CLA-2 CO:R:C:S 557339 MLR
Mr. Ian Hyland
Customs Supervisor
Alcatel Canada Wire Inc.
250 Ferrand Drive
North York, Ontario
Canada M3C 3J4
RE: Applicability of HTSUS subheading 9802.00.60 to copper
strands from Canada; insulating, cabling, wrapping,
armoring, jacketing performed in U.S.
Dear Mr. Hyland:
This is in reference to your letter of May 10, 1993,
concerning the applicability of subheading 9802.00.60, Harmonized
Tariff Schedule of the United States (HTSUS), to copper strands
from Canada.
FACTS:
Alcatel Canada Wire Inc ("Alcatel") is considering importing
U.S.-origin copper cathodes into Canada for conversion into
various copper strands which would subsequently be exported to
the U.S. to be made into finished conductor cables. The proposed
operations are effectively identical to those performed by
Alcatel in Headquarters Ruling Letter (HRL) 556345 dated February
10, 1992, in that the cathodes are melted in a furnace and passed
through casting, rolling, and pickling stages in a continuous
process to produce rods. However, unlike HRL 556345, where the
rods were exported to the U.S. for further processing into copper
strands and then cables, Alcatel proposes to transfer the rods to
another Canadian plant where they are drawn to smaller diameters
and stranded. The strand is then wound on reels and shipped to
cable manufacturing plants in the U.S.
In the U.S., the processes to make cables are stated to
include insulating, cabling, wrapping, armoring, and jacketing
the copper strands. Evidently, the copper strand returned to the
U.S. can only be used for further processing into electrical or
communications cables. In a brochure introducing the
instrumentation cables manufactured by Chester Cable Corporation,
it is indicated that some of the strands are coated with a PVC
jacket, twisted, and then applied with an overall shield of PVC
or CPE. When increased mechanical, chemical, or environmental
protection is required, a hermetically sealed aluminum tape or
copper tape armor with an additional PVC or CPE jacket can be
provided.
ISSUE:
Whether the copper strand will be eligible for the partial
duty exemption available under subheading 9802.00.60, HTSUS, when
imported into the U.S.
LAW AND ANALYSIS:
Subheading 9802.0060, HTSUS, 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
subject 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 of 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, Tariff Schedules of the
United States (TSUS) (precursor to 9802.00.60, HTSUS),
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.
In HRL 556345, it was held that the processes performed
abroad by Alcatel on the U.S.-origin copper cathodes to make
copper rod, constituted "further processing." Therefore,
clearly, the processes performed in Canada in this case, which
also include processing the rod into copper strand, constitute
"further processing." Accordingly, the only question remaining
is whether the domestic "further processing" requirement is met.
In this case, the domestic operations involve insulating,
cabling, wrapping, armoring, and jacketing the copper strand to
create finished conductor or communications cable.
In The Firestone Tire and Rubber Co. v. United States, 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 domes, 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 to be sufficient to satisfy the "further processing"
requirement. However, in HRL 071396 dated July 16, 1983, we held
that coating a metal article with an extruded polyvinyl plastic
material to provide a moisture-proof product did not constitute
"further processing" because the new characteristics incorporated
by the operation did not become an integral part of the metal
itself. It was stated that where a coating shield is preceded by
other operations such as etching or blasting that are intended to
impart significant new characteristics to the metal so as to
affect the metal itself, the coating may be considered a
processing within the meaning of the tariff provision. However,
as a general rule, surface coating or painting, standing alone,
is insufficient to qualify a metal article for the benefits of
subheading 9802.00.60, HTSUS. See HRL 067328 dated June 30,
1981, HRL 553833 dated October 17, 1985, and HRL 553630 dated May
24, 1985. Therefore, although the applied plastic coating may
have been the last step to process the metal article into tubing,
the coating alone was not sufficient processing to qualify the
imported tubing under the requirements of item 806.30, TSUS.
Furthermore, in HRL 554940 dated March 27, 1989, it was held
that the processes of subjecting stainless steel strips to
"electrochemical cleaning" and extruding a dimethyl polysiloxane-
related strip of rubber onto the metal did not change the shape
of the metal nor impart new and different characteristics which
became an integral part of the metal itself, thereby precluding
the application of item 806.30, TSUS, treatment. Also, in HRL
555997 dated August 14, 1991, U.S.-origin optical blanks made of
germanium were exported to Singapore for grinding, beveling, and
polishing into optical elements. In the U.S., the optical
elements were inspected, their surface was cleaned, and an
infrared thin-film design coating was applied. It was stated
that unlike the situation in Firestone, the only operation to
which the germanium lenses were subjected (aside from cleaning)
was the application of a thin infrared coating. This coating not
only did not change the metal's shape or form, but the new
characteristics imparted by the operation did not become an
integral part of the metal itself.
Based on the description of the operations to be performed
in the U.S. on the copper strand to create the cables, it is our
opinion that the domestic "further processing" requirement would
not be satisfied. In HRL 556345, the emphasis on the domestic
processing was on the drawing operation conducted on the imported
copper rod to make copper strands. However, Alcatel now proposes
to perform this drawing operation in Canada. Therefore, we find
that, as in HRL 071396, although the insulating, cabling,
wrapping, armoring, and jacketing operations in the U.S. may
finish the copper strands for their intended purpose, these
operations do not impart new characteristics which become an
integral part of the copper strands.
HOLDING:
On the basis of the information submitted, we find that the
processes performed in Canada on the exported copper cathodes
constitute "further processing" as that term is used in
subheading 9802.00.60, HTSUS. However, the insulating, cabling,
wrapping, armoring, and jacketing operations performed in the
U.S. on the imported copper strands do not constitute "further
processing." Consequently, the imported copper strands will not
be entitled to entry under subheading 9802.00.60, HTSUS.
Sincerely,
John Durant, Director