CLA-2 CO:R:C:V 555417 GRV
David R. Amerine, Esq.
Brownstein Zeidman and Schomer
1401 New York Avenue, N.W., Suite 900
Washington, D.C. 20005
RE: Applicability of partial duty exemption under HTSUS sub-
heading 9802.00.50 to cut and bent random length steel
concrete reinforcing end bars imported from Mexico
Dear Mr. Amerine:
This is in response to your letters of June 8, and December
27, 1989, on behalf of W. Silver, Inc., requesting a ruling on
the applicability of subheading 9802.00.50, Harmonized Tariff
Schedule of the United States (HTSUS), to cut and bent random
length steel concrete reinforcing end bars imported from Mexico.
Information which you provided in a meeting at Customs Head-
quarters on November 16, 1989, concerning the bending operation
was also considered in preparing this ruling.
FACTS:
Your client manufactures steel concrete reinforcing bars
(rebars) in the U.S. from used railroad rails. After cutting 20
and 40 foot standard lengths from rebars ranging in length from
50 to 300 feet, end bars of various, non-standard lengths,
referred to as "random lengths," are left over. Although some of
the random lengths are sold directly to U.S. customers from the
manufacturing plant, others are currently exported to Mexico and
cut to shorter lengths, ranging from one to 14 feet. In Head-
quarter Ruling Letter 553534 (September 24, 1985), we held that
this cutting-to-length operation constituted an "alteration" of
the rebars within the meaning of item 806.20, Tariff Schedules of
the United States (TSUS) (carried over into the HTSUS as subhead-
ing 9802.00.50).
It is now proposed that some of the cut random lengths will
also be subjected to various bending operations, as specified by
customers' orders. You state that after the bending operation,
the bent random length rebars remain rebars, and will be used in
the same way they would be used prior to export and alteration.
You assert that bending some of the already cut random lengths
will not destroy the identity of the exported random lengths nor
result in a new and different product; that bending will not
change the character, quality, texture, or use of the merchan-
dise. Further, you indicate that no new American Society for
Testing Materials (ASTM) specifications will be applicable to the
imported bent random lengths, as ASTM designation numbers are not
contingent upon the length or shape of rebar. In this regard,
you state that both straight and bent rebar are classified under
ASTM A616. Accordingly, you assert that the cutting and bending
of the rebars does not constitute the "manufacture" of new and
different articles, but rather qualifies as an "alteration" under
the statute, and request that we confirm the applicability of
HTSUS subheading 9802.00.50 to the returned cut and bent rebars.
ISSUE:
Whether the bending of cut random length rebars constitutes
an "alteration" for purposes of HTSUS subheading 9802.00.50.
LAW & ANALYSIS:
Articles returned to the U.S. after having been exported to
be advanced in value or improved in condition by repairs or
alterations may qualify for the partial duty exemption under
HTSUS subheading 9802.00.50 provided the foreign operation does
not destroy the identity of the exported articles or create new
or different articles through a process of manufacture. However,
entitlement to this tariff treatment is precluded where the
exported articles are incomplete for their intended use prior to
the foreign processing, Guardian Industries Corp. v. United
States, 3 CIT 9 (1982), or where the foreign operation consti-
tutes an intermediate processing operation, which is performed as
a matter of course in the preparation or the manufacture of
finished articles. Dolliff & Company, Inc., v. United States, 81
Cust.Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978), aff'd, 66 CCPA 77,
C.A.D. 1225, 599 F.2d 1015, 1019 (1979). Articles entitled to
this partial duty exemption are dutiable only upon the cost or
value of the foreign repairs or alterations when returned to the
U.S., provided the documentary requirements of 19 CFR 10.8 are
satisfied.
Regarding the various ruling letters referenced--Headquar-
ters Ruling Letters (HRLs) 553534 (September 24, 1985), 071705
(February 21, 1984) and 071600/071752 (April 6, 1984)--, these
dealt with cutting-to-length or trimming operations, which are
not analogous to bending operations. Accordingly, we do not
consider these rulings to be dispositive of the issue presented
in this case.
