RR:TC:SM 560043 KKV

Ms. Angel L. Cooper A.N. Deringer, Inc. 173 W. Service Road Champlain, NY 12919

RE Tariff classification and country of origin of copper wire exported to Italy for coating and returned to the U.S. for additional processing; step in production of final product; lack of substantial transformation; Superior Wire v. United States; HRL 557201; HRL 556301; HRL 555705

Dear Ms. Cooper:

This is in response to your letter dated August 19, 1996 (and additional submission dated November 18, 1996), on behalf of Tecnosil U.S.A., Inc., which requests a binding ruling regarding the tariff classification and country of origin of copper wire exported to Italy for coating and returned to the U.S. for additional processing. A sample of the wire at two stages in the manufacturing process has been submitted for our examination.

FACTS:

Solid or stranded tin-plated annealed copper conforming to American Society for Testing and Material (ASTM) specification B-33, of U.S.-origin, is exported to Italy, where it is coated, by means of heat extrusion with pressure, with a silicone rubber insulating material. Upon its return to the United States, the insulated wire is fitted with a fiberglass braid which completes the article into an electric conductor for use as internal wiring for electric equipment and appliances where temperatures do not exceed 200ΓΈ Centigrade.

ISSUES:

1) What is the tariff classification of the insulated wire upon its return to the U.S. for additional processing?

2) What is the country of origin of the finished article?

LAW AND ANALYSIS:

1) Tariff Classification

Merchandise is classifiable under the Harmonized Tariff Schedule of the United States (HTSUS) in accordance with the General Rules of Interpretation (GRIs). GRI 1 states, in part, that for legal purposes, classification shall be determined according to the terms of the heading and any relative section or chapter notes.

While not binding on the contracting parties and therefore, not dispositive, the Harmonized Commodity Description and Coding System Explanatory Notes (ENS) provide a commentary on the scope of each heading of the Harmonized System, and thus, are useful in ascertaining the classification of merchandise under the System. Customs believes that the ENS should always be consulted ( See Treasury Decision (T.D.) 89-80, dated August 16, 1989, 54 Fed. Reg. 35127, 35128 (August 23, 1989).

Heading 8544, HTSUS, provides for, among other things, insulated wire, cable and other insulated electric conductors, whether or not fitted with connectors. Relevant Explanatory Notes state that, provided they are insulated, heading 8544 covers electric wire, cable and other conductors (e.g., braids, strips, bars) used as conductors in electrical machinery, apparatus or installations. The heading includes wiring for interior work or for exterior use and can vary from very fine insulated wire to thick cables of more complex types (see page 1404). Among other things, the good of heading 8544 are made up of either a single strand or multiple strand conductor, wholly of one metal or of different metals, and one or more coverings of insulating material, the aim of which is to prevent leakage of electric current from the conductor and to protect it against damages. Rubber and glass fiber yarns are among the insulating materials frequently used. These Explanatory Notes describe the articles in issue.

With regard to the merchandise at issue, under the authority of GRI 1, the tin-plated annealed copper wire coated with silicone rubber is provided for in heading 8544, HTSUS. If for a voltage not exceeding 80 V, the returned wire is classifiable in subheading 8544.49.00, HTSUS, dutiable at the rate of 4.6 ad valorem; if for a voltage exceeding 80 V but not exceeding 1,000 V, it is classifiable in subheading 8544.59.20, HTSUS, dutiable at the rate of 5.3 percent, ad valorem; and if for a voltage exceeding 1,000 V, the returned wire is classifiable in subheading 8544.60.40, HTSUS, dutiable at the rate of 4.6 percent, ad valorem.

2) Country of origin

Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), provides that, unless excepted, every article of foreign origin imported into the United States shall be marked in a conspicuous place as legibly, indelibly, and permanently as the nature of the article (or its container) will permit, in such a manner as to indicate to the ultimate purchaser in the United States the English name of the country of origin of the article. By enacting 19 U.S.C. 1304, Congress intended to ensure that the ultimate purchaser would be able to know by inspecting the marking on the imported goods the country of which the goods are the product. The evident purpose is to mark the goods so that at the time of purchase the ultimate purchaser may, by knowing where the goods were produced, be able to buy or refuse to buy them, if such marking should influence his will. United States v. Friedlaender & Co., 27 C.C.P.A. 297, 302 C.A.D. 104 (1940).

Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as:

The country of manufacture, production, or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of this part; however for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.

Accordingly, the country of origin of an article is the country in which it was wholly manufactured or, if processed in several countries, the country in which the article last underwent a substantial transformation. The well-established test for determining whether a substantial transformation has occurred is derived from language enunciated by the court in Anheuser-Busch Brewing Association v. United States, 207 U.S. 556, 562 (1908), which defined the term "manufacture" as follows:

Manufacture implies a change, but every change is not manufacture and yet every change in an article is the result of treatment, labor and manipulation. But something more is necessary, as set forth and illustrated in Hartranft v. Wiegmann, 121 U.S. 609. There must be transformation; a new and different article must emerge, having a distinctive name, character or use.

Simply stated, a substantial transformation occurs "when 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) (cited with approval in Torrington Co. v. United States, 764 F. 2d 1563, 1568 (1985)).

In Superior Wire v. United States, 669 F. Supp. 472 (1987), aff'd, 867 F.2d 1409 (1989), wire rod in coils was shipped to Canada where it was drawn into wire. The resulting product had various applications, but was primarily used for concrete sewer pipe reinforcement. The Court of International Trade found that the wire rod dictated the final form of the finished wire, and that wire rod and wire could be viewed as different stages of the same product. The court noted that while the wire emerged stronger and rounder after the drawing process, its strength characteristic was metallurgically predetermined through fabrication of the wire rod. Thus, the court found no significant change in the use or character of the wire rod.

In general, Customs has determined that laminating, coating, and encapsulating operations do not result in a substantial transformation. In Headquarters Ruling Letter (HRL) 557201, dated November 17, 1993, Customs held that, while the encapsulation process added certain qualities to the wire which did not exist prior to such operation, the essential character of the bunched wire, as a conductor of electricity, was not changed because of the enhancements attributable to the insulating material. Similar to the processing of the wire rod in Superior Wire, the process of producing the insulated wire is a step in the production of the final product. The fact that the insulated wire and bare wire may be classified in different headings of the HTSUS may be evidence of a substantial transformation, but is not dispositive of the issue.

In HRL 556301, dated May 4, 1992, Customs reconsidered a previous ruling, and affirmed that copper wire subjected to drawing, bunching and twisting, annealing, and encapsulating with polypropylene to form an insulated wire strand constituted a substantial transformation. However, the insulated wire strand did not undergo a second substantial transformation for purposes of the GSP when it was bundled with others and further encapsulated with PVC to form cordage. (See also 555705, dated August 26, 1991).

In the instant case, U.S.-origin copper wire (solid or stranded) which has been plated with tin and annealed, is exported to Italy, where it is encapsulated in a silicone rubber insulating coating, and returned to the U.S. for additional processing. Although the insulating coating may add certain physical qualities to the wire which did not exist in its uncoated state, i.e., tensile strength, resistance to heat, abrasion and chemicals, etc., these enhancements do not alter the essential character of the exported material -- a conductor of electricity. Similar to the processing of the wire rod in Superior Wire, the process of producing the insulated wire is a step in the production of the final product. Accordingly, we find that the exported wire is not substantially transformed into a new and different product as a result of processing in Italy. In the absence of a substantial transformation, which renders the exported material a product of Italy, the country of origin of the insulated wire, at the time of its importation and upon completion of processing in the U.S., is the United States. Therefore, the imported wire is not subject to the country of origin marking requirements of 19 U.S.C. 1304.

HOLDING:

Under the authority of GRI 1, the tin-plated, annealed copper wire coated with silicone rubber is provided for in heading 8544, HTSUS. If for a voltage not exceeding 80 V, the returned wire is classifiable in subheading 8544.49.00, HTSUS; if for a voltage exceeding 80 V but not exceeding 1,000 V, it is classifiable in subheading 8544.59.20, HTSUS; and if for a voltage exceeding 1,000 V, the returned wire is classifiable in subheading 8544.60.40, HTSUS.

U.S.-origin solid or stranded tin-plated annealed copper is not substantially transformed into a new and different article as a result of operations in Italy which coat the wire with silicone rubber insulating material. Accordingly, the country of origin of the insulated wire, at the time of its importation and upon completion of processing in the U.S., is the United States. The imported wire is not subject to the country of origin marking requirements of 19 U.S.C. 1304.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant Director Commercial Rulings Division