MAR-2-05 CO:R:C:V 734716 ER

Walter J. Spak, Esq.
Vincent Bowen, Esq.
3 Lafayette Centre
1155 21st Street, NW
Washington, DC 20036-3384

RE: Reconsideration of HQ 734091; country of origin marking of mirror polished stainless steel; substantial transformation.

Dear Messrs. Spak and Bowen:

This is in response to your letter dated July 6, 1992, on behalf of Okura & Co. (America), Inc., in which you request reconsideration of HQ 734091 (June 2, 1992), involving the country of origin marking requirements for certain mirror polished stainless steel.

FACTS:

The facts set forth in HQ 734091 are incorporated by reference. There Customs found that sheets of grade 304 stainless steel with a 2B or a BA finish exported from Japan into Singapore for polishing to achieve a No. 8 mirror finish are not substantially transformed within the meaning of 19 U.S.C. 1304. Counsel for Okura has requested reconsideration of this ruling and seeks a determination that such polishing operations do result in a substantial transformation. ISSUE:

Whether sheets of stainless steel with a BA or 2B finish are substantially transformed by the processing performed in Singapore which achieves a No. 8 mirror polished finish to the stainless steel sheets?

LAW AND ANALYSIS: As discussed in HQ 734091, country of origin means the country of manufacture, production or growth of any article of foreign origin entering the U.S. (19 CFR 134.1). A commodity's country of origin for U.S. tariff purposes is the country in which the last substantial transformation took place. The test for determining whether a substantial transformation has occurred is whether an article emerges from a process with a new name, character or use, different from that possessed by the article prior to processing. The court in Uniroyal, Inc. v. United States, 3 CIT 220, 542 F.Supp. 1026, aff'd 1 Fed. Cir. 21, 702 F.2d 1022 (1983), emphasized that a substantial transformation will not result from manufacturing or combining processes that are minor in nature and leave the identity of the imported article intact. Uniroyal is widely cited to for the principles set forth therein regarding substantial transformation.

In determining whether machining operations effect a substantial transformation, Customs distinguishes between the kind and amount of further processing performed, i.e. between machining operations performed to achieve a specified form and those performed to achieve more cosmetic or minor processing operations. See, C.S.D.s 89-121 and 90-53. Customs consistently finds that embellishment and finishing operations, such as polishing, enameling and cleaning, are not regarded as extensive processes that result in a new and different article of commerce. See, HQ 554689 (August 21, 1987) and HQ 071314 (May 10, 1983).

In HQ 733299 (July 17, 1990), Customs found no substantial transformation where

[r]efinishing alone accounts for more than 70% of the time expended in completing the Gibson [guitar] ... In general, it is unlikely that any change in the surface finish of an article would be regarded by Customs as sufficient to change its essential character so as to result in a substantial transformation. For example, previous Customs rulings have held that polishing and grinding of a semifinished aluminum bowl (C.S.D. 89-130), and glazing and painting of pottery and ceramics (C.S.D. 89-121) do not result in substantial transformations...

While finishing is important to the functioning of the guitar, i.e., a proper finish is necessary to produce the desired sound characteristics, it is our view that such finishing is only one of a number of production steps which contribute to the instrument's performance. Of at least equal and probably greater importance are the type of wood used, the seasoning of the wood, and the manner in which the box is constructed. Under the circumstances, we regard the finishing in the U.S. as merely one of several steps which, together, contribute to the desired sound, but which by itself or even in conjunction with the other assembly steps does not change the essential character of the instrument...

In fact, the term "polishing" is specifically described as a finishing operation in one of the exhibits submitted by counsel. (U.S. Steel, "Fabrication of Stainless Steels"). Consistent with prior determinations and for the reasons outlined above and

discussed in the original ruling letter, we affirm our finding that the polishing operations do not result in a substantial transformation.

Nor is the use of the steel significantly changed by the polishing operations. As discussed in the original ruling and as described in the literature submitted by counsel, the stainless steel is used in construction and can be given different exterior finishes such as mirror finish, chemicolor, etching art, gp finish, and desta. Such changes to the surface finish of the steel are more accurately described as resulting in a narrowing of or restriction in use rather than a change in use. The stainless steel both before and after polishing is designed for and remains in the market for stainless steel products. See, HQ 734052 (October 17, 1991)(the application of decorative artwork to the surface of a plate by firing resulted in a restriction in use and not a change in use; accordingly, no substantial transformation resulted.)

Counsel asserts that polishing to a No. 8 finish improves corrosion resistance and characterizes this improvement as one which effects structural and mechanical property changes in the sheets, improving corrosion resistance. We do not find these changes to be significant in the substantial transformation test. Steel with a No. 2B finish as received from the mill already has excellent corrosion resistance. Improvement to corrosion resistance amounts to a change in a "characteristic" of the steel and not a change to the character. Such was the finding in National Hand Tools where the court ruled that no substantial transformation occurred where the processing performed on imported hand tools (heat treatment, electroplating and assembly) amounted only to changes in the "characteristics" of the material and did not change the character of the articles. National Hand Tool Corp. v. United States, Slip Op. 92-61, April 27, 1992. The 1991 Department of Commerce short supply determination which counsel cites to as support for their contention that a new commodity is created by virtue of the polishing operations is not binding on Customs in determining whether a substantial transformation has occurred. See, National Juice Products Ass'n v. United States, 10 CIT 48, 628 F.Supp. 978 (1986). In National Juice Products, the court did not find persuasive the standards of identity under the Food and Drug Administration (FDA) concerning a substantial transformation question. Additionally, the court agreed with Customs that a change from a producer good to a consumer good does not necessarily constitute a sufficient change in character and use to amount to a substantial transformation. Id. at 989.

Counsel reiterates that the polishing operations add substantial value and, accordingly, that a substantial transformation should be found. We disagree. In National Hand Tools, described above and which also involved articles of steel, the court altogether declined to consider the value-added element where, as here, the essential character of the metal articles remained unaltered by the processing.

HOLDING:

Applying a No. 8 mirror polish finish on sheets of grade 304 stainless steel with a 2B or BA finish is not a substantial transformation. Accordingly, the holding in HQ 734091 is affirmed and the country of origin of the stainless steel sheet is Japan.

Sincerely,

Harvey Fox, Director
Office of Regulations and Rulings