HQ 964160 - Originating goods status under North American Free Trade Agreement (NAFTA) for steel joists fabricated in Canada in part from non-originating angles, shapes and sections - United States International Trade Commision Rulings

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HQ 964160

JULY 18, 2001

CLA-2 RR:CR:GC 964160 JAS

CATEGORY: CLASSIFICATION

TARIFF NO.: None

Ms. Peggy Louie Chaplin
Sandler, Travis & Rosenberg, P.A.
111 South Calvert Street
Baltimore, MD 21202-3200

RE: Originating goods status under North American Free Trade Agreement (NAFTA) for steel joists fabricated in Canada in part from non-originating angles, shapes and sections

Dear Ms. Chaplin:

In a submission to the Director of Customs National Commodity Specialist Division, New York, dated March 24, 2000, on behalf of Canam Steel Works, you inquire as to the eligibility as an originating good under the North American Free Trade Agreement (NAFTA) of certain fabricated structural steel joists produced in Canada in part from non-originating components. Your submission has been referred to this office for reply. Additional facts and legal arguments were presented at a meeting in our office on February 20, 2001, which you confirmed by letter, dated May 21, 2001. There is no issue of tariff classification.

FACTS:

The merchandise entering the customs territory of the United States is fabricated structural steel joists of alloy or nonalloy steel. Also called long span joists, they are steel trusses consisting of parallel chords and triangulated web framework to be positioned between walls or resting on beams or other structural members to directly support floors or decks above. The joists entering the customs territory are provided for in heading 7308, Harmonized Tariff Schedule of the United States (HTSUS), as structures, of iron or steel, and parts thereof. They will be produced in Canada from angles, shapes and sections, of alloy or nonalloy steel, which may be either wholly or
in part of Canadian origin. Angles, shapes and sections of nonalloy steel are provided for in heading 7216, HTSUS, while those of other alloy steel are provided for in heading 7228, HTSUS. Each joist consists of a top and bottom piece with angles, channels and beams serving as the raw material. The two extremities of the joist, called shoes, are made from angles, channels, plates and round bars as spacers. The diagonal and vertical pieces, called the web, are made from angles and channels. The parts are cut to specification and holes drilled or punched as needed. The pieces are then assembled and tack welded. After checking for compliance to specification, the pieces are permanently welded together, inspected, painted, and prepared for shipment. Your March 24, 2000, submission included a sample joist in miniature, which we returned to you at the May 21, 2001 meeting.

ISSUE:

With respect to the non-originating angles, shapes and sections of nonalloy steel, whether the requisite tariff shift from heading 7216, HTSUS, to heading 7308, HTSUS, occurs.

LAW AND ANALYSIS:

To be eligible for tariff preferences under the NAFTA, goods must be “originating goods” within the rules of origin in General Note 12(b), HTSUS. General Note 12(b)(ii)(A), HTSUS, states, in relevant part, that for the purposes of this note, goods imported into the customs territory of the United States are eligible for the tariff treatment and quantitative limitations set forth in the tariff schedule as “goods originating in the territory of a NAFTA party” only if they have been transformed in the territory of Canada, Mexico and/or the United States so that 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.

The authorized change in tariff classification at issue here is to heading 7308 from any other heading, except for changes resulting from the following processes performed on angles shapes, or sections of heading 7216:
drilling, punching, notching, cutting, cambering, or sweeping, whether performed individually or in combination;
adding attachments or weldments for composite construction;
adding attachments for handling purposes;
adding weldments, connectors or attachments to H-sections or I-sections, provided that the maximum dimension of the weldments, connectors, or attachments is not greater than the dimension between the inner surfaces of the flanges of the H-sections or I-sections;
painting, galvanizing, or otherwise coating; or
adding a simple base plate without stiffening elements, individually or in combination with drilling, punching, notching, or cutting, to create an article suitable as a column.

See General Note 12(t)/73.7, HTSUS.

The joists entering the customs territory from Canada result from processes that involve combinations of drilling, cutting, punching and painting of non-originating angles, shapes and sections. You note that heading 7308, HTSUS, is divided into two classes of merchandise, separated by a semicolon, i.e., structures and parts of structures, of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, of iron or steel.

