CLA-02 RR:CR:SM 561108 KKV
Mr. Gil Cordova
Rudolph Miles & Sons, Inc.
P.O. Box 11057
El Paso, TX 79983
RE: Eligibility of used, worn diamond wire drawing dies for preferential tariff treatment under subheading 9802.00.50, HTSUS; Article 509; polishing; re-sizing; finishing; stamping; different diameter; Amity Fabrics, Inc. v. United States; HRL 554952; HRL 957375; foreign processing extends useful life of article; return to original use
Dear Mr. Cordova:
This is in response to your letter dated August 11, 1998 (and subsequent facsimile dated August 25, 1998), on behalf of Woodburn Diamond Die, Inc., which requests a ruling regarding the eligibility of wire dies for preferential tariff treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS). For our consideration, samples of the dies in their condition before and after foreign processing have been submitted.
FACTS:
You indicate that your client exports used, worn diamond dies, used for drawing wire, to Mexico for processing as follows:
Polishing: The inside diameter of the wire drawing die is polished to remove the worn areas.
Sizing: The inside diameter (the diamond) is sized using progressively finer diamond powders and stainless steel wire to bring the die to the altered diameter and form.
Finishing: The altered die is mounted in a lathe and the two faces and the outside diameter are polished to remove surface blemishes.
Stamping: The altered wire die is stamped with the altered wire size.
You state that the sizing operation is a complex process, resulting in a shape roughly similar to an hour glass, with the following four major components:
1) Front Entrance Bell:
a cone from 60?- 90? that extends form the top of the diamond down towards the center of the diamond. Its purpose is to guide the wire and lubrication through the die.
2) Reduction (Drawing) Angle:
This angle extends from the bottom of the front entrance bell within the diamond downward to a point past the center of the diamond. This is the part where the wire is actually reduced in size. The drawing angles are usually between 10? to 20? dependent upon the wire material being reduced, with a 2? tolerance.
3) Bearing:
This section is at the bottom of the drawing angle and is the smallest diameter of all the profiles within the diamond. It does the actual sizing of the wire as it passes through the die. a normal tolerance is .000050 of an inch.
4) Back Relief:
This is a cone of 60?- 90? that flares out from the bearing to the back side of the diamond. Its purpose is to give clearance after the wire is drawn to size and to position the actual working areas of the diamond, the drawing angle and bearing up into the center part of the diamond for strength during the drawing process.
You indicate that each die has a discrete serial number assigned to it when newly produced and that this number remains on the die throughout its life span, typically 5 to 6 years, during which time its diameter may be upsized anywhere from 5 to 10 times. In a telephone conversation with a member of my staff, you state that the size of the diameter of the altered die (i.e., degree of alteration of exported die) is not fixed but is dependent upon a given customer’s specifications, supplying the following example:
Die Serial Number Diameter of Worn Die Re-sized Diameter
EW697557 .0075 .0084
EW697550 .0084 .0089
EW697577 .0089 .010
EW697277 .010 .0112
EW697197 .0112 .0126
EW698042 .0126 .0141
EW698090 .0141 .0159
EW698157 .0159 .0179
EW698197 .0179 .0201
CTA384698 .0201 .0225
CTA262524 .0225 .0254
CTA392785 .0254 .0284
Upon completion of processing in Mexico, the diamond dies will be imported into the U.S. for sale to end users to draw wire.
ISSUE:
Whether used, worn diamond wire drawing dies which are re-sized in Mexico are eligible for the duty exemption under subheading 9802.0050, HTSUS, when returned to the U.S.
LAW AND ANALYSIS:
Articles exported from and returned to the U.S., after having been advanced in value or improved in condition by repairs or alterations in Mexico, may qualify for a duty exemption under HTSUS subheading 9802.00.50 (or subheading 9802.00.40, HTSUS, when performed pursuant to a warranty), provided the foreign operation does not destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g C.D. 1752, 36 Cust. Ct. 46 (1956) and Guardian Industries Corp. v. United States, 3 CIT 9 (1982). Articles entitled to this duty exemption are subject to the documentary requirements of section 181.64(c), Customs Regulations (19 CFR 181.64(c)).
Article 307 of the North American Free Trade Agreement (NAFTA) and Annex 307.1 of the Agreement provide, that articles exported from the U.S. to Mexico for "repairs or alterations" may, upon their return, enter into the U.S. free of duty.
The Customs regulations which implement NAFTA are contained in title 19 CFR Part 181. Section 181.64(a) defines "repairs or alterations" for purposes of NAFTA as follows:
For purposes of this section, "repairs or alterations" means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential characteristics of, or create a new or commercially different good from, the good exported from the United States.
