Rail Cushioning Packs are Transformed in Mexico, Importer Says in Trade Court Complaint

Selective Cushioning Units (SCUs) are products of Mexico due to their complex assembly, not products of China subject to Section 301 duties, Strato argued in a Nov. 3 complaint to the Court of International Trade (Strato, Inc., v. U.S., CIT #22-00315).

The case concerns the classification and country of origin of selective cushioning units which absorb tension and compression forces between rail cars. The SCUs are assembled in Mexico from Chinese-origin steel plates and U.S.-origin elastomer pads. In Nov. 2021, Strato's counsel filed a ruling request concerning the classification, country of origin, and USMCA eligibility of the SCU and suggested subheading 8607.30.1000 with a duty rate of 3.6%. In a headquarters ruling issued on June 3 (H322364), CBP agreed with Strato that the finished draft packs and buff packs are classified in subheading 8607.30.1000. However, CBP found that no substantial transformation took place in Mexico and held that the country of origin for the fully assembled SCU was China, based on the origin of the steel plates. CBP ruled that the plates provided the essence of the finished SCU because the plates made up the majority of the weight.

Strato requested an alternative if CBP found that no substantial transformation took place in Mexico, then the origin of the draft packs and buff packs should be the country of origin of the elastomer pads, arguing that the pads impart the essential character to the draft packs and buff packs, because the purpose of the SCU is to buffer and cushion rail cars. Despite what Strato says is "overwhelming evidence," CBP disagreed and found that the steel plates are equally essential to “absorb and dissipate force when applied to the rail car through the coupler.”

Strato then imported the SCU through the Port of Brownsville, Texas on Sept. 3 and paid the duties imposed by CBP as a condition of the entry. Strato filed a protest on Sept. 16 seeking to recoup "charges or exactions in accordance with 19 U.S.C. § 1514." CBP did not rule on the protest and after 30 days it was rendered a denial by operation of law on Oct. 16. The entry after CBP's ruling was "anticipating a fight," said Robert T. Givens, attorney for Strato. The entry and protest was part of a strategy to push back on the unfavorable CBP HQ ruling before importing more SCUs, he said.

Strato has asked the court to hold that a substantial transformation of the draft packs and buff packs components of the SCU took place in Mexico despite there being a pre-determined end use for the components, or alternatively, that the elastomer pads impart the essential character to the draft packs and buff packs and as such the country of origin of the draft packs and buff packs are the country of origin of the elastomer pads and order CBP to correct the subject entry and issue refunds with interest.