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HQ 560656




January 20, 1998

CLA-2 RR:CR:SM 560656 JML

CATEGORY: CLASSIFICATION

TARIFF NO: 9802.00.50; 9802.00.60

Mr. Peter Daquila, Controller
Degussa Corporation
3900 South Clinton Avenue
South Plainfield, NJ 07080

RE: Eligibility of bonded silver tin oxide strips for subheading 9802.00.50, HTSUS, treatment; eligibility for 9802.00.60, HTSUS, treatment.

Dear Mr. Daquila:

This is in response to your letter dated September 12, 1997, submitted on behalf of Degussa Corporation ("Degussa"), concerning the eligibility of silver tin oxide strips bonded in Germany for a duty allowance under heading 9802, Harmonized Tariff Schedule of The United States ("HTSUS"). You submitted samples of the bonded strips for our review.

FACTS:

Degussa Metal Group ("DCMG") purchases bonded silver tin oxide strips ("strips") from its parent company, Degussa AG in Germany, and imports the product into the United States. The strips are made from three constituent materials bonded together: silver tin oxide strip which is 88 percent silver and 12 percent tin oxide; silver strip which is 100 percent silver; and brazing strip which is 80 percent copper, 15 percent silver and 5 percent phosphorous. Degussa AG manufactures the three constituent materials and bonds them together in Germany by a process called "hot bonding." You describe the hot bonding as a complex process which forms the three constituent materials into one. After bonding, the silver tin oxide strip and the brazing strip comprise the top and bottom of the strip with the silver strip in between. A sample of a previous entry made for the imported bonded strips indicates that they are classifiable under subheading 7115.90.40, HTSUS ("[o]ther articles of precious metal or of metal clad with precious metal: [o]ther: [o]f silver, including metal clad with silver").

DCMG proposes to change its manufacturing scenario and produce the three constituent materials of the bonded strips at its New Jersey plant. The materials will then be shipped to Germany and hot bonded together to make the bonded silver tin oxide strip. The bonded strip will then be returned to the United States. You assert that under the proposed scenario, the imported bonded strips should be assessed duty only on the cost or value of the foreign hot bonding operations, as provided for under heading 9802, HTSUS.

ISSUE:

Whether the finished, bonded silver tin oxide strips will be eligible for a partial duty exemption under heading 9802, HTSUS.

LAW AND ANALYSIS:

Under the facts presented, there appear to be two tariff provisions under heading 9802, HTSUS, to which you may be referring: subheading 9802.00.50, HTSUS, and 9802.00.60, HTSUS.

Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles that are returned after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided that the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are met. For qualifying articles, duty is assessed only on the cost or value of the foreign processing. However, in circumstances where the operations abroad destroy the identity of the exported article or create a new or commercially different article, entitlement to subheading 9802.00.50, HTSUS, treatment is precluded. 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); Guardian Enterprises Corporation v. United States, 3 CIT 9 (1982), Slip Op. 82-4 (January 5, 1982). Additionally, entitlement to this tariff treatment is not available where the exported articles are incomplete for their intended purpose prior to the foreign processing and the foreign processing is a necessary step in the preparation or manufacture of the finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff'd, 599 F.2d 1015 (Fed. Cir. 1979).

We note in this case that the constituent materials used to make the bonded strips -- the silver tin oxide strip, the silver strip, and the copper strip -- appear to be further processed in Germany so as to become a new and commercially different article. That is, we are of the opinion that hot bonding the three constituent materials into one piece creates a new and commercially different article from the components as exported. Accordingly, 9802.00.50, HTSUS, tariff treatment is precluded for the bonded strips. 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); Guardian Enterprises Corporation v. United States, 3 CIT 9 (1982), Slip Op. 82-4 (January 5, 1982).

Subheading 9802.00.60, HTSUS, provides a partial duty exemption for:

[a]ny article of metal (as defined in U.S. [N]ote 3(d) of this subchapter) manufactured in the United States or subjected to a process 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.

This tariff provision imposes a dual "further processing" requirement on eligible articles of metal--one foreign, and when returned, one domestic. 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 United States, provided there is compliance with the documentary requirements of section 10.9, Customs Regulations (19 CFR 10.9).

As a threshold matter, subheading 9802.00.60, HTSUS, treatment is available for "any article of metal." Eligible articles of metal are defined in U.S. Note 3(d) of subchapter II, Chapter 98, which provides that:

[f]or purposes of subheading 9802.00.60, the term "metal" covers (1) the base metals enumerated in [N]ote 3 to section XV; (2) arsenic, barium, boron, calcium, mercury, selenium, silicon, strontium, tellurium, thorium, uranium, and the rare-earth elements; and (3) alloys of any of the foregoing. See 62 Fed. Reg. 67681, 67683 (1997) (modifying the language of U.S. Note 3(d) by inserting "[N]ote 3" in lieu of "additional U.S. [N]ote 1").

Note 3 to section XV provides:

[t]hroughout the schedule, the expression "base metals" means: iron and steel, copper, nickel, aluminum, lead, zinc, tin, tungsten (wolfram), molybdenum, tantalum, magnesium, cobalt, bismuth, cadmium, titanium, zirconium, antimony, manganese, beryllium, chromium, germanium, vanadium, gallium, hafnium, indium, niobium (columbium), rhenium and thallium. (Emphasis added).

Since the bonded strips will be made of the three strips hot bonded together to become one, with a significant amount of silver present, we note that the applicable tariff classification is subheading 7115.90.40, HTSUS ("[o]ther articles of precious metal or of metal clad with precious metal: [o]ther: [o]f silver, including metal clad with silver"). In Headquarters Ruling Letter ("HRL"), 555801, dated January 2,1991, Customs held that rings classifiable in Chapter 71, HTSUS, exported abroad for processing were not eligible for subheading 9802.00.60, HTSUS, treatment since such combinations of precious metals are not considered eligible articles of metal within the meaning of this tariff provision. Similarly, taking into account the significant amount of silver present in the bonded strips, as well as their classification under Chapter 71, HTSUS, we are of the opinion that the bonded strips are not eligible articles of metal for purposes of subheading 9802.00.60, HTSUS, as expressed in U.S. Note 3(d) of subchapter II, Chapter 98. Consequently, they are not eligible for the partial duty exemption available under that tariff provision.

HOLDING:

Based upon the information submitted, the imported bonded silver tin oxide strips will not be eligible for a partial duty exemption under subheading 9802.00.50, HTSUS, as the foreign hot bonding operations create a new and commercially different article -- the bonded silver tin oxide strips. As such, the foreign operations as performed on the strip materials do not constitute repairs or alterations for purposes of subheading 9802.00.50, HTSUS.

Similarly, the bonded strips will not be eligible for a partial duty exemption under subheading 9802.00.60, HTSUS. As the bonded strips are classifiable under subheading 7115.90.40, HTSUS ("[o]ther articles of precious metal or of metal clad with precious metal: [o]ther: [o]f silver, including metal clad with silver"), they are not within the definition of eligible metals for purposes of subheading 9802.00.60, HTSUS, as expressed in U.S. Note 3(d) of subchapter II, Chapter 98.

A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction.

Sincerely,

John Durant, Director
Commercial Rulings Division

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