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HQ 555215


August 15, 1989

CLA-2 CO:R:C:V 555215 GRV

CATEGORY: CLASSIFICATION

District Director of Customs
Chicago, Illinois 60603

RE: Application for Further Review of Protest No. 3901-8-000356, protesting denial of TSUS item 806.30 treatment to tungsten carbide powder

Dear Sir:

The above-referenced protest contests your denial of the partial duty exemption under item 806.30, Tariff Schedules of the United States (TSUS), to tungsten carbide powder imported from England following processing to extract it from industrial wastes. Protestant maintains, in the alternative, that TSUS item 806.20 is applicable.

FACTS:

The record reflects that drums of industrial wastes were exported to England on May 25, 1986, for conversion into tungsten carbide powder. The industrial wastes consisted of grinding residues in the form of dried tungsten carbide bearing sludge collected in the U.S. In England, the sludge was chemically processed to recover the tungsten carbide powder contained therein, which was then returned to the U.S. for use in the manufacture of tool tips.

The importer sought partial duty exemption under TSUS item 806.30 (now subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS)) for the returned powder and the Cer- tificate of Registration (Customs Form 4455) shows that the arti- cles were exported for processing. However, your office denied the duty exemption for the reason that the returned merchandise did not constitute an "article of metal," a condition of TSUS item 806.30. The denial was also based on the protestant's failure to produce evidence that the powder was returned to the U.S. for "further processing," a further condition of TSUS item 806.30.

The importer took no exception to this denial of TSUS item 806.30 treatment to the merchandise and concurred that the mer- chandise raised a question as to whether it can be considered an "article," within the meaning of that tariff provision. How- ever, importer contended that if TSUS item 806.30 was not appli- cable, than TSUS item 806.20 (now HTSUS subheading 9802.00.50) should be applicable. Protestant asserts that the processing abroad meets the definition of "alterations," within the meaning of TSUS item 806.20, as the term "repairs or alterations" has been defined to mean any restoration, change, addition, renova- tion, cleaning or other treatment which does not destroy the identity of the articles exported, or create a new or different article. (Emphasis protestant's). Protestant further states that the tungsten carbide contained in the exported industrial waste is exactly the same material that is returned after the recovery processing.

ISSUE:

Whether the returned tungsten carbide powder is entitled to the partial duty exemption available under either TSUS item 806.30 or 806.20.

LAW & ANALYSIS:

TSUS item 806.30 provides a partial duty exemption to:

[a]ny article of metal (except precious metal) manufactured in the United States or subjected to a process of manufac- ture in the United States, if exported for further process- ing, and if the exported article as processed outside the United States, or the article which results from the pro- cessing outside the United States, is returned to the United States for further processing.

This tariff provision imposes a dual "further processing" requirement on eligible articles of metal--one foreign, and when returned, one domestic. For purposes of TSUS item 806.30, "further processing" has been interpreted to mean a processing necessary to complete an article, as distinguished from process- ing to which a completed article may be subjected to adapt it for the purpose intended. T.D. 78-416, 12 Cust.Bull. 922 (1978). Metal articles satisfying these statutory requirements may be classified under this tariff provision with duty only on the value of such processing performed outside the U.S., upon compliance with section 10.9, Customs Regulations (19 CFR 10.9).

Protestant agreed that classification of the merchandise under TSUS item 806.30 raises a question with regard to whether the tungsten carbide bearing sludge can be considered an "arti- cle" within the meaning of this tariff provision. The returned tungsten carbide powder is classifiable under TSUS item 432.00 (see, T.D. 70-3(2), 4 Cust.Bull. 6 (1969)) in the Schedule en- compassing chemicals and related products. Metals and metal products are classifiable in Schedule 6. This TSUS schedule was an attempt to comprehensively cover metals and metal products; the intent was to classify all metals in the same place in order to avoid the problems encountered under the Tariff Act of 1930. See, United States v. A. Johnson & Co., Inc., 66 CCPA 35, C.A.D. 1218, 588 F.2d 297 (1978), rev'g, 80 Cust.Ct. 52, C.D. 4737, 450 F.Supp. 247, (1978). Only those chemical elements, determined to be a "metallic element" for purposes of Schedule 6 by exclusion from Schedule 4 pursuant to Headnote 1(iii) of Schedule 4, can be considered an "article of metal" for purposes of TSUS item 806.30. Thus, unlike tungsten powder, which is an unwrought metal classifiable under Schedule 6 (at TSUS item 629.28), tung- sten carbide powder is a chemical compound, classifiable under Schedule 4, and does not constitute an "article of metal" for purposes of TSUS item 806.30.

