CLA-2 CO:R:C:V 555659 SER

Mr. Leslie A. Glick
Porter, Wright, Morris & Arthur
1233 20th St., N.W.
Washington, D.C. 20036-2395

RE: GSP eligibility of baby strollers produced in Mexico; substantial transformation; Texas Instruments; 554027; 554025; 555189; 071518; 071534; 051189; 080189; 079125; 555377; 071620; C.S.D. 85-25.

Dear Mr. Glick:

This is in reference to your letter of May 11, 1990, on behalf of Graco Children's Products, Inc., requesting a ruling of whether certain baby strollers produced in Mexico are entitled to duty-free treatment under the Generalized System of Preferences (GSP)(19 U.S.C. 2461-2466). You also request the proper tariff classification of the strollers under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA).


The products at issue are various models of baby strollers. These strollers are known by various trade names: Stroll-A-Bed; Umbroller;; Travel Mate; Travel Rite; Premier; Regency; Regency, Ltd.; Brougham; Elite and Duet. Although there are some differences between the various models, the differences are mainly in terms of appearance and style, and minor differences in the features offered. Since the manufacturing process of the strollers is substantially similar, this ruling will encompass all models.

Graco intends to produce the strollers in Mexico, and import them through the ports of Brownsville, Hidalgo and Laredo, Texas. The manufacturing process of the strollers in Mexico involves essentially four imported materials-- 1) steel tubing cut to length, 2) unfabricated coil steel for use in producing brackets, 3) plastic resins, and 4) rolls of fabric.


The steel tubing is formed and cut to length in the U.S., and then brought into Mexico. In Mexico, the cut steel tubes are first punched, using special tooling and general purpose stamping presses, to form holes to be used for bolting, etc., in the final assembly. Following the punching, the fabricated tubes are painted, using a paint system conveyor and racks. The tubes are first pre-treated, and then a non-toxic paint or powder coating is applied. Some of the painted tubes are then bent by machines into their component shapes. A minimum of 1/3 to 1/2 of the tube components of a particular model are bent.

The brackets are produced in Mexico from U.S. produced coiled steel. Stamping machinery is used to convert the coil steel into stamped parts specifically designed as brackets. After the brackets are created, they are plated with various materials (copper, nickel, zinc and chrome) using machinery designed for plating.

The molded plastic parts, which comprise the handles, folding hinges, brakes, and folding clip in the finished article, are made from plastic resins of U.S. origin. These resins are transformed into their final form by an injection molding process. Extreme heat is applied to the plastic resin, turning it into liquid form, which is then injected into molds, where it cools and forms the various plastic parts.

The printed fabric is imported in rolls from Taiwan into Mexico. In Mexico, the fabric is spread and die cut into specific patterns and shapes. It is then sewn to form completed seats for the baby carriages as well as backs and certain other parts of the chair portion of the stroller.

The webbing, used in the strollers, is also imported into Mexico from Taiwan. In Mexico the webbing is cut to length, holes are punched into it, and "D" rings or buckles are sewn to the webbing. The webbing and the completed fabric components are then sewn into a finished seat.

Finally, the above-described major components are assembled with other parts to create the final product, after which the article is packaged for shipment to the U.S.


1. What is the tariff classification of the baby strollers under the HTSUSA?


2. Whether the non-Mexican materials imported into Mexico and used in the production of the baby strollers undergo a double substantial transformation so that the cost or value of the materials may be counted toward satisfying the 35% value- content requirement under the GSP.


Classification under the HTSUSA

Classification of goods under the HTSUSA is governed by the General Rules of Interpretation (GRI's), taken in order. GRI 1 provides that classification shall be determined according to the terms of the headings and any relative section or chapter notes.

The products at issue are classified in subheading 8715.00.00, which provides for "[b]aby carriages (including strollers) and parts thereof . . . ."

Applicability of GSP

Under the GSP, eligible articles the growth, product, or manufacture of a designated beneficiary developing country (BDC), which are imported directly into the U.S., qualify for duty- free treatment if the sum of 1) the cost or value of the materials produced in the BDC plus 2) the direct cost involved in processing the eligible article in the BDC is at least 35% of the article's appraised value at the time it is entered into the U.S. See 19 U.S.C. 2463(b).

As provided in General Note 3(c)(ii)(A), HTSUSA, Mexico is a BDC. In addition, the tariff provision under which the strollers are classified (subheading 8715.00.00, HTSUSA), 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). 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 U.S. and Taiwanese materials imported into Mexico may be included in the 35% calculation only if they are substantially transformed in Mexico into new and different intermediate articles of commerce, which, themselves, are substantially transformed in the production of the final article-- the baby strollers.


A substantial transformation occurs when a new and different article of commerce emerges from a process with a new name, character or use different from that possessed by the article prior to processing. Texas Instruments Incorporated v. United States, 69 CCPA 152, 681 F.2d 778, 782.

