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HQ 559057




December 13, 1995

CLA-2 R:C:S 559057 MLR

CATEGORY: CLASSIFICATION

District Director
U.S. Customs Service
Lincoln Juarez Bridge, Building #2
P.O. Box 3130
Laredo, Texas 78044-3130

RE: Request for Reconsideration of Internal Advice 33/93 (HRL 557387); Eligibility of glass face plates for duty-free treatment under the Generalized System of Preferences (GSP)

Dear Sir:

This is in response to your memorandum of February 21, 1995, forwarding a request for reconsideration of Internal Advice 33/93 {Headquarters Ruling Letter (HRL) 557387 dated October 1, 1993}, filed by Adduci, Mastriani, Schaumberg, Meeks & Schill, L.L.P., on behalf of Corning Glass Works ("Corning"), concerning the eligibility of glass face plates for duty-free treatment under the Generalized System of Preferences (GSP). A sample of a glass profile from Korea, a sample of a finished FTM glass TV panel, and supplemental information were submitted on September 12, 1995.

FACTS:

HRL 557387 analyzed the eligibility for duty-free treatment under the GSP of 14 inch FTM Glass TV Panels imported by Corning from Mexico. Rolled glass profiles of Korean origin were shipped to Mexico for processing into face plates for cathode ray tubes. In HRL 557387 it is stated that in Mexico, the glass profiles were surface ground and edge worked using "diamond grindless" on both sides of the glass profile. This was referred to as the "rough grind." Next, both sides of the glass profile and edges were subjected to an intermediate grinding on a "Hoffman machine." One side of the glass panel was then polished using a "Lapmaster machine." Finally, the panel was finished on a "Speedfam machine" to make "Antiglare," also described as a 14 inch FTM glass face plate for television tube-antiglare. The panel was then exported to the U.S. where it was incorporated in cathode ray tubes for television receivers.

HRL 557387 found that the underlying chemical, physical, and mechanical properties or structure of the rolled glass profiles were not changed in any significant degree by the grinding, polishing, and minor edgeworking operations performed in Mexico. Although the appearance was changed by the removal of a flange by edgeworking, the polishing of one side of the product, and the application of an anti-glare finish to the other side, HRL 557387 stated that the essential form, shape, and character of the glass product was determined by the manufacturing operations performed in Korea, and the product was substantially complete when it left Korea. Accordingly, the glass plates were not entitled to duty-free treatment under the GSP. It is also noted that the record of HRL 557387, while not presented in the facts, states that the only commercial use of the Korean rough profiles is "as material for manufacturing into face plates for cathode ray tubes."

Additional facts are now presented which allegedly prove that the Korean rolled raw glass profiles were substantially transformed into a "product of" Mexico. The sample glass profile submitted measures approximately 15 x 12 inches and 12/16 inch thick. One side of the glass profile has an edge which at its highest point measures 3/16 inch. Both sides of the glass profile also are shiny, so that the profile is transparent. It is stated that in Korea, a pressing process formed the glass profile. Molten glass is pressed in a machine mold that produces a flat glass profile with rounded corners. After the pressing process, the glass goes through a lehr, a furnace which controls the cooling of the glass to assure that the stress levels are at a commercially acceptable level to avoid breakage.

Furthermore, it is stated that the Mexican operations transform the clear, rough glass, which allegedly has no commercial utility, into a translucent screen capable of carrying and transmitting a cathode ray-generated image on its face. The tolerance and characteristics imparted by the Mexican operation are stated to be exacting, and provide the critical physical characteristics which are required for a face plate in a cathode ray tube.

