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HQ 557408

January 14, 1994

CLA-2 CO:R:C:S 557408 BLS


District Director of Customs
9400 Viscount Street
El Paso, Texas 79925

RE: Internal Advice 42/93; eligibility of bingo game cards for duty-free treatment under the GSP

Dear Sir:

This is in reference to the request for internal advice made by Arrow International, Inc., ("Arrow") concerning the eligibility of certain bingo game booklets produced in Mexico for duty-free treatment under the Generalized System of Preferences (GSP).


Counsel for Arrow has now advised that while the initial entries which are the subject of this request involve the processing of U.S. sheets of paper with printed bingo faces on master sheets, under the current method of production, bare paper of U.S. origin is sent to Mexico and the printing is now performed there. Our analysis will therefore cover both scenarios. It is further noted that the entries encompass the period October 1992 to the present.

According to the submission, each charitable bingo game establishes its own program or sequence of bingo games to be played at a bingo session. For control purposes, a specific color of a bingo sheet will be used for each game. The sequence of colors and the cut (number of bingo faces) is referred to as a booklet or pad of bingo sheets. The large, printed master sheets of bingo paper do not become a saleable, retail item until they are processed into a final booklet configuration. Arrow currently produces over 13,000 different types of bingo books annually. Also acording to the submission, the method of production is as follows:

Step 1: Sequentially ordered master sheets with bingo faces are pulled from inventory for each customer order in the required, customer specific master sheets.

Step 2: Each color of the customer specific master sheets is manually randomized by changing the order of the customer specific master sheets, resulting in customer specific randomized master sheets (RMS). The randomization process must ensure that duplicate faces will not be in play simultaneously and that each end-user will have unique faces.

Step 3: RMS are placed in a specially designed cabinet for collation.

Step 4: The RMS are collated by manually pulling RMS, one sheet at a time in the color rotation demanded by the customer order and inserting a printed wax backing sheet after each color rotation cycle. This results in customer specific collated master sheets (CMS).

Step 5: CMS are jogged to properly align the edges of the CMS.

After Step 5, the resulting product can be sold to jobbers and in fact similar products produced in the U.S. will actually be sold in the future to Cowells-

Arrow Bingo U.K. in England.

Step 6: CMS are placed on skids for transfer to a cutting machine.

Step 7: CMS undergo an initial cut. The cutting changes the CMS from a 36 face configuration into an 18 face configuration. The resulting product is referred to as cut collated master sheets (CCMS).

Step 8: The cut CCMS are glued along a single edge on a specially designed gluing rack.

Step 9: The glued CCMS are hand sliced from the gluing rack.

Step 10: The glued CCMS are fanned and inspected, forming booklets which have the specified number of pages plus a single backing sheet and the specified color rotation and series demanded by the customer order. At this stage, the product is referred to as customer specific collated UPS booklets (CUB).

After Step 10, the CUB can be sold (and are sold) to job shops that will complete the remaining cutting stages as demanded by their customers in order to
provide them with a product in the specified size.

Step 11: Booklets are cut to the size demanded by the specific customer order.

Step 12: Booklets are manually separated and inspected.

Step 13: Booklets are grouped into bundles and inspected.

Step 14: Booklets are transferred to the packing area.


Whether U.S.-origin sheets of paper from which bingo game booklets are created are subjected to a double substantial transformation in Mexico under the following scenarios:

1) The paper sent abroad consists of master sheets with bingo game faces;

2) Unprinted paper is sent abroad and printing of the bingo game faces occurs in Mexico.


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 cost of the processing operations in the BDC, is equivalent to at least 35 percent of the appraised value of the article at the time of entry, See 19 U.S.C. 2463(b).

Mexico is a designated BDC. See General Note 3(c)(ii)(A), Harmonized Tariff Schedule of the United States (HTSUS). In addition, it appears from a description of the merchandise that the articles in question are classified under subheading 9504.90.60, HTSUS, "Articles for arcade, table or parlor games... Other", a GSP eligible provision.

The cost or value of materials which are imported into the BDC to be used in the production of the article, as here, may be included in the 35% value-content computation only if the imported materials undergo a double substantial transformation in the BDC. That is, the non-Mexican components must be substantially transformed in Mexico into a new and different intermediate article of commerce, which is then used in Mexico in the production of the
imported article. See, section 10.177(a), Customs Regulations (19 CFR 10.177(a)); and Azteca Milling Co. v. United States, 703 F. Supp. 949 (CIT 1988), aff'd, 890 F.2d 1150 (Fed. Cir. 1989).

"[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." Torrington Co. v. United States, 764 F.2d 1563, 1568, 3 CAFC 158, 163 (Fed. Cir. 1985).

The initial question which must be resolved is whether the imported bingo booklets are considered a "product of" Mexico. We shall address this issue under the two scenarios presented, in the first instance, where the printing was done in the U.S., and the master sheets sent to Mexico, and secondly, where bare paper is sent to Mexico for printing of the bingo faces.

Printing in the U.S.

Under this scenario, Arrow argues that substantial transformations occur and intermediate articles of commerce are produced after completion of Steps 5 and 10. In support thereof, Arrow states that after Step 5, the collated master sheets will actually be sold in that form as a producer good; and the collated UPS booklets created after Step 10 may be sold to job shops. Arrow contends that the final product is a consumer good, different from both the product at Step 5 and the product after Step 10. The importer cites Headquarters Ruling Letter (HRL) 555265, dated July 3, 1989, Torrington, supra, and National Juice Products Association v. United States, 628 F. Supp. 978, (CIT 1986), to support its contention that at least two substantial transformations result from the processing in Mexico.

