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HQ 555763


March 8, 1991

CLA-2 CO:R:C:S 555763 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80

Mr. Alex Romero, Jr.
A. F. Romero & Co., Inc.
477 Railroad Blvd.
P.O. Box 989
Calexico, California 92231-0989

RE: Tariff treatment and country of origin marking requirements applicable to double walled pipe sections created by pressing, forming and welding in Mexico.Further fabrication; assembly; substantial transformation; 555532; 055684 ; T.D. 86-15; 087434 modified

Dear Mr. Romero:

This is in response to your letters dated June 19, and October 29, 1990, on behalf of American Metal Products, requesting a ruling concerning the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), and the country of origin marking requirements for double walled pipe sections. Your request for the tariff classification of this merchandise was answered in Headquarters Ruling Letter (HRL) 087434 dated October 18, 1990.

FACTS:

American Metal will manufacture double walled pipe sections in Mexico from U.S.-cut galvanized steel and aluminum sheet blanks. The double walled pipe sections will be 3 to 6 inches in diameter and will have various lengths of 6, 12, or 24 inches and 3, 4, or 5 feet. The inner pipe is made of aluminum and the outer pipe is made from galvanized steel. Each section of pipe has snap-lock coupling ends.

In Mexico, the U.S.-cut steel and aluminum sheet is rolled into the form of pipe; the rolled pipe length edges are seamed together on a horn press; a male and a female end are formed by a jig onto opposing ends of the pipe; the inner pipe is placed inside the outer pipe; and the two pipes are welded together in six spots on the outer male end.

After inspection and packaging, the double walled pipe sections are shipped to the U.S.

In HRL 087434, we stated that for purposes of the U.S.- Mexico steel arrangement, the double walled pipes will not be considered products of Mexico upon their return to the U.S. This conclusion was predicated on the assumption that the double walled pipes are merely assembled in Mexico from pipe sections of U.S. origin. However, the additional information provided in your October 29, 1990, letter indicates that the assembly operations are performed only after aluminum and galvanized steel sheets of U.S. origin are processed in Mexico, as described above, into inner and outer pipe sections. Therefore, as the facts provided in your October 29, 1990, letter are materially different from those upon which HRL 087434 was based, the statement in HRL 087434 concerning the country of origin of the double walled pipes is modified to conform with the country of origin determination set forth below. See section 177.9(d), Customs Regulations (19 CFR 177.9(d)).

The U.S. Department of Commerce is responsible for the administration of steel voluntary restraint agreements (VRAs), including the U.S.-Mexico steel VRA. Therefore, to determine the applicability of VRA certification requirements to the double walled pipe sections to be imported from Mexico, we recommend that you contact the Office of Agreements Compliance, International Trade Administration, Department of Commerce, Washington, D.C. 20230.

ISSUE:

I. Whether the pipe sections will be eligible for the partial duty exemption available under subheading 9802.00.80, HTSUS, when imported into the U.S.

II. Whether country of origin marking requirements are applicable to the imported pipe sections.

LAW AND ANALYSIS:

I. Applicability of subheading 9802.00.80, HTSUS

HTSUS subheading 9802.00.80 provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubrication, and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not loose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See, 19 CFR 10.16(c).

We are of the opinion that the pipes are not ready to enter into the assembly process without further fabrication. The pipes which will be welded together do not exist until they are first manufactured in Mexico. The U.S.-cut steel and aluminum blanks are rolled into pipe shapes and then seamed to manufacture the pipe sections. Thereafter, the male and female ends of the pipe are formed with a jig. Only after these manufacturing operations are performed will the assembly operation (welding) be performed. The U.S.-cut blanks are further fabricated in the manufacturing process to create the pipes that will be subjected to the assembly operation. Thus, the complete change in shape of the U.S.-cut blanks into pipe is a significant process and cannot be considered an operation incidental to the assembly. As the U.S.- cut blanks do not meet the requirement of clause (a) of subheading 9802.00.80, HTSUS, no allowance in duty can be made for the cost or value of the U.S.-cut steel and aluminum blanks.

II. Applicability of country of origin marking requirements

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the U.S. 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 manner as to indicate to the ultimate purchaser in the U.S. the English name of the country of origin of the article.

Part 134, Customs Regulations (19 CFR Part 134), implements the country of origin marking requirements and exceptions of 19 U.S.C. 1304. Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), provides that "country of origin" means the country of manufacture, production, or growth of any article of foreign origin entering the U.S. 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." The term "foreign origin" is defined in section 134.1(c), Customs Regulations (19 CFR 134.1(c)), as a country of origin other than the U.S., as defined in 19 CFR 134.1(e), or its possessions and territories.

