Hot Rolled Coils and Stainless Steel Rods of Foreign Origin Processed in Canada into Cold Rolled Coils and Stainless Steel Wire; Eligibility for the Partial Duty Exemption Under the United States-Canada Free- Trade Agreement (CFTA)

HQ 951283 JULY 9 1992 CLA-2:CO:R:C:M 951283 JAS CATEGORY: Classification TARIFF NO.: Headings 7219, 7223, HTSUS Mr. Chris Lee SAMMI Atlas Sales Inc. 7420 Airport Road, Mississauga Ontario, Canada L4T 4E5 RE: Hot Rolled Coils and Stainless Steel Rods of Foreign Origin Processed in Canada into Cold Rolled Coils and Stainless Steel Wire; Eligibility for the Partial Duty Exemption Under the United States-Canada Free- Trade Agreement (CFTA) Dear Mr. Lee: In your letter of February 28, 1992, you ask whether certain stainless steel products processed in Canada as described would be eligible upon entry into the Customs territory for a reduced rate of duty under the CFTA. FACTS: There are two fact patterns presented. In the first situation, hot rolled coils from unspecified European countries are imported into Canada and classified, depending on thickness, in one of two subheadings of heading 7219, a provision for flat- rolled products of stainless steel, of a width of 600 mm or more, not further worked than hot-rolled. In Canada, the hot rolled coils are pickled and oiled, then cold reduced in a rolling mill to a product classifiable, depending on thickness, in one of four subheadings of heading 7219, for flat-rolled products not further worked than cold-rolled (cold-reduced). In the second situation, stainless steel billets of Canadian origin are hot rolled in unspecified countries into stainless steel rod. Upon its return to Canada, this rod is classifiable in heading 7221, bars and rods, hot-rolled, in irregularly wound coils, of stainless steel. In Canada, the coiled rod is cold drawn into stainless steel wire of heading - 2 - 7223. You state that more than seventy (70) percent of the value of the cold drawn wires is accounted for in Canada. It is unclear, however, whether this figure represents the drawing process only or includes the original cost of the billets. ISSUE: Whether the described processing in Canada results in one of the changes in tariff classification in Canada required by General Note 3(c)(vii)(R). LAW AND ANALYSIS: With respect to goods not wholly obtained or produced in Canada and/or the United States, General Note 3(c)(vii)(B)(2), HTSUS, states in part that goods imported into the Customs territory of the United States are eligible for treatment as "goods originating in the territory of Canada" if they have been transformed in either Canada or the United States so as to be subject to a change in tariff classification as described in subdivision (c)(vii)(R) of note 3. Likewise, General Note 3(c)(vii)(F), HTSUS, states in part that whenever the processing or assembly of goods in the territory of Canada and/or the United States results in one of the changes in tariff classification in Canada described in subdivision (c)(vii)(R) of [this] note, such goods shall be considered to have been transformed in the territory of Canada and shall be treated as goods originating in the territory of Canada. One of the changes in classification in Canada with respect to chapters 72 through 83 is authorized by General Note 3(c)(vii) (R)(15)(ee). This is a change to headings 7218 through 7222 from any other heading outside that group. In the first fact pattern presented, the hot rolled coils entering Canada are classifiable in heading 7219. The processing of hot-rolled coil into cold- rolled coil does not result in a change in classification within the rules set forth in General Note 3(c)(vii)(R)(15). In the second fact pattern presented, the wire cold drawn in Canada cannot be considered wholly obtained or produced in Canada for CFTA purposes, even if the original billets were melted and poured in Canada from materials wholly obtained or produced in Canada or the United States, because the billets were processed into wire rod in a third country. The coiled wire rod of heading 7221 is drawn in Canada into wire of heading 7223. - 3 - With respect to the wire drawn in Canada, the change in classification necessary to confer originating good status is stated in General Note 3(c)(vii)(R)(15)(ff). This is a change to heading 7223 from any other heading except headings 7221 and 7222. The wire rods imported into Canada are classifiable in heading 7221. Therefore, the change in classification as a result of the processing into wire is specifically excluded from conferring originating good status on the wire. HOLDING: The processing of hot-rolled flat-rolled products of heading 7219 into cold-rolled flat-rolled products of heading 7219, and the processing of wire rod of heading 7221 into wire of heading 7223, do not result in changes in classification as required by General Note 3(c)(vii)(B)(2). Therefore, neither the cold-rolled flat-rolled products nor the wire qualify as originating goods for purposes of the CFTA tariff preferences. Sincerely, John Durant, Director Commercial Rulings Division