For purposes of the duty allowance under subheading 9802.00.50, HTSUS, the replacement and/or addition of parts to restore products to their original condition may constitute repair operations, provided that the particular article does not lose its identity and the replacement and/or additions are not so extensive as to create a new or different article. Press Wireless, Inc. v. United States, 6 Cust. Ct. 102, C.D. 438 (1941). In Press Wireless, supra, the court found that radio tubes or valves replaced with heavier filaments, allowing heavier amperage, were “repaired” within the meaning of paragraph 1615, Tariff Act of 1930 (a precursor provision of subheading 9802.00.50, HTSUS). Additionally, the court found that the identical tubes were returned in a “condition of restoration to their original efficiency”, and noted that an automobile repaired with materials of a heavier and superior quality than the worn out parts would still be the same automobile, and that a fur coat relined with a superior material would still be the same coat. The court held that the use of improved materials in the restoration was immaterial, as long as the article was not considered a new and different article of commerce or its identity was destroyed.
Thus, application of this tariff provision is precluded where the foreign operation destroys the identity of the exported article or creates a new or different commercial article. The replacement and/or addition of parts to restore products to their original condition may constitute repair operations for purposes of subheading 9802.00.50, HTSUS, if the particular article does not lose its identity and the replacements and/or additions are not so extensive as to create a new or different article.
In Amity Fabrics, Inc. v. United States, 43 Cust.Ct. 64, C.D. 2104, 305 F.Supp. 4 (1959), unfashionable “pumpkin” colored cotton twill back velveteen was exported to be redyed a black color, which was more marketable. The court found that the merchandise was advanced in value and improved in condition commercially by the dyeing operation and that such change constituted an alteration under paragraph 1615(g) of the Tariff Act of 1930 (the precursor to item 806.20, TSUS, which is, in turn, the precursor of subheading 9802.00.50, HTSUS). The court further found that "the identity of the goods was not lost or destroyed by the dying process; no new article was created; there was no change in the character, quality, texture, or use of the merchandise; it was merely changed in color."
In Headquarters Ruling Letter (HRL) 554952, dated March 14, 1989, Customs held that used casting molds re formed by an "explosive forming" process which consisted of removing the chrome surface, grinding away defects, fitting a mandrel into the used mold, wrapping a plastic explosive around the casting, immersing the unit into water, and detonating the explosive merely restored the exported casting molds to their original condition, and therefore, constituted a repair for purposes of TSUS item 806.20 (the precursor to subheadings 9802.00.40 and 9802.00.50, HTSUS).
In HRL 957375, dated April 19, 1995, Customs considered wax pattern dies (aluminum molds used for the production of patterns made of wax) which were exported to England for repair by reworking/resharpening of the edges. The wax pattern dies were previously manufactured articles which became worn out from repeated use. Customs determined that the used dies were completed articles in their condition as exported, and did not require the addition of any other component or attachment in order to function properly. Customs concluded that the foreign resharpening operation, which restored the dies to their original condition, did not create a new or commercially different article, nor change the character or use of the wax pattern die and held that the reworking/resharpening operation constituted a repair for purposes of subheading 9802.00.50, HTSUS.
Like the casting molds in HRL 554952, supra, and the wax pattern dies in HRL 957375, supra, the used diamond dies are previously manufactured articles which have become worn out from repeated use. The dies are completed articles in their condition as exported to Mexico prior to undergoing reshaping, and they do not require the addition of any other component or attachment in order to function properly. Although the processing in Mexico does not return the articles to their “original condition,” i.e., the identical diameter dimension, it does not create a new or commercially different article. Instead, the foreign processing acts to prolong the life of the article by rendering it fit for its original use, albeit for drawing wire of a different size or form. While the end product (drawn wire) of the altered die may be of a different size or shape than that obtainable from the unaltered die, the use to which the die is put - drawing wire - remains the same; the die itself is not a commercially different article. The foreign re-sizing operations do not result in a change in the character or use of the wax pattern die; both before and after alteration it remains a means by which wire is created. Accordingly, we find that the re-sizing operations performed in Mexico constitute “alterations” within the meaning of 19 CFR 181.64(a). Consequently, the altered dies will be eligible for the duty exemption provided in subheading 9802.00.50, HTSUS, provided the documentary requirements of 19 CFR 181.64(c) are met.
HOLDING:
Based upon the information provided, the foreign processing performed in Mexico which re-sizes the diameter of the exported used, worn diamond wire drawing dies acts to prolong the useful life of the exported dies by rendering them fit for its original use. Accordingly, these operations constitute acceptable "repairs" or "alterations," within the meaning of subheading 9802.00.50, HTSUS. Therefore, upon their return to the U.S., the altered dies will be eligible for the duty exemption available under this tariff provision provided the documentary requirements of 19 CFR 181.64(c) are met.
A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer.
Sincerely,
John Durant
Director
Commercial Rulings Division