HQ 950250
FEBRUARY 26 1992
CLA-2:CO:R:C:M 950250 JAS
Mr. George J. Carr
Husky Blade Company
P.O. Box 511
Renton, Washington 98057
RE: Leaf Springs for Heavy Duty Trucks Fabricated in Japan
from Hot U.S.-Origin Rolled Bar Stock; Substantial
Transformation
Dear Mr. Carr:
In your letter of January 8, 1992, you propose that truck
leaf springs fabricated in Japan from steel of United States
origin, be returned to the United States free of duty or at least
at a reduced rate.
FACTS:
The steel of United States origin, which you refer to as
bar stock, is flat lengths of hot rolled SAE grade 5160 alloy
steel with rounded edges. It is exported to Japan, typically in
the following dimensions: 20 ft. x 3 or 4 inches wide x 1/2, 3/8,
or 5/8 inch in thickness.
This steel is fabricated in Japan into taper leaf springs,
multi leaf and two stage flat leaf springs for heavy duty trucks
by the following process. Each 20 ft. length is cut down to
spring leaf length of between 45 to 60 inches, then heated in a
quenching furnace, and a single hole drilled at mid point.
Multiple leafs are then stacked and secured by a hex head bolt of
Japanese origin. The top leaf in each stack requires an eye at
each end to facilitate attachment to the truck's underside. This
involves separately heating the leaf then forcing the ends around
a mandrel. The individual leafs in the taper leaf springs are
reduced in thickness at the ends. This increases the air space
between leafs thus prolonging a spring's life expectancy. The
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heated stacks are then bent to a curve reflecting the stress the
springs are designed to accept, then completed into leaf springs
by attaching single or multiple clamps of Japanese origin. The
final step involves painting each leaf spring with a zinc-rich
anti-rust paint.
ISSUE:
Whether the described processing/assembly operation
substantially transforms the U.S.-origin steel into a product of
Japan for tariff purposes.
LAW AND ANALYSIS:
In order for the flat lengths of U.S.-origin steel to be
considered substantially transformed in Japan, so as to be
regarded as a product of that country for tariff purposes, there
must be evidence that the processing operation in Japan results
in a product other than or materially different from its
constituent material. That is, a new and different article of
commerce must emerge, one having a new name, character or use.
Anheuser-Busch Brewing Association v. United States, 207 U.S. 556
(1908). The merchandise returning to the United States has a new
name and is a distinct article of commerce. However, a mere
change in a product's name, without more, is a relatively
unimportant consideration in most cases. As to character and
use, there must be evidence that the processing in Japan
transforms the U.S. steel in such a way that it is no longer the
essence of the finished leaf springs. For the following reasons,
we believe this is the case here.
There is no indication that the steel shapes of U.S. origin
are capable of being processed only into automotive leaf springs.
SAE grade 5160 alloy steel is relatively generic and is suitable
for processing into a variety of articles. More importantly, the
described processing/assembly operation in Japan transforms a
basic steel mill product into a completely new and different
article of commerce, one commercially known and recognizable as
an automotive leaf spring. As imported, the leaf springs have
lost the identifying characteristics of a steel mill product and
have taken on a new and distinct use as a finished automotive
component.
HOLDING:
The flat lengths of hot rolled SAE grade 5160 alloy steel of
U.S. origin have been substantially transformed by the described
processing in Japan and will be regarded as products of Japan
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upon their return to the Customs territory. This ruling applies
both for duty purposes and for country of origin marking
purposes.
As you note, leaf springs and leafs therefor, of iron or
steel, imported into the Customs territory from outside thereof,
are classifiable in subheading 7320.10.00, Harmonized Tariff
Schedule of the United States (HTSUS). This is a provision
carrying a 4 percent ad valorem rate of duty. Because the
Customs Service is an administrative agency we lack the
authority to reduce or waive duties that have been statutorily
imposed. In addition, there is no provision in the HTSUS
applicable to the facts here which authorizes a partial duty
exemption for the cost or value of the U.S.-origin steel.
Sincerely,
John Durant, Director
Commercial Rulings Division