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HQ 563085




December 2, 2004

CLA-2 RR:CR:SM 563085 AL

Category: CLASSIFICATION

Thomas M. Keating
Hodes Keating & Pilon
39 South La Salle Street, Suite 1020
Chicago, Illinois 60603-1731

RE: Eligibility for preferential treatment of new wire drawing dies under subheading 9802.00.50 or 9802.00.60

Dear Mr. Keating:

This is in response to your ruling request, dated June 9, 2004, on behalf of Fort Wayne Wire Die (“FWWD”). Your request was forwarded to our office on July 15, 2004 and concerns the eligibility for preferential tariff treatment of diamond wire drawing dies and tungsten carbide wire drawing dies under subheadings 9802.00.50 or 9802.00.60, Harmonized Tariff Schedule of the United States (“HTSUS”).

FACTS:

According to your request, FWWD manufactures “rough drilled” dies in the U.S. and then exports those “rough drilled” dies for further processing abroad. In most cases, FWWD then, re-imports the dies that were processed abroad to undergo further processing in the United States. The following information was provided, along with samples.

Manufacture in the U.S.

“Rough Drilled” Diamond Die
Select the proper diamond type to be used in the wire drawing die; Identify and select the correct plane for each diamond; Polish two parallel flats on the natural diamond to control and maintain proper diamond orientation during manufacturing process; Mount diamond in die’s stainless steel casing and machine the casing: The stainless steel casing has a drilled pocket where the diamond stone is placed. Powdered metal is added to the casing pocket to surround the diamond stone. A computer-controlled hydraulic press is used to provide high pressure and high temperature that is applied to the die casing. The high pressure and heat melts the powdered metal. The die is then cooled and forms a single piece. Stamp serial number;
Laser pierce die to the appropriate hole size.

“Rough Drilled” Tungsten Carbide Die

Select the rough core tungsten carbide nib to be used in the tungsten carbide die; Mount the rough core nib into the steel casing and press and crimp into place; Stamp identification information on the back of the die.

You have indicated that certain customers purchase the “rough drilled” diamond and tungsten carbide wire drawing dies for their own use, but that in most circumstances the dies are sent abroad for further alteration to conform to specific customer requirements.

Further Processing Outside the U.S.

1. Diamond Wire Drawing Dies

Laser pierced hole is shaped within the required specifications using various abrasives; Die undergoes a series of steps including polishing, sizing, and etching of the hole size on the die.

2. Tungsten Carbide Wire Drawing Dies

Rough core hole is shaped within the required specification using various abrasives; Die undergoes a series of steps including polishing, sizing and stamping of the hole size on the die. Returned to the U.S. and shipped to the end user.

Further Processing of the Diamond Wire Drawing Dies upon return to the U.S.

Trimming the outside diameter and thickness of the die to customer specifications; Chamfer all sharp edges, removing excess metal; Inspect die to ensure serial number and size correspond to information on packing list; Stencil appropriate information on the front of the die, either by hand stamping or etching, depending on the size and thickness of the die. Round out the front and back countersink (funnel-shaped hole) of the die case opening to create a smooth surface finish of the countersink openings and ensure good diamond and metal blend at the intersection point; Polish the outside of the casing with an abrasive to ensure surfaces attain a high polish.

ISSUE:

Whether the wire drawing dies are eligible for preferential treatment under subheading 9802.00.50, HTSUS or in the alternative, subheading 9802.00.60, HTSUS.

LAW and ANALYSIS:

Subheading 9802.00.50, HTSUS, provides a full or 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 19 CFR 10.8 are met.

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, 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); and Guardian Industries Corporation v. United States, 3 CIT 9 (1982). Moreover, 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 (Cust. Ct. 1978), aff’d, 599 F.2d 1015 (CCPA 1979).

