CLA-2 RR:CR:SM 562581 MLR
Melvin S. Schwechter, Esq.
Brad A. Rubin, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
1875 Connecticut Ave., N.W., Suite 1200
Washington, D.C. 20009-5728
RE: Country of origin marking of Wire Strands; substantial transformation; bunching; lay plate; insulating
Dear Mr. Schwechter and Mr. Rubin:
This is in reference to your letter of November 15, 2002, requesting a ruling on behalf of Alcoa Fujikura Ltd. ("AFL"), concerning the country of origin marking of certain "PVC-insulated" and "XLPE-insulated" wire products from Honduras. A meeting was held February 11, 2003, and samples were submitted.
AFL intends to import "PVC-insulated" and "XLPE-insulated" bunched copper wire from Honduras. The insulated wire will be used in the U.S. in the production of automotive wire harnesses. Copper strands, classifiable under subheading 7413.00, Harmonized Tariff System of the United States (HTSUS); polyvinyl chloride (PVC) pellets, classifiable under subheading 3904.21, HTSUS; and cross-link polyethylene (XLPE) pellets, classifiable under subheading 3901.30, HTSUS, all of U.S. origin will be exported to Honduras.
The copper strands will be annealed in the U.S. and will be wound onto reels, containing between six and 14 untwisted and non-bunched copper strands. In Honduras, the strands are fed into a buncher, which arranges the strands in specific geometric orientations, with specific twist lengths ("lay lengths") based on the specifications of the end use application ("lay plate"). The strands then enter the "compaction die" which sets the diameter and length of the specific products, resulting in the creation of "bunched wire." By using strands of various sizes and numbers of strands, different sizes of bunched wire are produced. It is stated that the size of the bunched wire determines its electrical current carrying capacity and physical strength. The bunched wire will contain between seven and 104 strands, with American Wire Gauge (AWG) measurements varying between 10 and 22. It is stated that the AWG level identifies the diameter, electrical current capacity and temperature "rating," or maximum temperature levels within which the wire can function. From the compaction die, the bunched wire enters the "bow", which rotates and twists the bunched wire, based on the needs of the given end use of the wire.
Next, the bunched wire is wound onto a reel and prepared for insulation with either PVC or XLPE. The compound is melted and pumped through the extruder line. In the extruder line, a rotating wheel pulls the copper wire, and the compound is extruded over the wire. If PVC is used, the material is cooled following a controlled cooling with water, which solidifies the compound around the bunched wire. It is stated that PVC-insulated wire has a lower temperature rating and is more likely to be used in applications where it is subject to less intense heat. If XLPE is used, a steam vulcanization process is required which causes a chemical reaction in the extruded XLPE, causing "crosslinking" in the underlying polymer chain. It is stated that "crosslinking" eliminates any potential future re-melting into raw XLPE. XLPE has a higher temperature rating and is likely to be used in wire harnesses that pass directly before the engine. It is stated that the insulation resistance is determined based on the application in the industry.
What is the country of origin of the imported "PVC-insulated" and "XLPE-insulated" bunched copper wire imported from Honduras?
LAW AND ANALYSIS:
Section 304 of the Tariff Act of 1930, as amended (19 U.S.C. 1304), requires that, unless excepted, every article of foreign origin (or its container) imported into the U.S. 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 manner as to indicate to the ultimate purchaser the English name of the country of origin of the article. The regulations implementing the requirements and exceptions to 19 U.S.C. 1304 are set forth in Part 134, Customs Regulations (19 CFR Part 134).
"Country of origin" is defined in 19 CFR 134.1(b) as the country of manufacture, production or growth of any article of foreign origin entering the U.S. 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 the marking laws and regulations.
It is claimed that the country of origin of the PVC-insulated and XLPE-insulated wire is Honduras. As support, Headquarters Ruling Letter (HRL) 557201 dated November 17, 1993; and HRL 561245 dated June 24, 1999, are cited.
In HRL 557201, Customs considered the eligibility of automotive wiring harness sets for preferential tariff treatment under the Generalized System of Preferences (GSP). The first step in making the harnesses involved feeding bunched copper wire through a head, tip and die assembly and extruding a PVC compound onto the wire as it passed through the head. The insulated wire was cut to length and electrical terminals were applied. Sub-assemblies were formed, typically by joining the wires by ultrasonic or resistance welding. In order to protect the electrical joint, a PVC sheath was injection molded over the joint by covering the joint with "dual wall" heat shrink tubing. The wires were then formed into a harness assembly. One of the issues considered was whether the bunched wire and PVC compounds were substantially transformed into separate and distinct intermediate articles of commerce. While it was contended that the insulating material imparted varying physical properties to the bunched wire, i.e., tensile strength, heat, abrasion, and chemical resistance, which made the insulated wire fit for different end uses than bare bunched wire, Customs did not find a substantial transformation when the bunched wire was made into insulated wire. It was noted that the encapsulation process did add certain qualities to the wire which did not exist prior to such operation. However, Customs found that the essential character of the bunched wire, which was to be used to conduct electricity, was not changed because of these enhancements.
In HRL 561245, Customs also considered the eligibility of wire harnesses manufactured in the Philippines for preferential tariff treatment under the GSP. Copper rod, 8 millimeters in diameter, was welded together to provide one continuous copper rod, and subjected to multiple drawing operations to reduce its diameter. The resulting wire strand was annealed and bunched to form multi-stranded wire. The multi-stranded copper wire was then coated with either PVC or XLPE compounds by means of an extrusion process. The finished wire was wound onto coils and used in the assembly of wire harnesses. Customs held that the drawing, annealing, and bunching operations, which created multi-stranded copper wire, followed by the extrusion process, amounted to a substantial transformation of the copper wire rod. See also HRL 555705 dated August 26, 1991 (the combination of a four-step drawing process, twisting seven copper wires together with a specified lay or twist per inch into stranded wire, and coating the stranded wire with a polypropylene insulation, followed by a second coating constituted a substantial transformation).
