CLA-2 CO:R:CV:V 555461 CW
TARIFF NO. 9802.00.50
John N. Politis, Esq.
Sandler, Travis & Rosenberg, P.A.
Equitable Plaza
3435 Wilshire Boulevard
Los Angeles, California 90010-2204
RE: Entry of Molybdenum Ore under Subheading 9802.00.50, HTSUS
Dear Mr. Politis:
This is in response to your letter of August 16, 1989, in
which you request a ruling on behalf of Molycorp, Inc.
("manufacturer") that molybdenum ore mined in the U.S. and
purified abroad is eligible for entry under subheading
9802.00.50, Harmonized Tariff Schedule of the United States
(HTSUS).
FACTS:
You state that the manufacturer will reopen its molybdenum
ore mine in Questa, New Mexico. The ore (91% MoS "molysulfide")
contains impurities in the form of sulphur which must be removed
before the ore may be used to make steel. If not removed, the
sulfur compounds will cause "stringers" or defects in the steel,
which are accentuated when the steel is rolled. If too much
sulfur is present in the steel, expensive additions of rare
earths or manganese are needed for shape control of the
inclusions, a process that you indicate is economically
prohibitive. Thus, purification of the ore is required before it
may be used in the production of steel.
The sulfur impurities in the ore are removed through a
"roasting" process. You state that, normally, the manufacturer
roasts the ore at its U.S. facility. However, because start-up
production of the mine will be limited, the manufacturer has
chosen to use excess capacity that is available at roasting
facilities overseas, rather than operate its U.S. facility at
half-capacity. Roasting the ore is accomplished by means of a ten to twelve
stepped vertical roaster. The ore is placed in a series of ovens
which are heated to burn off the impurities. When finished, the
resulting molybdenum concentrate (92% MoO "molyoxide"), will be
returned to the U.S.
ISSUE:
Whether molybdenum ore which is roasted abroad to remove
sulfur impurities is eligible for entry under subheading
9802.00.50, HTSUS.
LAW AND ANALYSIS:
Subheading 9802.00.50 (formerly item 806.20, Tariff
Schedules of the United States (TSUS)), provides a partial duty
exemption to articles returned to the U.S. after having been
exported to be advanced in value or improved in condition by
repairs or alterations. Such articles are dutiable only upon the
value of the foreign repairs or alterations when returned to the
U.S., provided the documentary requirements of section 10.8,
Customs Regulations (19 CFR 10.8) are satisfied.
Where the article exported from the U.S. is incomplete for
its intended use and, therefore, requires a manufacturing process
to make it complete, that process is not an alteration under
subheading 9802.00.50, HTSUS. See Guardian Industries
Corporation v. United States, 3 CIT 9, 13 (1982). In Guardian
Industries, the court determined that glass for patio doors which
was exported to be annealed abroad was not eligible for entry
under item 806.20, TSUS, in part, because it was the practice of
the manufacturer to anneal glass intended for use in patio doors,
and U.S. law required annealing for such uses. Guardian
Industries at 13.
Roasting the molybdenum ore here is a process that is
required to complete the product for its intended purpose. It
appears from your submission that the molybdenum is mined for
sale to the iron and steel industry, that it has been the
manufacturer's past practice to roast the ore before sale to the
iron and steel industry, and that the ore cannot be sold for use
in making iron and steel unless the sulphur impurities are
removed. Accordingly, the roasting process is a manufacturing
step necessary to complete the ore for its intended use, and,
therefore, may not be considered a repair or alteration for
purposes of subheading 9802.00.50, HTSUS.
Your claim that the returned molybdenum is eligible for
entry under subheading 9802.00.50, HTSUS, is based on our ruling
in HQ 063616, dated March 26, 1981. In that ruling, we
determined that cylindrical shapes formed of metal oxides layered
over an aluminum substrate that were "regenerated" abroad after
use in the U.S. as catalysts in the "cracking" of oil were
eligible for entry under item 806.20, TSUS. You claim that the
purpose and effect of the roasting process here is the same as
that of the "regeneration" process at issue in HQ 063616.
We described the use of the catalysts, and the regeneration
process, in HQ 063616 as follows:
"1. Fresh, pure metal oxides (mixture of either molybdenum
and cobalt oxide or molybdenum and nickel oxide) on the
alumina substrate are placed in a stream of crude oil.
2. Two process may occur in the oil stream:
a) A certain percentage of the metal oxides chemically
react to form metal sulfides before the cylinders are
coated with tar or coke deposits and the remaining
oxide is unavailable for reaction due to that coating.
This reaction is not a catalytic activity, which refers
to the process of aiding a reaction without actually
being modified.
b) The molybdenum oxide and alumina may also act as
typical catalysts by assisting the 'cracking' of the
oil into lower molecular weight molecules and/or the
decomposition of organic sulfur compounds. However,
after the reaction they are still identifiable as
alumina and molybdenum oxide.
3. The catalyst is removed from the stream and sent for
regeneration.
4. During regeneration, the tar-like deposits are baked off
at 400-500 degrees F and some of the sulfide is subsequently
reconverted to the oxide at 950-1000 degrees F. The final
baking cycle may restore the catalyst cylinders to 95
percent metal oxide and 5 percent sulfide. Further baking
or higher temperatures would cause breakdown of the catalyst
(while restoring fully the metal oxides from the sulfides)."
After regeneration, the cylinders are returned to the U.S., where
they are again used as a catalyst as described above, then
shipped abroad for regeneration. With each use, there is a
greater and greater buildup of the metal sulfides and tars, and a
decreasing amount of oxide present, until, after an average of
five recyclings, the catalyst is finally "spent," or no longer
effective.
We do not find HQ 062616 to be controlling. In HQ 062616,
the article exported, the catalysts, were completely manufactured
for their intended use, and had, in fact, previously been put to
that use. The purpose of the regeneration was not to finish the
manufacture of an incomplete article, but to renovate or clean
the article of impurities which had attached during use. Here,
the roasting of the molybdenum is a processing step necessary
before the product may be put to its initial use. As such, the
roasting cannot be considered to be a repair or alteration of an
already complete article, and the molybdenum returned is not,
therefore, eligible for subheading 9802.00.50, HTSUS, treatment.
HOLDING:
Roasting the U.S. molybdenum ore abroad in order to remove
sulphur impurities exceeds the scope of an alteration under
subheading 9802.00.50, HTSUS. Therefore, the ore is not entitled
to classification under this tariff provision when returned to
the U.S.
Sincerely,
John Durant, Director
Commercial Rulings Division