HQ 554914: Ruling request concerning the eligibility for duty-free treatment under the GSP of, and the tariff classification and country of origin marking requirements applicable to, certain opthalmic plastic lenses from Mexico.

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 554914

                                   August 11, 1988


          CLA-2 CO:R:C:V  554914 CW/JD

          CATEGORY:  Classification; Valuation; Marking

          TARIFF NO.:  9001.50.00, HTSUS (708.01, TSUS)

          Mike Ainsa, Esq.
          Grambling & Mounce
          Seventh Floor
          Texas Commerce Bank Building
          El Paso, Texas 79901-1334

          RE:  Ruling request concerning the eligibility for duty-free
               treatment under the GSP of, and the tariff classification
               and country of origin marking requirements applicable to,
               certain opthalmic plastic lenses from Mexico.

          Dear Mr. Ainsa:

               This is in reference to a letter of December 31, 1987, from
          the law firm of Kemp, Smith, Duncan & Hammond, requesting a
          ruling on behalf of Epson El Paso, Inc. ("importer") concerning
          whether the cost or value of certain substances of U.S. origin
          used in the production in Mexico of molded plastic lenses may be
          included in the 35 percent value-content requirement for purposes
          of the Generalized System of Preferences (GSP).  You advise that
          your law firm, Grambling & Mounce, has replaced the above firm as
          counsel for the importer in connection with this ruling request.
          In addition to the above issue, our advice also is requested in
          regard to the tariff classification and country of origin marking
          requirements applicable to the imported lenses.

          FACTS:

               The ruling request states that your client plans to import
          several types of opthalmic plastic lenses to be manufactured by
          its wholly-owned subsidiary in Mexico.  According to the December
          31, 1987, letter, each of the different types of lenses will be
          produced in essentially the same manner from raw materials of
          U.S. origin.  These materials consist of the following three
          chemical substances:  diallyl diglycol carbonate (a monomer in
          liquid form), diisopropyl peroxydicarbonate (an initiator in
          solid form), and Ultra Violet Absorber ("UVA", a solid).  The
          monomer, a stable, passive substance, and the initiator, a highly
          active and reactive substance, are combined in distinct batches














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          to which is added the UVA, also a passive substance.  We are
          informed that when the monomer and initiator are combined, they
          create a new and distinctly different substance -- a polymer.
          The combination of the monomer and initiator causes an
          irreversible chemical reaction to take place resulting in the
          growing viscosity of the polymer, until, unless cooled, the
          polymer becomes a solid mass.

               The cooled polymer is then injected into a glass mold
          assembly which is placed in an air oven for heat curing at
          precisely-controlled temperatures over specific time sequences.
          The December 31, 1987, letter advises that during the curing
          process the polymer undergoes further irreversible chemical
          changes, resulting in a solid plastic lens.  Upon completion of
          the curing process, excess polymer is removed from the glass mold
          assembly and the assembly is rough cleaned in an organic solvent
          and placed in the air oven to maintain the temperature of the
          mold assembly and the molded lens.

               After the glass mold is removed from the air oven, the
          molded lens is released from the mold, cleaned, and placed in a
          Coating Basket.  In this basket, the lens is dipped into a "Hard-
          Coat-Solution", slowly withdrawn, and then heated to vaporize any
          organic solvent present on the lens.  Finally, the lens is
          removed from the Coating Basket, placed on an annealing pallet,
          and annealed in an Air Oven to stabilize the structure of the
          lens and to remove any structural stresses resulting from the
          molding and heating processes.

               It is contended that because the combining of the monomer
          and the initiator produces a new chemical substance --
          a polymer -- and begins a reaction process that, once started, is
          irreversible, a substantial transformation of the monomer,
          initiator, and UVA occurs.  Thus, your client believes that the
          resulting polymer constitutes a new and different article of
          commerce, possessing a name, character and use that is different
          from those of the three predecessor chemical substances.
          Moreover, we are asked to confirm that the production of the
          finished plastic lenses from the polymer represents a second
          substantial transformation, permitting the cost or value of the
          monomer, initiator, and UVA to be counted for purposes of
          satisfying the GSP 35 percent requirement.

