CON-9-04 RR:CR:DR 227937 CB
Vincent Bowen, Esq.
White & Case
601 13th Street, N.W.
Suite 600 South
Washington, D.C. 20005-3807
RE: Temporary Importation Under Bond; Article 303 of NAFTA;
NAFTA Duty Deferral; Subheading 9813.00.05, HTSUS; U.S. Note
1(c), Chapter 98, Subchapter XIII, HTSUS; 19 CFR 181.53(b)(5);
19 USC 3333(a)(2)
Dear Mr. Bowen:
This is in reply to your letters of March 10, and April 8,
1998, on behalf of Okura & Co. (America), Inc. ("Okura"),
wherein you requested a binding ruling regarding temporary
importations under bond (TIB) of carbon seamless steel casing.
FACTS:
According to your letter, Okura will import, under a TIB,
carbon seamless steel casing from Japan to be threaded in
Houston and intended for consumption in Canada. The length of
the each casing ranges between 11 and 14 meters. In its
imported condition, the Japanese casing conforms to all A.P.I.
specifications (including metallurgical and physical
properties) for seamless steel casing and is exclusively and
irretrievably dedicated for such use. The TIB operations will
consist of threading the ends. You state that only 4.86 inches
on each end will be threaded. The threading will cover only
about 2% of the length of the casing. The casing will be
threaded, with no grinding, sanding, crimping, flanging,
upsetting, quenching or heat treatment of any kind. Couplings
will be attached to permit joining of the individual segments
of casing.
It is your position that the operations performed in the
United States are not sufficient to bring the transaction
within the NAFTA duty deferral rules. It is your understanding
that
the non-NAFTA TIB provisions would apply to Okura's transaction
and, thus, that the TIBs
would be canceled upon exportation of the casing to Canada with
no requirement to file a consumption entry or pay duties.
ISSUE:
Is the exported threaded casing in the same condition for
purposes of the NAFTA duty deferral provisions?
LAW AND ANALYSIS:
Subheading 9813.00.05, Harmonized Tariff Schedule of the
United States (HTSUS), provides for temporary duty-free entry,
under bond, for merchandise imported into the United States for
the purpose of repair, alteration, or processing. The Customs
Service has liberally interpreted this provision to include
processes which would not otherwise qualify as a manufacture or
production for drawback under 19 U.S.C. 1313(a) or (b).
U.S. Note 1(c), Chapter 98, Subchapter XIII, HTSUS (as
amended by Presidential Proclamation 6780 of March 23, 1995
(published in the Federal Register on March 27, 1995 (60 FR
15845, 15853))), provides:
For purposes of this subchapter, if an article imported
into the United States under heading 9813.00.05 is
withdrawn for exportation to the territory of Canada or
of Mexico, the duty assessed shall be waived or reduced
in an amount that does not exceed the lesser of the total
amount of duty payable on the article that would have
been payable on importation under chapters 1 through 97,
inclusive of the Harmonized Tariff Schedule of the United
States or the total amount of customs duties paid to
Canada or Mexico on the exported article, unless such
article is covered by section 203(a)(1) through
203(a)(8), inclusive, of the NAFTA Implementation Act.
The amount of duties or refunds calculated on such
articles pursuant to this note shall be adjusted to take
into account any subsequent claim for preferential tariff
treatment made to another NAFTA country. This note shall
apply to shipment to Canada on or after January 1, 1996,
and to Mexico on or after January 1, 2001.
Section 203(a) of the NAFTA provides that all goods
imported into the United States are subject to NAFTA drawback
restrictions except if otherwise specifically exempted. One of
the categories of goods exempted from the NAFTA drawback
restrictions is merchandise exported to another NAFTA country
in the same condition as when imported. It is your position
that the standards previously enunciated by Headquarters
establish that the TIB operations proposed in your letter do
not change the condition of the casing for purposes of the
NAFTA limitations.
As you have stated, Headquarters rulings have recognized
that the status of a process or operation under one program is
not determinative of its status under another program. The
Court of International Trade has also recognized that results
may differ according to the purpose of the statute. See
National Juice Prods. Ass'n v. United States, 10 CIT 48, 58 n.
14, 628 F. Supp. 978 (CIT 1986)(". . . although the language of
the tests applied . . . is similar, the results may differ
where differences in statutory language and purpose are
pertinent.") Section 203(a) of the NAFTA requires that
whatever criteria is applied to drawback also be applied to all
imported goods. As you yourself note in your April 8 letter,
TIB entries are in fact treated as a form of "drawback" under
the NAFTA provisions. Based on existing precedent, we conclude
that the threading and coupling of the casing do constitute a
manufacture and, thus, bring the threaded casing under the
NAFTA duty deferral rules. The threading and coupling of the
casing is a manufacturing process which serves to impart
significant new characteristics on the casing. Namely, the
threading process allows the driller the option of joining
individual segments to extend the length of the casing. A
manufacture has been defined by the Supreme Court as a
transformation from which a new article emerges having a
distinctive name, character or use. See Anheuser-Busch Brewing
Association v. United States, 207 U.S. 556, 562 (1908)
(emphasis added). Thus, if a process results in an article
only having a different use, the definition of a manufacture
has been met.
Contrary to the assertion in your letters of February 18
and April 8, 1998, Customs has held that threading
pipe/tube/casing is a manufacture albeit for drawback purposes.
The threading and coupling of pipe were considered a
manufacture for purposes of 19 U.S.C. 1313(b). See T.D. 69-246-U (October 16, 1969). Recently, in HQ 227499, dated June
23, 1998, Customs held that imported steel pipes which are
threaded, and a coupling is attached, are not eligible for
unused merchandise drawback. This holding was based on the
finding that the threading and coupling of the pipes was
considered a manufacture.
Finally, we are further persuaded to reach this conclusion
by the legislative history to the NAFTA. A reading of the
legislative history indicates that the Parties intended to
restrict drawback and duty deferral programs between the
Parties. See H. Rept. 103-361, 103d Cong., 1st Sess. (1993).
We also note that threaded and/or coupled casing is
classifiable under a different subheading of the HTSUS, and
that a different rate of duty is also applicable. Threaded or
coupled casing is classifiable under subheadings 7304.29.10;
7305.20.20; or 7306.20.30, HTSUS. Other casings are
classifiable under subheadings 7304.29.20; 7305.20.40; or
7306.20.40, HTSUS. In all instances, the rate of duty for the
threaded/coupled pipe being higher.
HOLDING:
The exported threaded casing is not in the same condition
as when imported. Thus, the threaded pipe is a "good subject
to NAFTA drawback" within the meaning of 19 U.S.C. 3333(a)
because they are not exported to a NAFTA country in the same
condition as when
imported into the United States within the meaning of 19 U.S.C.
3333(a)(2), and duty is assessable pursuant to 19 C.F.R.
181.53(b)(5) upon exportation to Canada.
Sincerely,
John A. Durant, Director
Commercial Rulings Division