HQ 083313: Substantial Transformation of coil rolled steel

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                                       HQ 083313

                                    April 13, 1989


            CLA-2 CO:R:C:G:  083313  VEA

            CATEGORY: Classification

            TARIFF No.:

            Mr. Kenneth E. Natale, Esq.
            Duncan, Allen and Talmage
            1575 Eye Street, N.W.
            Washington, D.C. 20005-1175

            RE:  Substantial Transformation of coil rolled steel

            Dear Mr. Natale:

                 This letter is in response to your inquiry dated
            January 6, 1989, on behalf of your client,  Kern-Liebers USA
            Inc. (Kern), requesting a country of origin ruling of retractor
            springs for seat belts imported from Mexico.

            FACTS:

                 Your submission indicates that the merchandise at issue
            consists of retractor springs for seat belts processed from
            coils of rolled steel in Mexico.  Kern imports large coils of
            rolled steel under bond from West Germany to its Mexican
            affiliate.

                 The coils of rolled steel undergo the following processing
            in Mexico:

                  (1) The coil is split into strips.

                  (2) The strips are processed into springs by cutting
                      them to length and coiling.

                  (3) The spring coils are heated to 230 degrees
                      centigrade for 30 minutes.

                  (4) Each spring is then assembled into a plastic
                      spring housing, connected to a spring cup and
                      lubricated.

















                                         - 2 -

                 Kern's Mexican affiliate delivers the finished spring
            assemblies to unrelated Mexican companies, who incorporate them
            into a completed automotive seat belt retractor assembly and
            then ships them to the U.S.

                 Kern argues that the processing in Mexico substantially
            transforms the steel coil into a new and different product for
            tariff purposes, so that Mexico becomes the country of origin.

            ISSUE:

                 Whether the processing operations performed on the steel
            coil in Mexico substantially transform it so that it becomes a
            product of Mexico.

            LAW AND ANALYSIS:

                 For tariff purposes, the courts have held that a
            substantial transformation occurs if a new and different
            article emerges having a distinctive name, character or use.
            Anheuser-Busch Brewing Association v. The United States, 207
            U.S. 556 (1908) and  Uniroyal Inc. v. United States, 542 F.
            Supp. 1026 (1982).

                  Anheuser-Busch involved an action for drawback on corks
            imported from Spain into the United States.  The corks
            underwent a cleansing and coating process in the U.S.  The
            court held that this process did not substantially transform
            the merchandise into a different article and noted that "a cork
            put through the claimant's process was still a cork."  The
            court in Uniroyal also followed the rationale of the Anheuser-
            Busch decision and looked to both the processing that the
            article undergoes and the nature of the change in the article
            after processing.  In that case which dealt with foot wear
            uppers, the attachment of an outer sole to the upper was held
            not to substantially transform the upper since it was a minor
            manufacturing or combining process which left the identity of
            the upper intact.

                 Applying the test set out in Anheuser-Busch and Uniroyal,
            Customs has addressed the issue of substantial transformation
            in cases involving steel coil.  In a ruling letter dated
            November 21, 1985 (File # 553739 KP), Customs ruled that
            processing operations performed on imported coils substantially
            transformed the coil so that it became a product of Panama.
            The processing conducted on the coil included: (1) uncoiling,
            flattening, and slitting the strip; (2) forming the strip into
            tubes; (3) welding the seams; and (4) cutting the tube to
            specific lengths.  We ruled that this process resulted in a new













                                         - 3 -

            and different article.  The steel coils imported into Panama
            were flat rolled steel materials that lacked the
            characteristics of steel tubes.  Thus, the processing
            operations resulted in a product which had lost the identifying
            characteristics of the steel sheet in coil form.

                 Based on the test outlined in Anheuser-Busch and in
            Uniroyal, a substantial transformation occurs if two things
            exist.  First, a new and different article emerges, and
            second, the new article has a distinctive name, character and
            use.  The processing in Mexico in this case substantially
            transforms the steel coils into a new and different article,
            having a distinctive name, character or use.  Kern imports
            large coils of rolled steel into Mexico.  After it is imported,
            the coil is slit into strips, the strips are processed into
            springs and heated to 230 degrees centigrade for 30 minutes;
            and each spring is assembled into a plastic spring housing,
            connected to a spring cup and lubricated.  Spring assemblies
            are the end result of this processing.  Clearly, a new and
            different article emerges.  Contrary to both Anheuser-Busch and
            Uniroyal, the identity of the imported article does not remain
            intact.  The steel is no longer flat rolled steel material in
            coils, but has been manufactured into springs, which are used
            in automotive seat belt retractor assemblies.

                 The new article also has a distinctive name, character
            and use.  The article imported into Mexico comes in as steel
            coil, but after the processing becomes spring assemblies.  The
            processes performed on the steel coil at issue in this case
            result in the merchandise having a new character.  The
            merchandise comes into Mexico as a flat rolled steel material.
            However, after the processing, it is changed from steel sheets
            to springs.  The new article also has a distinctive use.
            Springs are used specifically in automotive seat belt retractor
            assemblies, a use for which the steel sheets in coil are unfit.

                 The imported merchandise in this case is similar to the
            merchandise in Customs' ruling of November 21, 1985, and
            undergoes some of the same processing.  The coils are cut into
            strip, cut to length and coiled.  As in that ruling, the steel
            coils imported into Mexico in this case are also steel
            materials that lack the characteristics of springs.  Thus, the
            processing operations result in a new and distinct product
            which has a new name, identifying characteristics and a
            different use from that of the steel coils.

















                                         - 4 -

            HOLDING:

                 The processing operations performed in Mexico
            substantially transform the steel coil; thus Mexico is the
            country of origin of the springs for tariff purposes.

                 As requested, your samples are being returned.

                                        Sincerely,




                                        John Durant, Director
                                        Commercial Rulings Division









































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