Main Idea: Comprehensive understanding of tariff classification and country of origin determinations is necessary for importers to determine the full scope of duties that may be applicable to their merchandise.

In N328620 (Oct. 27, 2022), U.S. Customs and Border Protection (CBP) discussed the tariff classification and country of origin marking for a steel racking structure from China. The product at issue was a steel racking structure designed for housing and storing equipment in data centers. The racking structure’s steel components include: (1) frame uprights, (2) tube beams, (3) connecting vertical beams, (4) cantilevers, (5) vertical support beams, (6) T-shape outriggers, (7) base plates and junction plates, (8) horizontal braces, and (9) flanges, bolts, nuts, and screws. The steel structure houses electrical and fiber cables and the cold air duct system used for cooling and thermal management in data centers. All the components are shipped unassembled and together, requiring installation after importation into the United States.

CBP determined that the steel racking structure is classified under subheading 7308.90.9590, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “Structures (excluding prefabricated buildings of heading 9406) and parts of structures, such as bridges and bridge sections, lock gates towers, lattice, masts, roofs, roofing frameworks, doors and windows and their frames and thresholds for doors, shutters, balustrades, pillars and columns) of iron or steel; plates, rods, angles, shapes, sections, tubes and the like, prepared for use in structures, or iron or steel: Other: Other: Other: Other: Other.” The rate of duty is free.

CBP then analyzed the country of origin for the steel racking structure under the agency’s marking rules.  Part 134 of the Customs Regulations (19 CFR Part 134) outlines the country of origin marking requirements and exceptions, under 19 U.S.C. 1304.

Under CBP’s regulations, the country of origin for marking purposes for most imported products is the last country where they product underwent a “substantial transformation” prior to being imported into the United States. A “substantial transformation” is defined generally as working or processing which results in the creation of a new and different article of commerce, having a name, character or use different from those of its components. 19 C.F.R. Part 134.35(a).  CBP applies the “substantial transformation” test on a case-by-case basis as noted in Superior Wire v. United States, 867 F.2d 1409 (Fed. Cir. 1989).

In this instance, CBP determined that the components or the packaging of the structure should be marked upon importation in a legible, permanent, and clear manner with “Made in China”, pursuant to 19 U.S.C. 1304(a)(3)(D); 19 CFR 134.32(d).

Finally, CBP noted that products of China classified under subheading 7308.90.9590, HTSUS, such as the racking structure are subject to an additional 25 percent of ad valorem rate of duty under the “Section 301 additional duties”, unless specifically excluded and that the product may be subject to antidumping duties and countervailing duties (AD/CVD).