HQ 0950924 - Stainless Steel Slab; Plate; Substantial Transformation; Hot Rolling; Heat Treatment; Pickling; Cutting - United States International Trade Commision Rulings

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HQ 950924

March 30, 1992

CLA-2 CO:R:C:M 950924

CATEGORY: CLASSIFICATION

TARIFF NO.: None

Robert J. Leo, Esq.
Adduci, Mastriani, Meeks & Schill
330 Madison Avenue
New York, New York 10017

RE: Stainless Steel Slab; Plate; Substantial Transformation; Hot Rolling; Heat Treatment; Pickling; Cutting

Dear Mr. Leo:

This is in response to your request dated December 18, 1991, on behalf of Charleroi (U.S.A.), for a ruling on the country of origin of certain stainless steel plates.

FACTS:

Stainless steel slab of Canadian origin is exported from Canada to Belgium. In Belgium, the slab is hot rolled into steel plate and heat treated. The plate is then exported from Belgium to the United States.

The slabs exported from Canada generally are rectangular in shape, are 4" to 12" in thickness, 36" to 80" in width, and 20' to 40' in length.

In Belgium, the slabs are heated in a furnace to a rolling temperature of between 2000 and 2500 degrees Fahrenheit. The most representative size of plate into which the slabs are rolled is 3/16" to 3/4" in thickness, 96" to 120" in width, and 240" to 360" in length. The plates have maximum dimensions of 4" in thickness, 160" in width and 600" in length.

After rolling, the plates are subjected to heat treatment, pickling, cutting to exact length, edge shearing or edge flame cutting, marking and packaging. The heat treatment is performed at 1700 to 2000 degrees Fahrenheit and affects the temper of the steel plates.

It is stated that the initial value of the slab is over 50% of the final resale price of the steel plates.

ISSUE:

Does the described processing substantially transform the slabs, making Belgium the country of origin?

LAW AND ANALYSIS:

In HQ 081659 (March 3, 1989), we noted that in order for steel slabs to be substantially transformed into other products, it must be established that the processing resulted in a product other than or materially different from the initial merchandise, that is, a new and different article must emerge from the processing, one having a new name, character or use. HQ Ruling 081659, citing Anheuser-Busch Brewing Association v. United States, 207 U.S. 556 (1908). See also Uniroyal Inc. v. United States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd. 702 F.2d 1022 (Fed. Cir., 1983).

In HQ 081659, we determined whether a substantial transformation took place when steel slabs were hot rolled into steel plate. We found that the slabs were semi-finished products which were processed into a finished steel product known as plate or sheet which had a variety of commercial applications. We found that the processing operations resulted in a significant change in the shape and dimensions of the product, and that the identity of the slab had been fundamentally changed to a product which no longer had the essence of the initial slab. We held that a substantial transformation had occurred.

Likewise, in HQ Ruling 079628 (August 25, 1987), we decided whether steel slab which had been hot rolled into a finished steel product had undergone a substantial transformation. We held that it did, stating that the hot rolling process constituted a substantial manufacturing which altered the identity of the slab to such an extent that a substantial transformation had occurred.

The slab under consideration is a semi-finished product which is processed in Belgium into plate, a finished product. The Making, Shaping and Treating of Steel, 10th Ed., Association of Iron and Steel Engineers (1985), pp. 701-702, states:

Blooms, slabs and billets...are referred to as semi- finished steel. After inspection and removal of defects by operations known by the collective name of conditioning (see Section 3), the semi-finished products are converted into finished products by rolling...

(emphasis in original)

This is consistent with the ruling requestor's March 16, 1992, submission, p. 2, where it is stated that "[t]he slabs are practically never used for anything but for re-rolling into a finished product."

It is Customs understanding that hot rolling of steel slabs into steel plates or sheets at temperatures of up to 2500 degrees Fahrenheit results in substantial metallurgical changes. Subsequent to rolling, the merchandise under consideration is heat treated at temperatures of up to 2000 degrees Fahrenheit to affect the steel's temper. Tempering of steel plates is an operation performed to obtain desired mechanical properties. See The Making, Shaping and Treating of Steel, supra, p. 884.

The processing operations in Belgium transform a semi- finished steel product known as slab, into a finished product known as plate which is ready to be machined and used in commercial applications. The processing results in the product having a different tariff classification. The identity of the slab that is exported from Canada to Belgium has been fundamentally changed and the slab has been substantially transformed.

The ruling requestor argues that the initial value of the slab is slightly over 50% of the final resale price of the finished plates. However, even higher initial values for products which have undergone substantial transformations exist. In HQ 079628, supra, we found that hot rolling normally increases the cost of the initial product by only 35 to 50 percent. In HQ 081659, supra, the processing represented only about 15 percent of the value added.

The ruling requestor also argues that the heat treatment of up to 2000 degrees Fahrenheit does not modify the mechanical properties of the steel, but only brings back the properties which might have been affected by the hot rolling operation. The initial slab, however, is a semi-finished product which is transformed into a finished product with a much different shape, different tariff classification and overall different identity than the initial product.

It is also suggested that Customs look to the rules of origin of the U.S./Canada Free Trade Agreement. Steel slab which is substantially transformed into steel plate in Belgium, however, is not subject to these rules.

HOLDING:

The described processing substantially transforms the stainless steel slabs under consideration, making Belgium the country of origin.

Hot rolled steel plate may be subject to a Voluntary Restraint Agreement (VRA). For further information on this issue, you may contact the Textiles and Metals Branch, Office of Trade Operations, U.S. Customs Service, 1301 Constitution Ave., N.W., Washington, D.C. 20229, (202) 566-2957.

Sincerely,

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