HQ 555170

May 30, 1989

CLA-2 CO:R:C:V 555170 BJO

CATEGORY: Classification

Paul E. Linet, Esq.

Aresty, Levin, Orenstein & Wernick

World Trade Center

Suite 104

Boston, Massachusetts 02210

RE: CBI Eligibility of Foil Strain Gages (BLH Electronics, Inc.)

Dear Mr. Linet:

This is in response to your letters of November 4, 1988, and

January 30, 1989, on behalf of BLH Electronics, Inc., in which

you request a ruling that foil strain gages manufactured by your

client are products of Costa Rica for purposes of the Caribbean

Basin Economic Recovery Act (CBERA)(19 U.S.C. 2701-2706), and

that the foil strain gages are properly classified for tariff

purposes under either subheading 8533.90.00 or 9031.90.60 of the

Harmonized Tariff Schedules of the United States (HTSUS). The

following is a ruling on the CBERA issue; your request for a

classification ruling will be separately answered. For purposes

of the following, we will assume the product is properly

classified under one of the aforementioned HTSUS subheadings,

both of which are CBERA-eligible.

FACTS:

Each strain gage is less than one-tenth the size of a

postage stamp, and is composed of thin metallic foil circuit

bonded to a flexible organic sheet. You state that foil strain

gages are devices used with a metal element or \"transducer\" to

test or measure physical stress. For example, the strain gages

can be used to measure stress on an aircraft wing, or used in a

scale. The strain gage will be attached to a transducer. It

appears from the technical information submitted that an

electrical charge is fed through the foil circuit. A force

applied to the transducer will be translated into a proportional

change in the electrical resistance of the gage, and,

consequently, the electrical output. Comparison of the

electrical input to the gage with the output will yield the

amount of strain.

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The foil strain gages will be produced as follows:

\(1\) In the United States, the metallic foil in circuit

patterns will be placed on the organic backing. These will

be produced \"in bulk;\" that is, over a hundred individual

foil patterns will be bonded to a single sheet measuring

approximately three by ten inches. These \"bulk etched

sheets\" will then be shipped to Costa Rica for additional

processing.

\(2\) Upon receipt in Costa Rica, the sheets will be visually

inspected.

\(3\) The sheets will then be subjected to a \"post-etch\"

operation. This involves manually applying a mild acid or

fine polishing abrasive to the sheets to thin the metallic

foil. This thinning operation is necessary to raise the

resistance value of the strain gages to their required

performance level. If this operation were not performed,

the strain gages would have only between 20 to 30 percent of

the requisite resistance value. You state that constant

attention to detail and repeated review of the actual amount

of thining being performed are monitored through use of

magnifying instruments. After the desired resistance value

is achieved, the acid is neutralized with a mild alkaline

solution.

\(4\) The sheets will then be subjected to slicing and

trimming operations in which the \"bulk etched sheets\" will

be mechanically punched or cut into individual strain gages.

\(5\) Because the importer intends to produce several

different models of the foil strain gages, some of the

sheets will be subjected to additional processing before and

after the slicing and trimming operations. These sheets

will be encapsulated, whereby tape or foil will be cut to

shape in Costa Rica, affixed to the sheets by clamps, and

fused thereon by a 2 to 4 hour oven baking. Pre-cut leads

will then be soldered or welded to the strain gage.

\(6\) All the strain gages will be tested to measure

electrical resistance, visually inspected, packed, and

shipped.

You also state that the direct processing costs in producing

the strain gages in Costa Rica will be equivalent to between 25

and 77 percent of the value of the finished gage, depending upon

the model, and that the remaining percentage of value of the

various models will be attributable to cost of U.S. materials.

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ISSUE:

Whether the foil strain gages are products of Costa Rica for

purposes of the CBERA.

LAW AND ANALYSIS:

Under the CBERA, eligible articles the growth, product, or

manufacture of a beneficiary country (\"BC\") which are imported

directly to the U.S. from a BC qualify for duty-free treatment,

provided the sum of (1) the cost or value of materials produced

in a BC or two or more BC\'s, plus (2) the direct costs of

processing operations performed in a BC or countries is not less

than 35% of the appraised value of the article at the time it is

entered. See 19 U.S.C. 2703(a)(1).