Counsel contends that the rough drilled wire drawing dies exported from the U.S. are complete for their intended use. Counsel cites Headquarters Ruling Letter (“HRL”) 562686, dated May 21, 2003, where it was held that the cutting of venetian blinds in Mexico to smaller sizes constituted an acceptable alteration. HRL 562686 made further reference to HRL 557161, dated June 28, 1993, where U.S. Customs and Border Protection (“CBP”) held that interior wooden shutters sent to Mexico to be stained or painted and lightly sanded were eligible for partial duty exemption under subheading 9802.00.50, HTSUS, upon re-importation into the U.S. In the instant case, counsel has stated that the customers who buy the “rough drilled” dies will in most circumstances need to further process the dies with similar operations to those being done by FWWD abroad in order to accomplish the dies intended use. This indicates that the “rough drilled” dies exported for further processing abroad are not ready for their intended use and the operations that take place abroad go beyond a mere repair or alteration. No evidence has been submitted to show that the rough drilled dies are used to draw wire. Therefore, we find that both the diamond wire drawing die and the tungsten carbide wire drawing die are not eligible for preferential treatment under 9802.00.50, HTSUS.

Subheading 9802.00.60, HTSUS, provides a partial duty exemption for certain metal articles that are manufactured or subjected to a process of manufacture in the United States, exported for further processing, and returned for further processing in the United States. Under subheading 9802.00.60, HTSUS, duty is assessed only on the cost or value of the foreign processing, provided that the documentary requirements of 19 CFR 10.9 are satisfied.

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 may be subjected are significant enough to qualify as “further processing” within the purview of subheading 9802.00.60, HTSUS. CBP stated in C.S.D. 84-49, 18 Cust. Bull. 987 (November 15, 1983), that:

For purposes of item 803.60, TSUS, [the precursor provision], the term “further processing” has reference to processing that changes the shape of the metal or imports new and different characteristics which become an integral part of the metal itself and which does 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.

Pursuant to U.S. Note 3(e) of Subchapter II, Chapter 98, HTSUS, for purposes of subheading 9802.00.60, the term “metal” covers (1) the base metals enumerated in Note 3 to section XV, HTSUS; (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. The base metals enumerated in Note 3 to section XV, HTSUS, include steel. Because the base metal support of the diamond wire drawing die is made of steel, the die is an eligible article of metal as defined in U.S. Note 3(e) of Subchapter II, Chapter 98, HTSUS. Because the die is machined in the U.S., it constitutes either an article manufactured in the U.S. or metal article subjected to a process in the U.S.

The diamond wire drawing die must also satisfy the dual processing requirement. In this case, FWWD creates a “rough drilled” diamond die in the U.S. Then, the “rough drilled” diamond die undergoes a series of steps including polishing, sizing, and etching of the hole size outside the U.S. The polishing and sizing are performed on the diamond only. The etching of the hole size is on the metal casing. Consequently, we find that these operations that take place outside the U.S. constitute sufficient “further processing” to satisfy the initial processing requirement of subheading 9802.00.60, HTSUS.

After the dies are returned to the U.S., the dies are trimmed to customer specification and all the sharp edges are chamfered. Information is stenciled which creates an indentation into the metal casing where hand stamping or etching may be necessary, depending on the size and thickness of the die. The front and back of the die case opening is rounded out, taking a surface layer cut with a standard lathe tool to remove excess metal and to refine the shape and finish of the countersink opening. The opening is machined to ensure good diamond and metal blend and smooth surface finishing in the opening. Then, the casing is polished with an abrasive to attain a high polish.

We find that the processes of trimming, chamfering and polishing constitute “further processing” in the U.S. Therefore, the diamond wire drawing dies will qualify for subheading 9802.00.60 upon compliance with all documentary requirements noted above.

The tungsten carbide wire drawing die is not eligible to receive preferential tariff treatment under 9802.00.60, HTSUS. The tungsten carbide wire drawing die does not undergo further processing when it is returned to the U.S. As it was stated earlier, the finished tungsten carbide wire drawing die is shipped immediately to the end user upon re-importation into the U.S., falling short of the dual processing requirement.

HOLDING:

Based on the facts presented, we find that only the diamond wire drawing dies, upon re-importation into the U.S. would qualify for preferential tariff treatment under subheading 9802.00.60, HTSUS, provided the documentary requirements set forth at 19 CFR 10.9 are satisfied.

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

Sincerely,

Myles B. Harmon, Direction
Commercial Rulings Division

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