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HQ 563401




June 22, 2006

CLA-02 RR:CTF:VS 563401 EAC

CATEGORY: CLASSIFICATION

Area Port Director
U.S. Customs and Border Protection
198 West Service Road
Champlain, NY 12919

RE: Request for Internal Advice; applicability of subheading 9802.00.60, HTSUS, to imported ferro-titanium powder; cored wire.

Dear Port Director:

This is in response to a request for internal advice from your office dated October 18, 2005, concerning the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States (“HTSUS”), to ferro-titanium powder imported from the United Kingdom. Your submission included a letter dated June 27, 2005, from counsel for Ferro-Ti & Alloys, Ltd. (hereinafter “Ferro-Ti”), as well as an undated letter from Minteq International, Inc. (hereinafter “Minteq”).

FACTS:

The request for internal advice in this case was submitted in order to establish whether certain ferro-titanium powder from the United Kingdom qualifies for the partial duty exemption under subheading 9802.00.60, HTSUS, upon return to the United States. In this case, “lump” titanium is exported from the United States to the United Kingdom in essentially three forms. The first is mined ore that is manufactured into titanium sponge in the United States. The second form of exported titanium is titanium shavings/turnings, borings, or other residuals that result from the further processing of the titanium sponge in the United States. The third form of exported titanium consists of lumps of titanium retrieved from pre-manufactured and finished articles in the United States.

In the United Kingdom, Ferro-Ti melts the lump titanium in an electric conduction furnace and forms the resulting molten titanium into titanium ingot. The titanium ingot is then sent through a series of crushers, screens, and rollers that grind the titanium into a powder. The resulting ferro-titanium powder is then exported back to the United States. It is stated that the ferro-titanium powder is highly combustible and may not be used as an alloying agent in this form because it would oxidize in the slag of molten metal.

In the United States, Minteq processes the ferro-titanium powder into titanium-cored wire. The first step of this domestic manufacturing process involves combining the imported powder with a steel jacket through the use of a machine referred to as a “cladding” or “roll-forming” machine. It is stated that this machine combines, compresses, shapes, and seals the powder and the steel jacket into a wire. During the first step, the steel is formed through four rollers/shapers into a U-shape. A specific metered portion of powder is then injected in the U-shape and the wire and powder are sent through nine additional forming rollers/shapers that compress and seal the items to form titanium-cored wire which possesses a consistent high-density core throughout. The high-density titanium core provides rigidity that ensures the wire will remain sealed during repeated bending. After production, the titanium-cored wire is wound onto spools that fit specialized feeding equipment. Minteq manufactures the titanium-cored wire in diameters of thirteen and sixteen millimeters.

The titanium-cored wire is thereafter sold to various steel manufacturers for use as an alloying agent in steel production. In this regard, the above-referenced letter from Minteq advises that steel manufacturers feed the cored-wire into molten steel with a feeding apparatus. In this manner, the cored wire penetrates the depth of the molten steel dispersing the alloying agent in a predictable and consistent manner, thereby improving efficiency and recovery.

At issue in this case is whether five shipments of ferro-titanium powder imported into the United States from the United Kingdom for use in titanium-cored wire qualify for a partial duty exemption under subheading 9802.00.60, HTSUS. It is your office’s position that the imported ferro-titanium does not qualify because it is merely “packaged” in the United States when combined with the steel jacket to form cored wire and that such operations do not constitute “further processing” within the meaning of subheading 9802.00.60, HTSUS.

ISSUE:

Whether the ferro-titanium powder from the United Kingdom qualifies for the partial duty exemption under subheading 9802.00.60, HTSUS, upon return to the United States.

LAW AND ANALYSIS:

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 section 10.9, Customs and Border Protection Regulations (19 CFR 10.9), are satisfied.

Pursuant to U.S. Note 3(e) of Subchapter II, Chapter 98, HTSUS, for purposes of subheading 9802.00.60, HTSUS, 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 titanium. Because the returned product in this case is made from titanium, the returned product is considered an eligible article of metal under U.S. Note 3(e) of Subchapter II, Chapter 98, HTSUS.

The titanium that is initially exported to the United Kingdom is subject to processes of manufacture in the United States. However, this tariff provision imposes a dual "further processing" requirement on qualifying metal articles: one foreign, and when returned, one domestic. Not all "processing" to which articles of metal may be subjected is significant enough to qualify as "further processing" within the purview of subheading 9802.00.60, HTSUS. After return to the United States, the ferro-titanium powder is compressed into a high-density core when combined with a steel jacket to form titanium-cored wire.

