CLA-2 CO:R:C:V 555248 DSN

Mr. Richard E. Giffard
Pool Technology Limited
P.O. Box 3707
Brownsville, Texas 78520

RE: GSP treatment for certain fiberglass articles

Dear Mr. Giffard:

This is in response to your letter of December 2, 1988, in which you request a ruling under the Generalized System of Preferences (GSP) (19 U.S.C. 2461-2466), that certain substances imported into Mexico for use in the production of solid fiberglass articles undergo a double substantial transformation. We regret the delay in responding.


According to your submission, a blend of different chemical intermediates of U.S. origin, such as styrene, phthalic anhydride, maleic anhydride and propylene glycol, is exported to Mexico where it is combined with other materials, such as solublecobalt metallaic, dimethuylaniline, additional styrene, and parabenzoquinone. These additional materials will be sourced either in the U.S. or Mexico. The blending and heating of the above substances forms an uncured thermoset resin, which has the consistency of a sticky viscous liquid. The uncured resin can either be stored in this form or immediately combined with fiberglass and other additives, including a catalyst, which causes the resin to harden. Before it hardens, the mixture is injected into a mold and cured to form the final solid fiberglass article.


Whether the uncured thermoset resin produced in Mexico from various chemical substances constitutes a substantially transformed constituent material of the imported fiberglass 2

articles so as to permit the cost or value of the chemical substances to be counted toward the GSP 35% requirement.


Under the GSP, eligible products of a designated beneficiary developing country (BDC) which are imported directly into the U.S. qualify for duty-free treatment if the sum of the cost or value of the materials produced in the BDC plus the direct costs involved in processing the eligible article in the BDC is at least 35% of the article's appraised value at the time of its entry into the U.S. See 19 U.S.C. 2463.

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 chemicals must be substantially transformed in Mexico into a new and different intermediate article of commerce, which is then used in the production of the final imported article. See 19 CFR 10.177(a).

The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. See Texas Instruments Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982).

We find that the process of mixing and heating the chemical intermediates and additives, resulting in an uncured thermoset resin, constitutes a substantial transformation. A chemical reaction results which changes the molecular structure of certain of the chemical substances and forms a product with a new name, character and use. The processing transforms the chemical intermediates and other additives, which have a wide variety of uses, into an article (the uncured resin) suited for specific uses. Under previous rulings involving the manufacture of products from chemical substances, we have ruled that an intermediate created in a two (or more) step process is an article of commerce if the intermediate is or can be isolated, and it has been or can be marketed in that form. See HRL 055716/ 055717 dated July 12, 1979 (C.S.D. 80-34, 14 Cust. Bull. 780 (1980)), and HRL 061030 dated May 25, 1979. Here, the intermediate product is isolated, and we are satisfied from the information presented that the uncured thermoset resin is an independent article of commerce, as evidenced by the BASF product series called "Laminac", which is an uncured polyester resin which is widely traded around the world.

A second substantial transformation results when the product is catalyzed and cured in a mold. After the curing of the 3

resins, an infusible plastic product is formed with a distinct shape and identity and its own particular use. The finished solid fiberglass article clearly is a new and different article of commerce when compared to the uncured thermoset resin from which it is, in part, made.


The processing in Mexico of imported chemical intermediates and other additives to form uncured thermoset resin results in a substantial transformation of the chemical substances into a constituent material of the final fiberglass article. Accordingly, the cost or value of the intermediate article may be counted toward the GSP 35% value-content requirement in determining whether the solid fiberglass articles are entitled to duty-free treatment under that program.


Jerry Laderberg

FOR John Durant, Director
Commercial Rulings Division