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HQ 555337


March 8, 1990

CLA-2 CO:R:C:V 555337 DSN

CATEGORY: CLASSIFICATION

Leslie Alan Glick, Esquire
Duncan, Allen and Talmage
4575 Eye Street, N.W.
Washington, D.C. 20005-1175

RE: GSP treatment of ring castings

Dear Mr. Glick:

This is in response to your letter of February 7, 1989, on behalf of Frederick Goldman, Inc., requesting a ruling under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466) that pure gold and alloy shot imported into Mexico, coverted into 14-karat gold shot by a melting and alloying process, and cast into rings undergoes a double substantial transformation, thereby permitting the value of the 14-karat gold shot to be counted toward the 35% value-content requirement under the GSP. We regret the delay in responding to your request.

FACTS:

According to your submission, pure gold and alloy pellets of U.S. origin are exported to Mexico where they are melted and alloyed to make 14-karat gold. While still in its molten state, the 14-karat gold alloy is poured through water to create 14- karat gold shot. The 14-karat gold shot is then melted and poured into a mold creating ring castings. The ring castings are then ground, filed and pre-polished. At this point, some of the ring casts will be returned to the U.S. to be set with stones while others will remain in Mexico where they will be set with stones and polished.

ISSUE:

Whether the ring casts are eligible for duty-free treatment under the GSP.

LAW AND ANALYSIS:

Under the GSP, eligible articles which are imported directly from a designated beneficiary developing country (BDC) into the U.S. qualify for duty-free treatment if the sum of the cost or value of the materials produced in the BDC, plus the direct costs involved in processing the eligible article in the BDC is at least 35% of the article's appraised value at the time it is entered into the U.S. See 19 U.S.C. 2463.

Mexico is a BDC, see General Note 3Ic)(ii)IA), Harmonized Tariff Schedule of the United States Annotated (HTSUSA), and, based on your description, it appears that the ring castings will be classified under subheading 7113.19.5000, HTSUSA, which provides for articles of jewelry and parts thereof, of precious metal or of metal clad with precious metal, of other precious metal, whether or not plated or clad with precious metal, other, other, which is a GSP eligible provision. Assuming that the ring castings will be imported directly to the U.S., they will receive duty-free treatment if the GSP 35% value-content minimum is met.

The cost or value of materials which are imported into the BDC and used in the production of the GSP eligible article may be included in the 35% value-content computation only if the imported materials undergo a double substantial transformation. That is, the U.S. gold and alloy pellets imported into Mexico must be substantially transformed in Mexico into a new and different article of commerce, which is then used in the production of the final article, the ring castings. See 19 CFR 10.177(a).

A substantial transformation occurs when a new and different article of commerce emerges from a process with a new name, character or use different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).

We find that the conversion of the pure gold and alloy shot in Mexico into 14-karat gold shot produces an intermediate article of commerce, which itself is then substantially transformed by casting into rings. See Headquarters Ruling Letters 554823 of December 15, 1987, and 555546 of January 30, 1990, where we held that 24-karat gold imported into Mexico, converted into 14-karat gold shot by an a11oying process, and cast into jewelry items results in a double substantial transformation, thereby permitting the value of the gold shot to be counted toward the GSP 35% value-content requirement. Therefore, since the operations in the present case are almost identical to those in the cited rulings, the cost or value of the gold and alloy shot may be included in the GSP 35% value- content computation.

HOLDING:

The alloying of U.S. gold and alloy shot and the subsequent casting of the alloy into ring castings is sufficient to constitute a double substantial transformation for purposes of the GSP. Accordingly, the value of the gold and alloy shot may be counted in determining the 35% value-content requirement for GSP eligibility purposes.

Sincerely,

John Durant, Director
Commercial Rulings Division


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