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HQ 556087


July 22, 1991

CLA-2 CO:R:C:S 556087 KCC

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.50

Mr. Robert Rico
Amex Trans-World Inc.
P.O. Box 60934 AMF
Houston, Texas 77205

RE: Pipe created by slitting, shearing, welding, forming, annealing, sizing, cutting, facing, threading and coating.Alteration; manufacturing process; advanced in value; improved in condition; 555343; 555417

Dear Mr. Rico:

This is in response to your letter dated May 3, 1991, to the Regional Commissioner, New York, on behalf of Hyundai Pipe of America, requesting a ruling on the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to pipe manufactured in Korea.

FACTS:

U.S.-origin steel hot bands will be shipped to Korea to be manufactured into a variety of pipe and tube products. The manufacturing process entails a series of operations including slitting, uncoiling, end shearing, forming, welding, seam annealing, sizing, cutting, facing, and finishing operations such as threading, coating, and coupling. Upon completion of these operations, the completed pipe will be imported into the U.S.

ISSUE:

Whether the pipe is eligible for the partial duty exemption available under subheading 9802.00.50, HTSUS, when imported into the U.S.

LAW AND ANALYSIS:

Subheading 9802.00.50, HTSUS, provides for the assessment of duty on the value of repairs or alterations performed on articles returned to the U.S. after having been exported for that purpose. However, the application of this tariff provision is precluded in circumstances where the operations performed abroad destroy the identity of the articles or create new or commercially different articles. See, A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'd, C.D. 1752, 36 Cust.Ct. 46 (1956); and Guardian Industries Corporation v. United States, 3 CIT 9 (1982), Slip Op. 82-4 (Jan. 5, 1982). Subheading 9802.00.50, HTSUS, treatment is also precluded where the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles. See, Dolliff & Company, Inc. v. United States, 81 Cust.Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979).

In this case, the foreign operations performed on the steel hot bands do not constitute alterations within the meaning of subheading 9802.00.50, HTSUS. The foreign operations such as slitting, shearing, welding, forming, seam annealing, sizing, cutting, facing, threading, coating, and coupling are manufacturing operations that are necessary to create the finished article--pipe. See, Headquarters Ruling Letter (HRL) 555343 dated May 30, 1989 (cutting of material to width or pattern to achieve a narrower or differently shaped product has been held to amount to more than a mere alteration); HRL 555417 dated January 22, 1990 (bending of rebars abroad constitutes a process of manufacture, which exceeds an alteration). Therefore, as the foreign processing in this case constitutes more than an alteration, the pipe is ineligible for classification under subheading 9802.00.50, HTSUS. Moreover, we are unaware of any other tariff provision which would accord reduced duty treatment to the imported pipe.

HOLDING:

On the basis of the information presented, it is our opinion that the foreign operations comprise further processing steps which create a new article. Accordingly, the pipe is not eligible for the partial duty exemption available under subheading 9802.00.50, HTSUS, when imported into the U.S.

Sincerely,

John Durant, Director
Commercial Rulings Division

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