CLA-2:CO:R:C:G 081333 SS

TARIFF NO.:

Mr. Gary Sarbo
Traffic Manager
Franco Steel Corporation
750 Third Avenue
New York, New York 10017

RE: Substantial transformation; tin-free steel; tin plate; lacquering; lithographing

Dear Mr. Sarbo:

Your letter dated November 4, 1987, to the United States Department of Commerce, concerning "re-export credit" for certain electrolytic tin-free steel and tin plate, was forwarded to us for a decision on whether the processing in the United States constitutes a substantial transformation. Our ruling follows.

FACTS:

(1) Electrolytic tin plate in coil or cut sheet which is lacquer coated in the United States, then re- exported;

(2) Electrolytic tin plate in coil or cut sheet which is lithographed in the United States, with customer's logo and/or design, then re-exported; and

(3) Electrolytic tin plate and tin-free steel which is scrolled in France, lacquer coated in the United States, then re-exported.

Tin plate and tin-free steel are manufactured as follows: steel slabs are heated and hot rolled to coil form on a hot strip mill. The coils are continuously pickled and cold reduced to the desired gauges. The cold reduced material is cleaned, annealed, and either temper rolled or cold reduced

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again (double reduced tin mill products). The temper rolled or double reduced coils are then processed through electrolytic coating lines where they are cleaned, pickled, and electroplated with tin or chromium.

Tin plate and tin-free steel are used mostly in the production of food containers. Food products react with these base metal coatings. A lacquer coating is applied to provide a protective layer which will increase the resistance to corrosion of the base metal from the food product. Generally, lacquers are inert organic solutions of resins or mixtures of resins and vegetable oils which may be clear or pigmented; they provide an effective barrier between the metal and the food, and thereby extending the self life of the canned food.

Lithographing tin mill products is done for aesthetic or decorative purposes, as well as for identification of the contents of a container. Lithography is a type of printing process, and lithographed designs are applied only on the surfaces of tin mill products that will be on the outside of the containers. The process begins with the application of a base coat or sizing which requires one pass on the coating line. Each additional color that is applied requires one additional pass. After all the desired colors are added, a top coat of varnish is applied. Lithography is a labor intensive process and requires skill and good control in order to achieve the desired art work.

The facts indicate that the tin plate and tin-free steel are imported in pre-cut plates of approximately 90-110 plates per base box. The prices per base box is estimated at $27.00. The estimated cost for lacquering is $2.50-$4.00 per base box. The estimated cost for the lithography process varies according to the number of colors used: the cost for up to four colors is approximately $9.00 per base box; five colors, $13.50 per base box; and six colors, $16.00 per base box.

ISSUE:

Whether the processes of lacquering or lithographing tin plate or tin-free steel result in a substantial transformation of these articles.

LAW AND ANALYSIS:

The country of origin of an article for U.S. tariff purposes is the country in which the last substantial transformation took place. Substantial transformation occurs if the processing performed on an article results in an article with a name, character or use different than that possessed by the article that is subjected to the processing.

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Substantial transformation cannot result from a manufacturing or combining process of a minor nature which leaves the identity of the article intact. See, Uniroyal, Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026, (1982, aff'd) 702 F.2d 1020 (Fed. Cir. 1983). See also, Anheuser-Busch Brewing Ass'n v. United States, 207 U.S. 556, 562 (1908), in which the court stated that a product cannot be said to originate in a country of exportation if it is not manufactured there. There must be a transformation, a new and different article must emerge, having a distinctive name, character, or use. Id., page 562.

In the instant case, the lacquering process does not result in a product with different name, character or use. While it is true that the tin plate or tin-free steel has undergone a process, not every process results in substantial transformation. See Anheuser-Busch Brewing Ass'n v. United States, supra, at page 562, in which the court stated that "[m]anufacture implies a change, but not every change is a manufacture, and yet every change in an article is the result of treatment, labor, and manipulation." In this case, blank tin plates and blank tin-free steel sheets remain blank plates and sheets which have been enhanced by the addition of an inert lacquer coating on one or both sides of the plate. There is no change in name. The use of the plate also remains the same: the plates may be used for making a variety of containers for food products, or may be put to any other use suitable for tin mill products of the dimensions in issue. Although the lacquer enhances the "corrosion-resistant" character of the tin mill products, this does not change the character of the product which is imparted by the base metal, the electrolytic coating, the thickness of the sheets, and the length and width of the sheets. Finally, the costs or value added to the tin plate or the tin-free steel sheets as a result of the lacquering process are small when compared to the cost of these base tin mill products.

However, the lithography process does result in a substantial transformation of the tin mill products. In the instant case, the lithography process is done for aesthetic reasons and for product identification. The colors and design, applied to the blank plates and sheets, impart a distinctive appearance and identity to individual articles that will be made from the plates and sheets. The process is performed in specific steps, requires skill, and is labor intensive. The lithographed tin plate and tin-free steel sheets are different in character, because, in this case, they are commercially identifiable as consisting of multiple, discrete articles which, when cut out and formed with can ends

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into specific containers, are used without additional labeling. The facts also indicate that the value added to the plate is substantial, varying from $9.00 per base box for one color (approximately 33 percent) to $16.00 per base box for six colors (approximately 59 percent).

HOLDING:

The process of lacquering tin plate and tin-free steel sheets does not result in substantial transformation of these articles.

The process of lithographing tin plate and tin-free steel sheets results in substantial transformation of these articles and, therefore, the country of origin of the lithographed plates and sheets is the United States.

Voluntary restraint arrangements (VRA's) have been renegotiated with most of the steel-producing countries. However, these VRA's are not yet in effect. Therefore, you should once again contact the Department of Commerce, International Trade Administration, Office of Agreements Compliance, in order to obtain information on the effect of this ruling on your request to obtain a VRA credit under the renegotiated VRA's for the tin plate and tin-free steel sheets that are exported from the United States after processing by lacquering or lithographing.

Sincerely,

Jerry C. Laderberg
Acting Director
Commercial Rulings Division

6cc: AD NY Seaport
2cc: Chief, CIE
1cc: Chief, Value Branch
1cc: Director, Trade Ops
1cc: Reading file
1cc: AC, CO
1cc: Director, CommRulDiv
1cc: Director, Agreements
Compliance (ITA, DOC)

SSingh:tj:Typed 07/20/88; rewritten 10/04/88; 4/2/90 JLV