CLA-2 CO:R:C:S 555997 RA
TARIFF No.: 9802.00.60
Ms. Jill Thomas
11-Vi Incorporated
375 Saxonburg Blvd.
Saxonburg, Pennsylvania 16057
RE: Applicability of partial duty exemption to germanium
lenses processed abroad and coated after return; Firestone
Tire; C.S.D. 84-49; 071396; 067328; 553833; 553630
Dear Ms. Thomas:
This is in response to your letter of December 3, 1990,
addressed to our New York office and referred to us for reply, on
the applicability of subheading 9802.00.60, Harmonized Tariff
Schedule of the United States (HTSUS), to U.S.-manufactured
lenses of germanium metal which are fabricated abroad and
returned to the U.S. for a coating operation.
FACTS:
Your company purchases optical blanks made of germanium in
the U.S. and exports them to your facility in Singapore for
grinding, beveling, and polishing into optical elements. The
operations performed in the U.S. upon their return include
quality inspection, surface cleaning in preparation for coating,
and finally the application of an infrared thin-film design
coating.
ISSUE:
Whether the surface cleaning and coating of the optical
elements after their return to the U.S. satisfies the domestic
further processing requirement of subheading 9802.00.60, HTSUS.
LAW AND ANALYSIS:
Subheading 9802.00.60, HTSUS, provides a partial duty
exemption for:
Any 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
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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.
Subheading 9802.00.60, HTSUS, imposes a dual "further
processing" requirement on eligible metal articles--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).
Germanium is an eligible article of metal for purposes of
subheading 9802.00.60, HTSUS. See U.S. Note 3(d), subchapter II,
Chapter 98, HTSUS, and additional U.S. Note 1, Section XV, HTSUS.
In C.S.D. 84-49, 19 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 character-
istics 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 precusor provision to subheading 9802.00.60, HTSUS, was item
806.30, Tariff Schedules of the United States (TSUS).)
In this case, the grinding and beveling operations performed
in Singapore satisfy the foreign "further processing" requirement
of the statute. However, it is our opinion that the cleaning and
coating operations performed when the optical elements return to
the U.S. are insufficient to comply with the domestic "further
processing" requirement. In Headquarters Ruling Letter (HRL)
071396 dated July 19, 1983, we held that the application of a
plastic coating to a metal article would not constitute "further
processing" because the new characteristics imparted by the
operation did not become an integral part of the metal itself.
We have consistently held that, as a general rule, surface
coating or painting, standing alone, is insufficent to qualify a
metal article for the benefits of this tariff provision. See
HRLs 067328 dated June 30, 1981, 553833 dated October 17, 1985,
and 553630 dated May 24, 1985.
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In The Firestone Tire and Rubber Co. V. U.S., 71 Cust. Ct.
63, 364 F.Supp. 1394, C.D. 4474 (1973), the court held that a
foreign rubber coating operation, consisting of an acid pickling
process designed to alter chemically the exterior surface of the
metal article, and the application of a special adhesive and
coating of rubber constituted "further processing" for purposes
of item 806.30, TSUS. These cumulative operations, which served
to impart a shock resistant quality to the article, were
considered by the court to be sufficient to satisfy the "further
processing" requirement. We believe the facts in Firestone are
distinquishable from those in the instant case because, unlike
the situation in Firestone, the only operation to which the
germanium lenses are subjected (aside from cleaning) is the
application of a thin infrared coating. This coating not only
does not change the metal's shape or form, but the new
characteristics imparted by the operation do not become an
integral part of the metal itself.
HOLDING:
The surface cleaning and infrared coating operations
performed on the returned germanium lenses are not considered
sufficient to qualify as "further processing" under subheading
9802.00.60, TSUS.
Sincerely,
John Durant, Director
Commercial Rulings Division