HQ 0554952 - Application for Further Review of Protest No. 3801-7-001293, protesting your denial of TSUS item 806.20 treatment to certain casting molds imported from Canada - United States International Trade Commision Rulings

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HQ 554952

March 14, 1989

CLA-2 CO:R:C:V 554952 GRV

CATEGORY: CLASSIFICATION

District Director of Customs
Detroit, Michigan 48226-2568

RE: Application for Further Review of Protest No. 3801-7-001293, protesting your denial of TSUS item 806.20 treatment to certain casting molds imported from Canada

Dear Sir:

The above-referenced protest contests your denial of the partial duty exemption under item 806.20, Tariff Schedules of the United States (TSUS), to certain casting molds imported from Canada.

FACTS:

The record in this matter reflects that certain used cast- ing molds, denominated "scrap casting molds" on the Certificates of Registration (Customs Form 4455), were exported, on consign- ment, to Canada for repairs. Each of the exported molds consist- ed of a continuously-cast mold tube with chromeplating on its contact surface.

The Protestant states that the foreign repair operation uses a unique re-forming process to return out-of-dimension con- tinuous casting molds to their original precise dimensions. The repair operation is styled an "implosion" process, whereby plas- tic explosive is wrapped around the casting, a mandrel of the required shape and accuracy is inserted into the used mold, the unit is immersed in a tank of water, and the explosive is deto- nated. This technique, known as "explosive forming," can be employed to either restore the dimensional accuracy to used mold tubes or to form new molds from crude castings. The various steps in this restorative/forming process include the following:

(1) removal of the chrome surface from the used mold's copper surface;
(2) grinding away of all defects on the used mold caused by abrasive wear;
(3) fitting a steel mandrel of the required shape and accuracy into the mold;
(4) covering the outer surface of the mold with explosive and lowering it into a water-filled tank; (5) multiple detonations of the mold onto the mandrel, un- til the desired dimensions are obtained; and, (6) resurfacing the restored mold's internal copper surface
with chromeplating.

On return to the U.S., the restored casting molds were de- nied the partial duty exemption under TSUS item 806.20 by your office based on the exported molds designation and valuation as "scrap" on the applicable Certificates of Registration. In the opinion of your office, the foreign repair operation was so extensive as to constitute a remanufacture of the "scrap" casting molds, rendering them new articles of commerce.

Protestant also claims that certain new molds manufactured in Canada and returned to the U.S. for chromeplating should be accorded TSUS item 806.30 treatment. However, we understand from your office that this issue has been resolved and need not be addressed in this decision.

ISSUE:

Whether the processing of the exported used casting molds constituted "repairs" within the meaning of TSUS item 806.20, thereby qualifying the returned molds for the partial duty exemp- tion provided for under this tariff provision.

LAW & ANALYSIS:

Articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repair opera- tions may qualify for the partial duty exemption under TSUS item 806.20 (now subheadings 9802.00.40 and 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS)), provided the operations do not destroy the identity of the exported articles or create new or different articles. Such articles are dutiable only upon the value of the foreign repairs when returned to the U.S., provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.

The designation of the casting molds as "scrap" appears to be the linch pin in this case, as your office concluded that such articles, designated as "scrap" and valued as such, are no longer serviceable and must be subjected to such an extensive repair process as to result in their remanufacture. Thus, your office determined that the repaired articles became new items not eligi- ble for TSUS item 806.20 treatment. While the protestant's rea- son for the designation of the casting molds as "scrap" at the time of export is not clear (although it may have been done to secure favorable freight rates), the eligibility of returned articles for the partial duty exemption under TSUS item 806.20 is determined by an inquiry into the condition of the article as exported, Dolliff & Co. v. United States, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979), and not by the designation of the exported articles on the export documentation.

We note that, for tariff purposes, the term "scrap" is defined in conjunction with the term "waste" at headnote 3(b), part 2, Schedule 6, TSUS, as:

...materials and articles of metal which are second-hand or waste or refuse, or are obsolete, defective or damaged, and which are fit only for the recovery of the metal content or for use in the manufacture of chemicals, and does not in- clude metal in unwrought form or metal-bearing materials provided for in part 1 of this schedule. (Emphasis sup- plied).

It is noted that this definition does not operate, in this case, to render the exported "scrap" molds ineligible for TSUS item 806.20 treatment, as the very reason the molds were exported was because they were defective or damaged--the very domain of TSUS item 806.20--and not for the recovery of their metal content.

In A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), the U.S. Court of Customs and Patent Appeals indicated that where the article imported differs in name, value, appear- ance, size, shape and use from the article exported, a conversion of the exported article into a new article is signaled.

However, in Press Wireless, Inc. v. United States, 6 Cust.Ct. 102, C.D. 438 (1941), certain radio tubes were sent abroad for repairs. Noting that the merchandise was exported under Customs supervision and in accordance with the applicable regulations, and that the tubes returned after repair were the same in construction, operation, performance, and use, and that the power output was the same, the Customs Court found that worn- out radio tubes were exported for repairs and that the identical tubes were returned in a condition of restoration to their origi- nal efficiency. Despite the replacement of a constituent part with a part requiring more power, the court found that the iden- tity of the articles exported had not been destroyed by the repair process, nor had the repairs created a new or different article. The repairs restored the articles to their original efficiency so as to prolong their usefulness.

This protest involves substantially similar issues to those presented in the Wireless case and, in similar fashion, we con- clude that the foreign repair operation (explosive reforming) merely restored the exported molds to their original condition.

CONCLUSION:

On the basis of the record presented in this matter, it is our opinion that the foreign operation (explosive reforming) merely restored the exported used casting molds to their original condition and, therefore, constituted repairs within the meaning of TSUS item 806.20. Accordingly, if your office is satisfied that there has been compliance with the documentary requirements of 19 CFR 10.8, we find that the returned casting molds qualify for the partial duty exemption under TSUS item 806.20. You are directed to grant the protest in full.

Sincerely,

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