United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1990 HQ Rulings > HQ 0555091 - HQ 0555238 > HQ 0555101

Previous Ruling Next Ruling


HQ 555101


November 15, 1988

CLA-2 CO:R:C:V 555101 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.80; 807.00

Mr. William D. Outman, II
Baker & McKenzie
815 Connecticut Avenue, N.W.
Washington, D.C. 20006

RE: Request for Reconsideration of Headquarters Ruling Letter 554015/727943 (May 12, 1986)

Dear Mr. Outman:

This is in response to your letter of August 18, 1988, on behalf of your client, ITT Corporation, Cannon Division, re- questing reconsideration of Headquarters Ruling Letter 554015/ 727943 (May 12, 1986). That ruling (1) denied eligibility under item 807.00, Tariff Schedules of the United States (TSUS), to certain electrical contacts and (2) found that ITT Cannon was not the "ultimate purchaser" of certain imported blanks. Enclosed with your letter were numerous exhibits, including sample materi- als and a video tape.

FACTS:

In our ruling of May 12, 1986, we held that certain metal alloy "blanks" imported into the U.S. for zone-annealing and gold electroplating were not thereby converted into "products of the United States" for purposes of TSUS item 807.00. The annealed and plated articles were to be used as electrical contacts in articles assembled abroad.

Customs determined (1) that the "blank" imported into the U.S. was already dedicated to use as a contact, (2) that the "blank" could in fact operate as a contact for a period of time without annealing or plating, and (3) that the annealing and plating constituted finishing operations to complete the merchan- dise for commercial use. We concluded that the manufacturer was not the "ultimate purchaser" for country of origin marking pur- poses, and that the contacts would not qualify as American com- ponents for purposes of item 807 upon reimportation. A prior ruling was referenced, which involved very similar merchandise (Headquarters Ruling Letter 063117, June 28, 1979).

On June 26, 1987, the U.S. Court of International Trade decided Ferrostaal Metals Corp. v. U.S., 664 F.Supp. 535, __ CIT __ (1987), holding that certain multiple manufacturing processes

--annealing and galvanizing--effected a change in the name,
character and use of cold-rolled steel sheet and that the changes constituted a substantial transformation of the article into a new and different article of commerce.

In your letter you request that, in view of intervening case law, we reconsider our initial ruling. You state that the imported metal alloy is a simple piece of raw metallic material manufactured to shape (in either pin or socket form) and known in the trade as a "blank;" that certain imported "blanks" are sub- jected to two critical processes--zone annealing (applied to all socket "blanks" and certain pin "blanks") and electroplating (applied to all "blanks"); that these manufacturing processes are necessary to allow the "blanks" to meet diverse electrical and physical requirements critical to the intended use of the "blanks" as contacts; that the zone annealing process effects an irreversible metallurgical transformation of the "blank," by ren- dering it ductile, a condition necessary in order to crimp the contact to a wire; that the electroplating process changes the chemical composition of the "blank's" surface to impede chemical oxidation and engagement wear, a condition necessary to provide a long-term, trouble-free product, and that no end user will accept a contact which has not undergone the plating process; that con- siderable financial resources and technically-trained personnel are required to affect the subject manufacturing processes; and that there is no commercial interchangeability or substitution possible between the raw "blanks" and plated contacts. In sum, you state that, taken as a whole, the combined processes of an- nealing and electroplating substantially transform the imported article into a new and different article having a distinctive name, character and use; rendering the contacts U.S. fabricated components for purposes of TSUS item 807.00 and rendering the manufacturer the "ultimate purchaser" for purposes of country of origin marking.

ISSUES:

Whether the imported merchandise is substantially trans- formed in the U.S., rendering it eligible for the partial duty exemption under TSUS item 807.00 (subheading 9802.00.80, Har- Harmonized Tariff Schedule of the United States (HTSUS)), as American fabricated components, and to exempt it from country of origin marking requirements, under section 304 of the Tariff Act of 1930, as amended, as the manufacturer is the "ultimate purchaser," under section 134.1(d), Customs Regulations (19 CFR

LAW & ANALYSIS:

In Ferrostaal Metals Corp. v. U.S., the court had occasion to consider whether the country of origin of cold-rolled steel
sheet manufactured in one country was changed by annealing and galvanizing (continuous hot-dip galvanizing) it in another. The court found, inter alia, that (1) strength and ductility consti- tute important characteristics of the steel and that annealing significantly affected the character by dedicating the sheet to uses compatible with the strength and ductility of the steel; (2) the hot-dip galvanizing process was substantial in terms of the value it added to the full hard cold-rolled steel sheet; and (3) substantial changes in the use of the steel sheet occur as a re- sult of the continuous hot-dip galvanizing process. In particu- lar, the court found that the annealing and galvanizing processes resulted in a change in character by significantly altering the mechanical properties and chemical composition of the steel sheet. Inasmuch as the continuous hot-dip galvanizing process effected changes in the name, character and use of the processed steel sheet, the court held that the country in which that pro- cess was performed became the country of origin of the processed sheet.

Comparing the processing to be performed on the imported "blanks" with that described in the Ferrostaal decision, we are now of the opinion that, taken as a whole, the multiple manufac- turing processes of annealing and electroplating, as described above, significantly alter both the mechanical properties and chemical composition of the imported "blanks," substantially transforming them into new and different articles of commerce.

CONCLUSION:

On reconsideration of the described manufacturing pro- cesses, as well as the samples and other evidence submitted, and in light of the U.S. Court of International Trade's decision in the Ferrostaal case, we find that the imported "blanks" (sockets and pins) which are subjected to both annealing and electroplat- ing processes in the U.S. are substantially transformed for country of origin marking purposes and may be considered fabri- cated components, products of the U.S., for purposes of TSUS item 807.00. Accordingly, the manufacturer will be considered the "ultimate purchaser" of the imported merchandise for country of origin marking purposes under section 134.1(d), Customs Regula- tions (19 CFR 134.1(d)), and merchandise subsequently assembled abroad with the annealed and electroplated contacts will qualify for partial duty exemption under TSUS item 807.00, upon return to the U.S. and compliance with the documention requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Headquarters Ruling Letters 063117 and 554015/727943 are modified accordingly.

Sincerely,


Previous Ruling Next Ruling

See also: