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It’s not under ‘upgrade’. It’s the last item of each level of the crafting spec list. Craft as you would any other item.
Go into the Crafting menu, and you'll be able to craft higher tier components from lower tiers. So common into uncommon, etc.
I just realized it doesn't allow you to upgrade items, just crafting materials.
It allows you to upgrade rare crafting component INTO epic crafting component. So if you have for example around 1000 common crafting components like me, it allows you to exchange it for the better ones. Works great if you want to craft your own gear.
How do I use this? I would image it make an uncommon item into a rare one? I have this perk but I don't see any chances in my options when I upgrade items.