More detailed facts of the Mexican operations are presented. The first operation is a process known as edge grinding. This removes an appendage of glass, ranging from 1/8 to 1/4 inch, projecting perpendicularly off one side of the glass plate. This glass is an excess profile resulting from pressing molten glass in a mold during the forming stage. The next Mexican operation is stated to involve rough grinding both surfaces of the glass profile on a Mattison diamond wheel grinder. This process is claimed to significantly reduce the width of the glass by at least .040 inch, in order to provide a gross parallel alignment of the two sides of the profile. Such flatness is stated to be critical to the ability of the finished panel to function in its intended capacity as a refractive surface for the images projected by the cathode ray tube of a video monitor. The mattison grinder removes up to several hundredths of an inch of glass from both sides of the profile, with the actual amount removed dependant upon the width of the raw profile. The third operation is fine grinding the profiles in Hoffman Machines which are dual-sided grinders configured to move the profile over a grinding surface. The grinding is performed to both sides of the profile to ensure that both sides are parallel. This fine grinding removes approximately .008 to .011 inch from the profiles. The machine is generally operated with 10 panels being processed at the same time, and the process takes ten minutes. Lastly, the profiles are subjected to further fine working in a Lapmaster polishing machine. The Lapmaster are single-sided polishing machines in which the profiles are held in a vacuum chuck fixture and lowered against a rotating felt pad that is flooded with an abrasive slurry, a thin watery mixture of a fine insoluble grit material such as clay or cement which acts as an abrasive to create a polished surface. It is stated that this polishing imparts the critical translucency to the profile and removes approximately .001 inch. The sample of the finished article submitted measures approximately 15 x 12 inches and 5/8 inch thick. One side of the glass profile is shiny, whereas the other side is matte so that the finished article is translucent.

It is stated that past entries of the raw Korean product were entered into the U.S. under subheading 7003.30.00, Harmonized Tariff Schedule of the United States (HTSUS), which provides for "Cast glass and rolled glass, in sheets or profiles, whether or not having an absorbent or reflective layer, but not otherwise worked: profiles." After undergoing the Mexican operations, it is stated that the product is entered under subheading 7011.20.00, HTSUS, which provides for "Glass envelopes (including bulbs and tubes), open, and glass parts thereof, without fittings for electric lamps, cathode-ray tubes or the like: For cathode-ray tubes."

ISSUE:

Whether the processing of the Korean glass profiles in Mexico in the manner set forth above constitutes a substantial transformation of the glass into a "product of" Mexico for purposes of the 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 performed in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the U.S. See 19 U.S.C. 2463(b).

At the time the articles at issue were entered, Mexico was a designated BDC, and the glass plates were entered under subheading 7011.20.00, HTSUS, a GSP-eligible provision. Therefore, the glass plates will receive duty-free treatment if they are considered to be a "product of" Mexico, and the 35 percent value-content requirement is met.

Merchandise is considered the "product of" a BDC if it either is wholly the growth, product, or manufacture of a BDC or has been substantially transformed there into a new or different article of commerce. 19 U.S.C. 2463(b)(2). The test for determining whether a substantial transformation has occurred is whether an article 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, 681 F.2d 778, 782 (CCPA 1982).

As support for the proposition that the raw glass was substantially transformed in Mexico, counsel states that the value-added is significant. It is also claimed that the raw glass profiles were not useable for their intended use, and that the machining operations in Mexico made the product useable for their specific purpose, thereby resulting in a substantial transformation. Counsel alleges that the Mexican operations are similar to the scenarios presented in C.S.D. 89-121 (July 25, 1989), where Customs addressed machining operations performed on blanks for socket wrenches, and C.S.D. 90-53 (February 12, 1990) which discussed surgical instruments. In both cases, Customs discusses operations such as the removal of minor imperfections or polishing, the marking with product identifications, and finish polishing which have not resulted in changes in origin, as opposed to significant machining operations which have resulted in substantial transformations.

In particular, counsel cites C.S.D. 89-121. In that case, forgings, resembling the size and shape of the finished articles but not yet machined to their actual dimensions, were contrasted to the forgings in T.D. 74-12(3) and HRL 711320 which were fully machined at the time of importation. In C.S.D. 89-121, counsel emphasizes that Customs considered the machining operations to be important in changing the fundamental character of the imported article from forgings to sockets, which enabled the product to be used as socket wrench tools; whereas T.D. 74-12(3) and HRL 711320 only involved cosmetic of minor processing operations such as identification marking, sand blasting, tumbling and plating.

