CLA-2 CO:R:C:S 558635 BLS
Andrew P. Vance, Esq.
Barnes, Richardson & Colburn
475 Park Avenue South
New York, New York 10016
RE: Eligibility of gold jewelry imported from Bolivia for
duty-free treatment under the GSP
Dear Mr Vance:
This is in reference to your letters dated July 12, 1994,
and January 5, 1995, requesting a ruling that certain gold
jewelry, to be imported from Bolivia, will be eligible for duty-free treatment under the Generalized System of Preferences (GSP).
You also request that we rule on the proper classification of the
articles to be imported.
FACTS:
Your client, Gori & Zucchi, (Zucchi), imports into Bolivia
from Italy a gold clad solid tube about 4 meters long, consisting
of a layer of 10kt. or 14kt. gold rolled around an iron core.
At the facility in Bolivia, the tube is wound around a
forming pin to form a spiral. The pins are of various shapes
and sizes (1", 2", or 3" in diameter) in accordance with the
products to be obtained. The spirals are deoxidated, sawed
down the length, thus separating each "ring" or "rung" in the
spiral from the next. In some cases, the rings so obtained are
manually aligned (made to lie flat).
The components are collected in PVC boxes, and heated in an
oven. Thereafter, they are dipped in acid which attacks the
iron and makes the rings empty of iron in about 24 hours. The
acid is neutralized and the components, now hollow, are washed,
cleaned and dried. These hollow hoops are then made into
various items of jewelry, such as earrings, bracelets, chains,
and bangles. In producing bracelets, the hoops may be further
processed by bending or winding by hand to achieve oval shapes or
smaller overall diameters. The shapes are cut and soldered into
links,
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buffed, cleaned, dried, and hand polished. A clasp is then
soldered to the shapes. The finished items are subjected to
quality control, and packaged.
A hoop can also be made into a necklace by combining, by
hand, different links with different overall diameters of tubing,
soldering them together, buffing, cleaning, polishing, soldering
a clasp, hand polishing, quality control inspection, and
packaging. In producing earrings and perhaps certain other
articles of jewelry, such as bangles, the hollow hoops may be
assembled without further change in shape or diameter with
clasps, yokes, posts, jump rings, and other findings to produce
the finished articles of jewelry.
You state that in the trade the hollow hoops are not
considered jewelry, but "findings", and are offered for sale to
the jewelry industry. You submit as an exhibit a catalog of
jewelry findings and semi-products from a related company which
establishes that these hoops are offered for sale in the trade.
ISSUE:
Whether the gold clad solid tubes to be imported into
Bolivia and used in the production of gold jewelry undergo a
double substantial transformation, thereby enabling the cost or
value of the tubes to be included in the 35% value-content
requirement under the GSP.
LAW AND ANALYSIS:
Under the GSP, eligible articles the growth, product or
manufacture of a designated beneficiary country (BDC) which are
imported directly into the customs territory of the U.S. from a
BDC may receive duty-free treatment if the sum of (1) the cost or
value of materials produced in the BDC, plus (2) the direct costs
of the processing operations performed in the BDC, is equivalent
to at least 35 percent of the appraised value of the article at
the time of its entry into the U.S. See 19 U.S.C. 2463(b)
Under General Note 4, Harmonized Tariff Schedule of the
United States, Bolivia is a designated BDC for purposes of the
GSP. The articles to be imported are properly classifiable
under subheading 7113.19.50, HTSUS, which provides for "Articles
of jewelry and parts thereof, of precious metal... Of precious
metal whether or not plated or clad with precious metal...
Other... Other." Articles from Bolivia classified under this
provision are eligible for GSP treatment.
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Where an article is produced from materials imported into
the BDC, as in this case, the article is considered to be a
"product of" the BDC for purposes of the GSP only if those
materials are substantially transformed into a new and different
article of commerce. See 19 CFR 10.177(a)(2). The cost or
value of materials which are imported into the BDC may be
included in the 35 percent value-content computation only if the
imported materials undergo a substantial transformation in the
BDC. That is, the non-Bolivian components must be substantially
transformed into an intermediate article of commerce, which is
then used in Bolivia in the production of the imported article,
the gold jewelry.