HRL 556301 dated May 4, 1992, reconsidered HRL 555705, and affirmed that the copper wire underwent a substantial transformation. The reconsideration request presented additional facts, including that the 14 AWG copper wire was drawn into 36 AWG wire, which was bunched and twisted to form 28 AWG stranded copper wire, which, in turn, was annealed and further bunched and encapsulated to form cordage. Customs considered the fact that the copper wire, compared to the drawn, bunched and twisted wire had different ampacity ratings, and that the annealing and first encapsulation process allowed the resulting insulated wire to become suitable for use as communication cords and prevented the wires from short-circuiting. Information was also presented concerning the second encapsulation, which allowed the resulting cordage to be used as telephone cords. HRL 556301 found that the drawing did not constitute a substantial transformation, either alone or in combination with the bunching and twisting process. Rather, the combination of drawing, bunching and twisting, and annealing, and encapsulating did constitute a substantial transformation. It was also found that the insulated wire strand did not undergo a second substantial transformation when it was bundled with other insulated wire strand and further encapsulated to form cordage.
In HRL 556564 dated October 30, 1992, Customs considered reels of bare, stranded wire subjected to an extrusion process which provided corrosion, heat, and abrasion protection. It was held that the encapsulation process did not substantially transform the wire into a new or different article of commerce for purposes of the GSP. See also HRL 560043 dated July 15, 1997 (copper wire coated abroad by means of heat extrusion with a silicone rubber insulating material did not undergo a substantial transformation).
In this case, it is claimed that the bunching is not a simple assembly and effects a dramatic change in structure, transforming individual strands into a bunched wire, with up to 100 wire strand components that have been twisted and brought together at specified points and lengths. It is stated that it is this process, along with insulation, that allows the strands to act as conductors of electricity. It is also claimed that it is the bunching process that changes the strands from a product with several possible applications to one especially designed to, and capable of, conducting electricity in a specific wire harness application.
As counsel correctly notes, Customs has not ruled on whether bunching and insulating alone constitutes a substantial transformation. Counsel claims that although Customs has ruled that insulating alone would not be sufficient to effect a substantial transformation of the wire, the insulation is an essential part of the manufacturing process since it finishes the process of making the wire usable as a conductor of electricity in the automotive wire harness applications. See HRL 560043; HRL 556564; and HRL 557201. Furthermore, counsel states that while the drawing and annealing are occurring in the U.S., the drawing of wire rod into wire is not a substantial transformation. See Superior Wire v. United States, 867 F.2d 1409 (Fed. Cir. 1989). Counsel also claims that the annealing performed in the U.S. does not alter the mechanical properties of the wire to a significant extent. We note that Customs has held that annealing alone does not constitute a substantial transformation. See HRL 555247 dated January 11, 1990. Therefore, it is claimed that the last two processes occurring in HRL 561245, namely the bunching and insulating of the wire, effect the substantial transformation.
Based on the rulings above, it is clear that the processes of drawing alone, bunching and twisting alone, and encapsulating alone do not result in a substantial transformation. HRL 556301 also found that the subsequent bunching of insulated wires and their second encapsulation into cordage did not result in a substantial transformation. In HRL 556301, it was noted that the insulated wire could be used as communication cords and the resulting cordage was used to make telephone cords. While the insulated wires examined in HRL 556301 could also be used as parts of such items as stereos, refrigerators, etc., it appears that the ruling determined that the change in character and use from communication cords to telephone cords was not sufficient enough to constitute a substantial transformation, as encapsulating alone is not a substantial transformation. At the meeting held on February 11, 2003, the engineering manager agreed that creating cordage by combining several insulated and bunched wires generally refines the use and makes the resulting cordage easier to use than individual bunched and insulated wires.
Rather, in HRL 556301, it appears that the initial bunching and encapsulation of the individual 14 AWG wires, stated to be capable for use primarily as "building wire", was more important. It was the initial bunching and encapsulation that allowed the resulting 28 AWG insulated wire to be used as communication cords which could carry low voltage and high speed signals to transmit voice and data. In this case, we note that the strands may be composed of 104 individual wires and, in conjunction with the arrangement of the wires into specific geometric orientations and use of either PVC or XLPE compound, this allows the strands to efficiently conduct electricity. Therefore, it is our opinion that the bunching and encapsulating is a sufficient change in character and use of the wire to result in a substantial transformation. We note this change in use is more dramatic compared to the second coating of the bunched and insulated wire in HRL 556301, which only refined the use of the communication cord into telephone cord. We also note that unlike HRL 557201, where the initial product was bunched wire, here, the bunching of the wire is occurring in Honduras. Additionally, the PVC and XLPE compounds have different chemical properties and temperature ratings and allow the wire to be used in different capacities. Accordingly, we find that the country of origin of the "PVC-insulated" and "XLPE-insulated" wire products is Honduras.
On the basis of the information provided, we find that the bunching and insulating of the copper strands constitutes a substantial transformation, such that the country of origin of the "PVC-insulated" and "XLPE-insulated" wire products is Honduras.
A copy of this ruling letter should be attached to the entry documents filed at the time the goods are 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.
Myles B. Harmon, Director
Commercial Rulings Division