HQ 0084831 - I/A 17/89, steel pipes and tubes to be used in knocked down piping system for hydraulic fiber board press - United States International Trade Commision Rulings

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HQ 084831

December 26, 1989

CLA-2 CO:R:C:G 084831 JMH

CATEGORY: CLASSIFICATION

TARIFF NO.: 8479.90.80

District Director
Buffalo District
111 West Huron St.
Buffalo, New York 14202

RE: I/A 17/89, steel pipes and tubes to be used in knocked down piping system for hydraulic fiber board press

Dear Sir:

This is in response to your request of April 11, 1989, for internal advice on certain knocked down piping systems to be used with hydraulic fiber board presses. You also request information regarding the requirements of an export certificate for pipes from Germany used in the systems.

FACTS:

The materials in question are seamless carbon steel pipes and tubes with outside diameters of 1/2 inch to 16 inches. The pipes and tubes are to be used in a knocked down piping system for installation in a hydraulic fiber board press. Some of the pipes and tubes originate in West Germany. The West German items are shipped to Canada where they are flared and grooved and combined with other steel pipe of Canadian origin. The flared and grooved pipes are then exported to the United States where they are assembled into a piping system. The piping system was imported to the United States in four separate shipments.

The importer contends that the piping system is an entirety, designed for use with a specific machine, the hydraulic fiber board press. The goods should be classified as parts. The importer also argues that the flaring and grooving of the West German pipe in Canada substantially transforms the German pipe into Canadian pipe. Thus, for Voluntary Restraint Arrangement (VRA) purposes, it is claimed that the pipe's country of origin is Canada.

Your district believes that the pipes and tubes are not part of the fiber board press. The articles should be classified within Chapter 73 of the HTSUSA as pipes and tubes. You disagree that the flaring and flanging of the pipes and tubes substantially transform the articles. Therefore, in your opinion the pipes and tubes remain products of West Germany and are subject to the VRA with the European Community (EC).

ISSUE:

Issue 1: Whether the steel pipes and tubes are properly classified within heading 8479.90.80, HTSUSA, as "Machines and mechanical appliances having individual functions, not specified or included elsewhere in this chapter; parts thereof...", or in the appropriate subheading for pipes and tubes in heading 7304, HTSUSA, as "Tubes, pipes and hollow profiles, seamless, or iron (other than cast iron) or steel..."

Issue 2: Whether the pipes and tubes originating in West Germany remain a product of West Germany, and therefore, subject to the Voluntary Restraint Arrangement (VRA) with West Germany, or whether the pipes and tubes are substantially transformed by the flanging and grooving so that they are products of Canada.

LAW AND ANALYSIS:

Issue 1:

The classification of merchandise under the HTSUSA is governed by the General Rules of Interpretation (GRI's). GRI 1, HTSUSA, states in part that "for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes..." The proper classification for the steel tubes and pipes is within heading 7304, HTSUSA. Heading 7304 describes:

7304 Tubes, pipes and hollow profiles, seamless, of iron (other than cast iron) or steel...

The importer contends that heading 8479, HTSUSA, the classification for the fiber board press, governs the classification of the steel pipes and tubes. It is argued that the piping system and the hydraulic fiber board press are an entirety. The notion of an entirety does not exist within the HTSUSA. A similar concept for mechanical appliances is found within Section XVI, Note 4, HTSUSA, which describes a "functional unit". However, to utilize this note, the unit must be imported together. The steel pipes and tubes were imported separately. Therefore, the piping system is ineligible for "functional unit" status.

The importer also claims that the pipes and tubes are "parts thereof..." within heading 8479, HTSUSA. Section XVI, Note 2, HTSUSA, directs the classification of parts of machines. However, this note only applies if the item being classified is a "part" of a machine. However, for the pipes to be "parts" in this case, they must be an integral, constituent or component article, without which the fiber board press would not be complete. We understand that the steel pipes and tubes in question are meant to connect the fiber board press to a separate off-line hydraulic pump located on another level of the manufacturing plant. The subject pipes and tubes in this case are not integral, constituent or component articles of the fiber board press. The fiber board press is a complete article without the steel pipes and tubes. Therefore, the pipes and tubes are not "parts" of the fiber board press.

Issue 2:

The determination of whether the steel pipes and tubes from West Germany are subject to the VRA with West Germany depends upon whether the steel pipes and tubes have been substantially transformed while in Canada. Ferrostaal Metal Corp. v. United States, 664 F. Supp. 535, 537 (CIT 1987). If a substantial transformation occurs from the operations performed in Canada, then Canada becomes the country of origin for the steel plates and angles.

A substantial transformation occurs when the articles "lose their identity as such, and become new articles having...a new name, character, and use..." Koru North America v. United States, 701 F.Supp 229, 234 (CIT 1988), citing United States v. Gibson-Thomson Co., 27 CCPA 267, 270, C.A.D. 98 (1940). See also Anheuser-Busch Brewing Ass'n v. United States, 207 U.S. 556, 562, 28 S.Ct. 204, 206, 52 L.Ed. 336 (1907). The name, character and use test has been adhered to by the courts. Ferrostaal Metals Corp. v. United States, 664 F.Supp. 535, 538 (CIT 1987), National Juice Products Association et al. v.United States, 682 F. Supp. 678 (CIT 1986), Torrington Co. v. United States, 764 F.2d 1563 (3rd Cir. 1985), Uniroyal, Inc. v. United States, 542 F. Supp. 1026 (CIT 1982).

In the present situation, the steel tubes and pipes arrive in Canada from West Germany. While in Canada, the articles are flared and grooved. It is the opinion of this office that these operations do not substantially transform the steel tubes and pipes. The flaring and grooving processes do not produce a product with a new name, character and use. The articles remain steel pipes and tubes. Since no substantial transformation occurs, West Germany remains the country of origin.

Merchandise, the country of origin of which is West Germany, is subject to the VRA with the EC. For further information regarding the importation from West Germany contact:

Nicholas Tolerico, Director
Office of Agreements Compliance
International Trade Administration
Room 7866
Department of Commerce
14th and Constitution Streets, N.W.
Washington, D.C. 20230

The above substantial transformation analysis also applies to the Tariff Schedule of the United States.

HOLDING:

The steel tubes and pipes, from West Germany, to be used in knocked down piping assembly for installation in hydraulic fiber board presses are properly classified within heading 7304 to 7306, HTSUSA.

The steel tubes and pipes imported to Canada from West Germany are not substantially transformed by the flaring and grooving which occurs in Canada. West Germany remains the country of origin.

You should advise the internal advice applicant of the outcome of this ruling.

Sincerely,

John Durant, Director
Commercial Rulings Division

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