HQ 556643: Request for Reconsideration of HRL 555811; eligibility of the Opposed Roll-Formed Blade Damper for duty-free treatment under the GSP; 055684; 071788; 555532; 555659; 555357; Superior Wire

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 556643

                          July 24, 1992

CLA-2 CO:R:C:S  556643  WAW

CATEGORY:  Classification

Allen E. Smith, Esq.
Allen E. Smith and Associates
1801 South Second Street
Suite 470
470 McAllen National Bank
McAllen, TX  78503

RE:  Request for Reconsideration of HRL 555811; eligibility of
     the Opposed Roll-Formed Blade Damper for duty-free treatment
     under the GSP; 055684; 071788; 555532; 555659; 555357;
     Superior Wire

Dear Mr. Smith:

     This is in response to your letter of April 7, 1992,
requesting a reconsideration of Headquarters Ruling Letter (HRL)
555811, in which we considered the eligibility of certain
diffusers, dampers and grilles assembled in Mexico and used in
the U.S. in the production of HVAC air distribution systems for
duty-free treatment under the Generalized System of Preferences
(GSP) (19 U.S.C. 2461-2466).  Specifically, you request that we
reconsider our decision regarding the "Opposed Roll-Formed Blade
Damper" (OBDR).  A sample of the merchandise was submitted for
examination.

FACTS:

     In HRL 555811 dated March 20, 1992, we held that the
imported aluminum flat stock which is die cut, stamped and shaped
into end rails and then subsequently assembled into an OBDR has
undergone the requisite double substantial transformation. 
However, we also found that the pre-cut and pre-punched aluminum
shapes and roll formed aluminum shapes and strips which were
machine bent to form C-shaped side and bottom rails and cut to
length to form blades, did not result in a double substantial
transformation of the imported materials.  You have asked us to
reconsider whether the side rails which make up the OBDR undergo
a double substantial transformation.

     The specific details of the assembly process of the OBDR is
set forth below.  The first step in the production of the damper
is the manufacture of the two ends and two side rails as follows:
 Component 1:

     (1) The two ends are die cut, stamped and shaped from
     aluminum flat stock.

Component 2:

     You state that two different side rails are required for
each damper.  The side rails are referred to as "active" and
"passive" rails.  The rail lengths, angles and hole patterns are
identical for both types of rails.  However, the active rail
requires an additional embossing (forming) operation which is
necessary to enable the attachment of the damper operator bracket
to the rail.  The rails are manufactured as follows:

(A) Punching and bending of the active and passive side rails

     (1) Imported roll formed and pre-cut aluminum shapes
     are taken from storage and placed on a work feed table
     located adjacent to a hydraulically powered punch
     press.

     (2) The press operator proceeds to insure that all built-in
     safety mechanisms are in place prior to applying power to
     the machine.

     (3) The trimmed, notched and cut to length part is placed in
     a die.  Power is applied which causes the die to hole punch
     the upper part of the side rail and bend the ends.  This
     operation forms a "C" shaped passive side rail with notched
     ends.  The holes punched in the upper part of the side rail
     are used for mounting purposes when the damper is attached
     to a diffuser.

     (4) The side rail component is then removed from the die and
     both visually and mechanically inspected to insure
     compliance with specifications.

(B) Embossing (forming) and punching of the active side rail

     (1) The die operator places the cut "C" shaped notched
     passive side rails on a work table adjacent to an embossing
     die.  The operator then adjusts the die stop to a position
     corresponding to the correct emboss location.

     (2) The operator proceeds to insure that all built-in safety
     mechanisms are in place prior to applying power to the
     machine.

     (3) The operator selects and inserts a single rail through
     the die and against the end locating stop.  Power is then
     applied allowing the die to cycle and complete the embossing
     (forming) operation and punching.  This operation forms a
     punched mounting support and a housing in the side rail for
     attaching the operator mechanism.

     (4) The piece is removed from the die and both visually and
     mechanically inspected to insure compliance with
     specifications.  

Component 3:

     (1) The bottom side rail is punched to form a housing
     for the nylon operator.

     You state that these operations result in a substantial
transformation of the imported materials into new and different
articles of commerce:  ends and side rails.  One worker is
responsible for stamping and forming the damper ends.  Another
worker is responsible for bending and punching the side rails.  

     You claim that the assembly of the damper constitutes the
second substantial transformation.  The assembly process is as
follows:

     (1) The bottom (follower) bracket is riveted to the
     pre-cut and pre-punched action rod;

     (2) The action rod is placed in the pre-bent bottom
     side rail (component 3).  Bushings (butterflies) are
     placed on the action rod, and all are then secured by
     eyelets;

     (3) Bushings (butterflies) are attached to the top side
     rail (component 2) with eyelets;

     (4) the nylon operator is inserted into the top bracket
     and then the bracket (with operator) is riveted to the
     bottom side rail (component 3);

     (5) Imported blades that were cut to length in Mexico
     are fitted to the bottom side rail (component 3);

     (6) The pre-bent top side rail (component 2) is fitted
     to the blades;

     (7) Shaped and punched ends (component 1) are inserted
     into the side rails and secured with eyelets to
     complete the assembly.

     One worker is responsible for cutting the blades.  Four
workers place the action rod in the operators and side rails,
eyelet them, assemble the operator to brackets and rivet them. 
Six workers assemble the blades and ends to the rails.  Two
workers complete the damper by eyeletting the ends to the side
rails.  Two workers back up any part of the line that slows down. 
The finished damper is inspected, and either wrapped and packaged
for shipment to the U.S., or sent to another assembly line for
use in another product.