We have previously ruled that tungsten oxide or ammonium para tungstate exported for conversion into tungsten metal powder or tungsten carbide did not qualify for TSUS item 806.30, as the exported materials consisted of chemical compounds rather than actual metals. Headquarters Ruling Letters 067631 (December 29, 1981) and 052750 (October 14, 1977) (both dealing with tungsten powders). In sum, TSUS item 806.30 applies only to articles in chief value of metal and does not apply to metallic oxides, ores or residues which are used to produce metal but do not contain metal themselves. Headquarters Ruling Letter 048723 (January 18, 1977). This view is supported by case law, as the phrase "arti- cle of metal" in the tariff schedules has been construed to ex- clude metallic oxides, ores or mixtures of inorganic compounds. El Paso Natural Gas Products Co. v. United States, 66 Cust. Ct. 487, C.D. 4240 (1971). See also, Meyer v. Arthur, 91 U.S. 570, 23 L.Ed. 455 (1875). In accord, United States v. C.J. Tower & Sons of Buffalo, 63 CCPA 46, C.A.D. 1163, 524 F.2d 1389 (1975), aff'g, 73 Cust.Ct. 101, C.D. 4559, 381 F.Supp. 979 (1974).

On the issue of "further processing" under TSUS item 806.30, it has been held that chemical processing, such as in this case, is but a process of segregation or elimination and not a manufacturing process. United States v. Tower & Sons, 9 Ct. Cust.Apls 135 (1919). Thus, for the foregoing reasons, protes- tant's claim for partial duty exemption under TSUS item 806.30 is denied. Attention is now turned to the alternative request for classification under TSUS item 806.20.

Articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or al- terations may qualify for the partial duty exemption under HTSUS subheading 9802.00.50 (formerly item 806.20, Tariff Schedules of the United States (TSUS)), provided the foreign operation does 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 or alterations when returned to the U.S., provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied.

19 CFR 10.8 provides that there shall be filed, prior to exportation of the article to be repaired or altered, a Certificate of Registration (Customs Form 4455), and, at the time of entry, a declaration from the person who performed the repairs or alteration as well as a declaration from the owner or importer. The Certificate of Registration for the merchandise in this case was filed 15 days after entry and reflects that the articles were exported for processing, not repairs or altera- tions. Moreover, it appears from the record that the declara- tions required by 19 CFR 10.8 were not filed in connection with the entry of the instant merchandise and that their production was not waived by your office. Therefore, as protestant failed to comply with the documentary requirements of 19 CFR 10.8 (and it is well settled that compliance with mandatory regulations is a condition precedent to recovery and the burden of proof thereof rests on the protestant (see, F.W. Myers & Co., v. United States, 72 Cust.Ct. 133, C.D. 4515, 374 F.Supp. 1395 (1974))), the alter- native claim for TSUS item 806.20 treatment is also denied.

CONCLUSION:

On the basis of the record presented, it is our opinion that the imported tungsten carbide powder is not entitled to the par- tial duty exemption under either TSUS item 806.20 or 806.30, as the tungsten carbide bearing sludge does not constitute an "arti- cle of metal" for purposes of the latter tariff provision, and protestant has not carried his burden of proof on compliance with mandatory regulations for purposes of the former tariff provision. You are directed to deny the protest in full. Please provide a copy of this ruling to the protestant.

Sincerely,


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