In Intelex Systems, Inc. v. United States, 59 C.C.P.A. 138, C.A.D. 1055 (1972), U.S. copper wire and insulating paper were exported to Spain where they were used in the production of lead-covered telephone cable. The lead-covered telephone cable was then imported into the United States and supplied to a contractor for installation. In considering whether the operations performed during installation constituted “further processing”, the court stated that processing performed on an already completed article, incident to using it for the purpose intended, is not sufficient to constitute “further processing” for purposes of paragraph 1615(g)(2), Tariff Act of 1930 [a precursor provision to subheading 9802.00.60, HTSUS]. As applied, the court found that the imported telephone cable was a completed article of commerce upon entry and that the domestic installation operations were not regarded as a process of manufacture in any common or commercial sense. Thus, the domestic installation operations did not constitute further processing.

Also relevant is C.S.D. 84-49, 18 Cust. Bull. 957 (November 15, 1983), in which U.S. Customs and Border Protection (“CBP”) stated:

For purposes of item 806.30, TSUS, [the precursor provision], 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 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.

In this case, the titanium from the United States is melted, formed into titanium ingots, and then crushed to form ferro-titanium powder in the United Kingdom. It is our opinion that at this point the ferro-titanium powder is a commercially finished article for purposes of subheading 9802.00.60, HTSUS. In this regard, we believe the evidence in this case shows that jacketing the ferro-titanium powder facilitates the process of introducing the powder into molten steel by tightly encasing the powder but that jacketing does not otherwise impart new properties upon the ferro-titanium powder itself.

Such new properties were evident in the case of Firestone Tire & Rubber Company v. United States, 71 Cust. Ct. 63, 364 F. Supp. 1394, C.D. 4474 (1973). In that case, top and bottom domes for premix soda syrup containers manufactured in the United States were shipped to Canada. In Canada, the domes were subject to an acid pickling process designed to alter chemically the exterior surface of the domes. Then, a measured amount of special rubber formation in the form of a cylindrical slug was placed with the dome in a mold within a steam-heated press. Thereafter, the mold was closed and, under heat and pressure, the rubber and the adhesive were vulcanized in the stainless steel domes. The court held that these operations, which imparted a shock resistant quality to the articles, were sufficient to satisfy the further processing requirement of item 806.30, TSUS.

The further processing requirement has also been the subject of various CBP rulings. For example, in Headquarters Ruling Letter (“HRL”) 557339 dated September 10, 1993, U.S.-origin copper cathodes were exported to Canada and converted into various copper strands. The strands were subsequently shipped to the United States where they underwent insulating, cabling, wrapping, armoring, and jacketing operations. CBP determined that such U.S. operations did not satisfy the domestic further processing requirement of subheading 9802.00.60, HTSUS, because they did not impart new characteristics on the copper wire that became an integral part of the copper strands. See also, HRL 071396 dated July 16, 1983 (coating a metal article with an extruded polyvinyl plastic material to result in a moisture-proof product did not constitute further processing because the new characteristics incorporated by the operation did not become an integral part of the metal itself).

Similarly, it is our opinion that the operations performed in the United States in this case, which are analogous to those considered in the rulings cited above, do not satisfy the domestic further processing requirement of subheading 9802.00.60, HTSUS. In this regard, while your submission indicates that the imported ferro-titanium powder is highly combustible and may not be used as an alloying agent because it would oxidize in the slag of molten metal, it does not appear from the evidence before us that the powder becomes a part of the slag or that the introduction of a metal jacket otherwise imparts new characteristics on the powder that becomes an integral part of the metal itself. Accordingly, we find that the domestic operations set forth above do not constitute further processing within the United States for purposes of subheading 9802.00.60, HTSUS. However, it should be recognized that in determining whether particular operations satisfy the domestic further processing requirement, there is no requirement under subheading 9802.00.60, HTSUS, that the same person who exported the material, or the same person who imported the material, perform the further processing in the United States. See, for example, HRL 557656 dated February 23, 1994. However, the importer must satisfy the port director of the actual performance of further processing within the United States. As applied to the facts of this case, we are unable to determine whether the operations performed by the referenced steel manufacturers would satisfy the domestic further processing requirement. Thus, this decision is limited to consideration of the operations performed in the United States that result in cored wire.

HOLDING:

Based upon the specific facts of this case, we find that the ferro-titanium powder returned to the United States from the United Kingdom does not qualify for the partial duty exemption under subheading 9802.00.60, HTSUS, when it is used in the production of titanium-cored wire.

You are to mail this decision to the internal advice applicant no later than 60 days from the date of this letter. On that date, the Office of Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other means of public distribution. Sincerely,

Monika R. Brenner, Chief

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