Applicability of partial duty exemption under HTSUS sub- heading 9802.00.50 to cut and bent random length steel concrete reinforcing end bars imported from Mexico

HQ 555417 January 22, 1990 CLA-2 CO:R:C:V 555417 GRV CATEGORY: CLASSIFICATION TARIFF NO.: 9802.00.50 David R. Amerine, Esq. Brownstein Zeidman and Schomer 1401 New York Avenue, N.W., Suite 900 Washington, D.C. 20005 RE: Applicability of partial duty exemption under HTSUS sub- heading 9802.00.50 to cut and bent random length steel concrete reinforcing end bars imported from Mexico Dear Mr. Amerine: This is in response to your letters of June 8, and December 27, 1989, on behalf of W. Silver, Inc., requesting a ruling on the applicability of subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), to cut and bent random length steel concrete reinforcing end bars imported from Mexico. Information which you provided in a meeting at Customs Head- quarters on November 16, 1989, concerning the bending operation was also considered in preparing this ruling. FACTS: Your client manufactures steel concrete reinforcing bars (rebars) in the U.S. from used railroad rails. After cutting 20 and 40 foot standard lengths from rebars ranging in length from 50 to 300 feet, end bars of various, non-standard lengths, referred to as "random lengths," are left over. Although some of the random lengths are sold directly to U.S. customers from the manufacturing plant, others are currently exported to Mexico and cut to shorter lengths, ranging from one to 14 feet. In Head- quarter Ruling Letter 553534 (September 24, 1985), we held that this cutting-to-length operation constituted an "alteration" of the rebars within the meaning of item 806.20, Tariff Schedules of the United States (TSUS) (carried over into the HTSUS as subhead- ing 9802.00.50). It is now proposed that some of the cut random lengths will also be subjected to various bending operations, as specified by customers' orders. You state that after the bending operation, the bent random length rebars remain rebars, and will be used in the same way they would be used prior to export and alteration. You assert that bending some of the already cut random lengths will not destroy the identity of the exported random lengths nor result in a new and different product; that bending will not change the character, quality, texture, or use of the merchan- dise. Further, you indicate that no new American Society for Testing Materials (ASTM) specifications will be applicable to the imported bent random lengths, as ASTM designation numbers are not contingent upon the length or shape of rebar. In this regard, you state that both straight and bent rebar are classified under ASTM A616. Accordingly, you assert that the cutting and bending of the rebars does not constitute the "manufacture" of new and different articles, but rather qualifies as an "alteration" under the statute, and request that we confirm the applicability of HTSUS subheading 9802.00.50 to the returned cut and bent rebars. ISSUE: Whether the bending of cut random length rebars constitutes an "alteration" for purposes of HTSUS subheading 9802.00.50. LAW & ANALYSIS: Articles returned to the U.S. after having been exported to be advanced in value or improved in condition by repairs or alterations may qualify for the partial duty exemption under HTSUS subheading 9802.00.50 provided the foreign operation does not destroy the identity of the exported articles or create new or different articles through a process of manufacture. However, entitlement to this tariff treatment is precluded where the exported articles are incomplete for their intended use prior to the foreign processing, Guardian Industries Corp. v. United States, 3 CIT 9 (1982), or where the foreign operation consti- tutes an intermediate processing operation, which is performed as a matter of course in the preparation or the manufacture of finished articles. Dolliff & Company, Inc., v. United States, 81 Cust.Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978), aff'd, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015, 1019 (1979). Articles entitled to this partial duty exemption are dutiable only upon the cost or value of the foreign repairs or alterations when returned to the U.S., provided the documentary requirements of 19 CFR 10.8 are satisfied. Regarding the various ruling letters referenced--Headquar- ters Ruling Letters (HRLs) 553534 (September 24, 1985), 071705 (February 21, 1984) and 071600/071752 (April 6, 1984)--, these dealt with cutting-to-length or trimming operations, which are not analogous to bending operations. Accordingly, we do not consider these rulings to be dispositive