CLA-2 OT:RR:CTF:VS H028394KSG

Anita Lee
Marubeni America Corporation
450 Lexington Avenue
New York, NY 10017-3984

RE: Eligibility of suspension pipe for duty-free treatment under the GSP

Dear Ms. Lee:

This is in reply to your letter dated April 22, 2008, concerning the eligibility of certain suspension pipe imported from Thailand for duty-free treatment under the Generalized System of Preferences (“GSP”).

FACTS:

Steel in the form of coil sheets is produced in Japan and shipped to Thailand. The steel is classified in subheading 7212.30, of the Harmonized Tariff Schedule of the United States (“HTSUS”).

In Thailand, the steel coil sheet is formed into a tube, which is cut into various sizes in accordance with the manufacturer’s specifications. The steel tube is classified in subheading 8311.90, HTSUS. The steel tube is sent to a second manufacturer in Thailand that will use a hydroforming process to produce suspension pipe. This is done by placing the steel tube into a die and filling it with liquid. The tube will be pushed in lengthwise while the liquid pressure is increased, forming the tube into the shape of the die. The suspension pipe, which is classified in subheading 8708.80.65, HTSUS, is imported directly from Thailand into the U.S.

ISSUE:

Whether the imported suspension pipe is eligible for special tariff treatment under the GSP.

LAW AND ANALYSIS:

Title V of the Trade Act of 1974, as amended (19 U.S.C.A. 2461-65), authorizes the President to establish a Generalized System of Preferences to provide duty-free treatment for eligible articles from beneficiary developing countries (“BDCs”). Articles produced in a BDC may qualify for duty-free treatment under the GSP if the goods are imported directly into the customs territory of the U.S. from the BDC and the sum or value of materials produced in the BDC plus the direct costs of the processing operations performed in the BDC is equivalent to at least 35 percent of the appraised value of the article at the time of entry into the U.S. See 19 U.S.C. 2463(a)(2) and (3). Thailand has been designated as a BDC for purposes of the GSP and may be afforded preferential treatment under the HTSUS. See GN 4(a), HTSUS. The imported good is classified in a GSP-eligible provision.

A good is considered to be a “product of” a BDC if it is wholly the growth, product or manufacture of the BDC, or if made of materials imported into the BDC, those materials are substantially transformed in the BDC into a new and different article of commerce. See 19 CFR 10.176(a). 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.” Texas Instruments Inc. v. United States, 681 F.2d 778 (1982).

The first issue involved in this case is whether the imported suspension pipe is a “product of” Thailand. The foreign steel would have to be substantially transformed in Thailand to be considered a “product of” Thailand. Based on the information presented, the steel coil sheet is used to produce suspension pipe, a new article with a new name, character and use. Accordingly, the imported suspension pipe would be considered a “product of” Thailand for the purposes of GSP.

To be eligible for duty-free treatment under the GSP, merchandise must also satisfy the 35% value-content requirement. If an article consists of materials that are imported into a BDC, as in the instant case, the cost or value of these materials may be counted toward the 35% value-content requirement only if they undergo a double substantial transformation in the BDC.

Customs has held that in general, cutting or bending materials to defined shapes or patterns suitable for use in making finished articles, as opposed to mere cutting to length or width which does not render the article suitable for a particular use, constitutes a substantial transformation. See Headquarters Ruling Letter (“HRL”) 555763, dated March 8, 1991. In this case, the Japanese steel is processed in Thailand from a sheet into a tube and then into a suspension pipe for use in automobiles. This would constitute a double substantial transformation. The processing of the steel sheet into a tube creates a new and distinct article with a new name, character and use that would constitute a substantial transformation. Further, the hydroforming process that is used to produce the suspension pipe suitable for use in automobiles from steel tubing is a significant manufacturing operation that results in a new article with a new name, character and use. Thus, the processing by the second producer in Thailand would constitute a second substantial transformation. Since the steel sheets undergo a double substantial transformation in the BDC, the Japanese-origin steel coil sheet may be counted toward the 35% value content requirement under the GSP.

HOLDING:

Based on the information provided, the steel coil sheet undergoes a substantial transformation in Thailand and therefore, the imported suspension pipe would be considered a “product of” Thailand for the purposes of the GSP. Further, the steel coil sheet undergoes a double substantial transformation and therefore, could be counted toward the 35% value-content requirement.

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 official handling the transaction.

Sincerely,

Monika R. Brenner
Chief, Valuation & Special Programs Branch