HQ 0955879 - Steel buttweld fittings; elbows, reducers and flanges; NAFTA; rules of origin; General Note 12(b); goods wholly obtained or produced; General Note 12(n) and (p); production; General Note 12(t) 73.6; change in tariff classification - United States International Trade Commision Rulings

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HQ 955879
May 17, 1994
CLA-2 CO:R:C:M 955879 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: N/A

Mr. Marc L. Goldberg
Flo-Bend, Inc.
P.O. Box 2995
Tulsa, Oklahoma 74101

RE: Steel buttweld fittings; elbows, reducers and flanges; NAFTA; rules of origin; General Note 12(b); goods wholly obtained or produced; General Note 12(n) and (p); production; General Note 12(t) 73.6; change in tariff classification

Dear Mr. Goldberg:

This is in response to your letter dated February 9, 1994, concerning the applicability of the North American Free Trade Agreement (NAFTA) to steel buttweld fittings when exported to Canada. A brochure and videotape were submitted for our examination. Additionally, information gathered by the National Import Specialist for steel was also used in making this determination.

FACTS:

The articles under consideration are buttweld fittings, specifically elbows, reducers and flanges. The starting material for the elbows and reducers is seamless pipe and tubing, and for the flanges the starting material is bar stock. These starting materials are composed of carbon steel and stainless steel from Germany, Japan and the United States, and chrome alloy steel from countries other than the United States, Canada or Mexico. The specifications and manufacturing process of the buttweld fittings were described in the submitted letter, videotape and brochure.

ISSUE:

Are the buttweld fittings, i.e., elbows, reducers and flanges, eligible for preferential tariff treatment under the NAFTA?

LAW AND ANALYSIS:

To be eligible for tariff preferences under the North American Free Trade Agreement (NAFTA), goods must be "originating goods" within the rules of origin in General Note 12(b), HTSUS. In this case, there are two methods by which goods imported into the United States may be "goods originating in the territory of a NAFTA party." The first method is that "they are goods wholly obtained or produced in the territory of Canada, Mexico and/or the United States." See, General Note 12(b)(i), HTSUS. The second method is that they be "transformed in the territory of Canada, Mexico and/or the United States" pursuant to General Note 12(b)(ii)(A), HTSUS, which states:
except as provided in subdivision (f) of this note, each of the non-originating materials used in the production of such goods undergoes a change in tariff classification described in subdivisions (r), (s) and (t) of this note or the rules set forth therein....

In the first method, the phrase "goods wholly obtained or produced in the territory of Canada, Mexico and/or the United States", means, in pertinent part:

(i) mineral goods extracted in the territory of one or more of the NAFTA parties;...

(x) goods produced in the territory of one or more of the NAFTA parties exclusively from goods referred to in subdivisions (n)(i) through (ix), inclusive, or from their derivatives, at any stage of production.

See, General Note 12(n), HTSUS. "Production" is defined by General Note 12(p), as "growing, mining, harvesting, fishing, trapping, hunting, manufacturing, processing or assembling a good."

We are of the opinion that when the buttweld fittings are manufactured from United States-origin starting material, they are considered "originating goods" for purposes of the NAFTA pursuant to General Note 12(b)(i), HTSUS. The finished buttweld fittings are goods wholly obtained or produced in the territory of a NAFTA country. The starting material of carbon steel and stainless steel seamless pipe, tube and bar stock is manufactured in the United States. The United States-origin products are then manufactured into finished elbows, reducers, and flanges in the United States. Therefore, the finished buttweld fittings are considered to be goods wholly obtained or produced in the territory of the United States and are eligible for preferential treatment under the NAFTA.

For all the other situations, i.e., where non-originating starting materials are used, we must examine whether the buttweld fittings are "transformed in the territory of Canada, Mexico and/or the United States" pursuant to General Note 12(b)(ii)(A), HTSUS. As the finished buttweld fittings, i.e., elbows, reducers and flanges, are classified under heading 7307, HTSUS, a transformation is evident when a change in tariff classification occurs that is authorized by General Note 12(t) 73.6, HTSUS. General Note 12(t) 73.6, HTSUS, states:

A change to headings 7305 through 7307 from any other chapter.

Therefore, any non-originating materials must come from a chapter other than chapter 73.

In the case of the elbows and reducers, the non-originating materials are seamless pipe and tubing which is classified within chapter 73; specifically under various subheadings of heading 7304, HTSUS. A change in tariff classification does not occur. Therefore, the buttweld elbows and reducers manufactured from non- originating seamless pipe and tubing are not eligible for preferential tariff treatment under the NAFTA.

However, for flanges manufactured from non-originating bar stock which is classified within chapter 72, HTSUS; specifically, under heading 7214, HTSUS, for nonalloy steel bars or under heading 7228, HTSUS, for bars of other alloy steel, a change in tariff classification occurs. Therefore, the buttweld flanges manufactured from non-originating bar stock are eligible for preferential tariff treatment under the NAFTA.

HOLDING:

Buttweld elbows, reducers and flanges manufactured from United States origin starting materials are eligible for the NAFTA tariff preference.

Buttweld elbows and reducers manufactured from non- originating seamless pipe and tubing are not eligible for the NAFTA tariff preference.

Buttweld flanges manufactured from non-originating bar stock are eligible for the NAFTA tariff preference.

Sincerely,

John Durant, Director
Commercial Rulings Division

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