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HQ 555105


October 31, 1988

CLA-2 CO:R:C:V 555105 GRV

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.60; 806.30

Mr. Howard Shube
Shube's Manufacturing, Inc.
2010 Ridgecrest Dr. SE
Albuquerque, New Mexico 87108

RE: Applicability of partial duty exemption under TSUS item 806.30, and country of origin marking requirements to certain U.S.-made pewter castings processed in Mexico

Dear Mr. Shube:

This is in response to your letter of August 9, 1988, re- questing a ruling on the applicability of item 806.30, Tariff Schedules of the United States (TSUS), and country of origin marking requirements to certain U.S.-made pewter castings pro- cessed in Mexico. Two sets of three samples were submitted for examination as well as technical descriptions of the various steps employed in the manufacture of pewter figurines.

FACTS:

You state that the first few steps are performed in the U.S. where the pewter figurines are initially cast in molds. The cast figurines are then exported to Mexico, where intermediate pro- cessing steps are performed.

These steps entail (1) subjecting portions of each figurine to various metal cutting and grinding operations to remove "flash" mold lines and other surface imperfections; (2) chemi- cally-inducing an oxidizing/blacking process to each figurine by dipping it into an antiquing solution, so that surface details will be accentuated; and (3) removal of the oxidized/blacked layer by means of abrasive tumbling and buffing with an abrasive fiber wheel.

The semi-finished figurines are then imported into the U.S. where the final processing steps are performed. These steps en- tail (1) subjecting all figurines to further surface perfecting operations described as "satin buffing," wherein a small layer of the surface metal is removed with a buffing wheel utilizing a fine-grain abrasive surface to give a uniform "satin finish;" (2) subjecting approximately 65% of the pieces to a faceting opera- tion described as "diamond cutting," wherein some metal is cut
away by a high-speed diamond flywheel to impart a jewel-like sparkle; and (3) application of a clear acrylic lacquer to all figurines. Selected figurines are also subjected to final as- sembly operations (attachment of other pewter parts and/or small pieces of crystal). Of the three enumerated steps, only the sec- ond, identified as "optional," involves a metal cutting opera- tion.

ISSUES:

I. Whether the pewter figurines will be eligible for the partial duty exemption under TSUS item 806.30 (subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS)) when returned to the U.S.

II. Whether the pewter figurines will be considered products of the U.S. for country of origin marking purposes.

LAW & ANALYSIS:

I. Applicability of TSUS item 806.30

TSUS item 806.30 (19 U.S.C. 1202) provides a partial duty exemption to:

[a]ny article of metal (except precious metal) manu- factured in the United States or subjected to a pro- cess 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. (Emphasis supplied).

TSUS item 806.30 imposes a dual "further processing" requirement on metal articles: one must be accomplished in the foreign country where the metal is exported to and one must be accom- plished in the U.S. when the metal is returned. Metal articles satisfying these statutory requirements may be classified under TSUS item 806.30 with duty only on the value of such processing done outside the U.S., upon compliance with section 10.9, Customs Regulations (19 CFR 10.9).

In C.S.D. 84-49, 18 Cust. Bull. 957 (1983) we held that:

[f]or 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.

The described manufacturing operation that occurs in Mexico comprises various grinding and metal cutting steps, i.e., "flash removal," and other steps that occasion a further loss of metal on the figurines by means of a chemically-induced oxidation pro- cess that is not analogous to painting. Taken as a whole, these various described manufacturing steps impact the metal itself and constitute "further processing" within the ambit of the statute. The samples submitted evidence these manufacturing steps.

Of the manufacturing operations that occur in the U.S., only the faceting-operation step, described as "diamond cutting" and identified as optional, truly impacts on the metal itself and imparts a new and different characteristic, i.e., a "jewel-like sparkle," to the metal. The "satin buffing" step, at best, only marginally affects the metal and, therefore, we believe that this step, by itself, is insufficient to constitute "further process- ing". Thus, only that portion of the pewter figurines (identi- fied as approximately 65% of the pieces) that undergo the facet- ing process described as "diamond cutting" are deemed to have been "further processed" within the meaning of the statute and will, upon their importation into the U.S. and compliance with all the requirements set forth in 19 CFR 10.9, be entitled to the partial duty exemption under TSUS item 806.30. The pewter fig- urines that merely undergo the "satin buffing" step will be sub- ject to full tariff treatment, for the reasons stated.

II. Country of Origin Marking Requirements

Headnote 2 to Part 1 of Schedule 8, TSUS, provides, in part, that:

[a]ny product of the United States which is returned after having been advanced in value or improved in condition abroad by any process of manufacture or other means...shall be treated for the purposes of this Act as a foreign article.... (Emphasis supplied).

In applying this provision, Customs has determined that, except in the case of textiles and textile articles covered by section 12.130, Customs Regulations (19 CFR 12.130), treatment "as a foreign article" shall not supersede the rules otherwise applicable in determining the country of origin of imported articles. Since the processing performed in Mexico does not
subtantially transform the castings into new and different articles of commerce having a new name, character, and use, they remain products of the U.S. for country of origin marking pur- poses. Accordingly, the finished figurines should carry no marking indicating a foreign country of origin.

HOLDING:

On the basis of the described manufacturing processes, and after viewing the samples submitted, only those pewter figurines that are subjected to the faceting operation will be entitled, upon return to the U.S. and compliance with the certification of registration requirements, to the partial duty exemption provided by TSUS item 806.30. The remaining figurines are not subjected to sufficient further processing upon their return to the U.S. and will be assessed duty upon their full appraised value. The foreign processing will not render the finished pewter figurines articles of foreign origin for country of origin marking purposes and they should not be so marked.

Sincerely,


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