NY 865158

AUG 14 1991


CLA-2-84:S:N:N1:104 865158

Mr. Brian Johnson
Border Brokerage Company
P.O. Box B
Blaine, Washington 98230

RE: The tariff classification of a mandrel from the United States and Canada.

Dear Mr. Johnson:

In your letter dated July 9, 1991, you requested a tariff classification ruling on behalf of Earle M. Jorgensen Co., Seattle, Washington. The alloy steel mandrel is used in a pipe rolling mill to form pipe to a continuous inside diameter. After a billet of steel has been formed, a hole is drilled through the center of the billet. The mandrel is set in the hole and the billet is then continuously rolled across the rolls of the mill until the pipe is formed. The mandrel is used to form both the inside and outside diameters of the pipe.

In your letter, you also request a determination as to whether processing done in Canada is considered an alteration or manufacturing process. A determination is also requested as to which value duty will be assessed against (1) the value of the processing done in Canada only or (2) the value of the processing done in Canada plus the value of mandrel as exported to Canada. Specification sheets and cost breakdown figures were submitted with your letter. Blueprints for mandrels are submitted to Earle M. Jorgensen Co. ("Jorgensen") by its various customers. Jorgensen performs the basic manufacturing of the mandrel. The mandrel is then sent to Canada where Ebco Industries ("Ebco") performs a chrome plating operation on the article. The chrome plating allows graphite to be applied to the surface of the mandrel.

The graphite is necessary so that the mandrel can be extracted from the billet after forming is completed. After the chrome plating and graphite coating operations have been performed, Ebco returns the mandrel to Jorgensen for further machining (e.g. grinding of the mandrel's ends). An alteration is performed on an article which is already complete and does not include intermediate processing operations which are performed in the preparation or manufacture of finished articles. Alterations are not performed on an exported article that is incomplete for its intended use and which requires a manufacturing process to make it complete. It is clear from the details noted above that the operations performed in Canada constitute a part of the manufacturing process begun in the United States. In the described circumstances, the plating and coating processes are considered more than a mere alteration for tariff purposes. The Canadian processes are but intermediate steps in the total manufacturing process begun and ended in the United States.

Further processing refers to processing that changes the shape of the metal or imparts new and different characteristics which did not exist before this processing. These new and different characteristics become an integral part of the metal itself. In addition to machining, grinding, drilling, threading, punching, and forming, further processing also refers to plating. It would not include the mere assembly of finished parts (e.g. bolting).

On the basis of the information submitted, the mandrel to be imported is subjected to further processing both in Canada and on return to the United States. It is understood that the article is not capable of being used either in its original condition as exported to Canada nor as reimported into the United States. The applicable subheading for the mandrel will be 8455.90.0000, Harmonized Tariff Schedule of the United States (HTS), which provides for other parts of rolling mills. The rate of duty will be 4.9% ad valorem.

Goods classifiable under subheading 8455.90.0000, HTS, which have originated in the territory of Canada will be entitled to a 1.9% ad valorem rate of duty under the United States-Canada Free Trade Agreement (FTA) upon compliance with all applicable regulations.

In addition, the mandrel will be eligible for the partial duty exemption available in subheading 9802.00.6000, HTS, upon compliance with all applicable regulations. Subheading 9802.00.6000, HTS, provides for any article of metal [as defined in U.S. note 3(d) to subchapter II] 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. Duty is assessed only upon the value of such processing performed outside the United States. This ruling is being issued under the provisions of Section 177 of the Customs Regulations (19 C.F.R. 177).

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is imported. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

Jean F. Maguire
Area Director
New York Seaport