HQ 555101: Request for Reconsideration of Headquarters Ruling Letter 554015/727943 (May 12, 1986)

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 555101

                                  November 15, 1988

          CLA-2 CO:R:C:V 555101 GRV

          CATEGORY:  CLASSIFICATION

          TARIFF NO.:  9802.00.80; 807.00

          Mr. William D. Outman, II
          Baker & McKenzie
          815 Connecticut Avenue, N.W.
          Washington, D.C.  20006

          RE:  Request for Reconsideration of Headquarters Ruling Letter
               554015/727943 (May 12, 1986)

          Dear Mr. Outman:

                This is in response to your letter of August 18, 1988, on
          behalf of your client, ITT Corporation, Cannon Division, re-
          questing reconsideration of Headquarters Ruling Letter 554015/
          727943 (May 12, 1986).  That ruling (1) denied eligibility under
          item 807.00, Tariff Schedules of the United States (TSUS), to
          certain electrical contacts and (2) found that ITT Cannon was not
          the "ultimate purchaser" of certain imported blanks.  Enclosed
          with your letter were numerous exhibits, including sample materi-
          als and a video tape.

          FACTS:

                In our ruling of May 12, 1986, we held that certain metal
          alloy "blanks" imported into the U.S. for zone-annealing and gold
          electroplating were not thereby converted into "products of the
          United States" for purposes of TSUS item 807.00.  The annealed
          and plated articles were to be used as electrical contacts in
          articles assembled abroad.

                Customs determined (1) that the "blank" imported into the
          U.S. was already dedicated to use as a contact, (2) that the
          "blank" could in fact operate as a contact for a period of time
          without annealing or plating, and (3) that the annealing and
          plating constituted finishing operations to complete the merchan-
          dise for commercial use.  We concluded that the manufacturer was
          not the "ultimate purchaser" for country of origin marking pur-
          poses, and that the contacts would not qualify as American com-
          ponents for purposes of item 807 upon reimportation.  A prior
          ruling was referenced, which involved very similar merchandise
          (Headquarters Ruling Letter 063117, June 28, 1979).

                On June 26, 1987, the U.S. Court of International Trade
          decided Ferrostaal Metals Corp. v. U.S., 664 F.Supp. 535, __ CIT
          __ (1987), holding that certain multiple manufacturing processes










          --annealing and galvanizing--effected a change in the name,































































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          character and use of cold-rolled steel sheet and that the changes
          constituted a substantial transformation of the article into a
          new and different article of commerce.

                In your letter you request that, in view of intervening
          case law, we reconsider our initial ruling.  You state that the
          imported metal alloy is a simple piece of raw metallic material
          manufactured to shape (in either pin or socket form) and known in
          the trade as a "blank;" that certain imported "blanks" are sub-
          jected to two critical processes--zone annealing (applied to all
          socket "blanks" and certain pin "blanks") and electroplating
          (applied to all "blanks"); that these manufacturing processes are
          necessary to allow the "blanks" to meet diverse electrical and
          physical requirements critical to the intended use of the
          "blanks" as contacts; that the zone annealing process effects an
          irreversible metallurgical transformation of the "blank," by ren-
          dering it ductile, a condition necessary in order to crimp the
          contact to a wire; that the electroplating process changes the
          chemical composition of the "blank's" surface to impede chemical
          oxidation and engagement wear, a condition necessary to provide a
          long-term, trouble-free product, and that no end user will accept
          a contact which has not undergone the plating process; that con-
          siderable financial resources and technically-trained personnel
          are required to affect the subject manufacturing processes; and
          that there is no commercial interchangeability or substitution
          possible between the raw "blanks" and plated contacts.  In sum,
          you state that, taken as a whole, the combined processes of an-
          nealing and electroplating substantially transform the imported
          article into a new and different article having a distinctive
          name, character and use; rendering the contacts U.S. fabricated
          components for purposes of TSUS item 807.00 and rendering the
          manufacturer the "ultimate purchaser" for purposes of country of
          origin marking.

          ISSUES:

                Whether the imported merchandise is substantially trans-
          formed in the U.S., rendering it eligible for the partial duty
          exemption under TSUS item 807.00 (subheading 9802.00.80, Har-
          Harmonized Tariff Schedule of the United States (HTSUS)), as
          American fabricated components, and to exempt it from country of
          origin marking requirements, under section 304 of the Tariff Act
          of 1930, as amended, as the manufacturer is the "ultimate
          purchaser," under section 134.1(d), Customs Regulations (19 CFR
          134.1(D)).

          LAW & ANALYSIS:

                In Ferrostaal Metals Corp. v. U.S., the court had occasion
          to consider whether the country of origin of cold-rolled steel











                                        - 3 -


          sheet manufactured in one country was changed by annealing and
          galvanizing (continuous hot-dip galvanizing) it in another.  The
          court found, inter alia, that (1) strength and ductility consti-
          tute important characteristics of the steel and that annealing
          significantly affected the character by dedicating the sheet to
          uses compatible with the strength and ductility of the steel; (2)
          the hot-dip galvanizing process was substantial in terms of the
          value it added to the full hard cold-rolled steel sheet; and (3)
          substantial changes in the use of the steel sheet occur as a re-
          sult of the continuous hot-dip galvanizing process.  In particu-
          lar, the court found that the annealing and galvanizing processes
          resulted in a change in character by significantly altering the
          mechanical properties and chemical composition of the steel
          sheet.  Inasmuch as the continuous hot-dip galvanizing process
          effected changes in the name, character and use of the processed
          steel sheet, the court held that the country in which that pro-
          cess was performed became the country of origin of the processed
          sheet.

                Comparing the processing to be performed on the imported
          "blanks" with that described in the Ferrostaal decision, we are
          now of the opinion that, taken as a whole, the multiple manufac-
          turing processes of annealing and electroplating, as described
          above, significantly alter both the mechanical properties and
          chemical composition of the imported "blanks," substantially
          transforming them into new and different articles of commerce.

          CONCLUSION:

                On reconsideration of the described manufacturing pro-
          cesses, as well as the samples and other evidence submitted, and
          in light of the U.S. Court of International Trade's decision in
          the Ferrostaal case, we find that the imported "blanks" (sockets
          and pins) which are subjected to both annealing and electroplat-
          ing processes in the U.S. are substantially transformed for
          country of origin marking purposes and may be considered fabri-
          cated components, products of the U.S., for purposes of TSUS item
          807.00.  Accordingly, the manufacturer will be considered the
          "ultimate purchaser" of the imported merchandise for country of
          origin marking purposes under section 134.1(d), Customs Regula-
          tions (19 CFR 134.1(d)), and merchandise subsequently assembled
          abroad with the annealed and electroplated contacts will qualify
          for partial duty exemption under TSUS item 807.00, upon return to
          the U.S. and compliance with the documention requirements of
          section 10.24, Customs Regulations (19 CFR 10.24).














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                Headquarters Ruling Letters 063117 and 554015/727943 are
          modified accordingly.


                                        Sincerely,





                                        John Durant, Director
                                        Commercial Rulings Division

















































          CO:R:CR:V:VILDERS:GRV:10/3/88:11/07/88