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