HTSUS subheading 9802.00.60; eligible article; further processing; galvanizing; C.S.D. 84-89; 19 CFR 10.9; 555530; 553869; 086289; 555432; Intelex

HQ 555915 June 17, 1991 CLA-2 CO:R:C:S 555915 DSN CATEGORY: Classification TARIFF NO.: 9802.00.60 Mr. Jeffrey J. Kost Project Manager-Substations R Jennings Manufacturing Company, Inc. 8 Glens Falls Technical Park Glens Falls, New York 12801 RE: HTSUS subheading 9802.00.60; eligible article; further processing; galvanizing; C.S.D. 84-89; 19 CFR 10.9; 555530; 553869; 086289; 555432; Intelex Dear Mr. Kost: This is in response to your letter of January 11, 1991, requesting a ruling on the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), to certain steel structural components imported from Canada. FACTS: According to your submission, U.S.-origin material consisting of angles, channels, wide flanges, pipes, plates, and fasterners are sent to Canada for a hot dip galvanizing operation. The steel structural components are then returned to the U.S. for what you describe as the "final stages of fabrication." You state that the operations performed on the components when returned to the U.S. "might include grinding, drilling, punching, threading, forming, etc." We understand from information you provided by telephone to our New York office that the threading operation is performed in the U.S. after galvanization because, if performed prior to galvanizing, the zinc will eradicate any pre-existing threads. With respect to grinding, in some instances, it may be necessary to remove any zinc icicles which may have formed during the galvanization process. The process described as "forming" consists of straightening the components by using large clamping devices or vices to correct any warping that may have occurred due to the steel being subjected to extremely high temperatures in the galvanizing tank. The "punching" process involves reaming out pre-existing holes which may have become filled with zinc during the Canadian galvanizing operation, while new holes may have to be drilled at the customers' request. Subsequent to the performance of any of the above-described operations, the structural components are partially assembled and then shipped to U.S. buyers. ISSUE: Whether the steel structural components will be entitled to the partial duty exemption under HTSUS subheading 9802.00.60 when returned to the U.S. LAW AND ANALYSIS: HTSUS subheading 9802.00.60 provides a partial duty exemption for: [a]ny article of metal (as defined in U.S. note 3(d) of this subchapter) manufactured in the United States or subject 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. This tariff provision imposes a dual "further processing" requirement on eligible articles of metal--one foreign, and when returned, one domestic. Metal articles satisfying these statutory requirements may be classified under this tariff provision with duty only on the value of such processing performed outside the U.S., provided there is compliance with the documentary requirements of section 10.9, Customs Regulations (19 CFR 10.9). In C.S.D. 84-89, 18 Cust.Bull. 957 (1983) we stated 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 characteristics 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. (The precursor provision to HTSUS subheading 9802.00.60 was item 806.30, Tariff Schedules of the United States (TSUS).) In this case, the steel structural components are eligible articles of metal for purposes of HTSUS subheading 9802.00.60. The galvanization process performed in Canada is considered a "further processing" operation, as it imparts new and different characteristics which become an integral part of the steel. See, Headquarters Ruling Letters (HRL) 555530 of February 7, 1990 and HRL 553869 of November 4, 1985, which held that electroplating with nickel, brass, or chrome is an operation sufficient to comply with the "further processing" requirement of TSUS, item 806.30. With respect to the operations performed in the U.S. upon return of the components, we find that the threading and drilling processes satisfy the domestic "further processing" requirement of HTSUS subheading 9802.00.60, as they clearly impact upon the metal and impart new and different characteristics which become an integral part of the steel. See C.S.D. 84-89 and HRL 554965 dated September 6, 1989. However, we are not satisfied from the information presented that the remaining operations to which the structural components may be subjected in the U.S. are sufficient to satisfy the domestic "further processing" requirement. In Intelex Systems Inc. v. United States, 59 CCPA 138, C.A.D. 1055, 460 F.2d 1083 (1972), the court discussed the type of processing that would qualify as "further processing". In that case, copper wire and insulating paper were processed abroad into lead-covered telephone cable and imported into the U.S. on cable rolls. The cable was then merely strung on poles after wire stripping and splicing operations. The issue presented was whether the imported telephone cable was "returned to the U.S. for further processing," within the meaning of paragraph 1615(g)(2)(B), Tariff Act of 1930, as amended (a precursor provision of HTSUS subheading 9802.00.60). The court considered the words "process" and "processing" and stated that: ...its meaning [processing] must be controlled by the particular context in which it is used here and the legislative intent. (Citation omitted). When we look to the context of [paragraph] 1615(g)(2), we do not think that Congress had in mind that any and all kinds of 'processing' would suffice to bring the article within the purview of 'processing' related to the kind of processing to which the article had been subjected before--namely, 'a process of manufacture,' as expressed in [paragraph] 1615(g)(2)(A). We continue of the view that Congress used the expression 'subjected to a process of manufacture' as synonymous with 'processing' (citation omitted), and that the 'further processing' referred to in {paragraph} 1615(g)(2) is a further manufacturing process. The court stated that it did "...not think that processes to which an already completed article were subjected, incident to using it for the purpose intended, were necessarily part and parcel of manufacturing processes performed on that article." (Court's emphasis). Therefore, finding no evidence that the operations performed in the U.S. on the imported telephone cable constituted a process of manufacture in any common or commercial sense, the court determined that the partial duty exemption was inapplicable to the imported cable. In the instant case, we find that the operations of removing by grinding any zinc icicles which may have formed during the foreign galvanizing process, and removing by punching any zinc which may have filled pre-existing holes, are minor finishing operations performed on essentially completed articles. These operations clearly do not impart new and different characteristics which become an integral part of the steel. See, HRL 555432 of July 26, 1990 (smoothing out the weld surface on the inside of a flange and pipe by grinding appears to be a minor finishing operation which is incidental to the assembly of the flange and pipe), and HRL 086289 dated March 13, 1990 (minor grinding of bracket edges is not "further processing." Similarly, straightening the components to correct any warping that may have occurred during the heating and galvanizing operation in Canada serves merely to restore the structural components' original shape and does not, in our opinion, impart new and different characteristics which become an integral part of the metal. We do not view this operation as a process of manufacture in any common or commercial sense. The subsequent partial assembly operations performed in the U.S. prior to the shipment of the components to U.S. buyers is also not considered "further processing" under this tariff provision. See C.S.D. 84-89 and HRL 555432 dated July 26, 1990. HOLDING: On the basis of the information submitted, it is our opinion that the galvanizing process performed in Canada to the steel structural components satisfy the foreign "further processing" requirement under HTSUS subheading 9802.00.60. However, of the operations to which the returned components may be subjected in the U.S., only the threading and drilling operations satisfy the domestic "further processing" requirement. Therefore, only those structural components which are threaded and/or drilled upon return to the U.S. will be entitled to the partial duty exemption available under this tariff provision, assuming compliance with the documentary requirements of 19 CFR 10.9. Sincerely, John Durant, Director Commercial Rulings Division cc: Assistant Area Director, NIS (859640)