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HQ 953601




May 14, 1993

CLA-2:R:C:M 953601 DFC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9306.30.40; 9305.29.50

Aubrey G. White
President and CEO
Imperial Magnum Corporation
P.O. Box 249
Oroville, WA 98844

Dear Mr. White:

In a letter dated March 1, 1993, you inquired as to the tariff classification under the Harmonized Tariff Schedule of the United States (HTSUS), of unprimed brass cartridge cases and rifle barreled actions.

FACTS:

The cartridge cases will be manufactured in Venezuela from brass cups of U.S. origin. Brass cups are cylindrical solid pieces of metal about one third the height of a finished cartridge case with a shallow depression to simulate a cup.

The rifle barreled actions will be manufactured in Finland. The term "action" is defined as the breech mechanism of a firearm by which it is loaded, fired and unloaded. The drawing submitted with the inquiry shows that the action is permanently fitted with a barrel, forged or welded as (opposed to a screwed in barrel).

ISSUE:

Whether the brass cartridge cases from Venezuela are entitled to duty-free treatment under the Generalized System of Preferences (GSP)?

LAW AND ANALYSIS:

Under the GSP, eligible articles the growth, product or manufacture of a designated beneficiary developing country (BDC) which are imported directly into the customs territory of the U.S. from a BDC may receive duty-free treatment if the sum of 1) the cost or value of materials produced in the BDC, plus 2) the direct costs of the processing operations in the BDC, is equivalent to at least 35% of the appraised value of the article
at the time of entry. See 19 U.S.C. 2463(b).

Where an article is produced from materials imported into the BDC, as in this case, the article is considered to be a "product of" the BDC for purposes of the GSP only if those materials are substantially transformed into a new or different article of commerce. "[A] substantial transformation occurs when an article emerges from a manufacturing process with a name, character, or use which differs from those of the original material subjected to the process." Torrington Co. v. United States, 764 F.2d 1563, 1568, 3 CAFC 158, 163 (Fed. Cir. 1985).

The cost or value of materials which are imported into the BDC to be used in the production of the article, as here, may be included in the 35% value-content computation only if the imported materials undergo a double substantial transformation in the BDC. That is, the brass cups of U.S. origin must be substantially transformed in Venezuela into a new and different intermediate article of commerce, which is then used in Venezuela in the production of the final article-- the brass cartridge cases. See section 10.177(a), Customs Regulations (19 CFR 10.177(a), and Azteca Milling Co. v. United States, 703 F. Supp. 949 (CIT 1988), aff'd 890 F.2d 1150 (Fed. Cir. 1989).

Venezuela is a BDC. See General Note 3(c)(ii)(A), HTSUS. Moreover, the applicable tariff classification of the cartridge cases, subheading 9306.30.40, HTSUS, is a GSP eligible provision. Therefore, the cartridge cases will receive duty-free treatment under the GSP if they are "products of" Venezuela, the 35% value- content requirement is satisfied, and they are imported directly to the U.S. from Venezuela.

The forming of the brass cartridge cases in Venezuela from the U.S. origin brass cups clearly results in a substantial transformation of the cups into new or different articles of commerce which are considered "products of" Venezuela. However, based on the information provided, it does not appear that a double substantial transformation results from the foreign forming process. Therefore, the cost or value of the brass cups may not be counted toward the 35% requirement.

Rifle Actions

It is our position that the rifle barreled actions are classifiable under subheading 9305.29.50, HTSUS, which provides for parts and accessories, of rifles, other.

HOLDING:

The unprimed brass cartridge cases are classifiable under subheading 9306.30.40, HTSUS, which provides for cartridges and parts thereof, cartridges and empty cartridge shells. The applicable column 1 rate of duty for this provision is 5% ad valorem.

The brass cartridge cases are considered "products of" Venezuela. Therefore, they will be entitled to duty-free treatment under the GSP if they are imported directly from that country and the sum of the cost or value of any materials produced in Venezuela plus the direct processing costs incurred there equals or exceeds 35% of the appraised value of the imported cartridge cases.

The rifle barreled actions are classifiable under subheading 9305.29.50, HTSUS, with duty at the rate of 3.6% ad valorem.

Sincerely,

John Durant, Director
Commercial Rulings Division


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