Stainless steel band on iPhone 4 rusting and spreading

A very good day to everyone looking at this post, since I got my iPhone 4 from marina bay sands on lunch day, I realize that I there is some rusting on the stainless steel band right above the black strip on the left side, i call singtel and ask them what can I do? They told me to go down to comm centre to have my phone checked out, but when I went there, they told me that they are not able to change the phone as it is only a rust and they they went on saying that they can change it if it's a hardware issue.
My first question is, is stainless steel suppose to rust.
My second questions is, rusting of stainless steel bend is not counted as hardware issue?

Stainless Steel is misleading to those who are casual observers. Depending on the grade of the alloy some oxidation may occur.
This is from Wikipedia, please be sure to corroborate anything in here you do not understand or doubt.
In metallurgy stainless steel, also known as inox steel or inox from French "inoxydable", is defined as a steel alloy with a minimum of 10.5[1] or 11% chromium content by mass.[2] Stainless steel does not stain, corrode, or rust as easily as ordinary steel, but it is not stain-proof.[3] It is also called corrosion-resistant steel or CRES when the alloy type and grade are not detailed, particularly in the aviation industry. There are different grades and surface finishes of stainless steel to suit the environment to which the material will be subjected in its lifetime. Stainless steel is used where both the properties of steel and resistance to corrosion are required.
Stainless steel differs from carbon steel by the amount of chromium present. Carbon steel rusts when exposed to air and moisture. This iron oxide film (the rust) is active and accelerates corrosion by forming more iron oxide. Stainless steels contain sufficient chromium to form a passive film of chromium oxide, which prevents further surface corrosion and blocks corrosion from spreading into the metal's internal structure.

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    Stainless Steel is misleading to those who are casual observers. Depending on the grade of the alloy some oxidation may occur.
    This is from Wikipedia, please be sure to corroborate anything in here you do not understand or doubt.
    In metallurgy stainless steel, also known as inox steel or inox from French "inoxydable", is defined as a steel alloy with a minimum of 10.5[1] or 11% chromium content by mass.[2] Stainless steel does not stain, corrode, or rust as easily as ordinary steel, but it is not stain-proof.[3] It is also called corrosion-resistant steel or CRES when the alloy type and grade are not detailed, particularly in the aviation industry. There are different grades and surface finishes of stainless steel to suit the environment to which the material will be subjected in its lifetime. Stainless steel is used where both the properties of steel and resistance to corrosion are required.
    Stainless steel differs from carbon steel by the amount of chromium present. Carbon steel rusts when exposed to air and moisture. This iron oxide film (the rust) is active and accelerates corrosion by forming more iron oxide. Stainless steels contain sufficient chromium to form a passive film of chromium oxide, which prevents further surface corrosion and blocks corrosion from spreading into the metal's internal structure.

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