CLA-2 CO:R:C:M 952462 LTO
Mr. Marvin Pohlman
Pohlman International Inc.
P.O. Box 3266
Florence, South Carolina 29501
RE: Cold-finished bars; stainless steel billets to bars
(substantial transformation); Anheuser-Busch Brewing
Association v. U.S.; "further worked"; Add. U.S. Note 2 to
Chapter 72; HQ 087601; 19 CFR 134.1
Dear Mr. Pohlman:
This is in response to your letter of June 4, 1992, to the
District Director of Customs in Charleston, South Carolina,
requesting the classification and country of origin for cold-
finished bars under the Harmonized Tariff Schedule of the United
States (HTSUS). This letter, along with your letter of July 9,
1992, to Customs in New York, was referred to this office for a
response.
FACTS:
Grades 303, 304, 316, 416, 15-5PH and 17-4PH stainless steel
billets are produced in Japan and Sweden. These continuous cast
billets are either round or square, and they range in size from
five to seven inches.
The billets are sent to Trinidad where they undergo the
following processing operations. They are heated to 2,250
degrees F and hot-rolled into rounds or hexagons ranging in size
from one to five inches. The cross section of each billet is
reduced by a minimum of a five to one reduction ratio (for
example, a five inch billet will be reduced to a one inch round
or hexagon). The material is then annealed (heat treated) to the
desired softness, straightened and cold finished (through a
"peeling" process) to closer or tighter tolerances. The product
- 2 -
is subsequently re-straightened, polished and cut to length
according to customer need.
The resulting cold-finished and polished bars are exported
from Trinidad into the U.S. Once in the U.S., the bars will be
used in the manufacture of shafts, valves and fittings.
ISSUE:
Whether the cold-finished and polished bars have undergone a
substantial transformation as a result of the processing
performed in Trinidad, so that they can be considered articles of
Trinidad.
LAW AND ANALYSIS:
In order for the billet of Japanese and Swedish origin to be
considered substantially transformed by the described processing
as to be regarded as a product of Trinidad for tariff purposes,
the evidence must show that the processing results in a product
other than or materially different from the merchandise entering
Trinidad. That is, a new and different article of commerce 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).
A steel billet is a semifinished product intended for
further hot-rolling (or forging). In Trinidad, the billet in
question is hot-rolled into rounds or hexagons ranging in sizes
from one to five inches. The cross section of the billet is
reduced by a minimum of a five to one reduction ratio. These
rounds or hexagons are then annealed to desired softness,
straightened and cold-finished. The cold-finishing gives the
product closer tolerances and improved surface finish. Finally,
the product is re-straightened, polished and cut to specific
lengths according to customer need, and then sent from Trinidad
to the U.S.
When the billet is hot-rolled, a significant molecular
change occurs--the molecular structure changes from the cast
dendritic structure into a uniform, "equiaxed" wrought structure.
Moreover, a significant physical change occurs--the shape and
physical dimensions of the steel product are greatly altered.
It is our opinion that the conversion of the stainless steel
billet into the bar results in a substantial transformation of
the billet. The billet and bar have distinct names, different
physical and molecular characteristics and different uses. Thus,
the bars should be considered to be products of Trinidad for
- 3 -
tariff purposes.
As to the bars' classification, the General Rules of
Interpretation (GRI's) to the HTSUS govern the classification of
goods in the tariff schedule. GRI 1 states in pertinent part
that "for legal purposes, classification shall be determined
according to the terms of the headings and any relative section
or chapter notes . . . ."
The bars are described under Heading 7222, HTSUS, which
provides for other bars and rods of stainless steel. The
subheadings at issue are as follows:
7222.20.00 Bars and rods, not further worked
than cold-formed or cold-finished
* * * * * * * * * * * * *
7222.30.00 Other bars and rods
If the bars are not "further worked," they are classifiable
under subheading 7222.20.00, HTSUS. If they are "further
worked," they fall to subheading 7222.30.00, HTSUS.
Additional U.S. Note 2 to Chapter 72 states that "the term
'further worked' refers to products subjected to any of the
following surface treatments: polishing and burnishing;
artificial oxidation; chemical surface treatments such as
phosphatizing, oxalating and borating; coating with metal;
coating with nonmetallic substances (e.g., enameling, varnishing,
lacquering, painting, coating with plastics materials); or
cladding [underlining in original]."
After the bars in question are cold finished, they are re-
straightened, polished and cut to length according to customer
need. They are, therefore, "further worked" for tariff purposes.
See, e.g., HQ 087601, dated November 23, 1990. The bars are
described by subheading 7222.30.00, HTSUS, which provides for
other bars and rods.
HOLDING:
The described processing operations in Trinidad result in a
substantial transformation, or a product having a new name,
character and use. Thus, the articles in question are products
of Trinidad.
The stainless steel bars are classifiable under subheading
7222.30.00, HTSUS, which provides for "[o]ther bars and rods of
- 4 -
stainless steel . . . [o]ther bars and rods." The corresponding
rate of duty for articles of this subheading which are products
of Trinidad is free, upon compliance with the Caribbean Basin
Economic Recovery Act.
Sincerely,
John Durant, Director
Commercial Rulings Division