MAR-2-05 CO:R:C:V 734716 ER
Walter J. Spak, Esq.
Vincent Bowen, Esq.
3 Lafayette Centre
1155 21st Street, NW
Washington, DC 20036-3384
RE: Reconsideration of HQ 734091; country of origin marking of
mirror polished stainless steel; substantial transformation.
Dear Messrs. Spak and Bowen:
This is in response to your letter dated July 6, 1992, on
behalf of Okura & Co. (America), Inc., in which you request
reconsideration of HQ 734091 (June 2, 1992), involving the
country of origin marking requirements for certain mirror
polished stainless steel.
FACTS:
The facts set forth in HQ 734091 are incorporated by
reference. There Customs found that sheets of grade 304
stainless steel with a 2B or a BA finish exported from Japan into
Singapore for polishing to achieve a No. 8 mirror finish are not
substantially transformed within the meaning of 19 U.S.C. 1304.
Counsel for Okura has requested reconsideration of this ruling
and seeks a determination that such polishing operations do
result in a substantial transformation.
ISSUE:
Whether sheets of stainless steel with a BA or 2B finish are
substantially transformed by the processing performed in
Singapore which achieves a No. 8 mirror polished finish to the
stainless steel sheets?
LAW AND ANALYSIS:
As discussed in HQ 734091, country of origin means the
country of manufacture, production or growth of any article of
foreign origin entering the U.S. (19 CFR 134.1). A commodity's
country of origin for U.S. tariff purposes is the country in
which the last substantial transformation took place. 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 processing. The court in Uniroyal, Inc. v. United
States, 3 CIT 220, 542 F.Supp. 1026, aff'd 1 Fed. Cir. 21, 702
F.2d 1022 (1983), emphasized that a substantial transformation
will not result from manufacturing or combining processes that
are minor in nature and leave the identity of the imported
article intact. Uniroyal is widely cited to for the principles
set forth therein regarding substantial transformation.
In determining whether machining operations effect a
substantial transformation, Customs distinguishes between the
kind and amount of further processing performed, i.e. between
machining operations performed to achieve a specified form and
those performed to achieve more cosmetic or minor processing
operations. See, C.S.D.s 89-121 and 90-53. Customs consistently
finds that embellishment and finishing operations, such as
polishing, enameling and cleaning, are not regarded as extensive
processes that result in a new and different article of commerce.
See, HQ 554689 (August 21, 1987) and HQ 071314 (May 10, 1983).
In HQ 733299 (July 17, 1990), Customs found no substantial
transformation where
[r]efinishing alone accounts for more than 70% of the time
expended in completing the Gibson [guitar] ... In general,
it is unlikely that any change in the surface finish of an
article would be regarded by Customs as sufficient to change
its essential character so as to result in a substantial
transformation. For example, previous Customs rulings have
held that polishing and grinding of a semifinished aluminum
bowl (C.S.D. 89-130), and glazing and painting of pottery
and ceramics (C.S.D. 89-121) do not result in substantial
transformations...
While finishing is important to the functioning of the
guitar, i.e., a proper finish is necessary to produce
the desired sound characteristics, it is our view that
such finishing is only one of a number of production
steps which contribute to the instrument's performance.
Of at least equal and probably greater importance are
the type of wood used, the seasoning of the wood, and
the manner in which the box is constructed. Under the
circumstances, we regard the finishing in the U.S. as
merely one of several steps which, together, contribute
to the desired sound, but which by itself or even in
conjunction with the other assembly steps does not
change the essential character of the instrument...
In fact, the term "polishing" is specifically described as a
finishing operation in one of the exhibits submitted by counsel.
(U.S. Steel, "Fabrication of Stainless Steels"). Consistent with
prior determinations and for the reasons outlined above and
discussed in the original ruling letter, we affirm our finding
that the polishing operations do not result in a substantial
transformation.
Nor is the use of the steel significantly changed by the
polishing operations. As discussed in the original ruling and as
described in the literature submitted by counsel, the stainless
steel is used in construction and can be given different exterior
finishes such as mirror finish, chemicolor, etching art, gp
finish, and desta. Such changes to the surface finish of the
steel are more accurately described as resulting in a narrowing
of or restriction in use rather than a change in use. The
stainless steel both before and after polishing is designed for
and remains in the market for stainless steel products. See, HQ
734052 (October 17, 1991)(the application of decorative artwork
to the surface of a plate by firing resulted in a restriction in
use and not a change in use; accordingly, no substantial
transformation resulted.)
Counsel asserts that polishing to a No. 8 finish improves
corrosion resistance and characterizes this improvement as one
which effects structural and mechanical property changes in the
sheets, improving corrosion resistance. We do not find these
changes to be significant in the substantial transformation test.
Steel with a No. 2B finish as received from the mill already has
excellent corrosion resistance. Improvement to corrosion
resistance amounts to a change in a "characteristic" of the steel
and not a change to the character. Such was the finding in
National Hand Tools where the court ruled that no substantial
transformation occurred where the processing performed on
imported hand tools (heat treatment, electroplating and assembly)
amounted only to changes in the "characteristics" of the material
and did not change the character of the articles. National Hand
Tool Corp. v. United States, Slip Op. 92-61, April 27, 1992. The
1991 Department of Commerce short supply determination which
counsel cites to as support for their contention that a new
commodity is created by virtue of the polishing operations is not
binding on Customs in determining whether a substantial
transformation has occurred. See, National Juice Products Ass'n
v. United States, 10 CIT 48, 628 F.Supp. 978 (1986). In National
Juice Products, the court did not find persuasive the standards
of identity under the Food and Drug Administration (FDA)
concerning a substantial transformation question. Additionally,
the court agreed with Customs that a change from a producer good
to a consumer good does not necessarily constitute a sufficient
change in character and use to amount to a substantial
transformation. Id. at 989.
Counsel reiterates that the polishing operations add
substantial value and, accordingly, that a substantial
transformation should be found. We disagree. In National Hand
Tools, described above and which also involved articles of steel,
the court altogether declined to consider the value-added element
where, as here, the essential character of the metal articles
remained unaltered by the processing.
HOLDING:
Applying a No. 8 mirror polish finish on sheets of grade 304
stainless steel with a 2B or BA finish is not a substantial
transformation. Accordingly, the holding in HQ 734091 is
affirmed and the country of origin of the stainless steel sheet
is Japan.
Sincerely,
Harvey Fox, Director
Office of Regulations and Rulings