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NY N012752




July 2, 2007

CLA-2-81:RR:E:NC:N1:117

CATEGORY: CLASSIFICATION

Mr. Yohai Baisburd
White and Case LLP
701 Thirteenth Street, NW
Washington, DC 20005

RE: The eligibility for duty free treatment for tantalum ingots from Kazakhstan.

Dear Mr. Baisburd:

In your letter dated June 5 2007, on behalf of H.C. Stark, Inc. you requested a ruling on the eligibility for duty free treatment under the General System of Preferences (GSP) of tantalum ingot imported from Kazakhstan. Specifically, you are requesting whether the processing of tantalum scrap used to create the tantalum ingot results in a double transformation in Kazakhstan.

The product to be imported will consist of tantalum ingot produced in Kazakhstan. Tantalum scrap in the form of rejected anodes and capacitors as well as capacitor parts such as casing, leads, washers etc. will be subjected to an acid digestion in hydrofluoric acid. This process is followed by an extraction/refinement process and drying which results in the creation of an intermediate product, identified as K-salt. This tantalum chemical then undergoes a sodium reduction process which results in a Tantalum precursor powder. This powder is pressed into bars and sent to a vacuum arc melting furnace where it is melted into compact forms called electrodes. They are further purified in an electron beam unit. The electrode is bombarded with electrons which gradually melt it. The melted metal is then drawn into ingots.

An article imported directly from a beneficiary developing country (BDC) may qualify for duty-free entry under the GSP only if it meets the country of origin criteria set forth in section 10.176(a), Customs Regulations (19 CFR 10.176(a)). The first criterion provides that an article must be the growth, product, manufacture or assembly of the BDC. In other words, the article must either be wholly the growth, product, or manufacture of a BDC, or it must have undergone a substantial transformation in the BDC so as to make it a product of the BDC. In addition, the sum of the cost or value of the materials produced in the BDC, plus the direct costs of processing operations performed in the BDC, must not be less than 35 percent of the appraised value of the imported article.

Section 10.177(a), Customs Regulations (19 CFR 10.177(a)), provides that the words "produced in the beneficiary developing country" refer to the constituent materials of which the eligible article is composed which are either (1) wholly the growth, product, or manufacture of the BDC, or (2) substantially transformed in the BDC into a new and different article of commerce. In the case of materials imported into a BDC, the cost or value of those materials may be counted towards the 35 percent requirement only if the imported material is first substantially transformed into a new and different intermediate article of commerce which is then used in the BDC in the production of the final imported article.

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, 69 CCPA 152, 681 F.2d 778 (1982).

In the present situation, the cost or value of the tantalum scrap may be counted toward satisfying the 35 percent value- content requirement only if there is a finding that the scrap will be subjected to a double substantial transformation in Kazakhstan. The double substantial transformation concept has its origins in the administrative and judicial interpretations of 19 CFR 10.177(a). See T.D. 76-100, 10 Cust. Bull. 176 (1976) and C.S.D. 85-25 (071827), 19 Cust. Bull. 544 (1985)

The acid digestion and extraction and refining process and the subsequent sodium reduction of the K-salt and casting into an ingot are sufficient to constitute a double substantial transformation for purposes of the GSP. Accordingly, the value of the tantalum scrap may be counted in determining the 35% value-content requirement for GSP eligibility purposes.

This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).

A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Gloria Stingone at 646-733-3020.

Sincerely,

Robert B. Swierupski
Director,

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