HQ 556480: Cutting and sewing of vinyl into pieces for dust covers; Substantial Transformation; Double Substantial Transformation; GSP; 19 U.S.C. 2463(b); 19 CFR 10.178

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 556480

                           May 5, 1992

CLA-2 CO:R:C:S 556480 RAH

CATEGORY:  Classification

Ms. Melanie A. Sweeney
Prime Shelter, Inc.
2749 N. Grand Avenue
Nogales, Arizona  85621

RE:  Cutting and sewing of vinyl into pieces for dust
     covers; Substantial Transformation; Double Substantial 
     Transformation; GSP; 19 U.S.C. 2463(b); 19 CFR 10.178

Dear Ms. Sweeney:

     This is in response to your letter of January 3, 1992, in
which you request a ruling on behalf of Atlas Machine Cover Mfg.
Co., as to whether the value of foreign materials used to
manufacture vinyl dust covers in Mexico may be included in the 35
percent value-content calculation for purposes of the Generalized
System of Preferences (GSP).

FACTS:

     Your client is currently manufacturing vinyl dust covers in
Nogales, Mexico, and importing them into the United States under
subheading 3926.90.90908, Harmonized Tariff Schedule of the
United States (HTSUS).  The vinyl dust covers are used for
keeping the dust off various parts of computer equipment. 

     The materials used to manufacture the vinyl dust covers
include vinyl material from Taiwan (rolls, 54 inches wide and
anywhere from 150 to 200 yards long), polyester thread and 7/8
inch vinyl binding from the United States.

     In Mexico the vinyl rolls are laid out and cut into
components consisting of three pieces (two sides and the body). 
The pieces are sewn together using the one inch binding and white
thread.  A label ("Made in Mexico") is also added at this time. 
Loose threads are trimmed and the dust cover is then forwarded





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for inspection and packing.  A sample of the completed vinyl dust
cover and photographs of the operation were submitted for review.


ISSUE:

     Whether the vinyl and thread from which the dust covers are
created undergo a double substantial transformation in Mexico,
thereby permitting the cost or value of those materials to be
counted toward the GSP 35 percent value-content requirement.   

LAW AND ANALYSIS:

     Under the GSP, eligible products which are the growth,
product, or manufacture of a designated beneficiary developing
country (BDC), may enter the U.S. duty-free if such products are
imported directly into the U.S. and the sum of 1) the cost or
value of the materials produced in the BDC, plus 2) the direct
costs involved in processing the eligible article in the BDC, is
equivalent to at least 35 percent of the appraised value of the
article upon its entry into the U.S.  19 U.S.C. 2463(b).  

     Mexico is a designated BDC.  See, General Note 3(c)(ii)(A),
HTSUS.  The vinyl dust covers will be classified under subheading
3926.90.90908, HTSUS, which is a GSP-eligible provision. 
Therefore, the articles will receive duty-free treatment if they
are considered to be the "product of" Mexico, the 35 percent GSP
value-content minimum is met, and the goods are "imported
directly" into the United States.

     If an article is comprised of materials that are imported
into the BDC, the cost or value of those materials may be
included in calculating the 35 percent value-content requirement
only if they undergo a "double substantial transformation" in the
BDC.  See, section 10.177(a), Customs Regulations (19 CFR
10.177(a)); Azteca Milling Co. v. United States, 703 F. Supp. 949
(CIT 1988), aff'd 890 F.2d 1150 (1989).  A substantial
transformation occurs "when an article emerges from a
manufacturing process with a new name, character, or use which
differs from that of the original material subjected to the
process."  The Torrington Company v. United States, 764 F.2d
1563, 1568 (Fed. Cir. 1985).  An "article of commerce" is one
that is readily susceptible of trade, and is an item that persons
might well wish to acquire for their own purposes of consumption
or production.  Id. at 1570.  The substantially transformed
constituent materials must then be used to produce the eligible
article which is subsequently exported to the United States.
Headquarters Ruling Letter (HRL) 055591, dated August 22, 1978.

     Based on the foregoing and an examination of the sample, we
are unable to conclude that the cutting process performed in
Mexico on the vinyl results in the creation of separate and







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distinct intermediate articles of commerce which are marketed as
such.  You have provided no information to indicate that the cut
pieces from the vinyl are distinct commercial entities in the
sense that they are separately bought and sold or are ready to be
marketed as such.  See, HRL 554941 dated October 24, 1989
(cowhides cut to 4 specific shapes which are attached to a wooden
frame of a boot-jack are not substantially transformed into
constituent materials of the boot-jack).  Moreover, the cutting
and sewing operations do not involve a large number of
components, nor appear to require a significant number of
different operations, period of time, skill, attention to detail,
or other than minimal manufacturing.  Therefore, the processing
of the vinyl in Mexico does not result in a double substantial
transformation.  Accordingly, the cost or value of the vinyl and
thread may not be counted toward the GSP 35 percent value-content 
requirement.
 
HOLDING:

     The materials used to manufacture vinyl dust covers are not
subjected to a double substantial transformation in Mexico. 
Accordingly, the cost or value of those materials may not be
counted toward the GSP 35 percent value-content requirement.   

                                   Sincerely,



                                   John Durant, Director
                                   Commercial Operations Division