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HQ 953414




APRIL 12, 1993

CLA-2:CO:R:C:M 953414 JAS

CATEGORY: CLASSIFICATION

TARIFF NO.: None

Mr. Vincent Bowen, Esq.
Willkie Farr & Gallagher
1155 21st. Street, N.W.
Washington D.C. 20036-3384

RE: Steel Sheet in Coils Galvanized in Mexico From Previously Annealed Full Hard Cold Rolled Sheet; Country of Origin

Dear Mr. Bowen:

In your letter of February 5, 1993, on behalf of Duferco Ltd., U.S.A., you inquire as to the country of origin of certain galvanized steel sheet in coils. There is no classification issue presented. As agreed to in your letter dated March 29, 1993, the country of origin of merchandise described as ASTM A- 446 grade E and A-792 grade 80 will be addressed in a subsequent ruling.

FACTS:

The merchandise entering Mexico is full hard cold rolled steel sheet conforming to Society of Automotive Engineers/ American Iron and Steel Institute (SAE/AISI) carbon steel grades 1006 and 1008. This steel sheet is sourced variously in Argentina and Czechoslovakia, and is shipped to Mexico for processing into corrosion-resistant steel sheet that conforms to American Society for Testing and Materials (ASTM) specifications for annealed and galvanized cold-rolled sheet of commercial quality (A-526) and lock-forming quality (A-527), for use in non- structural applications.

You state that prior to entering Mexico, the steel sheet is annealed at temperatures above the lower critical temperature (at least 1350 degrees F). This softens the steel and results in a substantial reduction in yield strength, tensile strength and hardness.

Upon importation into Mexico, the sheet is uncoiled, the sides are trimmed and the steel cleaned. The sheet is then heated to a temperature of 600 degrees C (1112 degrees F), then - 2 -
cooled to temperatures of between 800 to 900 degrees F, after which it is galvanized by dipping either in molten zinc or a mixture of zinc and aluminum. After galvanizing, the sheet is cooled, tested to insure uniform application of the metal coating, a chromate solution applied as a preservative, and the sheet recoiled.

The steel sheet entering Mexico is very hard with high yield and tensile strengths. You state the heat treatment in Mexico cannot be so high as to weaken the high yield and tensile strengths of this sheet, and that such treatment is closely controlled to that of the coating substance. You state further that the heat treating temperatures are well beneath the critical temperatures that result in changes in mechanical properties in the steel, and that any changes in tensile strength and yield point of the steel after the heat treatment are inconsequential. In any event, you note that mechanical property standards do not apply to commercial quality or lock-forming quality steel.

ISSUE:

Whether galvanizing full hard cold rolled steel sheet that has previously been annealed in another country effects a substantial transformation for tariff purposes.

LAW AND ANALYSIS:

In order for the full hard cold rolled steel sheet of Argentine or Czech origin to be considered substantially transformed in Mexico, so as to be regarded as a product of Mexico for tariff purposes, the evidence must show that the processing operation in Mexico results in a product other than or materially different from the product that entered Mexico. That is, a new and different article of commerce must emerge from Mexico, one having a new name, character or use. Anheuser-Busch Brewing Association v. United States, 207 U.S. 556 (1908). A mere change in a product's name, without more, is a relatively unimportant consideration in most cases. As to character and use, however, there must be evidence to show that the processing in Mexico transforms the full hard cold rolled steel sheet in such a way that it is no longer the essence of the finished product.

The steel sheet that becomes cold rolled commercial quality and lock-forming quality ASTM A-526 and ASTM A-527 steel sheet has been annealed, as described, prior to entering Mexico. This process relieves the stresses of cold rolling and makes the steel less strong, but more ductile or formable. This annealing process typically reduces tensile and yield strengths of the steel from in excess of 120,000 psi to between 30,000 to 55.000

Heating the steel in Mexico to the approximate temperature of the coating bath appears to be solely for the purpose of removing oxides from the steel's surface. This creates the proper hydrogen-nitrogen atmosphere that enables the zinc to properly bond to the steel's surface. Significant differences in temperature may also cause the zinc to harden prematurely as it is applied to the steel's surface. We are informed that the secondary heating results in no appreciable change in the steel's tensile and yield strengths.

We have previously held that galvanizing, by itself, does not constitute a substantial transformation because it is viewed as a mere finishing operation. See 081888, dated August 1, 1988. A similar result was reached in a case involving the gold-plating of watch bracelets. See 554692, dated March 8, 1988. The latter decision stressed that the plating did not change the character of the bracelets, nor did it create a new and different article.

Both decision 081888 and a similar decision on gold electroplating (555511, dated September 13, 1990), differentiated the hot-dip galvanizing process discussed in Ferrostaal Metals Corp. v. United States, 664 F. Supp. 535 (CIT 1987). In that case, annealing and galvanizing in a continuous operation resulted in a new and different article in which both the mechanical and chemical properties of the sheet were significantly changed. It is apparent that in this case the use or uses of the steel are established by the annealing operation that takes place before the steel enters Mexico. The subsequent galvanizing process in Mexico is a corrosion-resistant feature designed merely to extend the useful life of the product.

HOLDING:

Full hard cold rolled SAE/AISI grade 1006 and 1008 steel sheet that has been annealed, as described, in Argentina or Czechoslovakia, is not substantially transformed by virtue of the described galvanizing operation in Mexico, and is not a product of Mexico for tariff purposes. This steel sheet remains a product either of Argentina or Czechoslovakia.

This decision is not a definitive ruling for the purposes of interpreting the scope of an antidumping duty determination on this merchandise by the Department of Commerce.

Sincerely,

John Durant, Director
Commercial Rulings Division

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