CLA-2 CO:R:C:V 554952 GRV
District Director of Customs
Detroit, Michigan 48226-2568
RE: Application for Further Review of Protest No. 3801-7-001293,
protesting your denial of TSUS item 806.20 treatment to
certain casting molds imported from Canada.Repairs
(explosive reforming);Dolliff & Co. (1979);scrap;headnote
3(b), part 2, Schedule 6, TSUS;A.F. Burstrom (1956);Press
Wireless, Inc. (1941)
Dear Sir:
The above-referenced protest contests your denial of the
partial duty exemption under item 806.20, Tariff Schedules of the
United States (TSUS), to certain casting molds imported from
Canada.
FACTS:
The record in this matter reflects that certain used casting
molds, denominated "scrap casting molds" on the Certificates of
Registration (Customs Form 4455), were exported, on consignment,
to Canada for repairs. Each of the exported molds consisted of
a continuously-cast mold tube with chromeplating on its contact
surface.
The Protestant states that the foreign repair operation uses
a unique re-forming process to return out-of-dimension continu-
ous casting molds to their original precise dimensions. The
repair operation is styled an "implosion" process, whereby
plastic explosive is wrapped around the casting, a mandrel of the
required shape and accuracy is inserted into the used mold, the
unit is immersed in a tank of water, and the explosive is
detonated. This technique, known as "explosive forming," can be
employed to either restore the dimensional accuracy to used mold
tubes or to form new molds from crude castings. The various
steps in this restorative/forming process include the following:
(1) removal of the chrome surface from the used mold's
copper surface;
(2) grinding away of all defects on the used mold caused
by abrasive wear;
(3) fitting a steel mandrel of the required shape and
accuracy into the mold;
(4) covering the outer surface of the mold with explosive
and lowering it into a water-filled tank;
(5) multiple detonations of the mold onto the mandrel,
until the desired dimensions are obtained; and,
(6) resurfacing the restored mold's internal copper surface
with chromeplating.
On return to the U.S., the restored casting molds were
denied the partial duty exemption under TSUS item 806.20 by your
office based on the exported molds designation and valuation as
"scrap" on the applicable Certificates of Registration. In the
opinion of your office, the foreign repair operation was so
extensive as to constitute a remanufacture of the "scrap" casting
molds, rendering them new articles of commerce.
Protestant also claims that certain new molds manufactured
in Canada and returned to the U.S. for chromeplating should be
accorded TSUS item 806.30 treatment. However, we understand from
your office that this issue has been resolved and need not be
addressed in this decision.
ISSUE:
Whether the processing of the exported used casting molds
constituted "repairs" within the meaning of TSUS item 806.20,
thereby qualifying the returned molds for the partial duty
exemption provided for under this tariff provision.
LAW AND ANALYSIS:
Articles returned to the U.S. after having been exported to
be advanced in value or improved in condition by repair
operations may qualify for the partial duty exemption under TSUS
item 806.20 (now subheadings 9802.00.40 and 9802.00.50,
Harmonized Tariff Schedule of the United States (HTSUS)),
provided the operations do not destroy the identity of the
exported articles or create new or different articles. Such
articles are dutiable only upon the value of the foreign repairs
when returned to the U.S., provided the documentary requirements
of section 10.8, Customs Regulations (19 CFR 10.8), are
satisfied.
The designation of the casting molds as "scrap" appears to
be the linchpin in this case, as your office concluded that such
articles, designated as "scrap" and valued as such, are no longer
serviceable and must be subjected to such an extensive repair
process as to result in their remanufacture. Thus, your office
determined that the repaired articles became new items not
eligible for TSUS item 806.20 treatment. While the protestant's
reason for the designation of the casting molds as "scrap" at
the time of export is not clear (although it may have been done
to secure favorable freight rates), the eligibility of returned
articles for the partial duty exemption under TSUS item 806.20
is determined by an inquiry into the condition of the article as
exported, Dolliff & Co. v. United States, 66 CCPA 77, C.A.D.
1225, 599 F.2d 1015 (1979), and not by the designation of the
exported articles on the export documentation.
We note that, for tariff purposes, the term "scrap" is
defined in conjunction with the term "waste" at headnote 3(b),
part 2, Schedule 6, TSUS, as:
...materials and articles of metal which are second-hand or
waste or refuse, or are obsolete, defective or damaged, and
which are fit only for the recovery of the metal content or
for use in the manufacture of chemicals, and does not in-
clude metal in unwrought form or metal-bearing materials
provided for in part 1 of this schedule. (Emphasis sup-
plied).
It is noted that this definition does not operate, in this case,
to render the exported "scrap" molds ineligible for TSUS item
806.20 treatment, as the very reason the molds were exported was
because they were defective or damaged and in need of repair--the
very domain of TSUS item 806.20--, and not for the recovery of
their metal content.
In A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631
(1956), the U.S. Court of Customs and Patent Appeals indicated
that where the article imported differs in name, value,
appearance, size, shape and use from the article exported, a
conversion of the exported article into a new article is
signaled.
However, in Press Wireless, Inc. v. United States, 6
Cust.Ct. 102, C.D. 438 (1941), certain radio tubes were sent
abroad for repairs. Noting that the merchandise was exported
under Customs supervision and in accordance with the applicable
regulations, and that the tubes returned after repair were the
same in construction, operation, performance, and use, and that
the power output was the same, the Customs Court found that worn-
out radio tubes were exported for repairs and that the identical
tubes were returned in a condition of restoration to their
original efficiency. Despite the replacement of a constituent
part with a part requiring more power, the court found that the
identity of the articles exported had not been destroyed by the
repair process, nor had the repairs created a new or different
article. The repairs restored the articles to their original
efficiency so as to prolong their usefulness.
This protest involves substantially similar issues to those
presented in the Wireless case and, in similar fashion, we
conclude that the foreign repair operation (explosive reforming)
merely restored the exported molds to their original condition.
HOLDING:
On the basis of the record presented in this matter, it is
our opinion that the foreign operation (explosive reforming)
merely restored the exported used casting molds to their original
condition and, therefore, constituted repairs within the meaning
of TSUS item 806.20. Accordingly, if your office is satisfied
that there has been compliance with the documentary requirements
of 19 CFR 10.8, we find that the returned casting molds qualify
for the partial duty exemption under TSUS item 806.20. You are
directed to grant the protest in full.
Sincerely,
John Durant, Director
Commercial Rulings Division