United States International Trade Commision Rulings And Harmonized Tariff Schedule
faqs.org  Rulings By Number  Rulings By Category  Tariff Numbers
faqs.org > Rulings and Tariffs Home > Rulings By Number > 1998 HQ Rulings > HQ 560811 - HQ 561018 > HQ 560837

Previous Ruling Next Ruling


HQ

560837

April 27,
1998

CLA-2 RR:TC:SM 560837 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: 9802.00.60

Salvatore E. Caramagno, Esq.
Caramagno & Griffin
888 Sixteenth Street
Washington, D.C. 20006-4103

RE: Applicability of subheading 9802.00.60, HTSUS, to certain metal articles sent abroad for processing and returned to the U.S. for further processing

Dear Mr. Caramagno:

This is in reference to your letter dated January 29, 1998, and subsequent fax messages, on behalf of UNOVA, Industrial Automation Systems, Inc., requesting a ruling concerning the eligibility of certain metal articles for duty-free treatment under subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS).

FACTS:

Rough metal castings of a block and a head manufactured in the U.S. will be sent abroad for processing. These items, which you orally advised are of cast iron, will then be returned to the U.S. for further processing.

Block - Operations Abroad

1) Mill side lugs, pan rail, main bearings seat, main bearing bridges, lock slots, and bore reference holes.

2) Mill head face, oil cooler, drill side oil lines, and rough bore cylinder bores.

3) Mill front and rear ends, gun drill oil galleries, bore cam bores, and drill front and rear mounting holes.

4) Bore cup plugs, drill head bolt holes, drill steam holes, and gun drill oil main drain holes.

5) Drill main bearing cap, dil pan, top deck, and piston cooler nozzle holes.

6) Spot drill, gun drill, and finish ream tappet bores.

7) In-process crankcase washer

8) Assemble main bearing caps with bolts and automatic torque.

9) Semi-finish, finish, and gage cam bores, crank bores, thrust face, finish mill head faces, front, rear ends, and bore front, rear dowel holes.

10) Semi-finish, finish, and gage cylinder bores and head dowel holes.

11) Finish hone cylinder bores, cambores, and crank bores.

Block - Operations in the U.S.

12) Drill Oil Drain Back to the finish diameter of .7500 + .008/-.004.

13) Roll-over inspection station

14) Remove 15 main bearing cap bolts; final crankhouse washer.

15) Apply loctite, assemble cup plugs, automatic leak test.

16) Manual bubble test for leaks.

17) Cambushing press

In its fax dated April 16, 1998, UNOVA states that the Oil Drain Back is used to drain oil from the valley area to the pan. The engine recirculates oil from the oil pan to other areas of the engine for lubrication purposes. This is done by means of an oil pump siphoning oil through a pick-up screen in the oil pan through an oil filter to purify the oil. UNOVA states that if the oil drain back holes were missing, oil would not circulate properly and the engine would "starve" for oil, causing failure.

Heads - Operations Abroad

1) Finish locating pads

2) Rough and finish broach cover face; rough broach joint face; rough and finish intake and exhaust face

3) Gun drill bolt holes
- hollow mill
- machine spring seats
- finish mfg. Holes
- rough throat valve holes
- ends mill

4) Gun drill oil holes
Gun drill fuel holes
Drill and ream cup plugs
Drill fuel feed holes
Drill and tap exhaust and intake mounting holes Drill drain holes
Gun drill fuel feed holes

5) Drill, end mill and bore glow plug holes Semi-finish valve seat and guide holes
Finish mill joint face
Drill and tap pocker mounting holes

6) Washer

7) Finish spigots
Finish seat and guide holes
Mill, drill, tap and form ream injector holes Drill joint face holes

Heads - Operations in the U.S.

8) Finish washer

9) "Harden" valve seats.

UNOVA states that upon return of the articles from abroad, the operations in the U.S. include high frequency induction heating which is used to harden both intake and exhaust valve seats of the cylinder head. The hardening of the seat occurs due to a change in the structure of the metal that occurs after the metal has been heated and
quenched. In this process the seats are heated until they are red hot and the surrounding mass of metal changes from soft (pearlite) to hard (martensite). The depth of hardening is controlled by the power levels and the amount of time used for heating.