It is well-established that a "complex and meaningful" assembly operation can result in the emergence of a new and different article of commerce with a name, character and use different from the components of which it was made. See, Texas Instruments v. United States, 681 F.2d 778, 69 CCPA 151 (1982), and C.S.D. 85-25, 19 Cust. Bull. 544 (1985). However, such operations must result in the emergence of an article which differs in character and use from the component parts of which it is composed. See, HRL 557316, dated November 4, 1993. In Uniroyal, Inc. v. United States, 3 C.I.T. 220, 542 F.Supp. 1026 (1982), a country of origin marking case, the court found that a substantial transformation in the U.S. did not occur through the attachment of an outsole to a shoe upper. In the course of its opinion, the court pointed out that this operation was a minor manufacturing or
combining process which left the identity of the shoe upper intact, and that the completed upper was the very essence of the finished shoe.

The concept of the "very essence" of a product was applied in National Juice Products, where the court determined that imported frozen concentrated orange juice was not substantially transformed in the U.S. when it was domestically processed into retail orange juice products. The court agreed with Customs that the orange juice concentrate "imparts the essential character to the juice and makes it orange juice... thus, as in Uniroyal, the imported product is the very essence of the retail product." (See also HRL 555982/556704, blending of non-Belizan orange juice to produce frozen concentrated orange juice not considered substantial transformation.)

Applying the principles of Uniroyal and National Juice Products to the instant case, we find that through the various assembly operations performed in Mexico, i.e., cutting, collating, and gluing, the exported master sheets retain their essential character, that of bingo face sheets. The sheets are dedicated for use as bingo face sheets when printed in the U.S., and this use remains unchanged through completion of the bingo booklets. Whether in its imported condition as bingo booklets, or as master sheets, and through the intermediate assembly processes, the material is essentially the same product at different stages of manufacture. We do not find that National Juice Products, nor the other cited authorities, lend support to Arrow's position of a double substantial transformation.

In HRL 555365, we found that cutting rolls of aluminum strip into lengths and crowning the cut strips resulted in a new and different article of commerce which had limited uses, e.g., venetian blind slats, surveyor stakes, and lattice fences. Prior to these operations, the aluminum strip was a raw material which possessed nothing in its character which indicated any of these uses. The second substantial transformation occurred through various operations including the assembly of the slats with other components resulting in venetian blinds. In the instant case, the exported master sheet is not a raw, multi-functional material, as the rolls of aluminum strip in HRL 555365, but rather is a product dedicated to use as bingo faces throughout the processing in Mexico.

In Torrington, the court found that wire with a multitude of possible uses underwent a double substantial transformation in becoming sewing machine needles. The initial substantial transformation occurred when processing of the wire resulted in swaged needle blanks. We have limited Torrington to the specific
factual situation found therein (See, T.D. 86-7, 20 Cust. Bull. (1986)), and therefore do not recognize Torrington as precedent for the factual situation in the subject case. Even if we were to consider that case, we find no basis for support for the importer's position, since in Torrington the identity of the final product was clearly distinct from the wire from which it was made, while in the subject case the master sheet retains its identity as bingo faces throughout the foreign processing. We would also note that a change in commercial identity of the material, at different stages of production, and the fact that the materials prior to completion of the bingo booklets may be sold or offered for sale, is evidence of, but is not dispositive of the issue as to whether a substantial transformation has occurred.

Accordingly, we find that under this scenario, the operations in Mexico do not substantially transform the master sheets into "products of" Mexico, for purposes of the GSP.

Printing Performed in Mexico

Based on the reasoning set forth in Torrington, National Juice, and the other cited authorities, it is apparent that a substantial transformation occurs when unprinted paper is printed in Mexico with bingo game faces. Upon exportation from the U.S., the paper is a raw material of a generic nature with varied uses, but is dedicated to use as bingo game faces after the printing is completed. At this point, the sheets have a new identity, name, and character. Prior to this processing, the paper possessed nothing in its character which would indicate the nature of the final product. Therefore, we find under this second scenario that the master sheets are considered "products of" Mexico for purposes of the GSP.

The next question we must address, under this scenario, is whether the master sheets will be considered constituent materials of the completed bingo booklets.

We find that the requisite double substantial transformation does not occur, for the same reason we found no single substantial transformation under the first scenario. That is, the essential character of the master sheets, as bingo game faces, is retained through completion of the bingo booklets. Whether in its condition as master sheets, or in a secondary stage as customer collated master sheets, or customer specific collated booklets, the material is essentially the same product at different stages of production. Accordingly, while the completed booklets are considered "products of" Mexico, the cost or value of the materials cannot be used in determining the 35% value-content requirement under the GSP. .


1) Bingo game booklets produced from U.S.-origin master sheets are not "products of" Mexico and therefore are not entitled to duty-free treatment under the GSP.

2) Bingo game booklets produced from U.S.-origin unprinted paper are considered "products of" Mexico. However, such booklets do not undergo a double substantial transformation in Mexico and accordingly, their cost or value cannot be counted in determining the 35% value-content requirement under the GSP.

This decision should be mailed by your office to the internal advice requester no later than 60 days from the date of this letter. On that date the Office of Regulations and Rulings will take steps to make the decision available to Customs personnel via the Customs Module in ACS and the public via the Diskette Subscription Service, Lexis, Freedom of Information Act and other public access channels.


John Durant, Director
Commerial Rulings Division

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