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HQ 560308





April
10, 1997

MAR-05 RR:TC:SM 560308 BLS

CATEGORY: MARKING

Mr. C.E. Walker
INCO Limited
145 King Street West, Suite 1500
Toronto, Canada M5H 4B7

RE: Country of origin marking of nickel-coated carbon fibers; Article 509

Dear Mr. Walker:

This is in further reference to your letter dated July 31, 1996, requesting the tariff classification and country of origin marking requirements of a nickel-coated carbon fiber product to be imported from Canada. In Headquarters Ruling Letter (HRL) 959560 dated February 11, 1997, we addressed your inquiry regarding the classification and qualification of the good for tariff preference under the North American Free Trade Agreement (NAFTA).

FACTS:

The imported good, INCOSHIELD, is a nickel-coated carbon graphite fiber product designed to provide electrical conductivity in injection molded shapes for the purpose of shielding sensitive electronic equipment from electromagnetic and radio frequency interference. The product is described as a composite of carbon fiber, elemental nickel and polycarbonate resin.

The production of INCOSHIELD is as follows:

U.S.-origin carbon graphite fibers, 7 microns in diameter and in spools of continuous filaments, are exported to Great Britain (Wales) where a 99 percent pure nickel oxide sinter matte, of Canadian origin is deposited onto the filaments by a thermal deposition for the purpose of achieving a final specific electrical resistivity. The nickel-coated fibers (consisting of 45%-55% nickel by weight) are then shipped
to Canada where they are coated in bundles with a polycarbonate resin, and then chopped to lengths of 7 mm. The merchandise is then shipped to the U.S.

ISSUE:

What are the country of origin marking requirements for the imported product?

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.

Section 134.1(b) of the regulations (19 CFR 134.1(b)), defines "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.

The initial question we must address is whether the country of origin of the material imported into Canada is Great Britain; that is, whether the U.S.-origin graphite fibers and Canadian-origin nickel oxide sinter matte imported into Great Britain undergo a substantial transformation as a result of the operations performed there. For country or origin purposes, a substantial transformation occurs when an article loses its identity and becomes a new article having a new name, character and use. United States v. Gibson-Thomsen Co., 27 CCPA 267 (1940); National Juice Products Association v. United States, 10 CIT 48 (1986).

In the present situation, we find that the U.S.-origin carbon graphite fibers and nickel oxide material imported into Great Britain are substantially transformed as a result of the operations performed there. These operations, which include the deposit of nickel onto the filaments by a thermal deposition, result in a change in the name, character and use of both the carbon graphite fibers and the 99% pure nickel oxide element. Thus, while the carbon graphite fibers impart mechanical strength to the
injection molded shape, the nickel dissipates static electricity, and therefore imparts the critical electromagnetic shielding characteristics for which the final product, INCOSHIELD, is marketed. Accordingly, the product which emerges from these operations is a composite good (consisting of 45-55% nickel) with a name, character and use distinct from the materials from which it was produced.

Therefore, when imported into Canada, we find that the country of origin of the nickel-coated graphite fiber product is Great Britain.

The country of origin marking requirements for a "good of a NAFTA country" are determined in accordance with Annex 311 of the North American Free Trade Agreement ("NAFTA"), and Part 102 and 134, Customs Regulations (19 CFR Part 102 and 134).

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. Section 134.1(g) (19 CFR 134.1(g)), defines a "good of a NAFTA country" as an article for which the country of origin is Canada, Mexico or the United States as determined under the NAFTA Marking Rules.

Part 102 of the regulations (19 CFR Part 102), sets forth the "NAFTA Marking Rules" for purposes of determining whether a good is a good of a NAFTA country. Section 102.11 of the regulations (19 CFR 102.11) sets forth the required hierarchy for determining country of origin for marking purposes. Section 102.11(a) provides that "[t]he 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 requirements of these rules are satisfied."

Since INCOSHIELD is produced in Canada from nickel-coated carbon graphite fiber of British origin, the product is neither wholly obtained or produced nor is it produced exclusively from domestic (Canadian) materials. Therefore, paragraphs (a)(1) and (a)(2) of section 102.11 cannot be used to determine the country of origin of the finished article. Thus, paragraph (a)(3) of section 102.1 l is the applicable rule that we must first apply to determine the origin of the product.

As provided in HRL 959560, the imported product is classifiable under subheading 7508.90, HTSUS, as other articles of nickel. The material imported into Canada is also classified under subheading 7508.90. The specific tariff rule set out in section 102.20(n), Section XV, Chapters 72 through 83, of the regulations provides:

A change to subheading 7507.11 through 7508.90 from any other subheading, including another subheading within that group.
Since the material imported into Canada does not undergo the required change, we cannot use 19 CFR 102.11(a)(3) to determine country of origin of the imported product. The next rule in the hierarchy is 19 CFR 102.11(b), which 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, or

(2) If the material that imparts the essential character of the good is fungible, has been commingled, and direct physical identification of the origin of the commingled material is not practical, the country or countries of origin may be determined on the basis of an inventory management method provided under the Appendix to part 181 of the Customs Regulations.

Here, because section 102.11(b)(2) is not applicable, the rule that must be applied to determine the country of origin of the INCOSHIELD is section 102.11(b)(1).

The rule of interpretation which determines the "essential character" of the imported product is found in section 102.18(b)(2) of the regulations. This rule states that:

For purposes of applying 102.11, only domestic and foreign materials (including self-produced materials) that are classified in a tariff provision from which a change in tariff classification is not allowed in the rule for the good set out in 102.20 shall be taken into consideration in determining the essential character of the good.

In this case, the nickel-coated carbon graphite fiber is the foreign material that does not undergo the applicable tariff shift, and therefore imparts the essential character to the imported good. Consequently, the country of origin of INCOSHIELD is Great Britain.

HOLDING

Nickel oxide sinter matte of Canadian origin and carbon graphite fibers of U.S.-origin exported to Great Britain are substantially transformed as a result of the operations performed in that country. When imported into Canada to be further processed, the nickel-coated carbon graphite fibers do not undergo the applicable tariff change under the specific rule for the good set out in section 102.20(n), Customs Regulations (19 CFR 102.20(n)). Pursuant to section 102.11(b)(1) of the regulations (19 CFR 102.11(b)(1)), the essential character of the product is imparted by the nickel-coated carbon graphite fibers, which are of British origin. Therefore, the country of origin of the imported product is Great Britain, and the imported product must be marked accordingly.

A copy of this ruling should be attached to the entry documents filed at the time this merchandise is 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

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