CLA-2-73:OT:RR:NC:N1:116
Mr. Daniel H. Carroll
JAS Forwarding (USA), Inc.
4249-A Crosspoint Drive
Ladson, SC 29456
RE: The country of origin and applicability of heading 9802, HTSUS, of tubes exported from the United States to Germany for swaging and then returned to the United States for further processing
Dear Mr. Carroll:
In your letter dated August 14, 2019, you requested a country of origin ruling on behalf of your client, IFA Rotorion North America, LLC. (“IFA”).
According to the information provided in your submission, IFA exports welded nonalloy steel tubes of United States (U.S.) origin to Germany where they will be swaged and then returned to the U.S. to be friction welded and ultimately made into drive shafts. You inquire whether the swaging operations performed in Germany result in a substantial transformation. In addition, you ask if the tubes qualify for a partial duty exemption under HTSUS subheading 9802.00.5010 when returned to the U.S.
Section 134.1(b), Customs Regulations (19 CFR 134.1(b)), defines "country of origin" as:
the country of manufacture, production or growth of any article of foreign origin entering the United States. Further work or material added to an article in another country must effect a substantial transformation in order to render such other country the "country of origin" within the meaning of this part; however, for a good of a NAFTA country, the NAFTA Marking Rules will determine the country of origin.”
A substantial transformation occurs when an article emerges from a process with a new name, character and use different from that possessed by the article prior to processing. A substantial transformation will not result from a minor manufacturing or combining process that leaves the identity of the article intact. See United States v. Gibson-Thomsen Co., 27 C.C.P.A. 267 (1940); and National Juice Products Association v. United States, 628 F. Supp. 978 (Ct. Int’l Trade 1986).
In this case, we find swaging the tubes of U.S. origin in Germany does not result in a substantial transformation. The product leaves the U.S. as a tube and will be returned to the U.S. as a swaged tube. As such, the country of origin will be the United States.
Concerning the applicability of the partial duty exemption for the swaged tubes, subheading 9802.00.5010, HTSUS, provides for articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means: articles exported for repairs or alterations. Articles returned to the United States after having been repaired or altered in another country, that are 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.
This office finds that the swaging does not advance the article in value nor does the swaging improve the article in condition. The swaging is also not an alteration or repair, but instead is a furthering of the manufacturing process. As such, the subject tube does not qualify for a partial duty exemption in subheading 9802.00.5010, HTSUS.
Consideration for a partial duty exemption in subheading 9802.00.60, HTSUS, however, has also been reviewed. Subheading 9802.00.60 provides a partial duty exemption for: [a]ny article of metal . . . 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 for the United States for further processing. Subheading 9802.00.60, HTSUS, therefore imposes four requirements: (1) the merchandise must be an article of metal; (2) the metal must either be manufactured in the United States or subject to a process of manufacture in the United States; (3) the metal must be exported for further processing; and (4) the metal must be returned to the United States for further processing. For purposes of subheading 9802.00.60, HTSUS, “metal” includes “base metals enumerated in note 3 to section XV,” which in turn includes steel. Therefore, the nonalloy steel tubes will qualify as an “article of metal” under subheading 9802.00.60, HTSUS, satisfying the first requirement. The nonalloy steel tubes are of U.S. origin, satisfying the second requirement. The nonalloy steel tubes are exported to Germany where they are swaged. The conversion of the nonalloy steel tubes into swaged tubes changes the shape of the metal, preparing the tubes for the further processing in the U.S., satisfying the third requirement.
And finally, the nonalloy steel tubes are returned to the U.S. where they are friction welded and ultimately made into drive shafts. The subsequent fabrication of the swaged tubes into drive shafts constitutes “further processed” in the U.S., satisfying the fourth requirement.
Accordingly, the subject merchandise may be entered under subheading 9802.00.60, HTSUS. The duty due will be only upon the value of the foreign processing contingent upon compliance with the applicable regulations.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Angelia Amerson at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division