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HQ 560031




December 18, 1996

MAR-2-05 RR:TC:SM 560031 MLR

CATEGORY: MARKING

Mr. Gerry Groen
Tri-Lad Inc.
P.O. Box 430
220 Park Road North
Brantford, Ontario
Canada N3T 5P3

RE: Country of origin marking for flanges; forgings; Canada; Midwood; NAFTA; Article 509

Dear Mr. Groen:

This is in reference to your letter of August 15, 1996, requesting a ruling concerning the country of origin marking of flanges.

FACTS:

It is stated that Tri-Lad Inc. manufactures flanges in Canada. The article processed in Canada is stated to be a rough forging produced on either a roll ring, or a forging press. It may be forged in Canada, but it is stated that it is usually imported into Canada under subheading 7307.91.10, Harmonized Tariff Schedule of the United States (HTSUS). If the rough forging is imported into Canada, it is stated that the following processes are performed in Canada:

1. A significant majority of forgings are heat treated which consists of heating and cooling the forging under specified and controlled conditions to achieve the desired physical properties.

2. Lathing is performed which consists of two metal machining operations to achieve the shape and dimensional requirements. It is stated that many of the dimensional requirements are to industry standards, but large flanges often have weld end preparation dimensions that are a custom requirement specified by the end user. Ends must always be machined to permit either welding or threading attachment to the mating pipe.

3. Drilling is performed which removes material in a circular bolt hole pattern to provide holes necessary for bolt and fastener clearance. For smaller solid forgings, it may also include drilling the middle of the forging to produce a bore that is subsequently lathed.

4. The next operation is threading which consists of threading the bore for threaded flanges, to permit attachment of the flange to the mating pipe. Specialty flanges may require additional threading for the attachment of instrumentation piping (orifice flanges).

5. A minority of heat treated flanges are shot blasted which consists of the removal of mill scale to facilitate machining or to clean surfaces that remain unmachined at the end of production.

6. Material testing and certification captures changes in physical properties.

7. Die stamping identifies Tri-Lad as the manufacturer and Canada as the country of origin.

8. Painting is done in a traditional green color.

9. Quality assurance confirms that all standards are met.

10. Lastly, the flanges are packaged.

It is stated that the processes described above are comparable to those described in Midwood Industries, Inc. v. United States, 313 F. Supp. 951 (Cust. Ct. 1970), and the finished flange exported from Canada to the U.S. is stated to be classifiable under subheading 7307.91, HTSUS.

ISSUE:

Whether the flanges exported to the U.S. may be marked "Made in Canada."

LAW AND ANALYSIS:

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 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 a 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.

You refer to the American Society of Mechanical Engineers' definition of a manufacturer as a party that affects the mechanical properties of the material through heat treatment and the physical dimensions of the material by machining. Despite this definition, in 19 CFR 134.1(b), "country of origin" is defined as:

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" within the meaning of this part; however for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin. (Emphasis added.)

Section 134.1(j), Customs Regulations (19 CFR 134.1(j)), provides that the "NAFTA Marking Rules" are the rules promulgated for purposes of determining whether a good is a good of a NAFTA country. A "good of a NAFTA country" is defined in 19 CFR 134.1(g) as an article for which the country of origin is Canada, Mexico, or the U.S. as determined under the NAFTA Marking Rules set out at 19 CFR Part 102.

Section 102.11, Customs Regulations (19 CFR 102.11), sets forth the required hierarchy for determining whether a good is a good of a NAFTA country for marking purposes. Paragraph (a) of this section states that the country of origin of a good is the country in which:

(1) The good is wholly obtained or produced; (2) The good is produced exclusively from domestic materials; or
(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other applicable requirements of these rules are satisfied.

In this case, the applicable rule is 19 CFR 102.11(a)(3). The finished flanges are stated to be classifiable under subheading 7307.91, HTSUS. The applicable change in tariff classification for headings 7301-7307 set out in section 102.20(n), Section XV, Chapters 72 through 83, provides:

7301-7307 ... A change to heading 7301 through 7307 from any other heading, including another heading within that group.

It is stated that the forgings imported into Canada are classifiable under subheading 7307.91.10, HTSUS. Therefore, the forging imported into Canada will not undergo the requisite tariff shift, and 19 CFR 102.11(b) of the hierarchial rules must be applied, which in pertinent part provides that:

Except for a good that is specifically described in the Harmonized System as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country of origin cannot be determined under paragraph (a), the country of origin of the good:

(1) Is the country or countries of origin of the single material that imparts the essential character of the good ...

When determining the essential character of a good under 19 CFR 102.11, 19 CFR 102.18(b)(1) provides that only domestic and foreign materials that are classified in a tariff provision from which a change is not allowed shall be taken into consideration. Section 102.18(b)(1)(iii), Customs Regulations (19 CFR 102.18(b)(1)(iii)), provides that if there is only one material that is classified in a tariff provision from which a change in tariff classification is not allowed, then that material will represent the single material that imparts the essential character to the good under 19 CFR 102.11.

Pursuant to 19 CFR 102.18(b)(1)(iii), the single material that imparts the essential character of the finished flange is the forging. Accordingly, the country of origin of the finished stainless steel flange is the country of origin of the forging imported into Canada, which is not specified in this ruling request.

It is claimed that Midwood should be applicable in this instance because of the recent decision by the Court of International Trade (CIT) in CPC International Inc. v. United States, 933 F. Supp. 1093 (CIT July 8, 1996), which you state did not find that the NAFTA Marking Rules replace the principles and rules already in the law, i.e., the rules of substantial transformation. Please note that CPC International is still in litigation. Nevertheless, assuming arguendo that the court's decision in that case becomes the final disposition in that litigation, the issues presented in CPC International are distinguished from those in this case. The CIT in CPC International stated that Congress intended the interpretation of the ultimate purchaser provision of section 1304(a), as codified in 19 CFR 134.35(a), to remain in effect. On the other hand, the CIT specifically concluded that Congress authorized the issuance of regulations, necessary to implement the North American Free Trade Agreement Implementation Act of 1993 [codified at 19 U.S.C. 3311], which include the establishment of the Marking Rules. Since this case does not involve processing in the U.S., 19 CFR 134.35, the regulation which was the subject of CPC International, is not applicable. Accordingly, the NAFTA Marking Rules are clearly applicable in this case. Pursuant to 19 CFR 102.18(b)(1)(iii), the single material that imparts the essential character to the flanges imported into the U.S. is the forging. Pursuant to 19 CFR 102.11(b), the country of origin of the flanges is the country of origin of the forgings.

HOLDING:

Based upon the information provided, pursuant to 19 CFR 102.11(b), the country of origin of the finished flanges processed in Canada as described above is the country of origin of the forgings.

A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director

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