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HQ 958077

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JANUARY 31, 1996

CLA-2 RR:TC:MM 958077 JAS

CATEGORY: CLASSIFICATION

TARIFF NO.: 7226.10.50

Mr. Magnus Waller
CorMag, Inc.
279 Sumach Drive, RR #2
Burlington, Ontario L7R 3X5

RE: Transformer Cores; Flat-Rolled Products of Other Alloy Steel, Chapter 72, Note 1(k); Unfinished Parts of Apparatus for Transforming Electrical Current, Subheading 8504.90.90; Originating Goods, North American Free Trade Agreement (NAFTA); General Note 12(b)(ii)(A), General Note 12(t)/85.8

Dear Mr. Waller:

In a letter, dated June 5, 1995, you inquire whether the processing in Canada of alloy steel in coils from the United Kingdom is sufficient to confer originating goods status for purposes of the North American Free Trade Agreement (NAFTA). Your letter to us was in response to NY 807312, dated March 17, 1995, in which the Area Director of Customs, New York Seaport, requested certain additional information. In preparing this response, full consideration was given to the further information you provided to this office by telephone on December 20, 1995.

FACTS:

The merchandise entering the customs territory of the United States from Canada is individual pieces of alloyed steel, each measuring 4 inches wide, from 10 to 20 inches long, and from .009 to .014 inch in thickness. These steel pieces, which will be incorporated into cores for electrical transformers, are made in Canada from alloyed, grain oriented, electrical steel from the United Kingdom imported into Canada in coils. In Canada, the steel is uncoiled and the individual pieces cut to specific sizes and shapes as required by the transformer manufacturer. These pieces, referred to in the trade as legs and yokes, are ready for assembly, without further fabrication. You state that after importation into the United States, several thousand of these steel pieces are stacked and clamped into an E-shape, and the legs of the E are then encased in copper windings to complete the transformer. Electricity is passed through - 2 -
the copper to magnetize the core. It is your contention that these steel shapes are transformed in Canada into unfinished transformer cores that, upon importation into the customs territory of the United States, are classifiable in subheading 8504.90.90, Harmonized Tariff Schedule of the United States (HTSUS), as other parts of electrical transformers. In your opinion, this is a change in tariff classification sufficient to confer originating goods status on the merchandise for purposes of the NAFTA.

ISSUE:

Whether the processing in Canada of alloyed, grain oriented, electrical steel in coils from a non-NAFTA country, is sufficient to confer originating goods status for purposes of the NAFTA.

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 Notes 12(b)(I) and (ii)(A), HTSUS, state:

[f]or 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 --

(I) they are goods wholly obtained or produced entirely in the territory of Canada, Mexico and/or the United States; or

(Ii) they have been transformed in the territory of Canada, Mexico and/or the United States so that --

(A) 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...

One such authorized change in tariff classification is a change to subheading 8504.90 from any other heading. General Note 12(t)/85.8, HTSUS. In this regard, the term Flat-rolled products is defined in relevant part as rolled products of solid rectangular (other than square) cross section, which do not conform to the definition of Rule 1(ij) (Semifinished products), in the form of coils of successively superimposed layers, or straight lengths, which if of a thickness less than 4.75 mm are of a width - 3 -
measuring at least 10 times the thickness or if of a thickness of 4.75 mm or more are of a width which exceeds 150 mm and measures at least twice the thickness. Chapter 72, Note 1(k), HTSUS.

You state the alloyed, grain oriented, electrical steel in coils entering Canada is provided for either in heading 7225 or in heading 7226. The processing in Canada results in individual steel pieces that are straight lengths of a thickness less than 4.75 mm with a width measuring at least 10 times the thickness. Upon importation into the United States, the individual steel pieces remain flat-rolled products of heading 7226 and an authorized change in tariff classification does not occur. For this reason, the goods are not eligible for preferential treatment under the NAFTA.

HOLDING:

Under the authority of GRI 1, the individual pieces of alloyed, grain oriented, electrical steel, as described, are provided for in heading 7226. They are classifiable in subheading 7226.10.50, HTSUS, as flat-rolled products of other alloy silicon electrical steel, of a width of less than 300 mm. As they are not "goods originating in the territory of a NAFTA party," they are dutiable at the rate of 6.3 percent ad valorem.

Sincerely,

John Durant, Director
Tariff Classification

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