ISSUE:

     Whether the materials imported into Mexico that undergo
punching, bending and embossing operations in the production of
the side rails undergo a double substantial transformation,
thereby permitting the cost or value of these materials to be
included in the 35% value-content calculation required for
eligibility under the GSP.

LAW AND ANALYSIS:

     A complete enunciation of the law pertaining to eligibility
of articles under the GSP was provided in HRL 555811 and,
therefore, it will not be repeated here.  Discussion of the
applicable law will be limited to the current issue -- whether
the side rail components used in the production of the OBDR have
undergone a double substantial transformation.

     Customs has previously held that cutting or bending
materials to defined shapes or patterns suitable for use in
making finished articles constitutes a substantial
transformation.  See Headquarters Ruling Letter (HRL) 055684
dated August 14, 1979 (holding that those components of a water
cooler gas absorption refrigeration unit which were formed by
cutting to length, cleaning, and bending imported steel tubes
into the required component shapes and configurations, or by
cutting to length, flattening, and drilling holes into imported
tubing, were substantially transformed constituent materials for
GSP purposes, while those imported tubes which were simply cut to
length and assembled into the final article were not); HRL 071788
dated April 17, 1984 (forming 18 karat gold wire into circles,
ovals, and other specially designed links for bracelets results
in a substantial transformation); and HRL 555532 dated September
18, 1990 (shearing cold rolled steel to rectangular shape,
piercing to form the various openings, and roll forming the steel
into tubular shape results in a substantial transformation).  In
each of the above cases, the raw material had numerous uses
before undergoing the cutting operations and possessed little or
nothing in its character to indicate its ultimate shape or
purpose.  The number and variety of potential uses was restricted
and the essential character was permanently determined only after
the cutting processes were performed.
     
     Moreover, we have consistently held that punching of holes
into pre-formed articles is insufficient to constitute a
substantial transformation of the article into a new or different
article of commerce.  See HRL 555659 dated December 3, 1990 (the
process of punching holes in formed tubes does not constitute a
substantial transformation).  Likewise, the process of punching
holes in an aluminum frame and blade parts, which have already
been cut to length, to facilitate the assembly process, does not
appear to be any more involved than punching holes in pre-formed
tubes.

     Customs has previously held in HRL 555779 dated March 7,
1991, that finished wood molding which is angle-cut to specified
lengths and subsequently assembled by hand tacking or stapling
together the cut pieces into a picture frame, does not constitute
the requisite double substantial transformation.  In that ruling,
we stated that: 

     Cutting the molding to length and assembly of the cut
     lengths constitute the next stage of processing of the
     same product.  Unlike the situation in the venetian
     blind case, HRL 555265, the intermediate product in
     this case has but one use.  After the wood is
     fabricated into lengths of finished molding, it
     possesses the essential characteristics of a picture
     frame.  The purported intermediate article and the
     final article are not separate and distinct articles of
     commerce since the sole use of both items, finished
     wood molding and picture frames, is to display artwork,
     prints, photographs, etc.

     In support of your contention that the side rails undergo a
single substantial transformation by the process of bending,
punching and extruding the pre-cut aluminum components, you cite
HRL 555357 dated July 19, 1985.  In HRL 555357, we ruled that
while cutting aluminum strip to specific length, and punching
and/or drilling holes in the cut lengths to form components of
window frames and sashes did not substantially transform the
aluminum strip, that strip which was cut to specific length,
punched and/or drilled with holes, and notched, which gave the
strip a specific shape or pattern, was substantially transformed. 
The cutting, punching, drilling and notching operations in this
case alter the physical characteristics of the aluminum, and
affect the uses to which it may be put.  Prior to undergoing the
foregoing operations, the aluminum strip was a raw material which
did not possess anything in its character which indicated that it
was intended to serve as a window frame or window sash.  However,
after the cutting, punching, drilling and notching operations,
the aluminum components were suited for only a limited number of
uses.

     We find in the instant case, unlike the operations performed
in HRL 555357, that the bending, punching and embossing of the of
the roll formed and pre-cut aluminum strips for use as side rails
in an OBDR do not substantially transform the imported aluminum
into new and different articles of commerce.  It is our opinion
that the roll formed and pre-cut aluminum strips both before and
after these operations are clearly recognizable and dedicated for
use solely as side rails for damper assemblies.  In Superior Wire
v. United States, 11 CIT 608, 669 F. Supp. 472 (CIT 1987), aff'd,
867 F.2d 1409 (Fed. Cir. 1989), the court held that for VRA
purposes, wire rod drawn into wire was not substantially
transformed into a product of Canada.  In determining that there
was no significant change in use or character, the court found
that the operations performed on the wire rod were minor rather
than substantial and concluded that the "wire rod and wire may be
viewed as different stages of the same product."  Id. 867 F.2d
1414.  In the instant case, the imported roll formed and pre-cut
aluminum strips already possess a pre-determined quality and use,
they are imported into Mexico already trimmed, notched and cut to
length.  Therefore, Customs considers the aluminum strips both
before and after they have undergone the foreign processing
operations, as the same product at different stage of production,
rather than evidence that a substantial transformation has taken
place.  Accordingly, we find that the bending, punching and
embossing operations of the roll formed and pre-cut aluminum
strips in Mexico does not constitute a substantial transformation
of the imported materials into new and different articles of
commerce.

HOLDING:

     Based on the information and samples submitted, it remains
our opinion that the imported aluminum strips which are bent,
punched and embossed in Mexico into components which are used in
the assembly of the OBDR, do not undergo the requisite double
substantial transformation.  Therefore, the cost or value of the
imported aluminum may not be included in calculating the GSP 35%
value-content requirement for the OBDR.  Our decision in HRL
555811, is hereby affirmed.

                                   Sincerely,




                                   John Durant, Director
                                   Commercial Rulings Division