HQ 953674: Steel Sheet in Coils Recovery Annealed and Galvanized in Mexico from Full Hard Cold Rolled Steel; Corrosion- Resistant Steel Sheet, ASTM A 446 Grade E, ASTM A 792 Grade 80; Recovery Annealing, Recrystalization Annealing; Substantial Transformation; Country of Origin; Ferrostaal Metals Corp. v. United States, 11 CIT 470 (1987), HQ 953414

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 953674

                            DECEMBER 14, 1993

CLA-2:CO:R:C:M    953674 JAS

CATEGORY:   Classification

TARIFF NO.: None

Mr. Vincent Bowen, Esq.
Willkie Farr & Gallagher
1155 21st. St,N.W.
Washington, D.C. 20036-3384

RE:  Steel Sheet in Coils Recovery Annealed and Galvanized 
     in Mexico from Full Hard Cold Rolled Steel; Corrosion-    
     Resistant Steel Sheet, ASTM A 446 Grade E, ASTM A 792 
     Grade 80; Recovery Annealing, Recrystalization 
     Annealing; Substantial Transformation; Country of Origin;
     Ferrostaal Metals Corp. v. United States, 11 CIT 470 (1987),
     HQ 953414  

Dear Mr. Bowen:

     In your letter of February 5, 1993, supplemented on May 5,
1993, on behalf of Duferco Ltd., U.S.A., you inquire as to the
country of origin of certain corrosion-resistant steel sheet
processed in Mexico from steel sourced in the United States, 
Argentina and the Czech Republic (formerly Czechoslovakia).  

     We addressed the country of origin of annealed and
galvanized cold-rolled sheet of commercial quality (A-526) and
lock-forming quality (A-527) in HQ 953414, dated April 12, 1993.

FACTS:

     The merchandise entering Mexico is full hard cold-rolled
steel sheet in coils.  It is processed in Mexico into corrosion-
resistant structural quality steel sheet conforming to either
ASTM A-446 Grade E (zinc coated) or ASTM A-792 Grade 80
(aluminum-zinc coated).  These grades, with their high yield and
tensile strengths, are suitable for use in roofing and siding for
buildings and similar structural uses.

     In Mexico, the sheet is uncoiled, cleaned and the sides
trimmed.  The sheet is then passed through two heating zones
where it is heated to a maximum temperature of 600 degrees C
(1112 degrees F) for 25 seconds, and through two cooling zones
where the temperature is reduced to 880 degrees F.  You describe
this as a pre-heating that brings the steel to the approximate                              - 2 -

temperature of the coating materials to be applied and insures
that the coating material adheres to the steel.  The
controlled heating also insures that the steel does not reach
annealing temperatures which would significantly reduce its
strength and hardness and make it unsuitable for structural
applications.  After the controlled heating, the steel is dipped
into a bath either of molten zinc in a galvanizing process or a
mixture of zinc and aluminum.  

     You indicate that in both cases the chemical composition of
the steel is unaffected by the processing.  The grain structure
is not recrystallized and the atomical pattern or the
distribution of carbon, nitrogen and other elements is the same
after the processing as before.  The processing is said to result
in virtually no change in the steel's hardness, yield and tensile
strength.  Upon completion of the described processing the steel
is tested to insure uniform application of the coating, and a
chromate preservative is applied, after which the steel is
recoiled.  This is the condition of the merchandise as imported.

     You contend that because the described processing only
provides a corrosion-resistant coating, and the steel's sole use
in structural applications remains unchanged, the processing does
not substantially transform the steel into a product of Mexico
for tariff purposes.

ISSUE:

     Whether the heat treating and coating of full hard cold
rolled steel sheet, as described, effect a substantial
transformation for tariff purposes.

LAW AND ANALYSIS:   

     In order for the full hard cold rolled steel of U.S.,
Argentine and Czech origin to be considered substantially
transformed in Mexico, so as to be regarded as a product of
Mexico for tariff purposes, the evidence must show that the
processing in Mexico results in a product other than or
materially different from its constituent components.  That is, a
new and different article of commerce must emerge from the
processing, one having a new name, character or use.  Anheuser-
Busch Brewing Association v. United States, 207 U.S. 556 (1908). 
There must be evidence to show that the processing in Mexico
transforms the U.S., Argentine and Czech steel in such a way that
it is no longer the essence of the zinc coated and aluminum-zinc
alloy-coated steel sheet that enters the Customs territory. 

     The full hard cold rolled steel that enters Mexico is SAE/
AISI carbon steel grades 1006 and 1008 that has not been heat
treated.  The commercial uses of steel in this condition are
negligible.  The steel becomes useful only after it is heat                              - 3 -

treated in some way.  The heat treating and coating of full hard,
cold rolled steel sheet was considered by the Court in Ferrostaal
Metals Corp. v. United States, 11 CIT 470 (1987).  The Court
observed that whether these processes change the character of the
imported merchandise depends on the nature of the operations and
their effect on the properties of the steel.  The Ferrostaal
court distinguished "recovery annealing" from "recrystalization
annealing" and noted that neither changes the actual chemical
composition or dimensions of the sheet.  In strongly worded
dictum, however, the Court noted that recovery annealing used in
producing ASTM A-446 Grade E steel sheet of the type in issue
here resulted in a transformation less substantial than that
resulting from recrystalization annealing, since steel grains do
not form, grow or change shape during recovery annealing. 
Customs has independently researched the issue and our findings
are consistent with the Ferrostaal Court's description of
recovery annealing and its effects.  Our findings are also
consistent with the metallurgical analysis of actual samples of
the steel you have submitted which purports to evidence no change
in grain structure and virtually no change in hardness, tensile
and yield strengths.
  
     The described processing has not been shown to be sufficient
to transform a hard, brittle steel dedicated solely to structural
uses into a steel with a wider range of commercial or formable
applications.  It remains structural quality steel. 

HOLDING:

     The processing of full hard cold rolled steel sheet in
Mexico by a combination of recovery annealing and coating with
molten zinc or a zinc/aluminum alloy, as described, does not
substantially transform the steel into a product of Mexico for
tariff purposes.  The steel remains a product of the country in
which it was melted and poured.

     This decision is not a definitive ruling for the purposes of
interpreting the scope of any antidumping duty determination on
this merchandise that may be pending before the Department of
Commerce.
                              
                              Sincerely,


                              John Durant, Director
                              Commercial Rulings Division