HQ 0952462 - 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 - United States International Trade Commision Rulings

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HQ 952462

October 26, 1992

CLA-2 CO:R:C:M 952462 LTO

CATEGORY: CLASSIFICATION

TARIFF NO.: 7222.30.00

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
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
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
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

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