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NY N012924




July 10, 2007

CLA-2-39:RR:E:NC:N2:221

CATEGORY: CLASSIFICATION MARKING

TARIFF NO.: 3917.23.0000

Ms. Evangelina Ramirez
EFR Customhouse Brokerage
2290 Enrico Fermi Drive, Suite 21
San Diego, CA 92154

RE: The tariff classification and status under the North American Free Trade Agreement (NAFTA) of PVC pipes from Mexico; Article 509

Dear Ms. Ramirez:

In your letter dated June 15, 2007, on behalf of Action Plastics, Inc., California, you requested a ruling under the NAFTA on the country of origin for marking and duty for polyvinyl chloride (PVC) pipes.

You state that the pipes are made in the United States and exported to Mexico in lengths of 10 and 20 feet. In a telephone conversation you advised this office that the resin from which the pipes are made is of American origin. At the time of exportation to Mexico the pipes have one end expanded. In Mexico the 10 foot long pipes are bent to a curved shape. The 20 foot pipes are cut to size, and some go though a process to expand the diameter of one end. All are bent to a curved shape. The processed pipes are then exported to the United States.

The applicable tariff provision for the PVC pipes will be 3917.23.0000, Harmonized Tariff Schedule of the United States (HTSUS), which provides for tubes, pipes and hoses and fittings therefor, of plastics: tubes, pipes and hoses, rigid: of polymers of vinyl chloride. The general rate of duty will be 3.1 percent ad valorem.

Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on World Wide Web at http://www.usitc.gov/tata/hts/.

You have inquired about the country of origin for marking purposes and for duty purposes. 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.

Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines the country of origin as the country of manufacture, production, or growth of any article of foreign origin entering the United States. 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.

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 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.

Section 102.1(e), Customs Regulations (19 CFR 102.1(e)) defines "foreign material" as "a material whose country of origin as determined under these rules is not the same country or origin as the country in which the good is produced." Unfinished PVC tubes of U.S. origin are exported to Mexico for additional processing prior to the importation of the finished tubes into the U.S. Because the PVC tubes are processed in Mexico of U.S. material, the tubes are neither wholly obtained or produced, nor produced exclusively from domestic materials. Accordingly, neither 19 CFR 102.11(a)(1) or 102.11(a)(2) may be used to determine the origin of the finished articles, and analysis must continue to 19 CFR 102.11(a)(3).

Pursuant to 19 CFR 102.11(a)(3), the country of origin of a good is the country in which each foreign material incorporated in that good undergoes an applicable change in tariff classification as set forth in 19 CFR 102.20, and satisfies any other applicable requirements of that section. In this case, because the finished PVC pipes imported into the U.S. from Mexico are classified under subheading 3917.23.0000, HTSUS, the change in tariff classification must be made in accordance with section 102.20(g), Section VII: Chapters 39 through 40, subheadings 3916.10-3918.90, HTSUS, which requires a change to subheading 3916.10 through 3918.90 from any other subheading, including another subheading within that group.

The unfinished PVC pipes, which are initially classified under subheading 3917.23, HTSUS, remain classified under subheading 3917.23, HTSUS, subsequent to the additional processing in Mexico. Thus, there is no applicable change in tariff classification within the requirements of section 102.20, and the country of origin of the good may not be determined in accordance with this provision.

Since 19 CFR 102.11(a) (incorporating section 102.20), is not determinative of origin, the next step in determining the marking requirements is to apply section 102.11(b), Customs Regulations, which states in part: “Except for a good that is specifically described in the Harmonized Tariff Schedule as a set, or is classified as a set pursuant to General Rule of Interpretation 3, where the country 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.”

Because the finished PVC tubes consists of only one material, and because that material is classifiable in a tariff provision from which a change in tariff classification is not allowed under the applicable rule in 19 CFR 102.20(g), the U.S. origin tube is the single material which imparts the essential character to the finished good pursuant to section 102.18(b)(iii). Accordingly, for country of origin marking purposes, the country of origin of the finished PVC tubes after having been bent, cut and edge expanded in Mexico is the United States. Because the marking requirements of 19 U.S.C. 1304 are applicable only to articles of foreign origin, the PVC tubes need not be marked upon entry into the United States.

By operation of General Note 12 of the HTSUS, the eligibility of a particular article for NAFTA duty preference is predicated, in part, upon an origin determination under the NAFTA Marking Rules of either Canada or Mexico. Application of the NAFTA Marking Rules contained in 19 CFR 102.11 did not yield an origin determination of either Canada or Mexico, but the United States. However, the NAFTA Preference Override set forth in 19 CFR 102.19 is applicable to the subject merchandise. Specifically, 19 CFR 102.19(b) states:

(b) If, under any provision of this part, the country of origin of a good which is originating .....is determined to be the United States and that good has been exported from, and returned to, the United States after having been advanced in value or improved in condition in another NAFTA country, the country of origin of such good for Customs duty purposes is the last NAFTA country in which that good was advanced in value or improved in condition before its return to the United States.

Based on the facts presented, the PVC tubes at issue are an originating good under NAFTA and have been determined under section 102.11(b) to be a good of U.S. origin. Because the articles were returned to the U.S. after having been advanced in value or improved in condition in Mexico by virtue of bending, cutting and expanding operations, the country of origin of the PVC tubes for Customs duty purposes is Mexico, pursuant to 19 CFR 102.19(b). Accordingly, the free "MX" NAFTA rate will be applicable to the bent PVC tubes provided the original PVC tubes qualify as an originating good pursuant to General Note 12, HTSUS.

This ruling on the country of origin for marking and duty purposes presupposes that the PVC pipes, upon their exportation to Mexico, are of U.S. origin for NAFTA purposes, as you claim in your request. To qualify as U.S. origin for NAFTA purposes, the pipes must either be wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States, or transformed in the territory of Canada, Mexico and/or the United States so that 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, or are goods produced entirely in the territory of Canada, Mexico and/or the United States exclusively from originating materials.

Although you state that the pipes are extruded in the United States from resin that is manufactured in the United States, you do not indicate whether the materials used to produce the resin are themselves originating. If all of the components originate in the United States, Canada or Mexico, then the pipes that are shipped from the United States, being made entirely in the territory of the United States, using materials which themselves were originating, will satisfy the requirements of HTSUS General Note 12(b) (iii).

If any of the components originate in countries other than the United States, Canada or Mexico, then the pipe may still be eligible for NAFTA since each of the non-originating materials used to make the pipe has satisfied the changes in tariff classification required under the HTSUS General Note 12(t)/39.1. In this case, the pipe will also be subject to a Regional Value Content (RVC) requirement of 60 percent under the Transaction Value Method or 50 percent under the Net Cost Method as required under the rule applicable to the pipe.

This ruling is being issued under the provisions of Part 181 of the Customs Regulations (19 C.F.R. 181).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Joan Mazzola at 646-733-3023.

Sincerely,

Robert B. Swierupski
Director,

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