               Regarding the tariff classification of the imported molded
          lenses, it is your client's position that these articles should
          properly be classified in item 708.01, Tariff Schedules of the
          United States (TSUS).















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               Concerning the applicability of country of origin marking
          requirements to the imported plastic lenses, we note that the
          Manufacturing Process Description enclosed with the December 31,
          1987, ruling request refers in item XXIV to the fact that the
          lenses are marked by the use of marking machinery with the Seiko
          logo.  In items XXV-XXVII, reference is made to inspection of and
          labeling of the "power" of each lens.  In items XXVIII and XXIX,
          it is stated that each lens is placed in an envelope which bears
          country of origin information, the lens envelopes are placed in
          lens packages, and the packages are placed in lens cases that
          indicate country of origin.

               In the U.S., laboratories or optical houses will grind and
          fit these lenses to eyeglass frames.  You advised a member of my
          staff by telephone that the words "grind and fit" mean that the
          outer rim of the lenses will be shaped to allow insertion in
          various shapes of eyeglass frames.  It is your understanding that
          the vision corrective qualities of the lenses are imparted during
          the manufacturing process in Mexico.  That appears consistent
          with the fact that the "power" of each lens is labeled before
          export from Mexico.

          ISSUE:

               1.  Whether the polymer produced in Mexico from certain
          chemical substances of U.S. origin constitutes a substantially
          transformed constituent material of the imported molded plastic
          lenses so as to permit the cost or value of the U.S. chemical
          substances to be counted toward the GSP 35 percent requirement.

               2.  Whether the imported lenses are substantially trans-
          formed in the U.S. by being ground and fitted to eyeglass frames
          so as to make the domestic grinder/fitter the ultimate purchaser
          of the lenses for country of origin marking purposes.

               3.  Whether the imported lenses are properly classifiable in
          item 708.01, TSUS (subheading 9001.50.00, Harmonized Tariff
          Schedule of the United States (HTSUS)).

          LAW AND ANALYSIS:

               With respect to the first issue, section 10.176(a) of the
          Customs Regulations (19 CFR 10.176(a)) provides that an article
          may qualify for duty-free treatment under the GSP only if the sum
          of the cost or value of the materials produced in the beneficiary
          developing country (BDC), plus the direct costs of processing
          operations performed in the BDC, are not less than 35 percent of
          the appraised value of the imported article.  














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               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.  Thus, the cost or value of materials not wholly the
          growth, product, or manufacture of the BDC (i.e., materials
          imported into the BDC) may be counted toward the 35 percent
          requirement only if those materials are first substantially
          transformed into a new and different intermediate article of
          commerce which is then used in the BDC in the production of an
          eligible article which is imported directly into the U.S.

               A substantial transformation occurs when a new and different
          article of commerce emerges from a process with a distinctive
          name, character or use different from that possessed by the
          original material that was processed.  See Texas Instruments,
          Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982), and
          Torrington Co. v. United States, 8 CIT 150, 596 F. Supp. 1083
          (1984).

               It is clear in this case that the three chemical substances
          of U.S. origin will undergo a substantial transformation in
          Mexico since the molded plastic lenses are new and different
          articles of commerce when compared to the chemical substances
          used in producing them.  The question to be resolved is whether,
          during the production of the lenses, the chemical substances
          exported to Mexico are substantially transformed into a separate
          and distinct intermediate article of commerce (the polymer) which
          is then used in the production of the plastic lenses.

               Based upon the information presented, we are unable to
          conclude that the polymer produced by combining the U.S. raw
          materials constitutes a separate and distinct article of commerce
          which is marketed as such.  No information or evidence has been
          provided which indicates that the polymer involved in this case
          is a distinct commercial entity in the sense that it is
          separately bought-and-sold or is ready to be marketed as such.
          Therefore, it is our opinion that the production of the molded
          plastic lenses in Mexico constitutes a continuous manufacturing
          process resulting in the creation of only one separately
          identifiable article of commerce which is the article
          imported into the U.S.