An article composed of materials produced in a non-BC, as

here, is the \"growth, product, or manufacture\" of the BC if the

non-BC materials are substantially transformed in the BC into a

\"new and different article of commerce.\" See 19 CFR

10.195(a)(1).

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.\" See The Torrington Co. v. United States, 764 F.2d

1563, 1568 (Fed. Cir. 1985).

You state that the processing of the \"bulk etched sheets\" in

Costa Rica results in a new and different article of commerce,

namely, the finished strain gages. Specifically, you state that

the product undergoes a change in name, from \"bulk etched sheets\"

to \"foil strain gages;\" that the thinning of the metal circuit by

chemical or mechanical means, and cutting or punching the bulk

etched sheets into individual units (as well as encapsulating and

attaching leads to some models) represents a character change;

and that as a result of the thinning operations, the resistance

value of the product is increased to the level to permit the

article to be used as a strain gage. In sum, you state that

until processed in Costa Rica, the bulk-etched sheets are not

known as strain gages, cannot function as strain gages, and

cannot be sold as strain gages.

We find that the strain gages are not new and different

articles of commerce which are substantially transformed from the

bulk-etched sheets. Rather, the bulk-etched sheets and strain

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gages are \"merely different stages of the same product.\" See

Superior Wire v. United States, Appeal No. 88-1020, 23 Cust.

Bull. 50 (No.10) (Fed. Cir. February 15, 1989). In Superior

Wire, the Court of Appeals for the Federal Circuit affirmed the

determination of the Court of International Trade that drawing

wire from wire rod was a minor rather than substantial

transformation, even though the physical properties of the wire

rod, and therefore its use, were affected as a result of the

processing. The record in that case showed that the wire that

emerged from the drawing process was stronger and rounder than

the wire rod. However, because these properties of the wire,

which affected the use to which it could be put, were

predetermined by the chemical content of the rod and the cooling

process used in its manufacture, the court found that wire drawn

from the rod was not a new and different product, but the last

stage in the processing of the same product.

The primary difference in physical properties between the

\"bulk etched sheets\" and the finished foil strain gages appears

to be the higher resistance level of the latter. This

characteristic of the finished strain gage, however, appears to

have been predetermined in the creation of the \"bulk etched

sheets\" in the same way that the strength characteristic of the

wire in Superior Wire was metallurgically predetermined in the

fabrication of the rod. It appears from the technical data, as

well as your description of the strain gage\'s operation, that the

strain gage is a conductor through which an electrical charge is

sent. The resistance of a conductor depends upon its material

composition, temperature, and its cross-sectional area and

length. See E. Lister, Electric Circuits and Machines, 5 (5th ed.

1975). The materials used in producing the strain gages, and the

length and design of the foil circuit, is determined in the U.S.

production of the bulk-etched sheets. The thinning operations in

Costa Rica affect only the cross-sectional area of the strain

gage circuit. However, the amount of thinning that can be done

in Costa Rica is predetermined by the width of the circuit

produced during the U.S. operations. In Superior Wire, the lower

court found that because the \"parameters\" of the strength

characteristic of the final product were metallurgically

predetermined in the fabrication of the rod, no significant

change in character or use was found to have occurred as a result

of the cold-drawing process. Superior Wire v. United States, 669

F. Supp. 472, 480 (CIT 1987). Here, too, the parameters of the

strain gages\' resistance are predetermined in the U.S., where the

choice of materials, and the length and width of the circuit are

fixed.

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In support of its finding that the final product was

predetermined by the metallurgy of the rod, the Federal Circuit

in Superior Wire noted that if the rod is produced improperly for

its intended application, the wire drawing process is incapable

of making the product suitable for such use. 23 Cust. Bull. 50

(No.10). The same appears to be true here. If, for example, the

bulk-etched sheets contained circuits too narrow in cross-

sectional area, or of improper materials or length, the Costa

Rican thinning operations would not appear capable of producing

strain gages of the required resistance.

