That piece goes in the part of the pipe that comes in two seperate pieces. If I had a picture or could photoshop one I could show you alot better. Sorry man
It goes into either the passenger side inlet or driver's--I can't remember--but I believe it's the driver's. You should be able to tell when you start bolting it up. It slides into the piece that will be bolted up to your exhaust manifold.
If I remember, there's a gasket on the passenger side, but on the driver's side, the exhaust manifold sits down into the inlet of the X pipe. That's where that little sleeve comes in.
That's where it goes. I'm 100% sure now, because when I got my UPR X, I wasn't sure either, so I had to ask around myself. That sleeve acts sort of like an adapter. If you notice, the diameter of your exhaust manifold is smaller than the opening for the X. The sleeve helps insure a tight fit.