Importer Seeks Duty-Free Treatment for Reimported Steel Tubes Shipped to Canada for Processing
Importer Maple Leaf Marketing (MLM) filed a complaint at the Court of International Trade on Sept. 23 seeking duty-free treatment for its boronized steel tubing that was made in the U.S., exported to Canada for alteration, then brought back into the U.S. MLM said that its imports qualify for classification under Harmonized Tariff Schedule secondary subheading 9802.00.50. The importer further sought to clear its goods of Section 232 steel and aluminum duties since the products are of U.S. origin (Maple Leaf Marketing v. United States, CIT #20-03839).
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Subheading 9802.00.50 provides for "Articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means: Articles exported for repairs or alterations: Other [than pursuant to a warranty]." MLM said that goods warrant the use of this subheading and duty-free treatment when they return to the U.S. after having been repaired and altered while in Canada.
The relevant imports are hardened and boronized Range 2 (28' - 32') American Petroleum Institute (API) 5CT J-55 seamless and electric resistance welded steel tubing product, branded as "EndurAlloy," used as oil country tubular goods in the U.S. oil and gas industry. MLM brought in the EndurAlloy Range 2 API 5CT J-55 seamless and ERW steel tubing in 2018 and 2019. The tubes at issue were either made in the U.S. or imported as "green tubes" from foreign producers then substantially transformed into the steel tubing for use as OCTG.
MLM first established that the imported "green tubes" cannot be classified as the Range 2 API 5CT J-55 steel tubing, meaning the further-processed green tubes qualify as being made in the U.S. After processing, the tubing is shipped to Canada where MLM's vendor, Endurance Technologies Inc. (ETI) carries out boronizing alteration treatments, then ships the tubes back. After the boronizing treatment, the tubes still remain finished Range 2 API 5CT J-55 steel tubing, the complaint said. The processing "merely advanced the value and improved the condition" of the imports.
As such, subheading 9802.00.50 should apply to the goods, the importer argued. This subheading clarifies that it only applies to goods where the value of the processing shall be the cost to the importer of such charge or the value of the charge if no charge is made as set in the invoice and entry papers. Further, a section of CBP's regulations says that "goods returned after having been repaired or altered in Canada pursuant to a warranty, are eligible for duty-free treatment, provided that the requirements of this section are met."
For a good to be considered altered under the subheading and the U.S.'s federal regulations, the article must be a finished good; the article may be subject to any manufacturing process including restoration, addition, renovation, redying or cleaning; and the opeartions carried out abroad must not destroy the essential elements of the exported good. MLM said its imports meet these elements and thus qualify for the subheading.
MLM also said its products were of U.S. origin and not subject to Section 232 duties. "ETI’s Canadian processing does not substantially transform the finished Range 2 API 5CT J-55 steel tubing into goods having a different country of origin, and the goods remain of U.S.-origin when reimported into the U.S. by MLM," the complaint said. "Section 232 duties cannot be assessed or collected on goods of U.S. origin."