HQ 555248: GSP treatment for certain fiberglass articles

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 555248

                          April 9, 1990


CLA-2 CO:R:C:V  555248 DSN

CATEGORY:   Classification

Mr. Richard E. Giffard
Pool Technology Limited
P.O. Box 3707
Brownsville, Texas 78520

RE:  GSP treatment for certain fiberglass articles

Dear Mr. Giffard:

     This is in response to your letter of December 2, 1988, in
which you request a ruling under the Generalized System of
Preferences (GSP)  (19 U.S.C.  2461-2466), that certain substances
imported into Mexico for use in the production of solid 
fiberglass articles undergo a double substantial transformation.
We regret the delay in responding.

FACTS:

     According to your submission, a blend of different chemical
intermediates of U.S. origin, such as styrene, phthalic 
anhydride, maleic anhydride and propylene glycol,  is exported to
Mexico where it is combined with other materials, such as
solublecobalt metallaic, dimethuylaniline,  additional styrene, and
parabenzoquinone.   These additional materials will be sourced
either in the U.S. or Mexico.   The blending and heating of the
above substances forms an uncured thermoset resin, which has the
consistency of a sticky viscous liquid.   The uncured resin can
either be stored in this form or immediately combined with
fiberglass and other additives, including a catalyst, which 
causes the resin to harden.   Before it hardens, the mixture is
injected into a mold and cured to form the final solid fiberglass
article.

ISSUE:

     Whether the uncured thermoset resin produced in Mexico from
various chemical substances constitutes a substantially 
transformed constituent material of the imported fiberglass
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articles so as to permit the cost or value of the chemical
substances to be counted toward the GSP 35% requirement.

LAW AND ANALYSIS:

     Under the GSP, eligible products of a designated beneficiary
developing country (BDC) which are imported directly into the 
U.S. qualify for duty-free treatment if the sum of the cost or
value of the materials produced in the BDC plus the direct costs
involved in processing the eligible article in the BDC is at 
least 35% of the article's appraised value at the time of its 
entry into the U.S.   See 19 U.S.C. 2463.

     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 non-Mexican chemicals must be 
substantially transformed in Mexico into a new and different
intermediate article of commerce, which is then used in the
production of the final imported article.   See 19 CFR 10.177(a).

     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).

     We find that the process of mixing and heating the chemical
intermediates and additives, resulting in an uncured thermoset
resin, constitutes a substantial transformation.  A chemical
reaction results which changes the molecular structure of certain
of the chemical substances and forms a product with a new name,
character and use.   The processing transforms the chemical
intermediates and other additives, which have a wide variety of
uses, into an article (the uncured resin) suited for specific 
uses.   Under previous rulings involving the manufacture of
products from chemical substances, we have ruled that an
intermediate created in a two (or more) step process is an 
article of commerce if the intermediate is or can be isolated, 
and it has been or can be marketed in that form.  See HRL 055716/
055717 dated July 12, 1979 (C.S.D. 80-34, 14 Cust. Bull. 780
(1980)), and HRL 061030 dated May 25, 1979.  Here, the 
intermediate product is isolated, and we are satisfied from the
information presented that the uncured thermoset resin is an
independent article of commerce, as evidenced by the BASF product
series called "Laminac", which is an uncured polyester resin 
which is widely traded around the world.

     A second substantial transformation results when the product
is catalyzed and cured in a mold.  After the curing of the
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resins, an infusible plastic product is formed with a distinct
shape and identity and its own particular use.  The finished 
solid fiberglass article clearly is a new and different article 
of commerce when compared to the uncured thermoset resin from 
which it is, in part, made.

HOLDING:

     The processing in Mexico of imported chemical intermediates
and other additives to form uncured thermoset resin results in a
substantial transformation of the chemical substances into a
constituent material of the final fiberglass article. 
Accordingly, the cost or value of the intermediate article may 
be counted toward the GSP 35% value-content requirement in
determining whether the solid fiberglass articles are entitled 
to duty-free treatment under that program.

                              Sincerely,

                              Jerry Laderberg

                         FOR  John Durant, Director
                              Commercial Rulings Division