CLA-2 CO:R:C:S 557284 WAW
Mr. Shields T. Fair
8715 Wallen Ridge Drive
Tucson, AZ 85710
RE: Eligibility of night stand table for duty-free treatment
under the Generalized System of Preferences; substantial
transformation; double substantial transformation; wood;
Dear Mr. Fair:
This is in response to your letter dated April 17, 1993,
regarding the eligibility of a night stand table imported from
Mexico for duty-free treatment under the Generalized System of
Preferences (GSP) (19 U.S.C. 2461-2466).
You state that you intend to manufacture among other things,
chairs, tables -- including dining, end, coffee, and other tables
-- cabinets, dressers, and beds in Mexico. All of the products
which you intend to manufacture will consist predominantly of
wood, and in some instances will also have some metal hardware
and/or cloth with foam padding underneath. Most of the wood and
hardware will be exported from the U.S. to your Mexican
manufacturing facility. You state that, where possible, you will
utilize wood which originates from Mexico. As you have only
provided a description of the operations involved in the
production of a night stand table, we are limiting this ruling to
the facts relating to that item and, therefore, we are not
considering at this time whether the other articles which you
produce will also be eligible for duty-free treatment under this
A description of the operations which you intend to use in the
production of a night stand table in Mexico are as follows:
Production of the night stand table individual components:
(1) From the wood stock, quality pieces of wood are selected
which meet the parts list attached to drawing TNS-001.
(2) In the production of the legs, four pieces of pine are
cut to the proper dimensions measuring 28" x 1.5" x 1.5".
The pieces are shaped according to pattern #TNS-001-L. In a
telephone conversation with a member of my staff on May 26,
1993, you stated that the table leg is passed through a
routing machine which slightly tapers the leg and rounds the
edges. Four miter holes are routed in each leg according to
pattern #TNS-001-L. Two holes are routed in each leg to
anchor the lower shelf according to pattern TNS-001-L. The
legs are sanded and smoothed.
(3) In the production of the top, two pieces of wood
measuring 2" x 12" #1 pine are cut to 30" length. Blind
miter slots are cut on the underside of the two pieces
according to pattern #TNS-001-T. Four holes are cut for
assembly with the legs of the night stand table. The two cut
pieces are bonded and clamped together with wedges and
contractors' cement for 24 hours. The table top is also
passed through a routing machine which curves and slightly
rounds off the edges. The top is sanded and smoothed.
(4) In the production of the shelf, two pieces of 1" x 12"
#1 pine are cut to 26" length. Blind miter slots are cut on
the underside of the two pieces according to pattern #TNS-001-S. The two cut pieces are bonded and clamped together
with wedges and contractors' cement for 24 hours. The bonded
shelf board is cut to finished size measuring 25" x 20".
Miter slots are cut in the ends of the shelf according to
pattern TNS-001S. The shelf is sanded and smoothed.
Assembly of the night stand table:
(1) In the assembly of the night stand table, the top is
first placed upside down on a workbench. The four legs are
glued into the top. A leather mallet is used to tap the legs
(2) The lower shelf is assembled into the legs by clamping
the components together by means of pegs and glue. All glue
drips are removed. The night stand is left to dry for at
least 24 hours.
The clamps are removed and the night stand assembly is
inspected and any repairs are made.
(1) All the surfaces are sanded until the table meets
(2) The appropriate stain is selected depending upon
(3) The table is dried off and inspected thoroughly. (4)
After 12 to 24 hours have elapsed, the table is inspected
and touched-up as needed.
(5) The table is sprayed with wax and allowed to dry.
(6) The underside of the table is stamped with the label
"Made in Mexico".
All of the parts of the table are inspected for defects a
The finished night stand table is tagged with a stock number
and wrapped in blankets and prepared for shipment to the
Whether the operations performed in Mexico on the U.S. raw
dimension lumber result in a double substantial transformation,
thereby enabling the cost or value of the lumber to be counted
toward the 35% value-content requirement for purposes of the GSP.
LAW AND ANALYSIS:
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 costs involved in
processing the eligible article in the BDC, is at least 35% of the
appraised value of the article at the time of its entry into the
U.S. See section 10.176(a), Customs Regulations (19 CFR 10.176(a)).
As stated in General Note 3(c)(ii)(A), Harmonized Tariff
Schedule of the United States (HTSUS), Mexico is a designated BDC.
In addition, based on your description of the merchandise, it
appears that the article at issue is classified under subheading
9403.50.9080, HTSUS, which provides for "[w]ooden furniture of a
kind used in the bedroom: Other: Other." Articles classified under
this provision are eligible for duty-free treatment under the GSP
provided the article is a "product of" the BDC, it meets the 35%
value-content requirement, and it is "imported directly" into the
U.S. from the BDC. Merchandise is considered the "product of" a BDC
if it is either wholly the growth, product or manufacture of a BDC
or has been substantially transformed there into a new or different
article of commerce. 19 U.S.C. 2463(b)(2).
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 Texas Instruments Incorporated v. United States, 2
CIT 36, 520 F. Supp. 1216 (CIT 1981), rev'd, 681 F.2d 778, 69 CCPA
151 (CCPA 1982).
If an article is comprised of materials that 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 imported
materials used to produce the night stand table 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
final article - night stand table.
Customs has previously held that cutting materials to defined
shapes or patterns suitable for use in the assembly of a finished
article, as opposed to mere cutting to length and/or width which
does not render the article suitable for a particular use,
constitutes a substantial transformation. In HRL 553878 dated
October 28, 1985, raw dimension lumber and plywood sheets were
exported to Mexico where they were cut and shaped into various
components, i.e., cabinet doors, drawers, drawer front, face
frames, mouldings, kick plates, cabinet sides and cabinet tops,
suitable for assembly into cabinets. In HRL 553878 we examined
commercial magazines and other documentary evidence to determine
whether the component parts were in fact saleable articles of
commerce. We concluded that "the foreign wooden raw materials
have been substantially transformed into new and different
articles of commerce in the beneficiary country and, therefore,
may be considered intermediate constituent materials."
