CLA-2 CO:R:C:V 555620 KAC
Mr. Dave Morris
CE MacPherson Company
468 Rideau Street
P.O. Box 320
Kingston, Ontario, Canada
RE: Applicability of duty exemptions under HTSUS subheadings
9802.00.50 and 9802.00.60 to torispherical tank heads
created by bending, flanging, cutting, cleaning, grinding,
machining, and welding.Further processing;555417;C.S.D. 84-
49;553950
Dear Mr. Morris:
This is in response to your letter dated March 26, 1990,
requesting a ruling on the applicability of subheadings
9802.00.50 and 9802.00.60, Harmonized Tariff Schedule of the
United States (HTSUS), to torispherical (flanged and dished) tank
heads to be imported from Canada.
FACTS:
Your company will ship hot rolled stainless steel plates cut
into discs in the U.S., to Canada for certain processing, after
which they will be returned to the U.S. for further processing.
In Canada, the exported discs will be subjected to the following
operations:
(1) bending the disc into a uniform "dish shape" for the
head;
(2) flanging the head to the required diameter;
(3) cutting off excess material beyond the specified
height; and
(4) cleaning the head.
The head is then imported into the U.S. where your U.S. customer
will grind or machine a bevel onto the edge of the head and cut
holes into the head. The heads will then be welded to cylinders
to create tanks. After the welding operation, the heads will
undergo further operations to complete the tank, which include
cutting further holes in the head and grinding or buffing the
interior of the head to remove forming marks.
ISSUE:
Whether torispherical tank heads will qualify for the
partial duty exemption available under HTSUS subheading
9802.00.50 or 9802.00.60 when returned to the U.S.
LAW AND ANALYSIS:
Subheading 9802.00.50, HTSUS, provides for the assessment of
duty on the value of repairs or alterations performed on articles
returned to the U.S. after having been exported for that purpose.
However, the application of this tariff provision is precluded in
circumstances where the operations performed abroad destroy the
identity of the articles or create new or commercially different
articles. 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);
Guardian Industries Corporation v. United States, 3 CIT 9 (1982),
Slip Op. 82-4 (1982). Subheading 9802.00.50, HTSUS, treatment is
also precluded where the exported articles are incomplete for
their intended use and the foreign processing operation is a
necessary step in the preparation or 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 (1979). Articles entitled to this partial
duty exemption are dutiable only upon the cost or value of the
foreign repairs or alterations, provided the documentary
requirements of section 10.8, Customs Regulations (19 CFR 10.8),
are satisfied.
In this case, the foreign operations performed on the
stainless steel discs do not constitute alterations within the
meaning of subheading 9802.00.50, HTSUS. The bending and flanging
of the discs to the specified radius are further processing steps
that are necessary to manufacture the torispherical heads. See,
Headquarters Ruling Letter (HRL) 555417 dated January 22, 1990,
which held that the bending of rebars abroad constitutes a
process of manufacture, which exceeds an alteration.
HTSUS subheading 9802.00.60 provides a partial duty
exemption for:
[a]ny article of metal (as defined in U.S. note 3(d) of this
subchapter) manufactured in the United States or subjected
to a process of manufacture in the United States, if
exported for further processing, and if the exported article
as processed outside the United States, or the article which
results from the processing outside the United States, is
returned to the United States for further processing.
This tariff provision imposes a dual "further processing"
requirement on eligible articles of metal--one foreign, and when
returned, one domestic. Metal articles satisfying these
statutory requirements may be classified under this tariff
provision with duty only on the value of such processing
performed outside the U.S., provided there is compliance with the
documentary requirements of section 10.9, Customs Regulations (19
CFR 10.9).
In C.S.D. 84-49, 18 Cust.Bull. 957 (1983) we stated that:
[f]or purposes of item 806.30, TSUS, the term 'further
processing' has reference to processing that changes the
shape of the metal or imparts new and different
characteristics which become an integral part of the metal
itself and which did not exist in the metal before
processing; thus, further processing includes machining,
grinding, drilling, threading, punching, forming, plating,
and the like, but does not include painting or the mere
assembly of finished parts by bolting, welding, etc.
(The precursor provision to HTSUS subheading 9802.00.60 was item
806.30, Tariff Schedules of the United States (TSUS).)
In this case, the stainless steel disc is an eligible
article of metal for purposes of HTSUS subheading 9802.00.60.
The bending, flanging, and cutting of the discs in Canada are
considered "further processing" operations, as they change the
metal and impart new and different characteristics which become
an integral part of the metal. Moreover, the operations
performed in the U.S. to the returned heads (grinding or
machining of the bevel onto the edge and cutting holes) are
considered sufficient processes to comply with the domestic
"further processing" requirement of HTSUS subheading 9802.00.60.
See, C.S.D. 84-49, and HRL 553950 dated December 13, 1985, which
held that the cutting of metal constituted "further processing."
HOLDING:
On the basis of the information submitted, it is our opinion
that the processes performed abroad exceed an alteration, and,
therefore preclude tariff treatment under HTSUS subheading
9802.00.50. However, the processes performed abroad and in the
U.S. constitute "further processing" as that term is used in
HTSUS subheading 9802.00.60, and, therefore, the imported
stainless steel heads will be entitled to classification under
this tariff provision with duty only on the cost or value of such
processing performed outside the U.S., upon compliance with the
documentary requirements of 19 CFR 10.9.
Sincerely,
John Durant, Director
Commercial Rulings Division