Application for Further Review of Protest 2809-22-109824; Country of Origin of Saturated Wax; Section 301 Measures

HQ H330009 March 4, 2024 OT:RR:CTF:VS H330009 AM CATEGORY: Origin U.S Customs & Border Protection Port of San Francisco 555 Battery Street, Room 319 San Francisco, CA 94111 Attn: Protest Unit RE: Application for Further Review of Protest 2809-22-109824; Country of Origin of Saturated Wax; Section 301 Measures Dear Port Director: This is in response to the Application for Further Review (“AFR”) of Protest No. 2809-22-109824 timely filed on December 13, 2022 by Ernst & Young, LLP, on behalf of Masterank America Inc., (hereinafter, the “protestant”). This decision concerns the country of origin of Saturated Wax MR3200 (“Saturated Wax”) and the applicability of Section 301 duties to the merchandise. FACTS: The merchandise subject to the protest at issue is Saturated Wax MR3200 (“Saturated Wax”). The merchandise was entered on August 18, 2021, and liquidated on June 17, 2022. The protestant claims the entry of the merchandise was inadvertently declared as Chinese origin by the protestant’s broker and was subject to an additional 7.5% duty due to Section 301 measures. The protestant filed the protest challenging the assessment of duties paid and claims the country of origin is Taiwan. Saturated Wax is used to reduce unwanted penetration or interactions of numerous liquids and gases in various surfaces. Moreover, it serves as improved wet strength coating of corrugated cardboard or other cellulosic paper materials. Saturated Wax is comprised of the following raw materials: 88% Paraffin wax; 2% Epolene C16; and 10% Alpha Olefin C30+. The production process of Saturated Wax takes place in the manufacturing facility in Taiwan. The paraffin wax is imported from China and the Epolene C16 is imported from the United States. You describe the production process as follows: The measured imported raw materials are placed into and blended in the material handling blending tank. The paraffin wax is heated to 230 F for a prolonged period of ten hours in the material blending tank. The mixture is then agitated at high speeds, which allows the raw materials to bind together due to the high sheer stress agitation and the heating procedure. The product is then slabbed by using the slabbing machine. Before and after the slabbing process, the product is inspected by the Quality Department on color, drop point, and viscosity level. Finally, the packing department packs the final product. The protestant asserts the country of origin for the Saturated Wax is Taiwan. ISSUE: What is the country of origin of the saturated wax for purposes of Section 301 trade remedies? LAW AND ANALYSIS: The United States Trade Representative (“USTR”) has determined that an additional ad valorem duty of 25 percent will be imposed on certain Chinese imports pursuant to USTR’s authority under Section 301(b) of the Trade Act of 1974 (“Section 301 measures”). The Section 301 measures apply to products of China enumerated in Section XXII, Chapter 99, Subchapter III, U.S. Note 20, Harmonized Tariff Schedule of the United States (“HTSUS”). When determining the country of origin for purposes of applying current trade remedies under Section 301, the substantial transformation analysis is applicable. See, e.g., Headquarters Ruling (“HQ”) H301619, dated November 6, 2018. The test for determining whether a substantial transformation will occur is whether an article emerges from a process with a new name, character, or use, different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 681 F.2d 778 (C.C.P.A. 1982). This determination is based on the totality of the evidence. See Nat’l Hand Tool Corp. v. United States, 16 CIT 308 (1992), aff’d, 989 F.2d 1201 (Fed. Cir. 1993). If the manufacturing or combining process is a minor one which leaves the identity of the article intact, a substantial transformation has not occurred. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940). U.S. Customs and Border Protection (“CBP”) has previously held that when chemical compounds are mixed together to form a different substance and the individual properties of each ingredient are no longer discernible, a substantial transformation has occurred. See HQ 563303, dated Sept. 30, 2005; HQ 555609, dated Nov. 5, 1990; and HQ 555032, dated Sept. 23, 1988. To determine whether a substantial transformation occurs, CBP considers the totality of the circumstances and makes such determinations on a case-by-case basis. The country of origin of the item’s components, extent of the processing that occurs within a country, and whether such processing renders a product with a new name, character, and use are primary considerations in such cases. Additionally, factors such as the resources expended on product design and development, the extent and nature of post-assembly inspection and testing procedures, and worker skill required during the actual manufacturing process will be considered when determining whether a substantial transformation has occurred. No one factor is determinative. For instance, in National Juice Products Ass’n v. United States, 10 CIT 48, 628 F. Supp. 978 (Ct. Int’l Trade 1986), the United States Court of International Trade (“CIT”) upheld CBP’s decision in HQ H728557, dated September 4, 1985, that imported orange juice concentrate was not substantially transformed when it was mixed with water, essential oils, flavoring ingredients, and domestic fresh juice in order to produce frozen concentrated orange juice and reconstituted orange juice. CBP found that the manufacturing process did not create an article with a new name, character, or use. The CIT agreed that the manufacturing process did not change the “fundamental character of the product” as “it was still essentially the juice of oranges”. See HQ H237605 dated June 25, 2014. In determining whether a substantial transformation occurs in the manufacture of chemical products, CBP has consistently examined the complexity of the processing and whether the final article retains the essential identity and character of the raw material. Where the finished product retains the identity and character of the precursor ingredients, CBP has found that no substantial transformation occurs. See, e.g. HQ H304539 (April 20, 2020) (no substantial transformation occurs where perfume oil base is combined with ethyl alcohol and water, as the oil base is the essence of the eau de toilette). This office consulted CBP Laboratories and Scientific Services Directorate, New York Laboratory in Newark, New Jersey concerning the instant case, which informed us that the production process of Saturated Wax “does not result in the formation of new chemical bonds between the wax and the other constituents.” For Saturated Wax MR3200, we find that it is the paraffin wax which is the “very essence,” of the finished product. Based on the information presented, we also find that the raw materials are not substantially transformed when processed into Saturated Wax. The production of the Saturated Wax involves merely mixing the raw materials and heating the resulting mixture without changing the characteristics and properties of the raw materials. Therefore, in accordance with the rulings cited, we find that no substantial transformation occurs in Taiwan, and the country of origin for Saturated Wax MR3200 is China. HOLDING: Saturated Wax MR3200 is not substantially transformed as a result of the production process as performed in Taiwan and the country of origin is China and is subject to Section 301 measures. The protest should be DENIED. You are instructed to notify the protestant of this decision no later than 60 days from the date of this decision. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to this notification. Sixty days from the date of the decision, the Office of Trade, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the Customs Rulings Online Search System (“CROSS”) at https://rulings.cbp.gov/, which can be found on the CBP website at https://www.cbp.gov and other methods of public distribution. Sincerely, for Yuliya A. Gulis, Director Commercial Trade and Facilitation