Judicial decisions considering the meaning of the term
"alterations" look not only at the condition of the article
exported, but at the nature of the foreign operation involved.
See, Dolliff, op cit., United States v. J.D. Richardson Company,
36 CCPA 15, C.A.D. 390 (1948), cert. denied, 336 U.S. 936, 69
S.Ct. 746, 93 L.Ed. 1095 (1948), and A.F. Burstrom v. United
States, 44 CCPA 27, C.A.D. 631 (1956), aff'g, C.D. 1752 (1955).
In Burstrom, the appellate court held that the conversion of
steel ingots into steel slabs by hot-rolling was more than an
alteration of the ingots, as the imported steel slabs differed in
name, value, appearance, size, shape, and use from the exported
ingots. In considering the Appellant's position that, so long as
the material imported is the same material which is exported, any
change which takes place is no more than an "alteration," the
court stated that such application went beyond any sensible
meaning of the term "alteration." Discussing the amendment of
paragraph 1615(g) (a precursor provision of HTSUS subheading
9802.00.50) by the Customs Simplification Act of 1954 (which
created a separate tariff provision for metal articles processed
abroad), the court stated that:
[t]he distinction which must be made is between the terms
"repairs," "alterations" and "processing." The 1954
amendment uses the expression "subjected to a process of
manufacture" as synonymous with processing and the inclusion
of processing, as distinguished from repairs and altera-
tions, was the change brought about by the amendment.
Beyond these considerations, the courts have stated that for
tariff purposes a process which converts one article into a new
article is not an "alteration." Guardian Industries. In the
Guardian case, the court found that the merchandise imported was
a separate and different commercial article from the merchandise
exported, as evidenced by the fact that the respective products
were classifiable in separate tariff provisions. Regarding the
subject merchandise in this case, we note that, while the tariff
provision applicable to straight rebar that is cut-to-length is
HTSUS subheading 7214.20.00, the tariff provision applicable to
bent rebars is HTSUS subheading 7308.90.90. NY 844635 (September
18, 1989). Further, we have previously ruled that the cutting-
to-length and bending of rebars constitutes "further processing"
for purposes of subheading 9802.00.60. HRL 543665 (January 9,
1986).
Also, in HRL 071451 (September 30, 1983), C.S.D. 84-39, 18
Cust. Bull. 932 (1984), we held that TSUS item 806.20 was not
applicable to lamp filaments that were specially formed and
annealed abroad, as these steps were found to constitute further
processing steps performed as part of the overall manufacture to
obtain a completely manufactured product. While two foreign
processing operations were enumerated in that case, either one
was sufficient to disqualify the imported article from the
benefits available under TSUS item 806.20.
Given this framework within which to assess the applica-
bility of HTSUS subheading 9802.00.50, we believe that the
bending operation exceeds an "alteration" and constitutes a
manufacturing process, as the bending of metal is generally
regarded as a forming operation, intended to cause permanent
deformation of the material. See, in general, Manufacturing
Processes (8th ed.), by Amstead, Ostwald and Begeman (John Wiley
& Sons; 1987), at pgs. 353-4 ("[w]here bending is involved the
metal is stressed in both tension and compression at values below
the ultimate strength of the material without appreciable changes
in its thickness."), and Manufacturing: Materials and Processes
(3rd ed.), by Moore and Kibbey (John Wiley & Sons; 1982), at pg.
307 ("[b]ending is intended to cause localized plastic flow about
one or more linear axes in the material without causing
fracture"). As the character of the exported rebar is changed by
the bending operation, and the straight and bent rebars are
classifiable in different tariff provisions, we find that the
rebar to be imported is not the same article as that which is
exported. Accordingly, we find that the bending operation
exceeds an "alteration" with the meaning of HTSUS subheading
9802.00.50.
HOLDING:
On the basis of the information presented, it is our opinion
that the foreign bending operation constitutes a process of
manufacture and not an "alteration," within the meaning of HTSUS
subheading 9802.00.50. Accordingly, the bent rebar will not be
eligible for the partial duty exemption available under this
tariff provision when returned to the U.S.
Sincerely,
John Durant, Director
Commercial Rulings Division