating materials, if the good satisfies all applicable requirements set forth in this note (including the provisions of subdivision (o)); or …
Based on the facts provided, the subject masterbatch products described above qualify for USMCA preferential treatment, because they will meet the requirements of HTSUS General Note 11(b)(iii), Chapter 32, 5. (A) “A change to subheadings 3206.11 through 3206.42 from any other subheading, including another subheading within that group.” Since all the raw materials used in making the products in Canada are classified in subheadings other than 3206.19, HTSUS, the applicable tariff shift rule in GN 11 of HTSUS has been met, and therefore the products are originating under the USMCA, and are entitled to preferential treatment under USMCA upon compliance with all applicable laws, regulations, and agreements.
This merchandise may be subject to the requirements of the Toxic Substances Control Act (TSCA), which are administered by the U.S. Environmental Protection Agency. Information on the TSCA can be obtained by contacting the EPA at 1200 Pennsylvania Avenue, N.W., Mail Code 70480, Washington, D.C., by telephone at (202) 554-1404, or by visiting their website at www.epa.gov.
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 above, please contact National Import Specialist Nuccio Fera at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division