Customs has also held that wood doors made in Costa Rica from
lumber from various countries was entitled to duty-free treatment
under the Caribbean Basin Economic Recovery Act. See HRL 555338
dated July 10, 1989. In HRL 555338, the lumber was cut and shaped
into doors, sometimes carved with decorative designs or grooved
using special wood working machines and sanded, glued, and
stained in Costa Rica. Customs ruled that "the lumber itself is
substantially transformed in Costa Rica when it is cut and shaped
to create doors and door frames, which are distinct articles of
commerce with a completely new and different name, character, and
Consistent with HRLs 555338 and 553878, we are of the opinion
that the operations of cutting and further processing, e.g.,
cutting into smaller pieces, routing, precision-hole drilling,
etc., to create furniture parts suitable for assembly into a
finished night stand table, constitute a single substantial
transformation of the lumber imported into Mexico. In the
instant case, all of the night stand table components have
been further processed beyond merely cutting to smaller sizes,
and all have characteristics that render them suitable for a
In another ruling concerning, among other things, the
assembly of loudspeakers and television cabinets in Mexico from
imported raw dimension lumber, we held that cutting the lumber
into smaller pieces, beveling, routing, precision-tolerance
tenoning, edge band application, precision-hole drilling,
bending, etc., to create furniture parts suitable for assembly
into the finished articles, constituted a single substantial
transformation of the raw dimension lumber. See HRL 555683 dated
February 15, 1991. In HRL 555683, we also found that the
subsequent assembly of the cut lumber components into the
finished assembled speakers resulted in a second substantial
transformation. See also HRL 555156 dated August 8, 1990 (the
manufacture of speakers in which dimensional lumber is cut to
shape and then assembled into fully functional articles,
subjected to quality control and testing, resulted in a double
substantial transformation of the imported lumber).
We have held that, for purposes of the GSP, an assembly
process will not work a substantial transformation unless the
operation is "complex and meaningful." See C.S.D. 85-25, 19 Cust.
Bull. 544 (1985). Whether an operation is complex and meaningful
depends on the nature of the operation. In making this
determination, we consider the time, cost, and skill involved,
the number of components assembled, the number of different
operations, attention to detail and quality control, as well as
the benefit accruing to the beneficiary developing country (BDC)
as a result of the employment opportunities generated by the
In Texas Instruments. Inc. v. United States, 681 F.2d 778
(Fed. Cir. 1982), the court implicitly found that the assembly of
three integrated circuits, photodiodes, one capacitor, one
resistor, and a jumper wire onto a flexible circuit beard (PCBA)
constituted a second substantial transformation. It would appear
that the assembly procedure which took place in Texas Instruments
does not achieve the level of complexity contemplated by C.S.D.
85-25. However, as the court pointed out in Texas Instruments, in
situations where all the processing is accomplished in one GSP
beneficiary country, the likelihood that the processing
constitutes little more than a pass-through operation is greatly
diminished. Consequently, if the entire processing operation
performed in the single BDC is significant, and the intermediate
and final articles are distinct articles of commerce, then the
double substantial transformation requirement will be satisfied.
Such is the case even though the processing required to convert
the intermediate article into the final article is relatively
simple and, standing alone, probably would not be considered a
substantial transformation. See HRL 071620 dated December 24,
1984 (in view of the overall processing in the BDC, the materials
were determined to have undergone a double substantial
transformation, although the second transformation was a
relatively simple assembly process which, if considered alone,
would not have conferred origin).
In the instant case, pursuant to HRLs 555683 and 555156 and
the court's holding in Texas Instruments, we find that the final
assembly of the component night stand parts to form the finished
night stand table results in a second substantial transformation.
Even though we believe that the assembly operation in the instant
case, which involves gluing the legs into the top and the lower
shelf into the legs, sanding the legs, top and shelf, and
staining the wood, may not be complex enough to constitute a
substantial transformation by itself, nevertheless, we are of the
opinion that the overall processing operations (i.e., cutting,
routing, precision-hole drilling, etc.) performed in Mexico are
In addition, the production processes involved in creating
the night stand table are not the type of "pass-through"
operations which Congress intended to prohibit from receiving GSP
benefits. "The provision would not preclude meaningful assembly
operations utilizing foreign components, provided the assembly is
of significance to the local economy, meets the 35% local content
rule, and results in a new and different article." H.R. Rep. No.
98-266, 98th Cong., 1st Sess. 13 (1983). Based on the foregoing
analysis and consistent with our prior rulings, we find that the
materials used in the production of the night stand table have
undergone the requisite double substantial transformation.
Based on the information provided, we find that the cutting
and assembly operations performed on the imported lumber to
produce the night stand table in Mexico result in a double
substantial transformation of the imported material. Therefore,
the cost or value of the U.S.-origin lumber may be included
toward the 35% value-content calculation for purposes of the GSP.
On July 4, 1993, the GSP program expired. Therefore,
merchandise which is entered, or withdrawn from warehouse, on or
after July 5, 1993, will be subject to duty. If the GSP program
is reinstated by Congress in the future, this ruling will be
applicable to the merchandise described in your ruling request,
provided that the information you have provided remains the same.
For your information, Customs has issued a general notice
describing the procedures an importer should follow if the GSP
expires. See 27 Cust. Bull. 19 (July 14, 1993).
John Durant, Director
Commercial Rulings Division