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 v. United States, 69 CCPA 152, 156, 681 F.2d 778,782
(1982).
In order to achieve a "double substantial transformation",
the materials imported into the BDC must be substantially
transformed into a new and different intermediate article of
commerce, which is substantially transformed a second time into
the final article. The intermediate article itself must "...be
an article of commerce, which must be readily susceptible of
trade, and be an item that persons might well wish to buy or
acquire for their own purposes of consumption or production.."
Torrington Co. V. United States, 8 CIT 150, 596 F. Supp. 1083
(1984), aff'd, 764 F.2d 1563 (Fed. Cir. 1985).
In Headquarters Ruling Letter (HRL) 555929 dated April 22,
1991, gold wire of U.S.-origin was converted in the Dominican
Republic into gold links, which were then combined to create
necklaces and bracelets. We held in that case that the gold
links were substantially transformed intermediate articles of
commerce.
Similarly, in the instant case, we find that the hollow
hoops which will emerge from the processing in Bolivia are new
and different articles of commerce in comparison to the gold clad
solid metal tubes from which they were made. Accordingly, we
find that these hoops are considered "products of" Bolivia.
However, we do not find, as urged, that previous stages of the
processing operations in Bolivia result in other substantially
transformed intermediate articles of commerce. In this regard,
we note that the evidence submitted establishes a trade only in
one intermediate stage of production, i.e., upon completion of
the hollow hoops. Preceding operations are merely steps in the
production of the hoops.
The next question which must be addressed, however, is
whether, during the
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various types of operations performed resulting in the finished
items of jewelry, the hoops themselves are substantially
transformed into the completed necklaces,
earrings, bracelets, etc.
In HRL 556060 dated August 27, 1991, we held that bending,
cutting and soldering operations performed to create earrings
resulted in a substantial transformation. Further, in HRL
556892 dated December 23, 1992, we found that gold links woven
into chains formed the fundamental and essential character of the
finished bracelet or necklace and dedicated its use as jewelry.
Accordingly, we held in that case that the weaving operation
substantially transformed the links into a new and different
article, for purposes of the "product of" requirements.
However, Customs has long held that merely soldering
closures to chains or other items of jewelry and cleaning and
polishing operations provide new features to the items but do not
change their essential character. See HRL 556624 dated July 31,
1992 (soldering clasps to gold chains constitutes a simple
combining operation for which GSP treatment is not allowed); and
HRL 557100 dated April 30, 1993 (cutting to length, soldering end
tips, attaching locks or clasps and brushing and cleaning of gold
chains does not result in a substantial transformation).
As applied to the instant case, we find that a second
substantial transformation occurs where the hoops are further
processed into bracelets or necklaces. The operations involved
in producing these articles of jewelry include bending or winding
of the tubing to achieve oval shapes or smaller diameters,
cutting and soldering the resulting shapes into links, and
combining the links by soldering and attachment of a clasp. We
find that the completed necklace or bracelet has an essential
character different from the hoop from which it was derived.
However, where the operations consist merely of soldering the
completed hoops together to form earrings, bangles or similarly
produced articles of jewelry, and a clasp or other type closure
is added, the essential character of the hoops has not changed as
a result of this finishing operation. Therefore, the hoops do
not undergo a second substantial transformation when used to
produce these items of jewelry.
HOLDING:
Based on the information submitted, we find that the gold
clad solid tube is a constituent material of the imported gold
bracelets and necklaces. Therefore, the cost or value of this
component may be included in calculating the 35 percent value-content requirement under the GSP. The bracelets and necklaces
will receive duty-free treatment under the GSP, provided the
"imported directly" and 35
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percent value-content requirements are satisfied. However, the
gold clad solid tube will not undergo the requisite double
substantial transformation when used to produce the imported
earrings, bangles, or other items of jewelry produced by a simple
soldering operation of the hollow hoops, and the addition of a
clasp or other closure. Therefore, the cost or value of the
solid tube cannot be used in calculating the 35 percent value-content requirement under the GSP in this instance.
A copy of this ruling letter should be attached to the entry
documents filed at the time the merchandise is entered. If the
documents have been filed without a copy, this ruling should be
brought to the attention of the Customs officer handling the
transaction.
Sincerely,
John
Durant, Director
Commercial
Rulings Division