Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.60 to electrical arc welding wire

HQ 555314 May 16, 1990 CLA-2 CO:R:C:V 555314 GRV CATEGORY: CLASSIFICATION TARIFF NO.: 9802.00.60 Jonathon R. Moore, Esq. Windels, Marx, Davies & Ives 1701 Pennsylvania Avenue, N.W. Washington, D.C. 20006 RE: Applicability of partial duty exemption under HTSUS subhead- ing 9802.00.60 to electrical arc welding wire Dear Mr. Moore: This is in response to your letters of February 23, May 4, December 1, and 22, 1989, on behalf of Hobart Brothers Company, requesting a ruling on the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), to unfinished electrical arc welding wire to be imported from Mexico. Although your original request of February 23, 1989, raised certain other issues for our consideration, you subsequently advised us by letter dated May 4, 1989, and in a telephone conversation with a member of my staff on April 27, 1990, that you were withdrawing the portion of your request relating to these additional issues. FACTS: Your client proposes to purchase U.S.-produced steel wire rod in coils of 2,000-4,000 pounds and ship it to Mexico for manufacture into two classes of electrical arc welding wire-- classes ER70S-3 and ER70S-6. The former will be drawn from wire rod conforming to ASTM specification A 510-77 and the latter will be drawn from wire rod conforming to AISI Steel Product Manual "Wire and Rods, Alloy Steel" (September 1975). Both wire rod products will measure .219 of an inch in diameter when exported to Mexico, which will be reduced to .035-.045 of an inch (more than 70%) by drawing operations before return to the U.S. In Mexico, the wire rod will be subjected to the following operations: (1) mechanical descaling to remove accumulated black iron oxide and mill scale from the coiled wire rod by reverse bending in a descaler machine; (2) breakdown cold-drawing of the wire rod by drawing it through six to eight dies; reducing the wire diameter by approximately 47%, from .219 of an inch to about .104 of an inch; (3) intermediate cold-drawing of the wire rod to reduce the wire diameter a further 47%, to a range from .0485-.038 of an inch (for a total cross-sectional reduction of between 78-83%), depending on the final size of the finished product; (4) chemical surface treating the wire by passing it through a hot alkaline bath and water rinse, to remove drawing lubricants, and a hot sulfuric acid bath, to activate the wire surface for plating; (5) metallizing the wire by immersing it in a copper coating bath, which deposits a copper coat of approxi- mately .05 to .10% by weight on the wire and then removing the residues by rinsing the wire; (6) finish cold-drawing the wire to reduce its diameter a further 10 to 14% to bring it to the exact dimension necessary to meet an assortment of welding specifica- tions. (However, you indicate that the wire in this condition will not meet American Welding Society specifications and must be further processed in the U.S.); (7) coating the wire with a special lubricant for welding applications. The wire is then coiled and returned to the U.S. for further processing. In the U.S., the wire is roll formed by passing it through a series of opposed rolls a number of times in two planes under controlled tension, to work the wire beyond its elastic limit. A final pass over a guide sheave of a given diameter then imparts the correct cast (uniform diameter) and helix (the property of wire to lie flat) to the product. The finished product is then packaged in a variety of different packages to meet consumer processing, equipment, storage and handling needs. ISSUE: Whether the electrical arc welding wire will be eligible for the partial duty exemption provided for under HTSUS subheading 9802.00.60 when returned to the U.S. LAW & ANALYSIS: HTSUS subheading 9802.00.60 provides a partial duty exemp- tion 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 process- ing outside the United States, is returned to the United States for further processing. HTSUS subheading 9802.00.60 imposes a dual "further processing" requirement on qualifying U.S. articles of metal: one foreign, and when returned, one domestic. U.S. metal articles satisfying these statutory requirements may be classified under HTSUS sub- heading 9802.00.60 with duty only on the value of such process- ing done outside the U.S., upon compliance with section 10.9, Customs Regulations (19 CFR 10.9). In C.S.D. 84-49, 18 Cust.Bull. 957 (1983) we held 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 character- istics 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. We have also held in Headquarters Ruling Letter (HRL) 037817 (January 2, 1975) that descaling is regarded as a "further processing" within the meaning of HTSUS subheading 9802.00.60, and, in HRL's 047665 (November 30, 1976), 058868 (March 16, 1979) and 555356 (December 26, 1989, abstracted as C.S.D. 90-32(6), 24 Cust.Bull. & Dec.___ (1990)), that the drawing of steel wire rod abroad into an intermediate wire size--a cold-forming operation-- constitutes "further processing" sufficient to satisfy the foreign processing requirement of HTSUS subheading 9802.00.60. Upon return to the U.S., the unfinished electrical welding wire is subjected to a roll-forming operation, which further changes its shape and imparts different characteristics to the wire by imparting the correct cast and helix to the electrical arc welding wire so that it can meet the applicable American Welding Society specifications for finished wire products. This cold-forming operation is similarly found to constitute "further processing" sufficient to satisfy the domestic processing requirement of HTSUS subheading 9802.00.60. HOLDING: On the basis of the described manufacturing processes, the electrical arc welding wire will be eligible for the partial duty exemption under HTSUS subheading 9802.00.60 when returned to the U.S., provided the documentary requirements of 19 CFR 10.9 are met. Sincerely, Jerry Laderberg Acting Director Commercial Rulings Division