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HQ 956211



August 11, 1994
CLA-2 CO:R:C:M 956211 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 8546.20.00

District Director
U.S. Customs Service
111 W. Huron Street
Room 603
Buffalo, New York 14202-2378

RE: Protest 0901-93-101705; ceramic insulators; non-originating material; Japanese origin porcelain; CFTA; 8547; General Note 3(c)(vii)(B)(2); change in tariff classification; incomplete or unfinished article; essential character; EN Rule 3(b)

Dear District Director:

This pertains to Protest 0901-93-101705, concerning the applicability of the United States-Canada Free Trade Agreement (CFTA), to ceramic insulators.

FACTS:

The ceramic insulators under consideration are Type A-2812 C Base Insulators, Type A-S 4006M Radio Tower Guy Strain Insulators, and Type A-4722B Radio Tower Base Insulators. The information submitted by the protestant, Racal-Decca Canada Ltd., describes the ceramic insulators as follows:

Type A-4722B Radio Tower Base Insulator is an "oil filled porcelain cylinder cemented between two metal plates."

Type A-S 4006M Radio Tower Guy Strain Insulator is installed in the guy ropes supporting the tower and sustain a tensile load. The load element within the insulator taking this tensile load is a fibreglass loop. This loop is enclosed within the porcelain cylinder which is oil filled to provide a protective environment for the loop."

Although the protestant does not describe the Type A-2812 C Base Insulators, we note that technical specifications for each of the ceramic insulators was provided.

The protestant manufactures the ceramic insulators in Canada from non-originating parts which are Japanese origin porcelain tubes. The only description of the operations performed in Canada is the following statement provided by the protestant:

We had to undertake work on the porcelains such as cutting and grinding...More importantly the value of the porcelain is very low by comparison with the work undertaken in Canada in producing the rest of the insulators....

Upon importation into the U.S. from Canada, the entries of the ceramic insulators were liquidated on July 16, 1993, under subheading 8546.20.00, HTSUS, as electrical insulations of ceramic. The ceramic insulators were not granted CFTA preferential tariff treatment.

In a protest timely filed on October 14, 1993, the protestant states that the ceramic insulators are eligible for CFTA preferential tariff treatment. The protestant states that, when imported into Canada, Canadian Customs classified the Japanese origin porcelain tubes, under subheading 8547.10.80, Harmonized Tariff Schedule (HTS), as parts of porcelain insulators. Therefore, the protestant contends that the ceramic insulators undergo the applicable CFTA tariff shift and are eligible for preferential tariff treatment.

ISSUE:

Are the ceramic insulators eligible for preferential tariff treatment under the CFTA?

LAW AND ANALYSIS:

To be eligible for tariff preference under the CFTA, goods must be "originating goods" within the rule of origin in General Note 3(c)(vii)(B), Harmonized Tariff Schedule of the United States (HTSUS). There are two primary means in General Note 3(c)(vii)(B), HTSUS, by which articles imported into the U.S. may be "goods originating in the territory of Canada." The first method is if the goods are "wholly obtained or produced in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(1), HTSUS. The ceramic insulators are manufactured from Japanese origin porcelain, so they are not "wholly obtained or produced in the territory of Canada."

The second method is if the goods are "transformed in the territory of Canada and/or the United States." General Note 3(c)(vii)(B)(2), HTSUS. A transformation is evident when a change in tariff classification occurs that is authorized by General Note 3(c)(vii)(R), HTSUS. General Note 3(c)(vii)(R)(16)(bb), HTSUS, states that for chapters 84 through 85 "[a] change from one heading (other than a parts heading) to another heading, other than heading 8528 or 8529" is acceptable.

There is no dispute that, upon importation into the U.S., the ceramic insulators under consideration are classified under subheading 8546.20.00, HTSUS, which provides for "Electrical insulators of any material...Of ceramics." Therefore, to be entitled to preferential tariff treatment under the CFTA pursuant to General Note 3(c)(vii)(R)(16)(bb), HTSUS, the non-originating (Japanese) porcelain material imported into Canada must be classified in a heading other than heading 8546, HTSUS.

