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HQ 555511

September 13, 1990

CLA-2 CO:R:C:V 555511 GRV


TARIFF NO.: 9802.00.80

William D. Outman, II, Esq.
Baker & McKenzie
815 Connecticut Avenue, N.W.
Suite 1100
Washington, D.C. 20006-4078

RE: Partial Reconsideration of Customs Headquarters Ruling Letter 555101 (November 15, 1988)

Dear Mr. Outman:

This is in response to your letters of November 2, and December 18, 1989, on behalf of ITT Corporation, Cannon Division, requesting partial reconsideration of Headquarters Ruling Letter (HRL) 555101 (November 15, 1988), which was itself a reconsidera- tion of HRL 554015/727943 (May 12, 1986). We concluded in HRL 555101 that, based on further evidence and intervening case law, those raw metallic "blanks" (sockets and pins) subjected to both the zone-annealing and gold electroplating processes in the U.S. (1) would be considered substantially transformed in the U.S. for country of origin marking purposes, and (2) would be considered U.S. fabricated components for purposes of item 807.00, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS)). HRL 554015/727943 had previously held that these processes would not effect a substantial transformation of the imported "blanks". The annealed and/or plated sockets and pins are used as electrical contacts in articles assembled abroad. You request that we reconsider that portion of the ruling which requires the merchandise to be subjected to both processes before it qualifies for the duty exemption under the tariff provision.

We have considered in connection with the instant reconsideration request a letter from your client dated October 16, 1989, as well as the information provided by you and a representative of your client during a meeting at Customs Headquarters on November 3, 1989.


You maintain that HRL 555101, while correct, was not entirely responsive to your original reconsideration request as it failed to confirm your stated position that either the annealing or electroplating process results in the substantial transformation of the imported "blanks". You specifically ask that we address whether the gold electroplating operation, by itself, is sufficient to satisfy the substantial transformation test. In this regard, you contend that the electroplating transforms a "blank", which has no use, into an electrical contact, which has a specific use, and that this process adds a relatively large value to the "blank". Moreover, you state that because the electroplating is performed to give the contacts capabilities and performance features not otherwise attainable in the absence of such plating, this operation can readily be distinguished from cosmetic electroplating.


Whether the gold electroplating process effects a substantial transformation of the imported metallic "blanks".


A "product of the United States," for purposes of subheading 9802.00.80, HTSUS, is defined in section 10.12(e), Customs Regulations (19 CFR 10.12(e)), as:

... an article manufactured within the Customs territory of the United States and may consist wholly of United States components or materials, of United States and foreign components or materials, or wholly of foreign components or materials. If the article consists wholly or partially of foreign components or materials, the manufacturing process must be such that the foreign components or materials have been substantially transformed into a new and different article, or have been merged into a new and different article.

Whether a substantial transformation of foreign-made articles or materials has occurred in the U.S. is determined by reference to section 10.14(b), Customs Regulations (19 CFR 10.14(b)), which provides that:

[f]oreign-made articles or materials may become products of the United States if they undergo a process of manufacture in the United States which results in their substantial transformation. Substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character, or use, which is different from that originally possessed by the article or material before being subject to the manufacturing process. The mere finishing or modification of a partially or nearly complete foreign product in the United States will not result in the substantial transformation of such product and it remains the product of a foreign country.

Within this context, we discussed in HRL 555101 our understanding of the import of the decision in Ferrostaal Metals Corporation v. United States, 664 F.Supp. 535 (CIT 1987), on the subject metallic "blanks" in this case. We stated that:

[c]omparing the processing to be performed on the imported "blanks" with that described in the Ferrostaal decision, we are now of the opinion that, taken as a whole, the multiple manufacturing processes of annealing and electroplating, as described above, significantly alter both the mechanical properties and chemical composition of the imported "blanks," substantially transforming them into new and different articles of commerce.

Accordingly, we concluded that:

... the imported "blanks" (sockets and pins) which are subjected to both annealing and electroplating in the U.S. are substantially transformed for country of origin marking purposes and may be considered fabricated components, products of the U.S., for purposes of TSUS item 807.00.

HRL 554015/727943 was modified accordingly.

In the Ferrostaal case, the dispositive question before the court was whether the operations performed on the subject steel sheet, described as a continuous hot-dip galvanizing process, substantially transformed the sheet. The process involved two steps: annealing, undertaken to restore the steel's ductility lost in a previous cold rolling, and galvanizing, or dipping the steel in a pot of molten zinc, thus changing the steel's chemical composition to improve its resistance to rust. The court held, based on the totality of the evidence, that the continuous hot- dip galvanizing process substantially transformed the subject steel sheet.

It is important to note that the court in Ferrostaal did not hold that either the annealing or the galvanizing process alone constituted a substantial transformation, but determined that the multiple manufacturing processes effected the requisite changes necessary for a finding of a substantial transformation. This was recognized in HRL 555247 dated January 11, 1990, which held that annealing stainless steel hot bands in the U.S. Virgin Islands to create stainless steel sheet and plate did not substantially transform the hot bands into "products of" the insular possession for purposes of General Note 3(a)(iv), HTSUS. In sum, we decline to expand the scope of the Ferrostaal decision by holding that a mere, one-step galvanizing or electroplating process, although similar to that involved in the court case, results in a substantial transformation of the metal article.

Moreover, recent rulings on the issue of whether galvanizing or electroplating, in and of itself, results in a substantial transformation have concluded that it does not. See, for example, HRL's 554692 dated March 8, 1988, 081888 dated August 1, 1988, and 732159 dated September 7, 1990. We reasoned in these rulings that such a process is essentially a finishing operation which neither creates a new article nor alters the intended use of the article. Consistent with these rulings and the Ferrostaal decision, we find that the electroplating operation in the instant case does not effect a substantial transformation of the imported metallic "blanks".


Imported "blanks" (sockets and pins) which are subjected to both annealing and electroplating processes in the U.S. are substantially transformed for country of origin marking purposes and may be considered fabricated components, products of the U.S., for purposes of subheading 9802.00.80, HTSUS. However, merely electroplating the metallic "blanks" will not result in a substantial transformation. HRL 555101 is affirmed.


John Durant, Director

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