HQ 081333: Substantial transformation; tin-free steel; tin plate; lacquering; lithographing

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 081333

                                     April 20, 1990

             CLA-2:CO:R:C:G 081333 SS

             CATEGORY: Classification

             TARIFF NO.:

             Mr. Gary Sarbo
             Traffic Manager
             Franco Steel Corporation
             750 Third Avenue
             New York, New York 10017

             RE:  Substantial transformation; tin-free steel; tin plate;
                  lacquering; lithographing

             Dear Mr. Sarbo:

                  Your letter dated November 4, 1987, to the United States
             Department of Commerce, concerning "re-export credit" for
             certain electrolytic tin-free steel and tin plate, was
             forwarded to us for a decision on whether the processing in
             the United States constitutes a substantial transformation.
             Our ruling follows.

             FACTS:

                  (1)   Electrolytic tin plate in coil or cut sheet which
                        is lacquer coated in the United States, then re-
                        exported;

                  (2)   Electrolytic tin plate in coil or cut sheet which
                        is lithographed in the United States, with
                        customer's logo and/or design, then re-exported;
                        and

                  (3)   Electrolytic tin plate and tin-free steel which is
                        scrolled in France, lacquer coated in the United
                        States, then re-exported.

                  Tin plate and tin-free steel are manufactured as follows:
             steel slabs are heated and hot rolled to coil form on a hot
             strip mill.  The coils are continuously pickled and cold
             reduced to the desired gauges.  The cold reduced material is
             cleaned, annealed, and either temper rolled or cold reduced












                                          - 2 -

             again (double reduced tin mill products).  The temper rolled
             or double reduced coils are then processed through
             electrolytic coating lines where they are cleaned, pickled,
             and electroplated with tin or chromium.

                  Tin plate and tin-free steel are used mostly in the
             production of food containers.  Food products react with these
             base metal coatings.  A lacquer coating is applied to provide
             a protective layer which will increase the resistance to
             corrosion of the base metal from the food product.  Generally,
             lacquers are inert organic solutions of resins or mixtures of
             resins and vegetable oils which may be clear or pigmented;
             they provide an effective barrier between the metal and the
             food, and thereby extending the self life of the canned food.

                  Lithographing tin mill products is done for aesthetic or
             decorative purposes, as well as for identification of the
             contents of a container.  Lithography is a type of printing
             process, and lithographed designs are applied only on the
             surfaces of tin mill products that will be on the outside of
             the containers.  The process begins with the application of a
             base coat or sizing which requires one pass on the coating
             line.  Each additional color that is applied requires one
             additional pass.  After all the desired colors are added, a
             top coat of varnish is applied.  Lithography is a labor
             intensive process and requires skill and good control in order
             to achieve the desired art work.

                  The facts indicate that the tin plate and tin-free steel
             are imported in pre-cut plates of approximately 90-110 plates
             per base box.  The prices per base box is estimated at $27.00.
             The estimated cost for lacquering is $2.50-$4.00 per base box.
             The estimated cost for the lithography process varies
             according to the number of colors used:  the cost for up to
             four colors is approximately $9.00 per base box; five colors,
             $13.50 per base box; and six colors, $16.00 per base box.

             ISSUE:

                  Whether the processes of lacquering or lithographing tin
             plate or tin-free steel result in a substantial transformation
             of these articles.

             LAW AND ANALYSIS:

                  The country of origin of an article for U.S. tariff
             purposes is the country in which the last substantial
             transformation took place.  Substantial transformation occurs
             if the processing performed on an article results in an
             article with a name, character or use different than that
             possessed by the article that is subjected to the processing.











                                          - 3 -

             Substantial transformation cannot result from a manufacturing
             or combining process of a minor nature which leaves the
             identity of the article intact.  See, Uniroyal, Inc. v. United
             States, 3 CIT 220, 542 F. Supp. 1026, (1982, aff'd) 702 F.2d
             1020 (Fed. Cir. 1983).  See also, Anheuser-Busch Brewing Ass'n
             v. United States, 207 U.S. 556, 562 (1908), in which the court
             stated that a product cannot be said to originate in a country
             of exportation if it is not manufactured there.  There must be
             a transformation, a new and different article must emerge,
             having a distinctive name, character, or use. Id., page 562.

                  In the instant case, the lacquering process does not
             result in a product with different name, character or use.
             While it is true that the tin plate or tin-free steel has
             undergone a process, not every process results in substantial
             transformation.  See Anheuser-Busch Brewing Ass'n v. United
             States, supra, at page 562, in which the court stated that
             "[m]anufacture implies a change, but not every change is a
             manufacture, and yet every change in an article is the result
             of treatment, labor, and manipulation."  In this case, blank
             tin plates and blank tin-free steel sheets remain blank plates
             and sheets which have been enhanced by the addition of an
             inert lacquer coating on one or both sides of the plate.
             There is no change in name.  The use of the plate also remains
             the same:  the plates may be used for making a variety of
             containers for food products, or may be put to any other use
             suitable for tin mill products of the dimensions in issue.
             Although the lacquer enhances the "corrosion-resistant"
             character of the tin mill products, this does not change the
             character of the product which is imparted by the base metal,
             the electrolytic coating, the thickness of the sheets, and the
             length and width of the sheets.  Finally, the costs or value
             added to the tin plate or the tin-free steel sheets as a
             result of the lacquering process are small when compared to
             the cost of these base tin mill products.

                  However, the lithography process does result in a
             substantial transformation of the tin mill products.  In the
             instant case, the lithography process is done for aesthetic
             reasons and for product identification.  The colors and
             design, applied to the blank plates and sheets, impart a
             distinctive appearance and identity to individual articles
             that will be made from the plates and sheets.  The process is
             performed in specific steps, requires skill, and is labor
             intensive.  The lithographed tin plate and tin-free steel
             sheets are different in character, because, in this case, they
             are commercially identifiable as consisting of multiple,
             discrete articles which, when cut out and formed with can ends














                                          - 4 -

             into specific containers, are used without additional
             labeling.  The facts also indicate that the value added to the
             plate is substantial, varying from $9.00 per base box for one
             color (approximately 33 percent) to $16.00 per base box for
             six colors (approximately 59 percent).

             HOLDING:

                  The process of lacquering tin plate and tin-free steel
             sheets does not result in substantial transformation of these
             articles.

                  The process of lithographing tin plate and tin-free steel
             sheets results in substantial transformation of these articles
             and, therefore, the country of origin of the lithographed
             plates and sheets is the United States.

                  Voluntary restraint arrangements (VRA's) have been
             renegotiated with most of the steel-producing countries.
             However, these VRA's are not yet in effect.  Therefore, you
             should once again contact the Department of Commerce,
             International Trade Administration, Office of Agreements
             Compliance, in order to obtain information on the effect of
             this ruling on your request to obtain a VRA credit under the
             renegotiated VRA's for the tin plate and tin-free steel sheets
             that are exported from the United States after processing by
             lacquering or lithographing.

                                          Sincerely,




                                          Jerry C. Laderberg
                                          Acting Director
                                          Commercial Rulings Division






























































             6cc:  AD NY Seaport
             2cc:  Chief, CIE
             1cc:  Chief, Value Branch
             1cc:  Director, Trade Ops
             1cc:  Reading file
             1cc:  AC, CO
             1cc:  Director, CommRulDiv
             1cc:  Director, Agreements
                    Compliance (ITA, DOC)

             SSingh:tj:Typed 07/20/88; rewritten 10/04/88; 4/2/90 JLV