You cite HQ 951215, dated April 22, 1992, and a February 1999 World Customs Organization Classification Opinion for the proposition that, for classification purposes at least, heading 7308 encompasses two separate and distinct classes of merchandise. Your argument is that the NAFTA origin rule for heading 7308 applies only to goods of that heading which have not lost their identity by being fabricated into structures or their parts, i.e., the second class of articles in heading 7308, angles, shapes and sections prepared for use in structures, and not to the first class of articles, i.e., structures and parts of structures, of iron or steel. This is because for classification purposes goods of heading 7216 that have been “prepared for use in structures” are removed from that heading and referred to heading 7308. You maintain that to apply General Note 12/73.7 to the whole of heading 7308 would result in a situation where the NAFTA preference could never be attributed to any structure or part thereof incorporating goods of heading 7216. This, you conclude, would render that portion of heading 7308 “useless surplus.” For purposes of contrast, you cite HQ 561152, dated March 8, 1999, to support this argument. In the cited ruling, H-beams, also called sections, and angles, both of U.S. origin, were sent to Mexico where the H-beam was cut-to-length and drilled, and the angles in stock lengths holed punched at regular intervals, and sheared to length in four pieces to create clip angles. The assembly was completed by welding the clip angles to the ends of the beam. The ruling merely concluded, in part, that for purposes of the NAFTA preference, because both the H-beam or section and the angles were originating materials when leaving the United States, the finished good imported into the
customs territory after assembly in Mexico qualified as an originating good because it was produced in the territory of Mexico exclusively from originating materials. As some of the angles, shapes and sections in the joists at issue here are non-originating, HQ 561152 is not sufficiently instructive as to the issues presented in this case.

Your May 21, 2001, submission emphasizes that a literal reading of the exceptions in General Note 12(t)/73.7 would preclude anything classified in heading 7216 from ever qualifying as a tariff shift to heading 7308, at which point the provision that allows for such a tariff shift becomes a nullity. The submission summarizes your argument that the exceptions should not apply when the shift from an angle, shape or section of heading 7216 is to “a new and different article of commerce” which is a structure or part of a structure of heading 7308. See p. 6. This interpretation, you contend, would allow some goods of heading 7216 to make the shift, which would be consistent with the intent of the NAFTA origin rules and with the rule of construction that statutory language should never be interpreted as superfluous or a nullity if any other reasonable construction is possible.

In our opinion, this interpretation, while intriguing, would sanction a tariff shift to heading 7308 based on the substantial transformation of merchandise of heading 7216, a legal requirement that isn’t found in General Note 12(t)/73.7 or any other NAFTA tariff shift rule. Also, some statutory provisions are so confusing or poorly drafted as to make it difficult to decipher a proper interpretation. For example, angles, shapes and sections of heading 7216 may be subjected to certain of the processes described in General Note 12(t)/73.7(A), (C) and (E) yet, for classification purposes, remain in that heading. They do not become angles, shapes or sections prepared for use in structures of heading 7308, let alone parts of structures of that heading. Also, there is little basis for distinguishing the process described in 73.7(B) from that in 73.7(F).

If the drafters of General Note 12(t)/73.7 intended to limit origin status to angles, shapes and sections of heading 7216 that are transformed into other parts of structures of heading 7308, and to deny origin status to goods of heading 7216 that are merely transformed into angles, shapes and sections prepared for use in structures, they could easily have fashioned General Note 12(t)/73.7 similar to Note 12(t)/73.3, which specifically limits origin to a narrow class of goods, i.e., those changing to one particular subheading from another subheading in the same chapter as well as from any other chapter. Some form of legislative history or other clear indication of the drafters’ actual intent would obviate the need for interpretation that borders on speculation. In the absence of such evidence, we are left to conclude that the plain language of General Note 12(t)73/7 should control. See Sea-Land Service v. United States, 14 CIT 195 (1990).

HOLDING:

In the described circumstances, the long span joists fabricated in Canada in part from non-originating angles, shapes and sections do not qualify as “goods originating in the territory of a NAFTA party” upon entering the customs territory, and are not eligible for preferential tariff treatment under the NAFTA.

Sincerely,

John Durant, Director
Commercial Rulings Division

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