CLA-2 CO:R:C:G: 081431 DSN
Mr. Jack Alsup
Alsup & Associates
P.O. Box 1251
Del Rio, Texas 78841
RE: Classification and GSP eligibility for knee pads and
pool floats
Dear Mr. Alsup:
This is in response to your inquiry of November 28, 1987,
in which you requested GSP eligibility and tariff classification
under the Tariff Schedules of the United States Annotated
(TSUSA), and the Harmonized Tariff Schedule of the United States
Annotated (HTSUSA), for two products from Brazil on behalf of
Fabrionics Inc. As you are aware the HTSUSA became effective on
January 1, 1989. Therefore, this ruling is for HTSUSA only. A
sample was provided for one product, while only a picture was
submitted of the other.
FACTS:
The first product is called a "knee ease" which is a pad
designed to cushion the knees when kneeling during gardening or
while performing household chores. The pad is constructed of
foamed polyvinyl chloride (PVC) plastic and is coated with vinyl
plastic and measures approximately 18 inches by 7-1/2 inches by 1
inch. The pad has scalloped sides with rounded edges and a cut-
out section which forms a built-in handle. The company logo and
other information is silk screened on the front of the "knee
ease".
The second product is a pool float which is made of the
identical materials as the knee pad but is substantially larger.
The pool float features a closed pillow design which creates a
comfortable head rest. It also comes with scalloped sides or
without scallops.
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For the production of the knee pads, your client exports
PVC foam blanks to Mexico where they will be die cut, cut to size
and shaped into 14 pieces. Your client also ships vinyl coating
dry blend and solvent which is mixed in Mexico to produce a vinyl
liquid mixture. Each piece of foam will be dipped in the liquid
a total of three times.
The manufacture of the pool floats involves similar
processing, but with the addition of one step. Each blank is cut
into two pieces having scalloped sides and curved edges. A 45-
degree cut out is made approximately one foot from the head of
the blank. The head is folded over at the cut and is then glued
to itself, forming a pillow. The dipping process follows.
ISSUE:
1. What is the classification of the merchandise at issue
under the HTSUSA?
2. Whether the operations performed on the foam blanks
result in a double substantial transformation, thereby enabling
the cost or value of the PVC constituent material to be counted
toward the 35 percent value-content requirement for purposes of
the GSP.
LAW AND ANALYSIS:
ISSUE ONE
Classification of merchandise under the HTSUSA is in
accordance with the General Rules of Interpretation (GRI's),
taken in order. GRI (1) provides that for legal purposes,
classification shall be determined according to the terms of the
headings and any relative section or chapter notes. With regard
to the knee pads, heading 3924, HTSUSA, provides for tableware,
kitchenware, other household articles and toilet articles, of
plastics. The Explanatory Notes constitute the official
interpretation of the tariff at the international level. The
Explanatory Notes to heading 3924 state that the heading covers
other household articles such as dustbins, buckets, watering
cans, etc. It is our opinion that the heading covers knee pads
designed to be used while performing tasks around the home.
We do not consider the pool floats as household articles
because their use is not confined to the home as they can be used
either in backyard pools, community pools, the ocean or even as
mats to sunbathe. Since pool floats can be used in other places
besides the home, it appears inappropriate to include these
articles under the provision for other household articles.
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Heading 3926, HTSUSA, provides for other articles of
plastics and articles of other materials of headings 3901 to
3914. The Explanatory Notes for heading 3926, state that the
heading covers articles not elsewhere specified or included, of
plastics. Since there is no specific heading providing for pool
floats, heading 3926, HTSUSA, is applicable.
ISSUE TWO
Under the Generalized System of Preferences (GSP), eligible
products of a designated beneficiary country (BDC) which are
imported directly into the U.S. qualify for duty-free treatment
if the sum of the cost or value of the constituent materials
produced in the BDC plus the direct costs involved in processing
the eligible article in the BDC is at least 35 percent of the
article's appraised value at the time of its entry into the U.S.
