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HQ 556106

August 29, 1991

CLA-2 CO:R:C:S 556106 KCC


TARIFF NO.: 9802.00.80; 9802.00.60

Mr. Peter Glover
American National Can
8770 West Bryn Mawr Avenue
Chicago, Illinois 60631-3542

RE: Beverage can end with pull tab created by punching, forming, scoring, and pressing.Assembly; further fabrication; 19 CFR 10.16(c)(5); further processing; C.S.D. 84-49; Intelex; 555377; 554011; GSP; substantial transformation; C.S.D. 85-25; 055684; 555532

Dear Mr. Glover:

This is in response to your letter dated June 19, 1991, concerning the applicable duty imposed on beverage can ends with pull tabs manufactured in Mexico from U.S.-origin materials.


You intend to ship U.S.-origin end aluminum stock and end aluminum tab stock to Mexico to manufacture beverage can ends with pull tabs. In Mexico, the foreign operations entail:

1) punching out circles from the narrow widths of end aluminum stock;
2) forming the tab opening on the circle; 3) applying a lining compound to one side of the circle; 4) scoring the edges of the tab which allows the tab to be opened correctly when pulled off the beverage can; 5) punching out the pull tab ring from end aluminum tab stock; and
6) pressing together the pull tab ring and circle.

Upon completion of the foreign operations, the completed beverage can ends with pull tabs will be imported into the U.S., where the beverage can ends will be attached to beverage cans.


I. Whether the beverage can ends with pull tabs will qualify for the partial duty exemption available under subheading

9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), when imported into the U.S.

II. Whether the beverage can ends with pull tabs will qualify for the partial duty exemption available under subheading 9802.00.60, HTSUS, when imported into the U.S.

III. Whether the beverage can ends with pull tabs will qualify for duty-free treatment under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466).


All articles imported into the U.S. are subject to duty unless specifically exempted therefrom under the HTSUS.

I. Applicability of subheading 9802.00.80, HTSUS

Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:

[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape, or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process, such as cleaning, lubricating, and painting.

All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this tariff provision is subject to duty upon the full cost or value of the imported assembled article, less the cost or value of the U.S. components assembled therein, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).

Section 10.14(a), Customs Regulations (19 CFR 10.14(a)), states in part that:

[t]he components must be in condition ready for assembly without further fabrication at the time of their exportation from the United States to qualify for the exemption. Components will not lose their entitlement to the exemption by being subjected to operations incidental to the assembly either before, during, or after their assembly with other components.

Section 10.16(a), Customs Regulations (19 CFR 10.16(a)), provides that the assembly operation performed abroad may consist of any method used to join or fit together solid components, such as welding, soldering, riveting, force fitting, gluing, laminating, sewing, or the use of fasteners.

Operations incidental to the assembly process are not considered further fabrication operations, as they are of a minor nature and cannot always be provided for in advance of the assembly operations. However, any significant process, operation or treatment whose primary purpose is the fabrication, completion, physical or chemical improvement of a component precludes the application of the exemption under subheading 9802.00.80, HTSUS, to that component. See, 19 CFR 10.16(c).

We are of the opinion that beverage can ends with pull tabs will not be eligible for the duty allowance available under subheading 9802.00.80, HTSUS. Machining or punching out the circles and the pull rings is not an acceptable assembly operation or operation incidental to the assembly, but is a further fabrication of the aluminum stock. In effect, the machining and punching operations create the circles and pull rings which will later be pressed together. See, 19 CFR 10.16(c)(5) which states that machining, pressing, stamping, and any other operation, treatment or process which impart significant new characteristics or qualities to the article affected shall not be regarded as an operation incidental to assembly.

II. Applicability of subheading 9802.00.60, HTSUS

Subheading 9802.00.60, HTSUS, provides a partial duty exemption for:

[a]ny article of metal (as defined in U.S. note 3(d) of this subchapter) manufactured in the United States or subject to a process of manufacture in the United States, if exported for further processing, and if the exported article as processed outside the United States, or the article which results from the processing outside the United States, is returned to the United States for further processing.

