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HQ 085535

December 28, 1989

CLA-2 CO:R:CV:G: 085535 JLV; 844942



Mr. Rober J. Glader
C & B Inc.
407 N. Beverly
Arlington Heights, IL 60004

RE: Substantial transformation; country of origin of nails manufactured from wire rod

Dear Mr. Glader:

In a letter of August 25, 1989, you requested a ruling on whether nails, produced in St. Kitts and Jamaica from wire rod produced in one or more foreign countries (steel products of which are subject to export certification requirements at entry), would be subject to export certification at the time of importation into the United States.


The merchandise to be produced in St. Kitts and Jamaica consists of various types of nails. These nails are called "construction nails and galvanized nails" in your letter. The nails will be produced from low carbon wire rod. Because you did not state otherwise, we assume that all of the processing operations will be performed in either St. Kitts or in Jamaica. No samples or descriptive literature were submitted.

You state that the wire rod will be sourced from one or more foreign countries. The processing operations in St. Kitts or Jamaica are as follows:

1. Draw the wire rod into wire.

2. Convert the wire into nails.

3. Finish the nails by deburring, cleaning, coating (in some cases), and packaging.


Whether the processing of wire rod into nails is a substantial transformation so as to result in a product of the country in which the processing takes place?

Does the country of origin of the nails, in this case, determine the status of the nails for purposes of the export certification requirements of the steel voluntary restraint arrangements (VRAs)?


Country of origin of an article which has been processed in more than one country is that country in which the last substantial transformation takes place. A substantial trans- formation takes place when the processing of a material or article results in a new and different article having a distinct name, character, or use. Anheuser-Busch Brewing Association v. United States, 207 U.S. 556 (1908); Ferrostaal Metals v. United States, 664 F.Supp 535 (CIT 1987).

The nails, whether or not galvanized, are distinct in name, character, and use from the wire rod material used in the manufacture of the nails. A nail is defined in Webster's Third New International Dictionary Unabridged, 1965, page 1500, as a slender and usually pointed and headed fastener designed for impact insertion. The low carbon wire rod is a semifinished hot rolled steel material that is used, in some cases, as reinforcing material for concrete, and in most cases for drawing into various sizes of wire. We conclude, therefore, that the wire rod is substantially transformed into a new and different article, nails, and that the nails are products of the country in which this processing takes place.

VRA steel, under the expired VRAs, if processed in a non- VRA country before exportation to the United States, remained subject to the VRA unless the processing resulted in a substantial transformation. In this case, the nails produced in either St. Kitts or Jamaica from VRA wire rod would not have been subject to the steel VRAs which expired on September 30, 1989. On December 12, 1989, the Office of the United States Trade Representative announced that VRAs had been agreed upon with the European Community and 16 other countries. These VRAs, however, are not yet in effect, nor are we aware of any changes in the coverage or criteria for determining whether steel products, processed in a non-VRA country, remain subject to the VRA.


Low carbon wire rod, produced in one country, is substantially transformed when processed by drawing and then converting into nails in a second country. Therefore, nails, produced in St. Kitts or Jamaica from low carbon wire rod of foreign origin, are products of the country in which the processing takes place.

Although the nails would not have been subject to restraints under the recently expired VRAs because the wire rod is substantially transformed in a non-VRA country, we cannot advise you as to the VRA status of the nails under the renegotiated VRAs. You should contact the Office of the United States Trade Representative, 600 17th Street NW, Washington, D.C. 20506 (202-395-3230), or the Director, Office of Agreements Compliance, International Trade Administration, Department of Commerce, Washington, D.C. 20230 (202-377-3793), for information on the status of the VRAs and the changes, if any, in the criteria for determining what products are subject to the VRAs.


John Durant, Director

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