See 19 U.S.C. 2463. The cost or value of materials which are
imported into the BDC to be used in the production of the
article, as here, may be included in the 35 percent value-content
computation only if the imported materials undergo a double
substantial transformation in the BDC. That is, the materials
imported into Mexico from the U.S. to produce the knee pads and
pool floats must first be substantially transformed into a new
and different intermediate article of commerce, which is then
used in Mexico in the production of the final imported article.
See Section 10.177(a), Customs Regulations (19 CFR 10.177(a)).
The test for determining whether a substantial
transformation has occurred is whether an article emerges from a
process with a new name, character or use, different from that
possessed by the article prior to the processing. See Texas
Instruments Inc. v. United States, 69 CCPA 152, 681 F.2d 778
(1982).
Customs application of the double substantial
transformation requirement in the context of the GSP received
judicial approval in The Torrington Company v. United States, 8
CIT 150, 596 F.Supp. 1083 (1984), aff'd 764 F.2d 1563 (1985).
The Court of International Trade, after affirming Customs
application of the double substantial transformation concept,
said:
Regulations promulgated by Customs define the term
"materials produced" to include materials from third
countries that are substantially transformed in the
BDC into a new and different article of commerce. 19
CFR 10.177(a)(2). It is not enough to transform
substantially the non-BDC constituent materials into
the final article, as the material utilized to
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produce the final article would remain a non-BDC
material. There must first be a substantial
transformation of the non-BDC material into a new and
different article of commerce which becomes "material
produced," and these materials produced in the BDC
must then be substantially transformed into the new
and different article of commerce. It is noted that
19 CFR 10.177(a) distinguishes between "merchandise
produced in the BDC" and the cost or value of the
"materials produced in the BDC" which demonstrates
the contemplation of a dual substantial
transformation requirement.
Id. at 1086.
We have previously held that cutting material to shape is
sufficient to result in a substantial transformation. See Ruling
554929, dated November 3, 1988. In the present case, we find
that the die-cutting of the foam blanks constitutes a substantial
transformation of these U.S. materials.
However, we do not find that the second set of processes
result in a second substantial transformation. The character of
the foam shapes will not be significantly changed by the coating
with the vinyl liquid mixture. In a ruling dated August 1, 1988
(HQ 081888), we held that coating of fencing material by
galvanizing was merely a finishing operation and that the
addition of a corrosion-resistant feature to the fencing did not
constitute a manufacture that resulted in a change in name,
character or use. We noted that while the coating may have been
necessary for the effective, long-term use of the fencing, it did
not change the fact that the uncoated article had but one use,
namely, fencing.
In the present case, the coating provides a surface which
is easy to clean, and the coated pads and floats are advertised
as providing "an extra thick, stain-resistant outer shell."
However, the uncoated pads and floats provide the essential
character of the finished product which is its buoyancy and
cushioning. The vinyl coating does not change these
characteristics nor does it alter the use of the uncoated pads
and floats.
HOLDING:
ISSUE ONE
The knee pads are classified under subheading 3924.90.5000,
HTSUSA, which provides for tableware, kitchenware, other
household articles and toilet articles, of plastics, other,
other, and dutiable at the rate of 3.4 percent ad valorem.
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The pool floats are classified under subheading
3926.90.9050, HTSUSA, which provides for other articles of
plastics and articles of other materials of heading 3901 to 3914,
other, other, other, and dutiable at the rate of 5.3 percent ad
valorem.
ISSUE TWO
On the basis of the information submitted, it is our
opinion that the foam blanks and vinyl coating solvents to be
exported to Mexico will not be substantially transformed into
constituent materials of the finished knee pads and pool floats
to be imported into the U.S. Therefore, the cost or value of the
foam blanks and vinyl coating solvents may not be counted for the
purposes of satisfying the 35 percent requirement.
Sincerely,
John Durant, Director
Commercial Rulings Division