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HQ 555060

March 20, 1989

CLA-2 CO:R:C:V 555060 DBI


John Scanlon, Jr., Esq.
Kemp, Smith, Duncan and Hammond
Post Office Drawer 2800
El Paso, Texas 79999-2800

RE: Eligibility of ophthalmic plastic lenses manufactured in Mexico for treatment under the GSP

Dear Mr. Scanlon:

This is in response to your letter of May 31, 1988 (JS No. 88-0369), seeking, on behalf of Silor Optical of Florida, Inc., a reconsideration of the eligibility of certain ophthalmic plastic lenses for treatment under the General System of Preferences


Your letters of January 14, 1986 and May 31, 1988, describe a two step process for the manufacture of ophthalmic lenses. In a meeting on February 7, 1988, with members of my staff and the Technical Branch, you submitted additional facts and documents. The following is a description of all the facts presented on this issue.

In the first manufacturing step in Mexico, two U.S. origin chemicals are reacted to form a polymerized mixture termed an "initiated concentrate." The two reactants are diethylene glycol bis (allyl carbonate) and isopropyl peroxydicarbonate. The trade names for these chemicals are CR-39TM and IPPTM respectively. CR-39TM serves as the monomer for the polymerization reaction and the IPPTM is a free radical initiator. An important property of a free radical initiator is that it is, by nature and design, highly reactive.

In Mexico, the CR-39TM and the IPPTM are mixed and begin to polymerize. When polymerization reaches a specific point the reaction is halted. A major reason for stopping the process at this point is that the partially polymerized product is more stable than the highly reactive IPPTM. This initiated concentrate and others like it, such as TRIGONOX ADC-NS60, have a commercial identity since many lens manufacturers do not desire to handle highly reactive initiators such as IPPTM. In the meeting, invoices and sales literature were presented as proof that the initiated concentrate is sold in the trade as an independent entity.

In the second manufacturing step in Mexico, the initiated concentrate is formed into the ophthalmic lenses and/or lens blanks. This is accomplished by restarting the reaction in step one using an external influence such as heat. The lenses are then shipped to the U.S.


Whether the operations performed in Mexico result in a dual substantial transformation, thereby enabling the cost or value of the constituent material to be counted toward the 35 percent value-content requirement for purposes of the GSP.


An article imported directly from a beneficiary developing country (BDC) may qualify for duty-free entry under the GSP only if it meets the country of origin criterion set forth in section 10.176(a), Customs Regulations (19 CFR 10.176(a)). This criterion provides that an article must be the growth, product, manufacture, or assembly of the BDC. In other words, the article must either be wholly the growth, product, or manufacture of a BDC, or it must have undergone a substantial transformation in the BDC so as to make it a product of the BDC. In addition, the sum of the cost or value of the materials produced in the BDC, plus the direct costs of processing operations performed in the BDC, must not be less than 35 percent of the appraised value of the imported article.

Section 10.177(a), Customs Regulations (19 CFR 10.177(a)), provides that the words "produced in the beneficiary developing country" refer to the constituent materials of which the eligible article is composed which are either: (1) wholly the growth, product, or manufacture of the BDC: or (2) substantially transformed in the BDC into a new and different article of commerce. In the case of materials imported into a BDC, the cost or value of those materials may be counted towards the 35 percent requirement only if the imported material is first substantially transformed into a new and different intermediate article of commerce which is then used in the BDC in the production of the final imported article.

In our original ruling on this matter dated May 15, 1986 (HQ 554084), we stated that the mere mixing of CR-39TM and IPPTM did not result in a substantial transformation.

We reasoned that the mixing constituted only a dilution, that there was no substantial process involved and that no new and different article was produced. We found that the mixing of CR- 39TM and IPPTM did not bring about the acquisition of a new chemical character or quality that was beyond the essence or identity of the original components. Rather, the mixing was found to be one step of a continuous process, all of which was dedicated only to the production of hard resin ophthalmic lenses.

After careful consideration of this matter, we are of the opinion that a double substantial transformation occurs in Mexico during the production of the ophthalmic lenses.

The issue in this case involves the difference in two chemicals associated by a chemical reaction versus their association as a solution. A basic principle of chemistry is that a reaction has occurred if the two reactants no longer possess the physical and chemical characteristics they possessed prior to the reaction.

The chemicals involved in this case begin to polymerize when mixed. Polymerization is defined by the Condensed Chemical Dictionary, 10th Edition as:

"A chemical reaction ... in which a large number of relatively simple molecules combine to form a chain-like macromolecule."

The same source goes on to say that:

"This [polymerization] may occur by addition, in which free radicals are the initiating agents that react with the double bond of the monomer by adding to it on one side, at the same time producing a new free electron on the other ... By this mechanism the chain become self-propagating."

This type of reaction is occurring in the processing performed by your client in Mexico. It is our opinion that this process involves a true chemical reaction and is not a dilution. The process is irreversible and the initial reactants cannot be recovered. Therefore, the CR-39TM the IPPTM have been substantially transformed into the initiated concentrate which is a new and different article of commerce.

Regarding the second step in the manufacturing process, we are of the opinion that a second substantial transformation occurs. The initiated concentrate is poured into a proper mold and the temperature is raised resulting in the completion of the polymerization process. The end product is a thermosetting plastic. This type of plastic, once molded, cannot be recast into a different article. It can be shaved to fit a particular holder or ground to a particular prescription, but it cannot be remelted to make any other product once it is cast into an ophthalmic lens. The process is irreversible.

Therefore, it is our opinion that the manufacturing of the initiated concentrate into ophthalmic lenses constitutes a second substantial transformation. The completion of the polymerization process changes the character of the constituent material (initiated concentrate) enabling to become ophthalmic lenses. Ophthalmic lenses are separate articles of commerce that manufacturers wish to buy and sell for their own purposes. As a result of the second step of manufacture, a finished product emerges with a separate identity and, therefore, is a new article of commerce.

Finally, these processes are not the type of "pass-through" operations which Congress intended to prohibit from receiving GSP benefits. "Keep[ing] in mind the GSP's fundamental purpose of fostering industrialization in beneficiary developing countries," we believe that the operations performed in this instance are the type of substantial operations contemplated by the GSP. See Torrington v. United States, 8 CIT 150, 596 F.Supp. 1083 (1984), aff'd 764 F.2d 1563 (1985).


Based on the information submitted, we find your additional arguments to be sufficient to reverse our prior ruling of May 15, 1986. The cost or value of the constituent material (initiated concentrate) may be counted toward satisfying the GSP 35 percent value-content requirement.


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