HQ 555641: GSP treatment of aluminum plastic reflectors.Substantial transformation; electroplating; molding; Azteca; Torrington; Texas Instruments; 555511; 732159; 554692; 055611; 051198; 555149

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 555641

                        October 18, 1990

CLA-2 CO:R:C:V  555641 KCC

CATEGORY:  CLASSIFICATION

Mr. Gordon W. Larson
Rudolph Miles & Sons, Inc.
4950 Gateway East
P.O. Box 144
El Paso, Texas 79942

RE:  GSP treatment of aluminum plastic reflectors.Substantial
     transformation; electroplating; molding; Azteca; Torrington;
     Texas Instruments; 555511; 732159; 554692; 055611; 051198;
     555149

Dear Mr. Larson:

     This is in response to your letter dated April 10, 1990, on
behalf of BRK Electronics Corporation, in which you request a
ruling that the cost or value of aluminum plastic reflectors
produced in Mexico and incorporated into rechargeable
flashlights, which will be imported into the U.S., may be counted
toward the 35% value-content requirement of the Generalized
System of Preferences (GSP) (19 U.S.C. 2461-2466).  Samples of
the plastic reflector before and after the aluminum
electroplating process were submitted for examination.  We regret
the delay in responding.

FACTS:

     You state that BRK's subsidiary in Mexico is presently
producing rechargeable flashlights, and that they are being
entered into the U.S. as articles entitled to GSP treatment.  The
Mexican subsidiary is presently purchasing the aluminum plastic
reflectors at arms length from a Mexican manufacturer who molds
the plastic into the required shape and creates the reflector by
an aluminum electroplating process.  However, BRK is now
contemplating changing their source of the reflector and is
looking at the following options to obtain this component.

     BRK's first option is to purchase the molded plastic
reflector in the U.S. and export it to Mexico.  BRK's subsidiary
will place the plastic reflector in a vacuum chamber with an
aluminum electrode.  An electric discharge will be applied in




the vacuum which will cause aluminum to be deposited as a film on
the plastic.  This creates the finished aluminum plastic
reflector which later will be incorporated into the rechargeable
flashlight.

     BRK's other option is to purchase U.S. origin plastic
pellets and export them to Mexico.  In Mexico, the pellets will
be molded into the proper plastic shape by BRK's subsidiary.  The
plastic reflector will then be exported to the U.S. where it will
undergo the above described electroplating process, after which
it will be returned to Mexico for incorporation into the
rechargeable flashlight.

ISSUE:

     Whether the aluminum plastic reflectors are substantially
transformed constituent materials of the rechargeable flashlights
for purposes of the 35% value-content requirement of the GSP.

LAW AND ANALYSIS:

     Under the GSP, eligible articles the growth, product or
manufacture of a designated beneficiary country (BDC) which are
imported directly into the customs territory of the U.S. from a
BDC may receive duty-free treatment if the sum of 1) the cost or
value of materials produced in the BDC, plus 2) the direct costs
of the processing operation in the BDC, is equivalent to at least
35% of the appraised value of the article at the time of entry.
See, 19 U.S.C. 2463(b).

     If an article is produced or assembled from materials which
are imported into the BDC, the cost or value of those materials
may be counted toward the 35% value-content minimum only if they
undergo a double substantial transformation in the BDC.  See,
section 10.177, Customs Regulations (19 CFR 10.177), and Azteca
Milling Co. v. United States, 703 F.Supp. 949 (CIT 1988), aff'd,
890 F.2d 1150 (Fed.Cir. 1989).  That is, the cost or value of
the imported materials used to produce the aluminum plastic
reflectors may be included in the GSP 35% value-content
computation only if they are first substantially transformed into
a new and different article of commerce, which is itself
substantially transformed into a rechargeable flashlight.

     A substantial transformation occurs "when an article emerges
from a manufacturing process with a name, character, or use which
differs from those of the original material subjected to the
process."  See, The Torrington Co., v. United States, 764 F.2d
1563 (Fed. Cir. 1985), citing Texas Instruments Incorporated v.
United States, 681 F.2d 778, 69 CCPA 151 (1982).



     We have held that electroplating, in and of itself, does not
result in a substantial transformation.  We found that the
electroplating operation is essentially a finishing operation
which neither creates a new article nor alters the intended use
of the article.  See, Headquarters Ruling Letter (HRL) 555511
dated September 13, 1990, which held that the electroplating of
metallic blanks did not result in a substantial transformation of
the imported metallic blanks; HRL 732159 dated September 7, 1990;
and 554692 dated March 8, 1988.

     In this case, we are of the opinion that the aluminum
electroplating operation does not result in a substantial
transformation.  Based on the information and samples presented,
the plastic reflector before the aluminizing process is
dedicated to use as, and has the essential character of, an
aluminum plastic reflector.  The aluminum electroplating
operation is merely a finishing operation which does not create a
new article nor alter the intended use of the article.
Therefore, in regard to the first option, U.S. molded plastic
reflectors which are electroplated in Mexico are not
substantially transformed into constituent materials of the
rechargeable flashlights.  As a result, the cost or value of the
reflectors may not be counted toward the 35% value-content
requirement.

     However, we have previously held that molding of plastic
into a specific shape which is then used in the manufacture of an
eligible article is considered a substantial transformation.
See, HRL 055611 dated October 13, 1978 (injection molding of
plastic pellets to form parts of toy pistols constitutes a
substantial transformation); HRL 051198 dated April 18, 1977
(injection molding of plastic to form parts of motors constitutes
a substantial transformation); and HRL 555149 dated May 11, 1989
(melting and molding of plastic resin into plastic parts
constitutes a substantial transformation).  Therefore, in regard
to the second option, molding the U.S. origin pellets into the
plastic reflector in Mexico constitutes a substantial
transformation.  As a result, the cost or value of the Mexican
molded plastic reflectors, which would not include the cost of
the electroplating process in the U.S., may be counted toward the
35% value-content requirement.

HOLDING:

     On the basis of the information presented, we find that a
substantial transformation does not occur where the U.S. molded
plastic reflectors are electroplated in Mexico.  Therefore, under
the first option, the cost or value of the reflectors may not be
counted toward the 35% value-content minimum.




     However, the aluminum plastic reflectors molded in Mexico
are substantially transformed constituent materials of the
rechargeable flashlights into which they will be incorporated.
Therefore, the cost or value of the aluminum plastic reflectors
(not including the cost of the U.S. electroplating process) may
be counted toward the GSP 35% value-content minimum.

                              Sincerely,




                              John Durant, Director
                              Commercial Rulings Division