of the issue presented in this case. Judicial decisions considering the meaning of the term "alterations" look not only at the condition of the article exported, but at the nature of the foreign operation involved. See, Dolliff, op cit., United States v. J.D. Richardson Company, 36 CCPA 15, C.A.D. 390 (1948), cert. denied, 336 U.S. 936, 69 S.Ct. 746, 93 L.Ed. 1095 (1948), and A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff'g, C.D. 1752 (1955). In Burstrom, the appellate court held that the conversion of steel ingots into steel slabs by hot-rolling was more than an alteration of the ingots, as the imported steel slabs differed in name, value, appearance, size, shape, and use from the exported ingots. In considering the Appellant's position that, so long as the material imported is the same material which is exported, any change which takes place is no more than an "alteration," the court stated that such application went beyond any sensible meaning of the term "alteration." Discussing the amendment of paragraph 1615(g) (a precursor provision of HTSUS subheading 9802.00.50) by the Customs Simplification Act of 1954 (which created a separate tariff provision for metal articles processed abroad), the court stated that: [t]he distinction which must be made is between the terms "repairs," "alterations" and "processing." The 1954 amendment uses the expression "subjected to a process of manufacture" as synonymous with processing and the inclusion of processing, as distinguished from repairs and altera- tions, was the change brought about by the amendment. Beyond these considerations, the courts have stated that for tariff purposes a process which converts one article into a new article is not an "alteration." Guardian Industries. In the Guardian case, the court found that the merchandise imported was a separate and different commercial article from the merchandise exported, as evidenced by the fact that the respective products were classifiable in separate tariff provisions. Regarding the subject merchandise in this case, we note that, while the tariff provision applicable to straight rebar that is cut-to-length is HTSUS subheading 7214.20.00, the tariff provision applicable to bent rebars is HTSUS subheading 7308.90.90. NY 844635 (September 18, 1989). Further, we have previously ruled that the cutting- to-length and bending of rebars constitutes "further processing" for purposes of subheading 9802.00.60. HRL 543665 (January 9, 1986). Also, in HRL 071451 (September 30, 1983), C.S.D. 84-39, 18 Cust. Bull. 932 (1984), we held that TSUS item 806.20 was not applicable to lamp filaments that were specially formed and annealed abroad, as these steps were found to constitute further processing steps performed as part of the overall manufacture to obtain a completely manufactured product. While two foreign processing operations were enumerated in that case, either one was sufficient to disqualify the imported article from the benefits available under TSUS item 806.20. Given this framework within which to assess the applica- bility of HTSUS subheading 9802.00.50, we believe that the bending operation exceeds an "alteration" and constitutes a manufacturing process, as the bending of metal is generally regarded as a forming operation, intended to cause permanent deformation of the material. See, in general, Manufacturing Processes (8th ed.), by Amstead, Ostwald and Begeman (John Wiley & Sons; 1987), at pgs. 353-4 ("[w]here bending is involved the metal is stressed in both tension and compression at values below the ultimate strength of the material without appreciable changes in its thickness."), and Manufacturing: Materials and Processes (3rd ed.), by Moore and Kibbey (John Wiley & Sons; 1982), at pg. 307 ("[b]ending is intended to cause localized plastic flow about one or more linear axes in the material without causing fracture"). As the character of the exported rebar is changed by the bending operation, and the straight and bent rebars are classifiable in different tariff provisions, we find that the rebar to be imported is not the same article as that which is exported. Accordingly, we find that the bending operation exceeds an "alteration" with the meaning of HTSUS subheading 9802.00.50. HOLDING: On the basis of the information presented, it is our opinion that the foreign bending operation constitutes a process of manufacture and not an "alteration," within the meaning of HTSUS subheading 9802.00.50. Accordingly, the bent rebar will not be eligible for the partial duty exemption available under this tariff provision when returned to the U.S. Sincerely, John Durant, Director Commercial Rulings Division