CLA-2 CO:R:CV:G: 085535 JLV; 844942
TARIFF NO.:
Mr. Rober J. Glader
C & B Inc.
407 N. Beverly
Arlington Heights, IL 60004
RE: Substantial transformation; country of origin of nails
manufactured from wire rod
Dear Mr. Glader:
In a letter of August 25, 1989, you requested a ruling on
whether nails, produced in St. Kitts and Jamaica from wire rod
produced in one or more foreign countries (steel products of
which are subject to export certification requirements at
entry), would be subject to export certification at the time
of importation into the United States.
FACTS:
The merchandise to be produced in St. Kitts and Jamaica
consists of various types of nails. These nails are called
"construction nails and galvanized nails" in your letter. The
nails will be produced from low carbon wire rod. Because you
did not state otherwise, we assume that all of the processing
operations will be performed in either St. Kitts or in
Jamaica. No samples or descriptive literature were submitted.
You state that the wire rod will be sourced from one or
more foreign countries. The processing operations in St.
Kitts or Jamaica are as follows:
1. Draw the wire rod into wire.
2. Convert the wire into nails.
3. Finish the nails by deburring, cleaning, coating
(in some cases), and packaging.
- 2 -
ISSUE:
Whether the processing of wire rod into nails is a
substantial transformation so as to result in a product of the
country in which the processing takes place?
Does the country of origin of the nails, in this case,
determine the status of the nails for purposes of the export
certification requirements of the steel voluntary restraint
arrangements (VRAs)?
LAW AND ANALYSIS:
Country of origin of an article which has been processed
in more than one country is that country in which the last
substantial transformation takes place. A substantial trans-
formation takes place when the processing of a material or
article results in a new and different article having a
distinct name, character, or use. Anheuser-Busch Brewing
Association v. United States, 207 U.S. 556 (1908); Ferrostaal
Metals v. United States, 664 F.Supp 535 (CIT 1987).
The nails, whether or not galvanized, are distinct in
name, character, and use from the wire rod material used in
the manufacture of the nails. A nail is defined in Webster's
Third New International Dictionary Unabridged, 1965, page
1500, as a slender and usually pointed and headed fastener
designed for impact insertion. The low carbon wire rod is a
semifinished hot rolled steel material that is used, in some
cases, as reinforcing material for concrete, and in most cases
for drawing into various sizes of wire. We conclude,
therefore, that the wire rod is substantially transformed into
a new and different article, nails, and that the nails are
products of the country in which this processing takes place.
VRA steel, under the expired VRAs, if processed in a non-
VRA country before exportation to the United States, remained
subject to the VRA unless the processing resulted in a
substantial transformation. In this case, the nails produced
in either St. Kitts or Jamaica from VRA wire rod would not
have been subject to the steel VRAs which expired on September
30, 1989. On December 12, 1989, the Office of the United
States Trade Representative announced that VRAs had been
agreed upon with the European Community and 16 other
countries. These VRAs, however, are not yet in effect, nor
are we aware of any changes in the coverage or criteria for
determining whether steel products, processed in a non-VRA
country, remain subject to the VRA.
- 3 -
HOLDING:
Low carbon wire rod, produced in one country, is
substantially transformed when processed by drawing and then
converting into nails in a second country. Therefore, nails,
produced in St. Kitts or Jamaica from low carbon wire rod of
foreign origin, are products of the country in which the
processing takes place.
Although the nails would not have been subject to
restraints under the recently expired VRAs because the wire
rod is substantially transformed in a non-VRA country, we
cannot advise you as to the VRA status of the nails under the
renegotiated VRAs. You should contact the Office of the
United States Trade Representative, 600 17th Street NW,
Washington, D.C. 20506 (202-395-3230), or the Director, Office
of Agreements Compliance, International Trade Administration,
Department of Commerce, Washington, D.C. 20230 (202-377-3793),
for information on the status of the VRAs and the changes, if
any, in the criteria for determining what products are subject
to the VRAs.
Sincerely,
John Durant, Director
Commercial Rulings Division
6cc: AD NY Seaport
1cc: NIS John Fitzgerald
2cc: Chief, CIE
1cc: AC, CO
1cc: Director, Trade Ops
1cc: Durant LIBRARY: valentine
1cc: Reading File FILE NAME: 085535