CBP Reverses Ineligibility Finding for Steam Turbine Assemblies Under US-Israel FTA
Steam turbine shaft assemblies and nozzle rings were properly claimed as eligible for duty-free treatment under the U.S.-Israel FTA, CBP said in a Nov. 30 ruling. The ruling, HQ H291700, was in response to an application for further review of protest submitted by Tuttle Law Offices for the importer, Ormat Nevada. The agency said the imported good satisfied the requirements of the FTA and that the protest should be granted.
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Ormat Nevada operates geothermal energy power plants in the U.S. and Ormat Israel produces steam turbine shaft assemblies and nozzle rings in Israel. Ormat goods made entry at Honolulu, Hawaii, after arriving on an Air Canada flight from Vancouver, though the importer said that the goods didn't enter Canadian customs territory. After the Automotive and Aerospace Center of Excellence and Expertise began a verification of the FTA claim, an import specialist concluded no substantial transformation occurred in Israel.
Ormat Nevada protested following liquidation in 2017 and said CBP incorrectly applied a transaction valuation method. Transaction value is wrong in this case because the seller, Ormat Israel, and the buyer, Ormat Nevada, are related. Neither the "circumstances of the sale nor the test values methods can be satisfied" for transaction value based on the contract between the two companies, it said. CBP agreed with that argument and said the goods should instead be appraised under computed value.
The company also argued that substantial transformation did occur Israel. While CBP has ruled that "simple machining of imported castings combined with a simple assembly does not result in a substantial transformation," that doesn't appear to be the case in this instance. After the assemblies are milled from circular metal forgings "additional complex assembly and processing occurs in Israel," the agency said. "Based on these facts, we find that a new and different article of commerce with a new name, character, and use was created when the raw metal forgings are processed into steam turbine shaft assemblies and nozzle rings in Israel. Therefore, a substantial transformation has occurred, and the U.S.-Israel FTA 'product of' requirement is satisfied."
Although the merchandise passed through Canada on the way to the U.S., CBP also found that the "imported directly" requirement was met. "The invoice and shipping documentation provided indicates that the final destination of the merchandise was the United States, and [Ormat Nevada] states that the merchandise did not enter the customs territory of Canada during this time or leave the control of the carrier, Air Canada," CBP said. Ormat Nevada also successfully showed that the merchandise exceeded the 35% value-content requirement, CBP said.
Email ITTNews@warren-news.com for a copy of the ruling.