Applicability of partial duty exemption to paper poly foil lamination in rolls cut to length and printed abroad and

HQ 555911 June 25, 1991 CLA-2 CO:R:C:S 555911 RA CATEGORY: Classification TARIFF NO.: 9802.00.60 Mr. Clifford Benderoff Zittrer, Siblin, Stein, Levine Chartered Accountants 1, Place Alexis Nihon Montreal, Quebec, Canada H3Z 3E8 RE: Applicability of partial duty exemption to paper poly foil lamination in rolls cut to length and printed abroad and cut to length and width upon return; T.D. 56438(1); CIE 980/65 Dear Mr. Benderoff: This is in response to your letter of February 12, 1991, requesting a ruling on behalf of Litho-Pak Inc. concerning the eligiblity for a partial duty exemption under subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), of rolls of printed paper poly foil lamination imported from Canada. FACTS: Paper poly foil lamination in rolls, manufactured in the U.S., is exported to Canada where it is cut to length to form smaller rolls and then printed prior to return to the U.S. for use as packaging materials. After receipt of the rolls of laminated aluminum foil by U.S. customers, the material is cut to length and width to fit the dimensions of the individual packages and folded and sealed to envelop the product. You state that, in its condition as exported to Canada and when returned, the material is classifiable in Heading 7607 HTSUS, which provides for "Aluminium foil (whether or not printed, or backed with paper, paperboard, plastics or similar backing materials) of a thickness (excluding any backing) not exceeding 0.2mm." ISSUE: Whether the rolls of printed paper poly foil lamination are entitled to the partial duty exemption under subheading 9802.00.60, HTSUS, when returned to the U.S.  - 2 - LAW AND ANALYSIS: Subheading 9802.00.60, HTSUS, provides a partial duty exemption for: Any article of metal (a 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 processing outside the United States, is returned to the United States for further processing. Thus, this tariff provision imposes a dual "further processing" requirement on eligible metal articles: one foreign, and, when returned, one domestic. Articles of metal satisfying these statutory requirements may be classified under HTSUS subheading 9802.00.60 with duty only on the value of such processing performed outside the U.S., upon compliance with the documentation requirements of section 10.9, Customs Regulations (19 CFR 10.9) (copy enclosed). We have consistently held that in order to be considered "further processing," some operation must be applied to the metal which changes the shape or form of the metal or imparts new and different characteristics which become an integral part of the metal itself, such as machining, grinding, drilling, threading, punching, forming, plating, and the like. See C.S.D. 84-49, 19 Cust. Bull. 957 (1983). Processing performed on an already completed article, incident to using it for the purpose intended, is not sufficient to constitute "further processing." Intelex Systems, Inc. v. United States, 59 CCPA 138, C.A.D. 1055 (1972). However, legislative history and judicial authority do not support a highly restrictive interpretation of the manufacturing operations necessary to qualify as "further processing." Firestone Tire & Rubber Company v. United States, 71 Cust. Ct. 63, C.D. 4474 (1973). U.S. Note 3(d), subchapter II, Chapter 98, HTSUS, provides, in pertinent part, that for purposes of HTSUS subheading 9802.00.60, the term "metal" covers the base metals enumerated in additional U.S. Note 1 to section XV, HTSUS. As aluminum is expressly enumerated in additional U.S. Note 1, we find that the foil product exported to Canada in this case is an eligible article of metal for purposes of HTSUS subheading 9802.00.60. In Headquarters Ruling Letter (HRL) CD 511.4 dated December 22, 1964 (C.I.E. 1032/65, abstracted as T.D. 56438(1)), we held that the cutting of aluminum foil to shorter lengths constituted  - 3 - "further processing" within the meaning of item 806.30, Tariff Schedule of the United States (TSUS) (the precursor provision to subheading 9802.00.60, HTSUS). A similar conclusion was reached in HRL TC 511.4 dated June 28, 1965 (C.I.E. 980/65), which involved aluminum foil cut to length and rewound into smaller rolls. Consistent with the above rulings, we are of the opinion that the cutting to length of the laminated foil in Canada is sufficient to satisfy the foreign "further processing" requirement of the statute. Further, the cutting of the returned product to length and width in the U.S. to fit individual packages would be sufficient to satisfy the domestic "further processing" requirement. Therefore, the printed paper poly foil lamination returned to the U.S. is entitled to classification under subheading 9802.00.60, HTSUS, assuming the documentation requirements of 19 CFR 10.9 are met. You ask whether our holding in this case would be the same if Litho-Pak Inc. acts as exporter of the rolls to Canada instead of the U.S. suppliers of the product. Assuming again that the requirements of 19 CFR 10.9 are satisfied, the returned laminated foil will be entitled to HTSUS subheading 9802.00.60 treatment whether the U.S.-manufactured material is exported to Canada by the U.S. suppliers or by your client. HOLDING: Based on the information submitted, the cutting to length in Canada of laminated paper poly foil of U.S. origin, and the cutting to length and width to exact dimensions after return to the U.S., would be sufficient to satisfy the "further processing" requirements of subheading 9802.00.60, HTSUS. Therefore, the returned laminated foil is entitled to classification under this tariff provision, with duty only on the value of the foreign processing, upon compliance with the documentation requirements of 19 CFR 10.9. Sincerely, John Durant, Director Commercial Rulings Division Enclosure