Consequently, counsel alleges that the Mexican processes involve substantial machining which bring the raw blanks to precise dimensional tolerances, then impart a functional surface characteristic critical to the function of the face-plate of a cathode ray tube. Counsel states that the raw blank is no more an essentially complete face-plate than socket blanks are essentially complete sockets, and that the raw blanks have no functional utility as a finished product. Lastly, counsel points out that the Mexican operations which changed the raw glass from subheading 7003.30.00 to 7011.20.00, HTSUS, are considered a good of Mexico for purposes of the North American Free Trade Agreement (NAFTA) country of origin interim regulations set out at 19 CFR Part 102, which provided that the origin will change when there is "a change to heading 7010 through 7020 from any other heading, except from heading 7007 through 7020."

We note that subsequent to C.S.D. 89-121, the Court of International Trade ruled on the amount and kind of further processing required to substantially transform tools. See National Hand Tool Corp. v. United States, Slip. Op. 92-61 (CIT April 27, 1992). In National Hand Tool, hand tool components, cold-formed or hot forged into their final shape, were imported into the U.S. where they were used to produce flex sockets, speeder handles, and flex handles. In the U.S., the speeder handles were reshaped by a power press, the grip of the flex handles were knurled, and the articles were subjected to a heat treatment which strengthened the surface of the steel; cleaned by sandblasting, tumbling, and/or chemical vibration before being electroplated. In certain instances, various components required some assembly. Although the court stated that a predetermined use would not preclude the finding of a substantial transformation, but rather, must be based on the totality of the evidence, no substantial change in name, character or use was found. Slip. Op. 92-61, at 7, 8. It for this reason that the notice of proposed rulemaking published at 60 FR 22312 (May 5, 1995), proposes to change the tariff shift rule for heading 7010-7018, which no longer would result in a change in origin.

In HRL 555923 dated June 17, 1991, Customs considered several raw materials, such as base metals in cylindrical-shaped rods of 1-4 inches in diameter and 3-36 inches in length; specialty glasses in rods or slabs of cylindrical or rectangular dimensions between 1-10 inches; and dielectrics which were chemical components generally in rectangular sheets in dimensions of 5-25 inches in length and width, and 1/10 of an inch to 1 inch in thickness, or cylindrical rods 1-4 inches in diameter and 1-10 inches in length. These materials were shipped to Mexico, where they were processed into lenses. First, the raw material were cut, sawed, or scribed into smaller pieces of approximately 1/8 to ½ inch in width, and 1-4 inches in diameter or squares, depending on the form of the raw material in question. The rough-cut blanks were then mounted onto an edging machine which ground the edge of the blank to a precise dimension, accurate to within a few thousandths of an inch. The precision-edged rough-cut blanks were then mounted onto a Blanchard milling machine which milled the top and bottom surface until both were reasonably flat. After this process, the blanks were mounted on a curve generating machine, after which the blanks were polished by grinding each surface with powders. Relying, on Superior Wire v. United States, 669 F. Supp. 472 (CIT 1987), aff'd 867 F.2d 1409 (Fed. Cir. 1989), where the court held that wire rod drawn into wire was not substantially transformed into a product of Canada, but was rather the same product in different stages of production, HRL 555923 held that while the raw materials clearly underwent one substantial transformation and the polished blanks were new and different articles of commerce, once the raw materials were cut into lens shape, they had a predetermined character and use as optical elements, and the variable involved in the Mexican processing was the tolerance necessary for each type of lens. Accordingly, the precise grinding operations for dimension and tolerance was determined to have begun during the production of the precision-edged rough-cut blanks and continued through the polishing operation. Therefore, no double substantial transformation was found, but rather the creation of the rough-cut blanks and generated blanks was considered a continuous manufacturing process.

