Leaf Springs for Heavy Duty Trucks Fabricated in Japan from Hot U.S.-Origin Rolled Bar Stock; Substantial Transformation

HQ 950250 FEBRUARY 26 1992 CLA-2:CO:R:C:M 950250 JAS CATEGORY: Classification TARIFF NO.: 7320.10.00, HTSUS 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 - 2 - 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 - 3 - 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