CLA-2 CO:R:C:M 950924
Robert J. Leo, Esq.
Adduci, Mastriani, Meeks & Schill
330 Madison Avenue
New York, New York 10017
RE: Stainless Steel Slab; Plate; Substantial Transformation;
Hot Rolling; Heat Treatment; Pickling; Cutting
Dear Mr. Leo:
This is in response to your request dated December 18, 1991,
on behalf of Charleroi (U.S.A.), for a ruling on the country of
origin of certain stainless steel plates.
FACTS:
Stainless steel slab of Canadian origin is exported from
Canada to Belgium. In Belgium, the slab is hot rolled into steel
plate and heat treated. The plate is then exported from Belgium
to the United States.
The slabs exported from Canada generally are rectangular in
shape, are 4" to 12" in thickness, 36" to 80" in width, and 20'
to 40' in length.
In Belgium, the slabs are heated in a furnace to a rolling
temperature of between 2000 and 2500 degrees Fahrenheit. The
most representative size of plate into which the slabs are
rolled is 3/16" to 3/4" in thickness, 96" to 120" in width, and
240" to 360" in length. The plates have maximum dimensions of 4"
in thickness, 160" in width and 600" in length.
After rolling, the plates are subjected to heat treatment,
pickling, cutting to exact length, edge shearing or edge flame
cutting, marking and packaging. The heat treatment is performed
at 1700 to 2000 degrees Fahrenheit and affects the temper of the
steel plates.
-2-
It is stated that the initial value of the slab is over 50%
of the final resale price of the steel plates.
ISSUE:
Does the described processing substantially transform the
slabs, making Belgium the country of origin?
LAW AND ANALYSIS:
In HQ 081659 (March 3, 1989), we noted that in order for
steel slabs to be substantially transformed into other products,
it must be established that the processing resulted in a product
other than or materially different from the initial merchandise,
that is, a new and different article must emerge from the
processing, one having a new name, character or use. HQ Ruling
081659, citing Anheuser-Busch Brewing Association v. United
States, 207 U.S. 556 (1908). See also Uniroyal Inc. v. United
States, 3 CIT 220, 542 F. Supp. 1026 (1982), aff'd. 702 F.2d 1022
(Fed. Cir., 1983).
In HQ 081659, we determined whether a substantial
transformation took place when steel slabs were hot rolled into
steel plate. We found that the slabs were semi-finished products
which were processed into a finished steel product known as
plate or sheet which had a variety of commercial applications.
We found that the processing operations resulted in a significant
change in the shape and dimensions of the product, and that the
identity of the slab had been fundamentally changed to a product
which no longer had the essence of the initial slab. We held
that a substantial transformation had occurred.
Likewise, in HQ Ruling 079628 (August 25, 1987), we decided
whether steel slab which had been hot rolled into a finished
steel product had undergone a substantial transformation. We
held that it did, stating that the hot rolling process
constituted a substantial manufacturing which altered the
identity of the slab to such an extent that a substantial
transformation had occurred.
The slab under consideration is a semi-finished product
which is processed in Belgium into plate, a finished product.
The Making, Shaping and Treating of Steel, 10th Ed., Association
of Iron and Steel Engineers (1985), pp. 701-702, states:
Blooms, slabs and billets...are referred to as semi-
finished steel. After inspection and removal of defects
by operations known by the collective name of conditioning
(see Section 3), the semi-finished products are converted
into finished products by rolling...
(emphasis in original)
-3-
This is consistent with the ruling requestor's March 16,
1992, submission, p. 2, where it is stated that "[t]he slabs are
practically never used for anything but for re-rolling into a
finished product."
It is Customs understanding that hot rolling of steel slabs
into steel plates or sheets at temperatures of up to 2500
degrees Fahrenheit results in substantial metallurgical changes.
Subsequent to rolling, the merchandise under consideration is
heat treated at temperatures of up to 2000 degrees Fahrenheit to
affect the steel's temper. Tempering of steel plates is an
operation performed to obtain desired mechanical properties.
See The Making, Shaping and Treating of Steel, supra, p. 884.
The processing operations in Belgium transform a semi-
finished steel product known as slab, into a finished product
known as plate which is ready to be machined and used in
commercial applications. The processing results in the product
having a different tariff classification. The identity of the
slab that is exported from Canada to Belgium has been
fundamentally changed and the slab has been substantially
transformed.
The ruling requestor argues that the initial value of the
slab is slightly over 50% of the final resale price of the
finished plates. However, even higher initial values for
products which have undergone substantial transformations exist.
In HQ 079628, supra, we found that hot rolling normally increases
the cost of the initial product by only 35 to 50 percent. In HQ
081659, supra, the processing represented only about 15 percent
of the value added.
The ruling requestor also argues that the heat treatment of
up to 2000 degrees Fahrenheit does not modify the mechanical
properties of the steel, but only brings back the properties
which might have been affected by the hot rolling operation. The
initial slab, however, is a semi-finished product which is
transformed into a finished product with a much different shape,
different tariff classification and overall different identity
than the initial product.
It is also suggested that Customs look to the rules of
origin of the U.S./Canada Free Trade Agreement. Steel slab
which is substantially transformed into steel plate in Belgium,
however, is not subject to these rules.
HOLDING:
The described processing substantially transforms the
stainless steel slabs under consideration, making Belgium the
country of origin.
-4-
Hot rolled steel plate may be subject to a Voluntary
Restraint Agreement (VRA). For further information on this
issue, you may contact the Textiles and Metals Branch, Office of
Trade Operations, U.S. Customs Service, 1301 Constitution Ave.,
N.W., Washington, D.C. 20229, (202) 566-2957.
Sincerely,
John Durant, Director
Commercial Rulings Division