As provided in section 134.32(m), Customs Regulations (19 CFR 134.32(m)), products of the U.S. exported and returned are specifically excepted from country of origin marking requirements. If a U.S. product is sent abroad for processing, the article remains a product of the U.S. excepted from the country of origin marking requirements unless, prior to its return, it is substantially transformed into an article of foreign origin. This exception from country of origin marking does not apply to articles assembled abroad in whole or in part from U.S.-made components and eligible for entry under subheading 9802.00.80, HTSUS. See, section 10.22, Customs Regulations (19 CFR 10.22). Such assembled articles are considered products of the country of assembly for purposes of 19 U.S.C. 1304, whether or not the assembly constitutes a substantial transformation.

If the U.S. product is substantially transformed abroad, it becomes an article of foreign origin and must be marked with its country of origin. In order for a substantial transformation to be found, a new and different article having a distinctive name, character, or use must emerge from the processing. See, Anheuser-Bush Brewing Ass'n v, United States, 207 U.S. 556, 28 S.Ct. 204 (1908).

In general, cutting or bending materials to defined shapes or patterns suitable for use in making finished articles, as opposed to mere cutting to length or width which does not render the article suitable for a particular use, constitutes a substantial transformation. See, HRL 055684 dated August 14, 1979, (components of a water cooler gas absorption refrigeration unit which were formed by cutting to length, cleaning, and bending imported steel tubes into the components' shapes and configurations, or cutting to length, flattening, and drilling holes into imported tubing, were substantially transformed into constituent materials for GSP purposes), and HRL 555532 dated September 18, 1990, (straightening, shearing to a rectangular shape, blanking, grit blasting, rolling to form in a tubular shape and seam welding to form a tube constitutes a substantial transformation).

We are of the opinion that the operations performed in Mexico result in a substantial transformation. The steel and aluminum sheet will undergo rolling, seaming, welding and forming operations that create a double walled pipe. The result of the processing in Mexico is to create a new and different article, a double walled pipe section, with a distinct character and use that is not inherent in the sheet imported into Mexico. Accordingly, the country of origin of the imported pipe is Mexico.

Specified methods for marking steel pipe are set forth in 19 U.S.C. 1304(c). Specifically, 19 U.S.C. 1304(c)(1) provides that "except as provided in paragraph (2), . . . (Such articles) shall be marked with the English name of the country of origin by means of die stamping, cast-in-mold lettering, etching, or engraving." If, because of the nature of the article, it is technically or commercially infeasible to mark by these methods, an equally permanent method, such as paint stencilling is permitted. See, 19 U.S.C. 1304(c)(2).

According to T.D. 86-15, 20 Cust.Bull. 29 (1986), certain categories of articles cannot be marked with the country of origin by any of the methods prescribed in 19 U.S.C. 1304(c)(1), without rendering such articles unfit for the purpose for which they are intended or violating industry standards. One of the categories specified is coated pipe, which includes galvanized pipe. Although T.D. 86-15 states that such category of pipe should be marked with an alternative marking method of either paint stencilling, or tagging of bundles or containers, the latter method is not an equally permanent method of marking the pipe within the meaning of 19 U.S.C. 1304(c)(2). Thus, in order to comply with the requirements of 19 U.S.C. 1304(c)(2), the imported pipe should be marked with the country of origin by means of paint stencilling, or another equally permanent method. We intend to recommend that T.D. 86-15 be modified to conform to the requirements of 19 U.S.C. 1304(c)(2).

Therefore, as the U.S.-cut steel is substantially transformed into double walled pipe sections, it is considered a product of Mexico, and, therefore, must be marked "Made in Mexico". The pipe section must be marked by means of paint stencilling or an equally permanent method.

HOLDING:

On the basis of the information submitted, we conclude that the formation of the U.S.-cut steel and aluminum blanks into pipe sections is not an acceptable assembly operation or operation incidental to the assembly process, but rather is further fabrication of the exported blanks. Therefore, the pipe sections will not qualify for the partial duty exemption available under subheading 9802.00.80, HTSUS.

The processing of the U.S.-cut steel and aluminum blanks as described above into double walled steel pipe sections in Mexico is considered a substantial transformation. Therefore, upon importation, the double walled pipe sections are considered a product of Mexico and should be marked accordingly.

Sincerely,

John Durant, Director

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