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HQ 082183

March 3, 1989

CLA-2:CO:R:C:G 082183 JAS



Kent K. Matsumoto, Esq.
Ober, Kaler, Grimes & Shriver
10 Light Street
Baltimore, Maryland 21202

RE: Country of Origin of Abrasion Resistant Steel Pipe Processed in Canada From Pipe Sourced in the U.K.

Dear Mr. Matsumoto:

In your letter of April 15, 1988, you inquire as to the country of origin, for tariff purposes, of steel pipe from the United Kingdom which is induction heated and water quenched in Canada to form abrasion resistant steel pipe. Our ruling follows.


The specialty pipe to be imported from Canada is abrasion resistant steel pipe for use in hydraulic slurry and pneumatic conveyance systems. The pipe is processed in Canada from an "unfinished" high carbon steel pipe (referred to as NASP 40) produced in the U.K. according to rigid specifications set by the Canadian processor. The processing operation in Canada, which results in a product called NASP 600, is a heat treat- ment consisting of the following:

1. Heating to the austenitizing temperature range (1,500 degrees fahrenheit) by means of induction coils.

2. Water-quenching of the inner wall by a system using a lance fitted with a sprayer head.

3. Quality assurance testing for hardness and ovality, and for camber and performance under hydrostatic conditions.

4. Supplementary fabrication, if required.

The Canadian processing results in a product, NASP 600, that is worth approximately three and one-half times the cost of the NASP 40 from the U.K. The heat treatment is very time- consuming, and takes about eight hours to process 600 feet of pipe. The process changes the microstructure of the pipe from ferrite/pearlite to 100% martensitic, which gives it the mechanical properties necessary for durability and abrasion resistance in slurry systems.

The mechanical properties of the unfinished pipe and the heat treated pipe are as follows:


Yield Strength 40-60 900-125
Ultimate Strength 75-100 300+
Ductility (elongation) App. 20% App. 10%
Hardness 200-240 BHN 600+ BHN
Charpy V-Notch Avg. 15-20 Joule 4 Joule


Has the described processing substantially transformed the pipe of U.K. origin into a product of Canada for tariff purposes?


An article is a product of the country in which it was last subject to a substantial transformation. The record must establish that the Canadian processing resulted in a product other than or materially different from the merchandise of U.K. origin; that is, a new and different article must emerge from the processing, one having a new name, character or use. Anheuser-Busch Brewing Association v. United States, 207 U.S. 556 (1908).

The "unfinished" pipe from the U.K., as you state, is made to rigid specifications for the Canadian processor, and has no use in the U.K. or Canada as pipe. In fact, it is not used by anyone in the industry, other than the Canadian processor. The processing, however, specially adapts the pipe for use in pneumatic conveyance systems for slurry and other abrasive materials. In a ruling, dated November 21, 1985 (file 553739), we held that quenching and tempering of multifunc- tional pipe in order to change it into pipe that meets A.P.I.
specifications for oil country tubular goods, together with the end finishing of the pipe, was a substantial transforma- tion.

The heat treatment you describe results in a product that has a new character and use. Even though prior to the Cana- dian heat treatment process the pipe is said to be limited in use to finishing into special abrasion-resistant pipe, the actual processing requires significant time and critical con- trol in order to impart the specific quality of surface hard- ness that is required for hydraulic slurry pipe systems. The processing significantly changes the microstructure of the steel in the pipe. The heat treatment, together with the existing chemical composition of the pipe, changes the physi- cal properties of the pipe to meet the specialized require- ments of a piping system that must withstand the effects of highly abrasive materials that are pumped in the hydraulic slurry and pneumatic conveyance systems.

This specialized use is indicative of a change in the character of the pipe. While there has been no significant visible change in the dimensions of the pipe, there have been significant changes in its mechanical properties so as to identify this pipe as a particular type of limited-use pipe. There is no indication that this pipe has any other applica- tion.


The heat treatment process, as described, results in a new and different article which is considered a product of Canada for tariff purposes.


John Durant

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