You claim that each of the four basic imported materials discussed above are substantially transformed into an intermediate product before final completion into the finished consumer product--the baby strollers. More specifically, you claim that eight substantial transformations occur during the course of the manufacturing process, and a ninth substantial transformation occurs in the production of the final product. You summarize the substantial transformations as follows: 1) conversion of formed tubing by punching; 2) conversion of formed tubing by bending; 3) painting of tubing; 4) transformation of coil steel for brackets by stamping into brackets; 5) plating of the brackets; 6) transformation of the plastic resins pellets by melting and injection molding into parts; 7) transformation of rolls of fabric into patterns through cutting to patterns and shapes; 8) transformation of the cut fabric into finished seats and backs for strollers through sewing; 9) transformation of all the above parts when assembling to create the finished baby stroller.

Clearly there is a substantial transformation of the U.S. and Taiwanese materials imported into Mexico during the production of the baby strollers. The question to be resolved is whether the imported materials undergo a substantial transformation to become intermediate articles of commerce.

Customs has consistently held that the cutting of fabric into specific patterns and shapes suitable for use in an assembly operation constitutes a substantial transformation. See Headquarters Ruling Letters (HRL) 555189 dated June 12, 1989, 554027 dated January 13, 1987, and 554025 dated December 16, 1986. Therefore, we find in regard to this case that the cutting to shape in Mexico of the imported rolls of fabric to create the components for the strollers' seat and back results in a substantial transformation of the imported fabric.

You also state that the plastic resins which are processed by thermal injection molding undergo a substantial transformation. Customs has consistently held that products created by a thermal injection molding process have undergone a substantial transformation. See HRL 071518 dated November 8, 1984, 071534 dated July 19, 1984. The handles, chips, etc., clearly are different articles from the resins from which they are made. -5-

It is also contended that the production of the brackets from coil steel constitutes a substantial transformation. We agree. The stamping of the brackets from coil steel results in parts which are specifically designed for incorporation into the strollers. The completed brackets clearly are new and different articles in comparison to the materials from which they are derived.

You also argue that the plating of the brackets alone can be considered a substantial transformation. In this regard, we have held that galvanizing or plating will not result in a substantial transformation, as it is essentially a finishing operation which neither creates a new article nor alters the intended use of the article. See HRL's 554692 dated March 8, 1988, 081088 dated August 1, 1988, and 732159 dated September 7, 1990.

It is claimed that the tubing, imported from the U.S. already formed and cut to length, undergoes a substantial transformation by the process of punching, painting and bending in Mexico. More specifically you state that each individual operation results in a substantial transformation. It is our position that the punching of holes in the pre-formed tubing is insufficient by itself to result in a substantial transformation of the tubing into a new or different article of commerce. We have ruled that procedures such as chamfering of pipes, (grinding the ends of pipes) constitutes a process too minor in nature to result in a substantial transformation. See HRL 080189 dated June 8, 1987. The process of punching holes in the formed tubes does not appear to be any more involved than a chamfering operation. We have also consistently held that mere painting of tubes is not a substantial transformation, and, therefore, the process of painting in the case at hand is also not considered a substantial transformation. See HRL 079125 dated May 3, 1987.

Customs has ruled that bending already cut-to-length tubing into a shape dedicated to a specific use constitutes a substantial transformation. See HRL 555377 dated October 16, 1989. It was stated in your submission that the amount of tubing which undergoes bending varies per model, but that only a minimum of 1/3 to 1/2 of the parts of a particular model are bent. Only those tubes which undergo the bending process will be considered to have undergone a substantial transformation.

After completion of the above described operations, the steel tubing, molded plastic parts, fabric seats, and steel brackets are assembled with other parts, such as wheels and hardware, to create the final article. This is accomplished through the use of screwdrivers, rivet machines, conveyors, packaging equipment, etc. Although the final assembly of the baby strollers does not appear to be exceedingly complex, in view


of the overall operations in Mexico, we do not believe that this is the minimal, "pass-through" operation that should be disqualified from receiving the benefit of GSP. See HRL 071620 dated December 12, 1984, which held that in view of the overall processing done in the BDC, the materials are determined to have undergone a double substantial transformation, although the second transformation is a relatively simple assembly operation which, if considered alone, would not confer origin. C.S.D. 85- 25, 19 Cust. Bull. 544 (1985). Accordingly, we find that the assembly of the final product constitutes a second substantial transformation of the fabric which is cut to shape, the tubing which is bent to shape, the molded plastic parts, and the steel brackets.


The strollers at issue are classified in subheading 8715.00.00, HTSUSA, which provides for baby carriages (including strollers) and parts thereof.

The cost or value of the materials imported into Mexico, which, as discussed above, are substantially transformed into constituent materials of the baby strollers may be included in the GSP 35% value-content calculation.


John Durant, Director
Commercial Rulings Division