CBP Rules That Steel Posts From US Wrongly Considered of Mexican Origin, Section 232 Tariffs Don't Apply

Steel fence posts assembled in Mexico are actually products of the U.S. and are not subject to the Section 232 tariffs, CBP said in a Feb. 27 ruling. The ruling was in response to a request from Alex Romero of A.F. Romero & Co. Customs Brokers on behalf of Merchant Metals that asked CBP to weigh in on whether steel fence posts sent to Mexico for assembly operations could be returned under heading 9802 and whether the return entry triggers Section 232 liability. CBP said the Mexican processing doesn't create a substantial transformation of the posts.

Merchant Metals produces the fence post assemblies with U.S.-origin square steel tubing, which is then sent to Mexico to assemble the final product. "The Mexican operations involve welding a flange to the bottom of the tube, powder coating the tube and flange, and soldering a steel cap on the end of the tube." Romero said "that the final product is a product of Mexico and is classified in subheading 7306.61.50" and asked about "the applicability of subheading 9802.00.80" on such goods from Mexico.

Subheading 9802.00.80 provides a duty allowance for goods "assembled abroad in whole or in part of fabricated components" that meet the necessary requirements. Here, CBP found that the steel pipe will keep its form and ship and won't lose its physical identity due to the processing in Mexico. "Based on these facts, and assuming that all documentary requirements are met, the fence posts will be eligible for a duty allowance under subheading 9802.00.80," CBP said.

As for Section 232 tariffs' applicability, CBP ruled that the goods were in fact of U.S. origin and therefore not subject to the tariffs. "Here, you state that the steel fence posts will be of Mexican origin," but CBP disagreed with that assertion. "With the exception of the flange and cap, the finished fence post has the same shape as the U.S.-origin steel tubing from which it is made," the agency said. "Furthermore, as the steel tubes are sent to Mexico as pre-cut components, the U.S. origin tubes will have a predetermined use at the time of importation, which is an important factor in determining whether a substantial transformation has occurred."

Instead, the steel tubes retain the "very essence" of the steel fence posts, CBP said. "Based on the information provided, the finished fence post is simply the U.S.-origin steel tube with a cap on the top and a flange on the bottom," the agency said. "Under these circumstances, no change in character will occur when the U.S.-origin steel tubing is processed into finished fence posts in Mexico. Accordingly, the merchandise will be a product of the United States, and the Section 232 measures will not apply."