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HQ 555037


June 24, 1988

CLA-2 CO:R:C:V 555037DBI

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.60; 806.30

Mr. John Kingery
Ussex, Inc.
P.O. Box 1368
292 Arnold Mill Road
Woodstock, Georgia 30188

RE: Applicability of partial duty exemption of item 806.30, TSUS, to processed steel in the form of scrap, ingot and slab

Dear Mr. Kingery:

This is in response to your letter dated May 26, 1988, in which you request a ruling on behalf of Ussex, Inc., concerning the applicability of item 806.30, Tariff Schedules of the United States (TSUS), to processed steel in the form of scrap, ingot and slab to be exported to Yugoslavia to be processed into hot rolled, cold rolled, galvanized and stainless coil or sheet, bars and wires.

FACTS:

You advise that your company will be purchasing processed steel in the form of scrap, ingot and slab from a U.S. supplier. You will then ship the steel to Yugoslavia where the steel will be manufactured into hot rolled, cold rolled, galvanized and stainless coils or sheets, bars and wires. The steel will be returned to the U.S. where the manufacturers will perform further processing consisting of rollforming, machine punching, stamping, drawing, spot or arc welding, peeling, polishing or a combination of the above.

ISSUE:

Whether the described steel products, when returned to the U.S., will be eligible for the partial duty exemption of item 806.30, TSUS (9802.00.60 (HTSUS))?

LAW AND ANALYSIS:

Under item 806.30, TSUS, articles of metal (except precious metal) manufactured in the U.S. or subjected to a process of manufacture in the U.S., if exported for further processing, and if the exported article as processed outside the U.S., or the article which results from the processing outside the U.S., is returned to the U.S. for further processing, may be entered with duty on the cost or value of the processing abroad upon compliance with section 10.9, Customs Regulations (19 CFR 10.9).

We have previously held in a ruling dated June 22, 1987, (HQ 554626), that in order for base metal scrap to qualify under item 806.30, TSUS, the scrap metal must be obtained from American metal and not from processing of foreign-made metal. Your letter does not indicate whether the processed steel you will purchase was U.S. metal. However, it must be U.S. metal and not foreign made in order for any of the scrap to qualify for 806.30, TSUS, treatment.

With respect to the foreign processing, we have previously held that for the 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 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. C.S.D. 84-49, 18 Cust. Bull. 957 (1983).

In the present case, the manufacture of steel into hot rolled, cold rolled, galvanized and stainless coils or sheets, bars and wires changes the shape of the metal and imparts a new and different characteristic which has become an integral part of the metal itself that did not exist prior to the processing.

Furthermore, we have previously held that processing steel into hot and cold rolled sheet (HQ 554549, April 20, 1987) and galvanized steel (HQ 554344, November 19,1986) constitute sufficient processing of the steel to comply with the "further processing" requirement of the foreign segment of item 806.30, TSUS.

In Intelex Systems, Inc. v. United States, 59 CCPA 138, C.A.D. 1055, 460 F.2d 1083 (1972), the court said that the expression "returned to the United States for further processing" means "that the articles processed abroad and returned to the United States is no more than an advanced material or article which will be subjected to further manufacturing process in the U.S. to get a complete article."

In this case, the steel is advanced by the manufacturing process performed abroad and is returned to the U.S. for further processing. The rollforming, stamping, drawing, machine punching and spot or arc welding would appear to comply with the requirements of item 806.30, TSUS, since such operations, when performed alone, are a necessary further fabrication that finish completed steel articles. However, the peeling and polishing, if performed alone, are not necessarily a further fabrication that finishes a completed steel article, and would not satisfy the requirements of item 806.30, TSUS. Therefore, these processes must be performed in combination with one of the other described processes in order to comply with item 806.30, TSUS.

HOLDING:

On the basis of the information submitted, it is our opinion that the manufacturing performed abroad and the U.S. processing constitute further processing as that term is used in item 806.30, TSUS, and, therefore, allowances in duty may be made under item 806.30, TSUS, for the cost or value of the processing abroad, upon compliance with section 10.9, Customs Regulations (19 CFR 10.9).

Sincerely,

John Durant, Director

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