This tariff provision imposes a dual "further processing" requirement on eligible articles of metal--one foreign, and when returned, one domestic. Metal articles satisfying these statutory requirements may be classified under this tariff provision with duty only on the value of such processing performed outside the U.S., provided there is compliance with the documentary requirements of section 10.9, Customs Regulations (19 CFR 10.9)

Not all "processing" to which articles of metal can be subjected are significant enough to qualify as "further processing," within the purview of subheading 9802.00.60, HTSUS. In C.S.D. 84-49, 18 Cust.Bull. 957 (1983), we stated that:

[f]or purposes of item 806.30, Tariff Schedules of the United States (TSUS), the term 'further processing' has reference to processing that changes the shape of the metal or imparts new and different characteristics which become an integral part of the metal itself and which did not exist in the metal before processing; thus, further processing includes machining, grinding, drilling, threading, punching, forming, plating, and the like, but does not include painting or the mere assembly of finished parts by bolting, welding, etc.

The aluminum is an eligible article of metal for purposes of subheading 9802.00.60, HTSUS. The punching and forming operations performed in Mexico are considered "further processing" operations, as they change the metal and impart new and different characteristics which become an integral part of the metal. See, C.S.D. 84-49.

However, we are of the opinion that the operation of attaching the beverage can end to the beverage can in the U.S. is insufficient to satisfy the domestic "further processing" requirement. In Intelex Systems, Inc. v. United States, 59 CCPA 138, C.A.D. 1055, 460 F.2d 1083 (1972), the court discussed the type of processing that would entail "further processing." In the Intelex case, copper wire and insulating paper were processed into lead-covered telephone cable and imported into the U.S. on cable rolls. The cable was then merely strung on poles after wire stripping and splicing operations. The issue presented was whether the imported telephone cable was "returned to the U.S. for further processing," within the meaning of paragraph 1615(g)(2)(B), Tariff Act of 1930, as amended (a precursor provision of subheading 9802.00.60, HTSUS). The court considered the words "process" and "processing" and stated that:

...its meaning [processing] must be controlled by the particular context in which it is used here and the legislative intent. (Citation omitted). When we look to the context of [paragraph] 1615(g)(2), we do not think that Congress had in mind that any and all kinds of 'processing' would suffice to bring the article within the purview of that paragraph. Instead, we believe that the words 'further processing' relate to the kind of processing to which the article had been subjected before--namely, 'a process of manufacture,' as expressed in [paragraph] 1615(g)(2)(A). We continue of the view that Congress used the expression

'subjected to a process of manufacture' as synonymous with 'processing' (citation omitted), and that the 'further processing' referred to in [paragraph] 1615(g)(2) is a further manufacturing process.

The court stated that it did "...not think that processes to which an already completed article were subjected, incident to using it for the purpose intended, were necessarily part and parcel of manufacturing processes performed on that article." (Court's emphasis). Therefore, finding no evidence that the operations performed in the U.S. on the imported telephone cable constituted a process of manufacture in any common or commercial sense, the court determined that the partial duty exemption was inapplicable to the imported cable.

In the instant case, the operation of attaching the beverage can ends to the beverage cans in the U.S. is merely an assembly operation which does not constitute a process of manufacture in a common or commercial sense. As stated in C.S.D. 84-49 and in previous ruling letters, assembly operations do not satisfy the further processing requirement of subheading 9802.00.60, HTSUS. See, HRL 555377 dated October 16, 1989, which held that brazing, a welding operation, is an assembly operation that does not satisfy the requirements of the tariff provision, and HRL 554011 dated February 21, 1986, which held that preparation grinding for welding and welding parts to form wheels do not constitute "further processing" within the meaning of item 806.30, TSUS.

III. GSP Treatment

Under the GSP, eligible articles the growth, product or manufacture of a designated beneficiary developing country (BDC) which are imported directly into the customs territory of the U.S. from a BDC may receive duty-free treatment if the sum of 1) the cost or value of materials produced in the BDC, plus 2) the direct costs of the processing operation in the BDC, is equivalent to at least 35% of the appraised value of the article at the time of entry. See, 19 U.S.C. 2463(b).

