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HQ 089538

August 7, 1991

CLA-2 CO:R:C:M 089538 DWS

CATEGORY: CLASSIFICATION

TARIFF NO.: 7219.32.00 - 7219.35.00

Mr. Ike Yang
Sammi AL Tech, Inc.
13942 Orange Avenue
Paramount, CA 90723

RE: Classification and Country of Origin of cold-rolled stainless steel coil

Dear Mr. Yang:

This is in response to your letter of April 29, 1991, concerning the classification and country of origin of certain cold-rolled stainless steel coil under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).

FACTS:

Type 304 hot-rolled stainless steel coils, manufactured in Canada, are sent to Korea where they are processed into cold- rolled steel coils. The cold-rolled steel coils will then be imported into the United States. Cold-rolled steel is different from hot-rolled steel in that its production is carried out below recrystallization temperatures, whereas hot-rolling is produced in temperatures above recrystallization. The cold reduction process significantly reduces the thickness of the hot-rolled product and results in a cold-rolled steel possessing greater tensile strength. In fact, the importer claims that there is a 50 to 60 percent reduction in thickness due to the cold reduction process. At the end of this process, a No. 2B unpolished finish will be applied, which is a bright cold-rolled finish produced by cold-rolling, annealing, and descaling followed by a final, light cold-rolled pass.

The importer claims that the cost of the hot-rolled stainless steel coil manufactured in Canada will be more than 60 percent of the value of the processed cold-rolled stainless steel coil. The cold-rolled stainless steel coils which will be imported into the United States measure from 0.4 mm to 3.5 mm in thickness and 48 inches in width.

ISSUE:

What is the classification and country of origin of the cold-rolled stainless steel coil?

LAW AND ANALYSIS:

COUNTRY OF ORIGIN

"Country of origin" is defined in 19 CFR 134.1(b) as "the country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the 'country of origin' within the meaning of this part."

"The essence . . . is that a product cannot be said to originate in the country of exportation if it is not manufactured there. The question, therefore, is whether operations performed on products in the country of exportation are of such a substantial nature to justify the conclusion that the resulting product is a manufacture of that country. 'Manufacture' implies a change, but every change is not manufacture . . . There must be transformation; a new and different article must emerge, 'having a distinctive name, character or use'." Ferrostaal Metals Corp. v. United States, 11 CIT 470, 473 (1987).

In HQ 080277, dated September 21, 1987, it was determined that cold reduction in one country, of hot-rolled steel coil from a different country, engenders a substantial transformation, and the steel becomes a product of the country in which the cold- rolling is accomplished.

It is our opinion that the cold-rolled stainless steel coil in question meets the substantial transformation test, in that it has a name, character, and use different from that possessed by the hot-rolled stainless steel coil as it originally entered Korea. In this case, the transformation to cold-rolled steel has not been of a minor nature. As stated by the importer, the thickness of the hot-rolled steel coil is reduced from 50 to 60 percent during the cold reduction process.

Therefore, because the product in question underwent a substantial transformation in Korea, that country is the country of origin for tariff classification purposes.

CLASSIFICATION

Classification of merchandise under the HTSUSA is in accordance with the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification is determined according to the terms of the headings and any relative section or chapter notes.

The cold-rolled stainless steel coil is described in subheadings 7219.32.00 to 7219.35.00, HTSUSA. Pursuant to GRI 1, it will be classifiable under one of these provisions depending on thickness.

To understand the language of heading 7219, HTSUSA, the Explanatory Notes may be utilized. The Explanatory Notes, although not dispositive, are to be used to determine the proper interpretation of the HTSUSA. 54 Fed. Reg. 35127, 35128 (August 23, 1989). Explanatory Note IV(C) to chapter 72 provides that further finishing to the product (i.e. annealing) does not affect the heading to which the steel is classified. At the end of the cold reduction process, an unpolished finish is applied to the steel through cold-rolling, annealing, and descaling, which does not, according to the Explanatory Notes, affect the classification of the cold-rolled steel.

HOLDING:

The country of origin for the cold-rolled stainless steel coil is Korea. It is classifiable under subheadings 7219.32.00 to 7219.35.00, HTSUSA, which provide for flat-rolled products of stainless steel, of a width of 600 mm or more: not further worked than cold-rolled:

7219.32.00- of a thickness of 3 mm or more but less than 4.75 mm;

7219.33.00- of a thickness exceeding 1 mm but less than 3 mm;

7219.34.00- of a thickness of 0.5 mm or more but not exceeding 1 mm;

7219.35.00- of a thickness of less than 0.5 mm.

The general, column one rate of duty is 10.1 percent ad valorem.

Regarding the applicability of Voluntary Restraint Arrangement (VRA) certification requirements, as this program is administered by the U.S. Department of Commerce, we recommend that you contact the Office of Agreements and Compliance, International Trade Administration, U.S. Department of Commerce, Washington, D.C., 20230 (telephone: 202-377-3793), for the VRA requirements applicable to the imported product.

Sincerely,

John Durant, Director
Commercial Rulings Division

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