Country of origin and eligibility for duty free treatment under the U.S.-Oman Free Trade Agreement Implementation Act for gold jewelry from Oman.

N070441 August 19, 2009 CLA-2-71:OT:RR:NC:N4:433 CATEGORY: Classification Maria E. Celis John M. Peterson Neville Peterson LLP Counsellors at Law 17 State Street – 19th Floor New York, NY 10004 RE: Country of origin and eligibility for duty free treatment under the U.S.-Oman Free Trade Agreement Implementation Act for gold jewelry from Oman. Dear Ms. Celis: In your letter dated July 28, 2009, on behalf of Rajni Jewelers, Inc., you requested a ruling “concerning the country of origin of certain gold jewelry to be manufactured in Oman and the eligibility of such jewelry for preferential treatment pursuant to the U.S.-Oman Free Trade Agreement (UOFTA).” Specifically you are requesting that the cost or value of the gold (undisclosed country of origin), melted down and subsequently drawn into wire or amorphous shapes be included as part of the qualifying thirty-five (35%) percent or more appraised value requirement, as stipulated under the UOFTA. Your request is based upon a double substantial transformation of the melted gold, further processed, and manufactured into finished earrings, bangles, bracelets, mixed link chain, rope chains, necklaces and pendants. Pure or scrap gold brought into Oman by Rajni Jewelers is melted down, and alloyed from 24 to 22 karat. The melted gold is either drawn into wire or made into amorphous shapes. For chain jewelry the following processing occurs: (1) gold is melted, (2) gold is alloyed from 24 karat to 22 karat, (3) gold is drawn into wire, (4) wire is converted into unclosed jewelry links in continuous lengths, (5) links are closed, and (6) links are flattened and polished. For molded jewelry pieces the process is as follows: (1) gold is melted, (2) gold is alloyed from 24 karat to 22 karat, (3) gold is molded into jewelry, and (4) jewelry is cleaned and polished. General Note 31, Harmonized Tariff Schedule of the United States (HTSUS), sets forth the criteria for determining whether a good is originating, under the UOFTA. General Note 31(b) states in pertinent part, that For the purposes of this note, subject to the provisions of subdivisions (c), (d), (e), (g) and (h) thereof, a good imported into the United States is eligible for treatment as an originating good of a UOFTA country under the terms of this note only if -- (i) the good is a good wholly the growth, product or manufacture of Oman or of the United States, or both; (ii) for goods not covered by subdivision (iii) below, the good is a new or different article of commerce that has been grown, produced or manufactured in the territory of Oman or of the United States, or both, and the sum of— (A) the value of each material produced in the territory of Oman or of the United States, or both, and (B) the direct costs of processing operations performed in the territory of Oman or of the United States, or both, is not less than 35 percent of the appraised value of the good at the time the good is entered into the territory of the United States; or (iii) the good falls in a heading or subheading covered by a provision set forth subdivision (h) of this note and— (A) each of the nonoriginating materials used in the production of the good undergoes an applicable change in tariff classification specified in such subdivision (h) as a result of production occurring entirely in the territory of Oman or of the United States, or both; or (B) the good otherwise satisfies the requirements specified in such subdivision (h); and is imported directly into the territory of the United States from the territory of Oman and meets all other applicable requirements of this note. For purposes of this note, the term “good” means any merchandise, product, article or materials. Articles imported directly from Oman into the territory of the United States may qualify for duty-free treatment under the U.S.-Oman Free Trade Agreement (UOFTA) only if they meet the country of origin requirements, as set forth in the Harmonized Tariff Schedule of the United States (HTSUS), General Note 31, paragraph (b). The term “new or different article of commerce” means a good that -- (1) has been substantially transformed from a good or material that is not wholly the growth, product or manufacture of Oman, the United States, or both; and (2) has a new name, character or use distinct from the good or material from which it was transformed. A good shall not be considered a new or different article of commerce by virtue of having merely undergone (I) simple combining or packaging operations, or (II) mere dilution with water or another substance that does not materially alter the characteristics of the good. A substantial transformation occurs when an article emerges from a process with a new name, character, or use different from that possessed by the article prior to processing. See Texas Instruments, Inc. v. United States, 69 CCPA 152, 681 F.2d 778 (1982). In this case, the processing of pure or scrap gold not of Oman origin into wire is considered a substantial transformation. For purposes of including the cost or the value of the non originating gold into the 35% or more value content computation, the gold must undergo a second or double transformation. See Azteca Milling Co. v. United States, 703 F. Supp. 949 (CIT 1988), aff'd, 890 F.2d 1150 (Fed. Cir. 1989). In order to achieve a "double substantial transformation", the materials imported must be substantially transformed into a new and different intermediate article of commerce, which is substantially transformed a second time into the final article. The intermediate article itself must "...be an article of commerce, which must be readily susceptible of trade, and be an item that persons might well wish to buy or acquire for their own purposes of consumption or production." See Torrington Co. V. United States, 8 CIT 150, 596 F. Supp. 1083 (1984), aff'd, 764 F.2d 1563 (Fed. Cir. 1985). In the present case, to qualify for inclusion of the 24 karat gold into the 35% or more value requirement for purpose of claiming duty-free treatment under the UOFTA, the gold must be substantially transformed into an intermediate article of commerce, which is then used in Oman in the production of the gold jewelry pieces. For chain jewelry, it has been held in previous rulings (HQ 555210 dated April 26, 1989 and HQ 562725 dated May 28, 2003) that the alloying of gold wires from 24 karat fine gold and the drawing down of such wires into formed links or chains, resulted in a substantial transformation – these wires of different gauges were then shaped into round circles or oval forms, soldered together, and then stamped into flat links forming chains and bracelets resulting in a second transformation. The alloyed wire was determined to be an intermediate article of commerce allowing for the cost or value of the gold to be included as part of the 35% value requirement. It is our opinion that the 24 karat gold alloyed into 22 karat, which in turn is manufactured into chains and bracelets, is similar to the processes in the two rulings above, allowing for the inclusion of the cost or value of the gold into the 35% requirement under the UOFTA; the country of origin for chain jewelry pieces is Oman. Not enough information on the condition or the processing of the scrap gold was provided. Gold from scrap should be alloyed already and not of pure state. Additional information on the condition and processing of the scrap gold is required before a ruling can be issued. For the molded jewelry pieces, HQ 560331 dated December 2, 1997 and HQ H022844 dated June 20, 2008, it was held that “gold” mixed with the appropriate percentages of alloying metals, poured into flasks and cast into various jewelry pieces set with semi-precious and/or diamonds, resulted in a substantial transformation. It was also determined that a double substantial transformation occurred as a result of the alloying of the metals and subsequent casting of those alloyed metals into finished jewelry pieces – significant processing of the rough castings were undertaken. Based on your four step process description for molded jewelry, as listed above, there is not enough information on the molding processes, work performed and finishing operations for each type of jewelry piece manufactured. Additional information on the casting processes is required before a ruling can be issued. Goods eligible for duty-free treatment under the UOFTA must be imported directly into the territory of the United States. “A good shall not be considered to be imported directly into the territory of the United States from the territory of Oman for purposes of this note if the good undergoes production, manufacturing or any other operation outside the territory of Oman or of the United States, other than unloading, reloading or any other operation necessary to preserve the good in good condition or to transport the good to the territory of Oman or of the United States.” This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177). A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Neil H. Levy at (646) 733-3036. Sincerely, Robert B. Swierupski Director National Commodity Specialist Division