You claim that a change in name from \"bulk etched sheets\" to

strain gages evidences a substantial transformation. However, as

the court in Superior Wire noted, this is the least persuasive

factor and is insufficient by itself to support a finding of a

substantial transformation. 23 Cust. Bull. 50 (No.10).

You have also suggested that the operations performed in

Costa Rica are analogous to those the Court of International

Trade determined resulted in a substantial transformation in Data

General Corporation v. United States, 4 CIT 182, \_\_\_ F. Supp.

\_\_\_(1982). The court there ruled that programming a Progammable

Read Only Memory (PROM) integrated circuit chip substantially

transformed the PROM into a new and different article for

purposes of item 807.00, TSUS. In response to the Government\'s

claim that this programming was a mere finishing operation, the

court stated that:

\"The \[government\] underestimates the time, expense and

expertise required to program a PROM\...unlike packaging

operations which can be conducted by unskilled or semi-

skilled labor, programs are designed by a project engineer

with many years of experience in designing and building

hardware. While replicating the program pattern from a

master PROM may be the quick one-step process to which the

\[government\] refers, the development of the pattern and the

production of the master PROM require much time and

expertise. Because of its capability to be programmed in a

manner individually desired by any end user, the PROM is a

recognized article of commerce in the electronic

industry\...To fulfill its intended character as an article

of commerce capable of being programmed, the PROM requires

neither finishing nor further modification.\"

4 CIT at 185.

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Unlike the PROM\'s in Data General, the bulk-etched sheets do

require finishing or further modification in Costa Rica to be a

recognized article of commerce, for you state that until the

\"post-etch\" processing is completed, the product is not

marketable or usable. In addition, it does not appear that the

strain gages here were engineered in Costa Rica, and the Costa

Rican processing operations do not appear to require highly

skilled labor. Finally, programming an integrated circuit does

not appear at all analogous to thinning a metallic foil with an

abrasive. Programming involves rupturing or fusing electrical

interconnections within the integrated circuit to bestow each

circuit with its electrical function or \"memory,\" Data General at

183, while the \"post-etch\" operation you describe involves

thinning the metallic foil printed on the bulk-etched sheets to

raise their resistance. The two operations involve different

processes and products, are undertaken for different purposes,

and have different physical and functional effects on the

articles processed. For these reasons, we do not feel that Data

General is applicable here.

The remaining operations performed in Costa Rica do not

substantially transform the \"bulk etched sheets\" into new and

different articles. The cutting of the bulk-etched sheets into

individual units, attaching pre-cut leads, or encapsulating the

strain gages does not change the essential character or use of

the product. Both before and after these operations, the

articles are clearly recognizable and dedicated for use solely as

strain gages.

You state that if the product were a textile article rather

than a strain gage, the \"slicing and trimming\" operations would

by themselves result in a substantial transformation under

section 12.130(e)(1)(iv), Customs Regulations (19 CFR

12.130(e)(1)(iv)). That regulation provides that the country

where fabric is cut into parts and assembled into a completed

article will usually be the country of origin of the completed

article for purposes of textile restraint agreements. It is our

view, however, that the better analogy is 19 CFR

12.130(e)(2)(ii), which provides that an article will usually not

be considered a product of a country where it has merely

undergone cutting to length or width and hemming or overlocking

fabrics which are readily identifiable as being intended for a

particular commercial use. The sample \"bulk etched sheet\"

submitted with your ruling request is marked between each

individual gage, apparently to guide the cutting or punching of

the sheet into individual strain gages. The \"bulk etched sheets\"

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are readily identifiable as intended for use as strain gages, and

a simple punching or cutting operation along the lines of

demarcation appears to be all that is necessary to convert them

into such.

CONCLUSION:

Based upon the information presented, the foil strain gages

are not products of Costa Rica for purposes of the CBERA, and,

therefore, they shall not receive duty-free treatment under that

program when imported into the United States.

Sincerely,

John Durant, Director

Commercial Rulings Division