Mexico is a BDC. See, General Note 3(c)(ii)(A), HTSUS. Based on the information submitted, it appears that the beverage can ends with pull tabs would be classified under subheading 8309.90.00, HTSUS, which provides for stoppers, caps and lids (including crown corks, screw caps and pouring stoppers), capsules for bottles, threaded bungs, bung covers, seals and other packing accessories, and parts thereof, of base metal: other, dutiable at the rate of 5.2% ad valorem. This is a GSP eligible provision.

If an article is produced or assembled from materials which are imported into the BDC, the cost or value of those materials may be counted toward the 35% value-content minimum only if they undergo a double substantial transformation in the BDC. See, section 10.177, Customs Regulations (19 CFR 10.177), and Azteca Milling Co. v. United States, 703 F. Supp. 949 (CIT 1988), aff'd, 890 F.2d 1150 (Fed. Cir. 1989). That is, the cost or value of the materials imported into Mexico and used to produce the beverage can ends with pull tabs may be included in the GSP 35% value-content computation only if they are first substantially transformed into a new and different article of commerce, which is itself substantially transformed into the beverage can ends with pull tabs.

A substantial transformation occurs "when an article emerges from a manufacturing process with a name, character, or use which differs from those of the original material subjected to the process." See, Torrington Co., v. United States, 764 F.2d 1563 (Fed. Cir. 1985), citing Texas Instruments Incorporated v. United States, 681 F.2d 778, 69 CCPA 151 (1982).

In general, Customs has held that cutting or bending materials to defined shapes or patterns suitable for use in making finished articles, as opposed to mere cutting to length and/or width which does not dedicate the resulting material to a particular use, constitutes a substantial transformation. See, HRL 055684 dated August 14, 1979 (cutting and stamping of the undefined sheet of metal and the lengths of square shafts into an absorber box results in a substantially transformed product); and HRL 555532 dated September 18, 1990 (creation of top and bottom pans by blanking the steel materials, die forming (or drawing), and die piercing constituted a substantial transformation).

In C.S.D. 85-25, 19 Cust. Bull. 844 (1985) (HRL 071827 dated September 25, 1984), Customs held that an assembly process will not constitute a substantial transformation unless the operation is "complex and meaningful." Whether an operation is "complex and meaningful" depends on the nature of the operation, including the number of components assembled, number of different operations, quality control, and the benefit to the BDC from the standpoint of both the value added to the PCBA and the overall employment generated thereby. Additionally, C.S.D. 85-25 stated that the factors which determine if a substantial transformation occurs should be applied on a case-by-case basis.

Based on the above-cited rulings, the foreign processes, consisting of punching, forming, and scoring, result in the substantial transformation of the aluminum stock into the circle and pull ring. The next determination to be made is whether a second substantial transformation occurs when the circle and pull ring are connected together. Using the standards defined in C.S.D. 85-25, this operation does not constitute the required second substantial transformation. The operation merely involves joining two components together by pressing. In sum, the time, cost, and complexity (or degree of skill) which are used to determine whether a substantial transformation occurs, indicate that there is no second substantial transformation. Therefore, the cost or value of the aluminum stock imported into Mexico may not be counted toward the 35% value-content requirement. The GSP value-content requirement will not be satisfied because the "value added" in Mexico as a result of the processing performed there is approximately 15% (based on your submitted figures).


From the information presented, we are of the opinion that the machining or punching of the U.S.-origin aluminum stock into the circle and pull ring is not an acceptable assembly operation, but is further fabrication of the U.S.-origin aluminum. Therefore, the imported can ends with pull tabs will not qualify for the duty allowance available under subheading 9802.00.80, HTSUS.

Additionally, the beverage can ends with pull tabs will not be subjected to "further processing" in the U.S., as required by subheading 9802.00.60, HTSUS, and therefore, will not be eligible for the partial duty exemption under this tariff provision.

The production of the circle and pull ring in Mexico constitutes a substantial transformation. However, no additional substantial transformation results from the final joining operation. Therefore, the cost or value of the materials imported into Mexico may not be included in the 35% value-content minimum required for eligibility under the GSP. The beverage can ends with pull rings are, therefore, dutiable on their full value.


John Durant, Director
Commercial Rulings Division

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