Consequently, we must examine the tariff classification of the Japanese origin porcelain when imported into Canada. The protestant argues that Canadian Customs classified the Japanese origin porcelain under heading 8547, HTS. Therefore, the ceramic insulators imported into the U.S. meet the change in tariff classification requirement of General Note 3(c)(vii)(R)(16)(bb), HTSUS, and are eligible for CFTA tariff preference. While, in principle, all countries that use the Harmonized System should give the same classification to identical merchandise through the six-digit subheading level, no country is bound to abide by another country's ruling. The foreign country's ruling is, at best, merely instructive of how others may classify like goods. See, T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

However, in this situation the protestant submitted an "Adjustment Request" to Canadian Customs requesting a "re-determination of tariff classification" which stated that "[i]nsulator components of porcelain were imported incorrectly as complete insulators." Canadian Customs re-appraised the merchandise and issued refunds. No legal or factual explanation accompied Canadian Customs re-appraisal to demonstrate their posisiton regarding this issue. Therefore, we do not find the re-apprasisal by Canadian Customs persuasive.

We are of the opinion that the proper classification of the Japanese origin porcelain when imported into Canada is under heading 8546, HTSUS, as electrical insulators. In understanding the language of the HTS, the Harmonized Commodity Description and Coding System (HCDCS) Explanatory Notes (ENs) may be consulted. See, T.D. 89-80. EN 85.46 (pgs. 1406-1407) states that:

Insulators of this heading are used for the fixing, supporting, or guiding of electric current conductors while at the same time insulating them electrically from each other, from earth, etc....

...Insulators are often given bell, accordion, petticoat, grooved, cylinder or other shapes. Certain types are constructed in such a way that when in position they may contain oil to prevent contamination of the surface by conducting materials....

...They may contain fixing devices (e.g., metal brackets, screws, bolts, clips, laces....

GRI 2(a), HTS, states that:

Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article....

In general, essential character has been construed to mean the attribute which strongly marks or serves to distinguish what an article is; that which is indispensable to the structure, core or condition of the article. In addition, EN Rule 3(b) (pg. 4), provides further factors which help determine the essential character of goods. Factors such as bulk, quantity, weight or value, or the role of a constituent material in relation to the use of the goods are to be utilized, though the importance of certain factors will vary between different kinds of goods.

We are of the opinion that the essential character of the ceramic insulators is the ceramic insulating material, i.e., the Japanese origin porcelain. The ceramic material is the component which serves to distinguish the ceramic insulators. It performs the insulating function. Moreover, it appears that the work performed by the protestant in Canada, which involves attaching fixing devices to the non-originating Japanese porcelain and filling the ceramic with oil, are operations which merely finish the ceramic insulators. EN 85.46 states that ceramic insulators of heading 8546, HTS, may include fixing devices and can be filled with oil.

The Japanese origin porcelain entering Canada has the essential character of an electrical insulator of ceramic and is, therefore, classified as an unfinished ceramic insulator pursuant to GRI 2(a), HTSUS. As the Japanese origin porcelain and completed ceramic insulators are both classified under the heading 8546, HTS, the ceramic insulators imported into the U.S. do not meet the tariff shift requirement of General Note 3(c)(vii)(R)(16)(bb), HTSUS, and, therefore, are not eligible for preferential tariff treatment under the CFTA.

HOLDING:

The ceramic insulators are not subject to the change in tariff classification pursuant to General Note 3(c)(vii)(R)(16)(bb), HTSUS, and, therefore, are not eligible for preferential tariff treatment under the CFTA.

The protest should be DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, this decision should be mailed, with the Customs Form 19, by your office to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act, and other public access channels.

Sincerely,

John Durant, Director
Commercial Rulings Division

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