Customs has also considered several situations concerning the cutting of crystal. In HRL 043004 dated May 26, 1976, it was held that polishing and placing flower designs on wine glasses was not a substantial transformation. Similarly, in HRL 733036 dated April 9, 1990, Customs held that simple flat cuts did not substantially transform finished champagne flutes. These cases were distinguished from HRL 734283 dated June 16, 1992, where crude crystal blanks with the general shape and dimensions of the finished article were substantially transformed since the edges of the blanks were very rough, their appearance was cloudy and they contained numerous imperfections such as air bubbles, and the extensive hand-cutting resulted in elaborately finished pieces of cut crystal. The essence of the finished article was found in its design and appearance, and although the blanks were dedicated to use, a change in use was found because the finished article was a decorative item used for display.

In HRL 554914 dated August 11, 1988, Customs held that chemical substances combined in Mexico to create a polymer which became a solid mass resulting in a solid plastic lens constituted a substantial transformation; however, the subsequent dipping of the lens into a hard coat solution and into an annealing pallet did not constitute another substantial transformation for purposes of the GSP. In addition, Customs held in HRL 734091 dated June 2, 1992, that cold-rolled stainless steel sheet with a 2B or BA finish, converted by a multi-step process which involved deburring the edges of the sheet, grinding the surface of the sheet, and passing the sheet through a total of 14 polishing steps to produce steel sheet with a No. 8 finish, did not constitute a substantial transformation.

Returning to the case at hand, it appears that the raw glass profiles are already in their final shape by having been pressed in Korea; and the cooling process performed in Korea is critical in assuring that the stress levels are acceptable for their intended use. Furthermore, the raw glass profiles appear to be in the same stage of the production process as the lens shaped blanks in HRL 555923. Counsel claims that this case differs from HRL 555923 in that the finished product imported from Mexico is not in the same stage of production as the glass which was sent from Korea to Mexico, and because the Mexican processing creates from a piece of glass which previously had no commercial use a finished product ready for installation as a face plate for a cathode ray display tube used in a computer monitor. However, while the Korean piece of glass may not be useable, the record of HRL 557387 indicates that the only commercial use of the Korean rough profiles is "as material for manufacturing into face plates for cathode ray tubes." Furthermore, the Mexican operations of edging, grinding, and polishing while important in achieving the translucency required, was not found to constitute a substantial transformation in HRL 555923 and HRL 734091. Counsel claims that the glass in this case underwent more than a change in their aesthetic appearance which was a reason for not finding a substantial transformation in HRL 734091. However, it is also clear that the blanks in HRL 555923 also underwent more than a change in their aesthetic appearance and still were not considered substantially transformed. We note that in Anheuser-Busch Brewing Ass'n v. United States, 297 U.S. 556, 562 (1908), the United States Supreme Court stated (albeit in the context of a drawback case) that:

[m]anufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labor, and manipulation. But something more is necessary as set forth and illustrated in Hartranft v. Wiegmann, 121 U.S. 609. There must be a transformation; a new and different article must emerge, 'having a different name, character, or use.'

In addition, in this case, the edging, grinding, and polishing only minimally changes the shape of the profiles. While the translucency is stated to be important in allowing the screen to carry an image, thus perfecting its predetermined use, the same can be said for the operations performed in the cases above, namely, the lathing and drilling, or the knurling and press shaping are important in creating usable tools; the edging, milling and polishing are important in creating usable lenses; and the deburring, grinding, and polishing were important in creating the steel sheet with a different finish for different uses. Accordingly, based on the foregoing, we do not find that the operations performed in Mexico create a new article of commerce.

HOLDING:

Based on the information provided, we are of the opinion that the edging, grinding, and polishing operations performed in Mexico to the raw glass profiles to create translucent cathode ray tubes does not constitute a substantial transformation. Therefore, as the cathode ray tubes are not "products of" Mexico, they are not entitled to duty-free treatment under the GSP. Accordingly, HRL 557387 is affirmed.

This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Rulings Module in ACS and the public via the Diskette Subscription Service, Freedom of Information Act and other public access channels.

Sincerely,

John Durant, Director

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