CLA-2 CO:R:C:S 555705 SER

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

RE: Eligibility under GSP of copper wire from Mexico; 554246; Superior Wire v. U.S.; Belcrest Linens v. U.S.

Dear Mr. Glick:

This is in reference to your letters of July 27, 1990, March 8, 1991, and March 14, 1991, on behalf of ACS Industries, Inc. (ACS), concerning the eligibility for duty-free treatment under the Generalized System of Preferences (GSP) of certain copper wires from Mexico.


You state that 14 AWG (American Wire Gauge)(.064 inch in diameter), soft bare copper wire is imported into Mexico where it undergoes a multi-step drawing process. The wire is reduced by more than 75% of the original wire product into a finer wire (36 gauge-- .0050 inch diameter), in a four-step drawing process in which the wire is reduced at each step.

The 36 gauge wire is then stranded by twisting together seven individual copper wires concentrically with a specified lay or twists per inch. The stranded copper wire is then coated with a polypropylene insulation. This is followed by a second coating of the wire with PVC. ACS insulates 2, 4, 6 or 8 wires at a time. These insulated wires are then respooled onto various size spools with lengths ranging from 500 to 5000 feet.


Whether the copper wire imported into Mexico undergoes a double substantial transformation so that the cost or value of the wire may be counted toward satisfying the 35% value-content requirement under the 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, it appears that the copper wires are classified in subheading 8544.11.00, HTSUSA, 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).

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 the drawing process of the copper wire, whereby the wire is reduced through a multi-stage process from a diameter of 14 AWG, or .064 inch, to a diameter ultimately of 36 AWG, or .005 inch, constitutes an initial substantial transformation. To support your conclusion you cite Headquarters Ruling Letter (HRL) 554246 dated July 29, 1987, which held that a two-step process of drawing wire rod into fine wire constituted a substantial transformation where the wire was reduced by 92 percent and the drawing process represented over 50 percent of the cost of the production of the wire to that point.

In a subsequent case, Superior Wire, a Div. of Superior Products Co. v. United States, 669 F.Supp. 472 (CIT 1987), aff'd, Superior Wire v. United States, 867 F.2d 1409 (Fed. Cir. 1989), the court held that the drawing of wire rod into wire through a multi-stage process did not constitute a substantial transformation of the wire rod. We believe that the holding in Superior Wire is controlling as to whether a substantial transformation occurs in the drawing of the copper wire in the instant case. -3-

The court in Superior Wire found that there was no significant change in the use or character of the wire, and only a relatively insignificant change in name. In examining whether there was a change in character or use, and, therefore, a substantial transformation, the court looked to whether the articles underwent a transition from producer goods to consumer goods. In this case, as in the Superior Wire case, there is no clear change from a producer good to consumer good when the wire is drawn from a 14 AWG to a 36 AWG. The main use of the copper wire, electrical wiring, has not significantly changed with the drawing and subsequent stranding processes that the wire undergoes. Furthermore, there is no significant change from a product suitable for many uses to one fit for only one purpose. Here, as in Superior Wire, the copper wire dictates the final form of the finished wire, as the basic properties of the wire are predetermined by the copper wire. Moreover, no real change in the composition of the copper wire occurs between the 14 AWG initial stage and the 36 AWG stage. It is our position that the 36 AWG stranded copper wire does not possess a significantly different character or use in comparison to the 14 AWG copper wire imported into Mexico.

You also claim that the change in tariff classification of the copper wires is an indication of a substantial transformation. The courts have held that a change in tariff classification is not dispositive, although it may be supportive of a substantial transformation. Belcrest Linens v. United States, 741 F.2d 1368 (1984). The classification change is from one heading to another within the same chapter and it is our position that the tariff classification change in this case is not indicative of a substantial transformation of the 14 AWG copper wire to the 36 AWG stranded copper wire.


Although the final article, insulated copper, wire may constitute a new and different article of commerce when compared to the copper wire imported into Mexico, it is our opinion that no intermediate article of commerce results from the processing performed in Mexico. Therefore, as the copper wire imported into Mexico does not undergo a double substantial transformation in that country, the cost or value of the wire may not be included in the GSP 35% value-content calculation.


John Durant, Director
Commercial Rulings Division