CLA-2 CO:R:C:G: 083313 VEA
TARIFF No.:
Mr. Kenneth E. Natale, Esq.
Duncan, Allen and Talmage
1575 Eye Street, N.W.
Washington, D.C. 20005-1175
RE: Substantial Transformation of coil rolled steel
Dear Mr. Natale:
This letter is in response to your inquiry dated
January 6, 1989, on behalf of your client, Kern-Liebers USA
Inc. (Kern), requesting a country of origin ruling of retractor
springs for seat belts imported from Mexico.
FACTS:
Your submission indicates that the merchandise at issue
consists of retractor springs for seat belts processed from
coils of rolled steel in Mexico. Kern imports large coils of
rolled steel under bond from West Germany to its Mexican
affiliate.
The coils of rolled steel undergo the following processing
in Mexico:
(1) The coil is split into strips.
(2) The strips are processed into springs by cutting
them to length and coiling.
(3) The spring coils are heated to 230 degrees
centigrade for 30 minutes.
(4) Each spring is then assembled into a plastic
spring housing, connected to a spring cup and
lubricated.
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Kern's Mexican affiliate delivers the finished spring
assemblies to unrelated Mexican companies, who incorporate them
into a completed automotive seat belt retractor assembly and
then ships them to the U.S.
Kern argues that the processing in Mexico substantially
transforms the steel coil into a new and different product for
tariff purposes, so that Mexico becomes the country of origin.
ISSUE:
Whether the processing operations performed on the steel
coil in Mexico substantially transform it so that it becomes a
product of Mexico.
LAW AND ANALYSIS:
For tariff purposes, the courts have held that a
substantial transformation occurs if a new and different
article emerges having a distinctive name, character or use.
Anheuser-Busch Brewing Association v. The United States, 207
U.S. 556 (1908) and Uniroyal Inc. v. United States, 542 F.
Supp. 1026 (1982).
Anheuser-Busch involved an action for drawback on corks
imported from Spain into the United States. The corks
underwent a cleansing and coating process in the U.S. The
court held that this process did not substantially transform
the merchandise into a different article and noted that "a cork
put through the claimant's process was still a cork." The
court in Uniroyal also followed the rationale of the Anheuser-
Busch decision and looked to both the processing that the
article undergoes and the nature of the change in the article
after processing. In that case which dealt with foot wear
uppers, the attachment of an outer sole to the upper was held
not to substantially transform the upper since it was a minor
manufacturing or combining process which left the identity of
the upper intact.
Applying the test set out in Anheuser-Busch and Uniroyal,
Customs has addressed the issue of substantial transformation
in cases involving steel coil. In a ruling letter dated
November 21, 1985 (File # 553739 KP), Customs ruled that
processing operations performed on imported coils substantially
transformed the coil so that it became a product of Panama.
The processing conducted on the coil included: (1) uncoiling,
flattening, and slitting the strip; (2) forming the strip into
tubes; (3) welding the seams; and (4) cutting the tube to
specific lengths. We ruled that this process resulted in a new
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and different article. The steel coils imported into Panama
were flat rolled steel materials that lacked the
characteristics of steel tubes. Thus, the processing
operations resulted in a product which had lost the identifying
characteristics of the steel sheet in coil form.
Based on the test outlined in Anheuser-Busch and in
Uniroyal, a substantial transformation occurs if two things
exist. First, a new and different article emerges, and
second, the new article has a distinctive name, character and
use. The processing in Mexico in this case substantially
transforms the steel coils into a new and different article,
having a distinctive name, character or use. Kern imports
large coils of rolled steel into Mexico. After it is imported,
the coil is slit into strips, the strips are processed into
springs and heated to 230 degrees centigrade for 30 minutes;
and each spring is assembled into a plastic spring housing,
connected to a spring cup and lubricated. Spring assemblies
are the end result of this processing. Clearly, a new and
different article emerges. Contrary to both Anheuser-Busch and
Uniroyal, the identity of the imported article does not remain
intact. The steel is no longer flat rolled steel material in
coils, but has been manufactured into springs, which are used
in automotive seat belt retractor assemblies.
The new article also has a distinctive name, character
and use. The article imported into Mexico comes in as steel
coil, but after the processing becomes spring assemblies. The
processes performed on the steel coil at issue in this case
result in the merchandise having a new character. The
merchandise comes into Mexico as a flat rolled steel material.
However, after the processing, it is changed from steel sheets
to springs. The new article also has a distinctive use.
Springs are used specifically in automotive seat belt retractor
assemblies, a use for which the steel sheets in coil are unfit.
The imported merchandise in this case is similar to the
merchandise in Customs' ruling of November 21, 1985, and
undergoes some of the same processing. The coils are cut into
strip, cut to length and coiled. As in that ruling, the steel
coils imported into Mexico in this case are also steel
materials that lack the characteristics of springs. Thus, the
processing operations result in a new and distinct product
which has a new name, identifying characteristics and a
different use from that of the steel coils.
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HOLDING:
The processing operations performed in Mexico
substantially transform the steel coil; thus Mexico is the
country of origin of the springs for tariff purposes.
As requested, your samples are being returned.
Sincerely,
John Durant, Director
Commercial Rulings Division
allums library
6cc: Area Director, New York Seaport
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