CLA-2 CO:R:C:V 555337 DSN
Leslie Alan Glick, Esquire
Duncan, Allen and Talmage
4575 Eye Street, N.W.
Washington, D.C. 20005-1175
RE: GSP treatment of ring castings
Dear Mr. Glick:
This is in response to your letter of February 7, 1989, on
behalf of Frederick Goldman, Inc., requesting a ruling under the
Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466)
that pure gold and alloy shot imported into Mexico, coverted into
14-karat gold shot by a melting and alloying process, and cast
into rings undergoes a double substantial transformation, thereby
permitting the value of the 14-karat gold shot to be counted
toward the 35% value-content requirement under the GSP. We
regret the delay in responding to your request.
FACTS:
According to your submission, pure gold and alloy pellets
of U.S. origin are exported to Mexico where they are melted and
alloyed to make 14-karat gold. While still in its molten state,
the 14-karat gold alloy is poured through water to create 14-
karat gold shot. The 14-karat gold shot is then melted and
poured into a mold creating ring castings. The ring castings are
then ground, filed and pre-polished. At this point, some of the
ring casts will be returned to the U.S. to be set with stones
while others will remain in Mexico where they will be set with
stones and polished.
ISSUE:
Whether the ring casts are eligible for duty-free treatment
under the GSP.
LAW AND ANALYSIS:
Under the GSP, eligible articles which are imported directly
from a designated beneficiary developing country (BDC) into the
U.S. qualify for duty-free treatment if the sum of the cost or
value of the materials produced in the BDC, plus the direct costs
involved in processing the eligible article in the BDC is at
least 35% of the article's appraised value at the time it is
entered into the U.S. See 19 U.S.C. 2463.
Mexico is a BDC, see General Note 3Ic)(ii)IA), Harmonized
Tariff Schedule of the United States Annotated (HTSUSA), and,
based on your description, it appears that the ring castings will
be classified under subheading 7113.19.5000, HTSUSA, which
provides for articles of jewelry and parts thereof, of precious
metal or of metal clad with precious metal, of other precious
metal, whether or not plated or clad with precious metal, other,
other, which is a GSP eligible provision. Assuming that the ring
castings will be imported directly to the U.S., they will receive
duty-free treatment if the GSP 35% value-content minimum is met.
The cost or value of materials which are imported into the
BDC and used in the production of the GSP eligible article may be
included in the 35% value-content computation only if the
imported materials undergo a double substantial transformation.
That is, the U.S. gold and alloy pellets imported into Mexico
must be substantially transformed in Mexico into a new and
different article of commerce, which is then used in the
production of the final article, the ring castings. See 19 CFR
10.177(a).
A substantial transformation occurs when a new and different
article of commerce emerges from a process with a new name,
character or use different from that possessed by the article
prior to processing. See Texas Instruments, Inc. v. United
States, 69 CCPA 152, 681 F.2d 778 (1982).
We find that the conversion of the pure gold and alloy shot
in Mexico into 14-karat gold shot produces an intermediate
article of commerce, which itself is then substantially
transformed by casting into rings. See Headquarters Ruling
Letters 554823 of December 15, 1987, and 555546 of January 30,
1990, where we held that 24-karat gold imported into Mexico,
converted into 14-karat gold shot by an a11oying process, and
cast into jewelry items results in a double substantial
transformation, thereby permitting the value of the gold shot to
be counted toward the GSP 35% value-content requirement.
Therefore, since the operations in the present case are almost
identical to those in the cited rulings, the cost or value of the
gold and alloy shot may be included in the GSP 35% value-
content computation.
HOLDING:
The alloying of U.S. gold and alloy shot and the subsequent
casting of the alloy into ring castings is sufficient to
constitute a double substantial transformation for purposes of
the GSP. Accordingly, the value of the gold and alloy shot may
be counted in determining the 35% value-content requirement for
GSP eligibility purposes.
Sincerely,
John Durant, Director
Commercial Rulings Division