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HQ 555461

March 15, 1990

CLA-2 CO:R:CV:V 555461 CW

CATEGORY: CLASSIFICATION

TARIFF NO. 9802.00.50

John N. Politis, Esq.
Sandler, Travis & Rosenberg, P.A.
Equitable Plaza
3435 Wilshire Boulevard
Los Angeles, California 90010-2204

RE: Entry of Molybdenum Ore under Subheading 9802.00.50, HTSUS

Dear Mr. Politis:

This is in response to your letter of August 16, 1989, in which you request a ruling on behalf of Molycorp, Inc. ("manufacturer") that molybdenum ore mined in the U.S. and purified abroad is eligible for entry under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

You state that the manufacturer will reopen its molybdenum ore mine in Questa, New Mexico. The ore (91% MoS "molysulfide") contains impurities in the form of sulphur which must be removed before the ore may be used to make steel. If not removed, the sulfur compounds will cause "stringers" or defects in the steel, which are accentuated when the steel is rolled. If too much sulfur is present in the steel, expensive additions of rare earths or manganese are needed for shape control of the inclusions, a process that you indicate is economically prohibitive. Thus, purification of the ore is required before it may be used in the production of steel.

The sulfur impurities in the ore are removed through a "roasting" process. You state that, normally, the manufacturer roasts the ore at its U.S. facility. However, because start-up production of the mine will be limited, the manufacturer has chosen to use excess capacity that is available at roasting facilities overseas, rather than operate its U.S. facility at half-capacity. Roasting the ore is accomplished by means of a ten to twelve stepped vertical roaster. The ore is placed in a series of ovens which are heated to burn off the impurities. When finished, the resulting molybdenum concentrate (92% MoO "molyoxide"), will be returned to the U.S.

ISSUE:

Whether molybdenum ore which is roasted abroad to remove sulfur impurities is eligible for entry under subheading 9802.00.50, HTSUS.

LAW AND ANALYSIS:

Subheading 9802.00.50 (formerly item 806.20, Tariff Schedules of the United States (TSUS)), provides a partial duty exemption to articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or alterations. 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.

Where the article exported from the U.S. is incomplete for its intended use and, therefore, requires a manufacturing process to make it complete, that process is not an alteration under subheading 9802.00.50, HTSUS. See Guardian Industries Corporation v. United States, 3 CIT 9, 13 (1982). In Guardian Industries, the court determined that glass for patio doors which was exported to be annealed abroad was not eligible for entry under item 806.20, TSUS, in part, because it was the practice of the manufacturer to anneal glass intended for use in patio doors, and U.S. law required annealing for such uses. Guardian Industries at 13.

Roasting the molybdenum ore here is a process that is required to complete the product for its intended purpose. It appears from your submission that the molybdenum is mined for sale to the iron and steel industry, that it has been the manufacturer's past practice to roast the ore before sale to the iron and steel industry, and that the ore cannot be sold for use in making iron and steel unless the sulphur impurities are removed. Accordingly, the roasting process is a manufacturing step necessary to complete the ore for its intended use, and, therefore, may not be considered a repair or alteration for purposes of subheading 9802.00.50, HTSUS.

Your claim that the returned molybdenum is eligible for entry under subheading 9802.00.50, HTSUS, is based on our ruling in HQ 063616, dated March 26, 1981. In that ruling, we determined that cylindrical shapes formed of metal oxides layered over an aluminum substrate that were "regenerated" abroad after use in the U.S. as catalysts in the "cracking" of oil were eligible for entry under item 806.20, TSUS. You claim that the purpose and effect of the roasting process here is the same as that of the "regeneration" process at issue in HQ 063616.

We described the use of the catalysts, and the regeneration process, in HQ 063616 as follows:

"1. Fresh, pure metal oxides (mixture of either molybdenum and cobalt oxide or molybdenum and nickel oxide) on the alumina substrate are placed in a stream of crude oil.

2. Two process may occur in the oil stream:
a) A certain percentage of the metal oxides chemically react to form metal sulfides before the cylinders are coated with tar or coke deposits and the remaining oxide is unavailable for reaction due to that coating. This reaction is not a catalytic activity, which refers to the process of aiding a reaction without actually being modified.
b) The molybdenum oxide and alumina may also act as typical catalysts by assisting the 'cracking' of the oil into lower molecular weight molecules and/or the decomposition of organic sulfur compounds. However, after the reaction they are still identifiable as alumina and molybdenum oxide.

3. The catalyst is removed from the stream and sent for regeneration.

4. During regeneration, the tar-like deposits are baked off at 400-500 degrees F and some of the sulfide is subsequently reconverted to the oxide at 950-1000 degrees F. The final baking cycle may restore the catalyst cylinders to 95 percent metal oxide and 5 percent sulfide. Further baking or higher temperatures would cause breakdown of the catalyst (while restoring fully the metal oxides from the sulfides)."

After regeneration, the cylinders are returned to the U.S., where they are again used as a catalyst as described above, then shipped abroad for regeneration. With each use, there is a greater and greater buildup of the metal sulfides and tars, and a decreasing amount of oxide present, until, after an average of five recyclings, the catalyst is finally "spent," or no longer effective.

We do not find HQ 062616 to be controlling. In HQ 062616, the article exported, the catalysts, were completely manufactured for their intended use, and had, in fact, previously been put to that use. The purpose of the regeneration was not to finish the manufacture of an incomplete article, but to renovate or clean the article of impurities which had attached during use. Here, the roasting of the molybdenum is a processing step necessary before the product may be put to its initial use. As such, the roasting cannot be considered to be a repair or alteration of an already complete article, and the molybdenum returned is not, therefore, eligible for subheading 9802.00.50, HTSUS, treatment.

HOLDING:

Roasting the U.S. molybdenum ore abroad in order to remove sulphur impurities exceeds the scope of an alteration under subheading 9802.00.50, HTSUS. Therefore, the ore is not entitled to classification under this tariff provision when returned to the U.S.

Sincerely,

John Durant, Director

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