               Concerning the country of origin marking issue, section 304
          of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides
          that every article of foreign origin (or its container) imported
          into the U.S. shall be marked in a conspicuous place as legibly,













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          indelibly and permanently as the nature of the article (or
          container) will permit, in such a manner as to indicate to the
          ultimate purchaser the English name of the country of origin of
          the article.

               Section 134.1(d), Customs Regulations (19 CFR 134.1(d)),
          defines "ultimate purchaser" as "generally the last person in the
          U.S. who will receive the article in the form in which it was
          imported."  Subparagraph (2) of that section provides that if an
          article is subjected to a minor manufacturing process which
          leaves the identity of the imported article intact, the consumer
          or user of the article who obtains it after the processing will
          be regarded as the "ultimate purchaser."

               Section 134.35, Customs Regulations (19 CFR 134.35),
          implementing the principle of U.S. v. Gibson-Thomsen Co., Inc.,
          27 CCPA 267, C.A.D. 98 (1940), provides that an article used in
          the U.S. in manufacture which results in an article having a
          name, character, or use differing from that of the imported
          article will be considered substantially transformed, and,
          therefore, the manufacturer or processor in the U.S. who converts
          or combines the imported article into the different article will
          be considered the ultimate purchaser of the imported article
          within the contemplation of 19 U.S.C. 1304(a).  Accordingly, the
          article shall be excepted from marking.

               It is contended in this case that inserting the lenses into
          eyeglass frames creates "commercial articles that are different
          in name, character and use from the imported lenses."  Customs
          takes the position, most recently stated in a ruling dated
          April 19, 1988 (HQ 730963), that "Personal prescription eyewear
          consists of frames and lenses, neither of which lose their
          separate identity when the latter are mounted in the former."
          That ruling concerned the marking of eyeglass frames and although
          the ruling conceded that purchasers face fewer choices in the
          selection of lenses compared to frames and that lenses do not
          come into contact with the wearer's face as frames do, we believe
          the purchaser's entitlement to country of origin information is
          at least equal if not greater in the case of lenses.  The essence
          of prescription eyewear is vision correction, and purchasers must
          be informed of the country where the substantial transformation
          of adding the corrective qualities, i.e., the "power" or
          prescription of the lenses, took place.

               Regarding the classification of the imported plastic lenses,
          we agree that the lenses are properly classified under the
          provision for Opthalmic lenses, not mounted, in item 708.01,
          TSUS, with a duty rate of 5.6 percent ad valorem.  The proposed
          HTSUS is scheduled to replace the TSUS.  The HTSUS provision













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          applicable to the subject lenses is subheading 9001.50.00, HTSUS,
          which provides for spectacle lenses of other than glass with a
          duty rate of 5.6 percent ad valorem.  This classification
          represents the present position of this agency regarding the
          dutiable status of the merchandise under the proposed HTSUS.  If
          there are changes before enactment, this advice may not continue
          to be applicable.

          HOLDING:

               Based on the available evidence, we find that the U.S.
          chemical substances exported to Mexico are not substantially
          transformed into constituent materials of the imported plastic
          lenses and, therefore, the cost or value of the chemical
          substances may not be counted for purposes of satisfying the 35
          percent requirement under the GSP.

               Moreover, for country of origin marking purposes, we find
          that the laboratories or optical houses are not the ultimate
          purchasers of the plastic lenses.  The lenses as imported and the
          lenses as inserted in eyeglass frames have not undergone a
          substantial transformation.  Grinding the outer rim of the lens
          to fit it into a frame effects only a minor change in the
          article's shape; the lens remains a lens and its character and
          use as an aid to correct the vision of the wearer remains
          unchanged.  Customs considers the ultimate purchasers of these
          lenses to be the persons who receive eyeglass frames with the
          lenses inserted therein.  Country of origin marking of these
          lenses may be accomplished by use of stickers on the lenses.
          Since the Seiko logo is added before the lenses are ground and
          fitted to a frame, we assume there is a spot on the lens where a
          sticker would survive the grinding process as well, probably in
          close proximity to the logo.

               The imported plastic lenses are classifiable in item 708.01,
          TSUS (subheading 9001.50.00, HTSUS).

                                     Sincerely,



                                     John Durant
                                     Director, Commercial
                                     Rulings Division