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HQ 950419

December 27, 1991

CLA-2 CO:R:C:M 950419 MBR

CATEGORY: CLASSIFICATION

TARIFF NO.: None

Ms. Marlene Bacon
Ferranti-Packard Transformers Ltd.
P.O. Box 548, Saint Catherines
Ontario, Canada L2R 6W9

RE: Silicon Electrical Steel; Transformer Parts; Substantial Transformation; Cutting; Stacking; Punching Guide Holes; VRA

Dear Ms. Bacon:

Your letters of June 4, 1991, and August 16, 1991, on behalf of Ferranti-Packard Transformers Ltd., regarding the substantial transformation of steel coils, have been forwarded to our office for reply.

FACTS:

The inquirer imports silicon electrical steel in coils into the United States. In the U.S. the coil is unwound onto a core cutting machine. The core cutting machine cuts the steel into highly precise, specifically ordered shapes (at a 45 degree angle). The steel shapes are stacked according to size and configuration, and guide holes are punched into the corners. The pieces are stacked to ensure uniformity and pins are inserted into the guide holes for transportation. The cut and stacked steel is then exported to Canada where the manufacture of transformer cores takes place.

ISSUE:

Are steel coils substantially transformed by specific cutting and stacking operations?

LAW AND ANALYSIS:

There is no issue of tariff classification presented. Moreover, if no substantial transformation is found to have occurred by the processing in the United States, and the merchandise is exported, the tonnage is recredited. See HQ 085044, dated July 26, 1989, and HQ 081743, dated April 18, 1988.

For substantial transformation to take place in the United States, the record must establish that the processing operations result in a product other than, or materially different from, the merchandise of foreign origin. This means that a new and different article must emerge from the processing, i.e., one having a new name, character or use. Anheuser-Busch Brewing Association v. United States, 207 U.S. 556 (1908).

In HQ 077880, dated December 23, 1986, and HQ 081550, dated October 18, 1989, we held:

Although cutting to length and winding into a specifically layered coil may not constitute high-cost processing operations, the resulting article is recognizable as an unfinished core for a transformer. The relevant specifications, i.e., the inside circumference, the cross sectional area, the location of the joints, and the number of sheets, are specific characteristics of the toroids and limit the use of the toroids as parts of electrical transformers. The toroids have a character and identity that is fixed with certainty. We distinguish these cut and assembled lengths of silicon electrical steel from the material lengths, in coil, of silicon electrical steel. In the latter case, there is no recognizable article and [it] is precluded from classification as a part, even though the material may be dedicated for making the individual articles. Avins Industrial Products Co. v. United States, 515 F.2d 782 (CCPA 1975).

Therefore, similarly, the record here supports a finding that a substantial transformation in name, character, and use occurs in the silicon electrical steel by certain processing operations incident to the fabrication of transformers (cutting, stacking, and punching guide holes). These operations dedicate the silicon electrical steel to a use or uses for which it was unsuited at the time of importation.

HOLDING:

The above described processing operations result in a product which would be considered substantially transformed for tariff purposes.

Sincerely,

John Durant, Director

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