CLA-2:CO:R:C:G 081659 JAS
Katherine S. Nucci, Esq.
Dykema Gossett
1752 N Street, N.W.
Washington, D.C. 20036
RE: Country of Origin of Sheet Steel in Coils Hot Rolled in
Canada From Slabs
Dear Ms. Nucci:
In letters, dated January 20, and October 31, 1988, you
inquire as to the country of origin of steel sheets in coil
which are hot rolled in Canada from slabs of Brazilian origin.
There is no tariff classification issue presented. Our ruling
follows.
FACTS:
You refer to the merchandise that enters the Customs
territory from Canada as hot rolled steel sheet, in coils,
ranging from .058 inch to .5 inch in thickness, and from 1,000
feet to 3,000 feet in length. After importation, the product
is uncoiled, pickled and slit. It is then suitable for use in
the automotive industry, the building trades, and in oil and
natural gas exploration, among other uses.
The steel slabs that enter Canada are semifinished
products rolled from ingots. They are A 607 grade 50 low
alloy slabs ranging from 16 feet to 34 feet in length, from 30
inches to 48 inches in width, and from 6 inches to 14 inches
in thickness. In Canada, they are reheated to rolling
temperatures of between 2100 to 2300 degrees F and held there
for approximately 2-1/2 hours. The slabs are then rolled to
an intermediate thickness in a process called roughing. In
this process, horizontal rolls reduce thickness between .8
inch to 1.6 inches, and vertical rolls reduce width up to 2
inches. In addition, the length is drastically increased as
indicated. The product is then trimmed on both ends and
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finished rolled at a temperature of 1600 degrees F to final
thickness, after which it is water cooled, then coiled. The
processing operations are said to represent up to fifteen (15)
percent value added.
ISSUE:
Does the described processing substantially transform the
slabs, and make Canada the country of origin for tariff
purposes?
LAW AND ANALYSIS:
In order for the steel slabs to have been considered
substantially transformed in Canada, the record must establish
that the processing there resulted in a product other than or
materially different from the merchandise of foreign origin;
that is, a new and different article must emerge from the
processing, one having a new name, character or use.
Anheuser-Busch Brewing Association v. United States, 207 U.S.
556 (1908).
In general, semifinished steel products such as blooms and
slabs have no commercial use and must be reworked. They are
first cleaned to remove defects that might affect surface
quality, and are thereafter converted to finished steel
products such as plates and sheets by reheating and further
hot working by rolling or forging coupled, in some instances,
with cold-working operations that follow the secondary hot
working.
Slabs cannot be used commercially because of their massive
size. In addition, their larger grain size makes them very
brittle. In this case, the processing operations in Canada
result in a significant change in the shape and dimensions of
the product, and render it commercially usable by equipment
that will stamp, drawn or bend it. Moreover, while there is
no change in chemistry, the hot rolling operations effect a
significant change in the product's microstructure. The
combination of hot rolling and controlled water cooling makes
the grain size smaller and more uniform throughout the entire
product. This improves hardness or ductility which is commer-
cially significant.
The processing operations in Canada transform a semi-
finished steel product known as a slab, with no commercial
uses, to a finished steel product known as a plate or a sheet,
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with a variety of commercial applications. The identity of
the product that enters the Customs territory has been fun-
damentally changed. It is no longer the essence of the
product that entered Canada.
HOLDING:
The described processing operations in Canada result in a
product that is substantially transformed there, one having a
new name, character and use. The articles entering the
Customs territory are products of Canada for Customs purposes.
Sincerely,
John Durant, Director,
Commercial Rulings Division