The purpose of hardening is to increase the high temperature wear resistance of the valve seats.

ISSUE:

Whether the completed articles will be eligible for the partial duty exemption under subheading 9802.00.60, HTSUS.

LAW AND ANALYSIS:

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

[a]ny article of metal (as defined in U.S. Note 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 qualifying metal articles: one foreign, and when returned, one domestic. However, not all "processing" to which articles of metal can be subjected are significant enough to qualify as "further processing," within the purview of subheading 9802.00.60. Intelex Systems, Inc. v. United States, 59 CCPA 138, C.A.D. 1055, 460 F.2d 1083 (1972), aff'g, 65 Cust. Ct. 306, C.D. 4093, 318 F.Supp. 515 (1970). Metal articles satisfying these statutory requirements may be classified under subheading 9802.00.60 with duty only on the value of such processing performed outside the U.S., upon compliance with the documentation requirements of 19 CFR 10.9.

In Intelex (a case decided under paragraph 1615(g)(2) of the Tariff Act of 1930, as amended, the precursor provision of TSUS item 806.30 and HTSUS subheading 9802.00.60), copper wire and insulating paper were foreign processed into lead-covered telephone cable and imported on cable rolls. In the U.S., the cable was merely strung on poles after a wire stripping and splicing operation. The issue presented was whether the imported telephone cable was "returned to the U.S. for further processing," within the meaning of paragraph 1615(g)(2)(B). The court
considered the words "process" and "processing" and stated that:

...its meaning [processing] must be controlled by the particular context in which it is used here and the legislative intent. (Citation omitted). When we look to the context of [paragraph] 1615(g)(2), we do not think that
Congress had in mind that any and all kinds of 'processing' taking place upon return of an article to the United States would suffice to bring the article within the purview of that paragraph. Instead, we believe that the words 'further processing' relate to the kind of processing to which the article had been subjected before--namely, 'a process of manufacture,' as expressed in [paragraph] 1615(g)(2)(A). We continue of the view that Congress used the expression 'subjected to a process of manufacture' as synonymous with 'processing' (citation omitted), and that the 'further processing' referred to in [paragraph] 1615(g)(2) is a further manufacturing process.

In that case, the court found that the operations performed in the U.S. on the imported telephone cable did not constitute a process of manufacture in any common or commercial sense, and held that subheading 9802.00.60, HTSUS, was inapplicable to the imported cable.

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

(But see Headquarters Ruling Letter (HRL) 557992 dated January 23, 1996, where Customs modified C.S.D. 84-49 by providing that a certain type of welding, "gas tungsten arc welding," performed in the U.S., constitutes "further processing" for purposes of subheading 9802.00.60, HTSUS. Whether other types of welding operations constitute "further processing" for purposes of subheading 9802.00.60, will be determined on a case-by-case basis.)

In this case, the cast iron block and head are eligible articles of metal for purposes of subheading 9802.00.60, HTSUS. When sent abroad, these metal articles undergo
various manufacturing operations which include milling, drilling and boring, which constitute "further processing" operations within the meaning of subheading 9802.00.60, HTSUS. We also find that upon return to the U.S., the drilling operations on the blocks and hardening operations performed on the heads impart new characteristics to the imported articles. Accordingly, we find that these operations performed in the U.S. also constitute "further processing" of these articles within the meaning of subheading 9802.00.60, HTSUS.

Under the circumstances, we find that the block and the head will be entitled to the partial duty exemption under subheading 9802.00.60, HTSUS, provided that the documentation requirements of 19 CFR 10.9 are satisfied.

HOLDING:

On the basis of the information submitted, we find that the processes performed abroad constitute "further processing" as that term is used in subheading 9802.00.60, HTSUS. In addition, we find that the operations to be performed in the U.S. also constitute "further processing" of the returned articles pursuant to this provision. Accordingly, the cast iron articles will be entitled to entry under HTSUS subheading 9802.00.60, with duty only on the cost or value of such processing, upon compliance with the documentation requirements of 19 CFR 10.9.

Sincerely,

John Durant,
Director
Commercial

Previous Ruling Next Ruling

See also: