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HQ 561778




September 28, 2000

CLA-2 RR:CR:SM 561778 BLS

CATEGORY: CLASSIFICATION

TARIFF NO.: subheading 9802.00.60

Mr. Ronald Balut, Import Operations
PANALPINA, INC.
1776 On-The-Green
Morristown, NJ 07960-7103

RE: Applicability of subheading 9802.00.60, HTSUS, to reprocessed titanium

Dear Mr. Balut:

This is in reference to your letter dated April 14, 2000, on behalf of Ferro-Ti & Alloys Ltd. (“Ferro-Ti”), concerning the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), to titanium alloy imported from England.

FACTS:

You state that titanium scrap is exported from the U.S. to England where it is processed by Ferro-Ti into a titanium alloy. The titanium alloy is then imported into the U.S. by Ferro-Ti. You have also advised telephonically (September 13, 2000) that the exported scrap is obtained from U.S.-manufactured products and that upon importation into the U.S., the titanium alloy is further processed by the consignee.

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(e) of this subchapter) manufactured in the United States or subject 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.

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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 U.S., provided there is compliance with the documentary requirements of section 10.9, Customs Regulations (19 CFR §10.9).

Articles of “metal” for purposes of subheading 9802.00.60, HTSUS, are defined in U.S. note 3(e), subchapter II, Chapter 98, HTSUS, which provides that:

[f]or purposes of subheading 9802.00.60, the term "metal" covers (1) the base metals enumerated in additional U.S. note 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.

Base metals are further enumerated in additional U.S. note 3, section XV, HTSUS, which provides that:

[f]or the purposes of the tariff schedule, the term "base metals" embraces aluminum, antimony, beryllium, bismuth, cadmium, chromium, cobalt, copper, gallium, germanium, hafnium, indium, iron and steel, lead, magnesium, manganese, molybdenum, nickel, niobium (columbium), rhenium, tantalum, thallium, tin, titanium, tungsten, vanadium, zinc and zirconium. (Emphasis added).

Accordingly, the imported titanium alloy is an article of metal for purposes of subheading 9802.00.60, HTSUS.

We have consistently ruled that "obsolete” and “industrial” scrap metal exported to be further processed is eligible for the benefits of subheading 9802.00.60, HTSUS, if it is shown that all of the metal articles from which the scrap was obtained were manufactured in the U.S. or subjected to a final process of manufacture in the U.S. See, Headquarters Ruling Letter (HRL) 554750 dated March 14, 1988, HRL 554750 dated September 23, 1988, and HRL 555557 dated April 15, 1991. "Obsolete” scrap is defined as worn-out or discarded metal articles.

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Therefore, the titanium scrap will be considered an eligible article of metal under subheading 9802.00.60, HTSUS, provided the port director is satisfied that the metal articles from which the scrap was obtained were manufactured in the U.S. or subjected to a final process of manufacture in the U.S.

There is no legal requirement under subheading 9802.00.60, HTSUS, that the same person who exported the material, or the same person who imports the material must perform the further processing in the U.S. However, the importer should satisfy the port director of the actual performance of further processing in the U.S. In this regard, while you state that the imported titanium alloy will be “further processed” upon importation into the U.S., the actual processing operations are not described. In C.S.D. 84-49, 18 Cust.Bull. 957 (1983), we stated that:

[f]or purposes of item 806.30, TSUS [precursor to 9802.00.60 HTSUS], 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.

Therefore, provided the port director is satisfied that the metal articles from which the scrap was obtained were manufactured in the U.S. or subjected to a final process of manufacture in the U.S., and that the titanium alloy is “further processed” upon importation into the U.S., the imported article will be entitled to entry under subheading 9802.00.60, HTSUS, upon compliance with the requirements of 19 CFR 10.9.

As stated earlier, articles entitled to classification in subheading 9802.00.60, HTSUS, are dutiable only on the cost or value of the processing performed outside the U.S. Thus, section 10.9(d), Customs Regulations (19 CFR 10.9(d)), provides, in pertinent part, that:

The cost or value of the processing outside the U.S., which is to be set forth in the invoice and entry papers as the basis for the assessment of duty under subheading 9802.00.60, HTSUS, shall be limited to the cost

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or value of the processes actually performed abroad, which will include all foreign and domestic articles used in the processing, but shall not include the United States exported article or any of the expenses incurred in this country whether by way of engineering costs, preparation of plans or specifications, furnishing of tools or equipment for doing the processing abroad, or otherwise.

HOLDING:

On the basis of the information submitted, it is our opinion that the processes performed abroad constitute "further processing" as that term is used in subheading 9802.00.60, HTSUS. However, since the actual processing operations to be conducted in the U.S. were not provided, the port director must be satisfied of the actual performance of “further processing” in the U.S. Therefore, provided the port director is satisfied that the metal articles from which the scrap was obtained were manufactured in the U.S. or subjected to a final process of manufacture in the U.S., and that titanium alloy is “further processed” in the U.S., the imported metal articles will be entitled to entry under subheading 9802.00.60, HTSUS, with duty only on the cost or value of such processing performed outside the U.S., upon compliance with the documentary requirements of 19 CFR §10.9.

A copy of this ruling 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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