Applicability of partial duty exemption to structural steel tube products from Canada; further processing; C.S.D. 84-49, 89-49; HRL 556080

HQ 556319 February 1, 1992 CLA-2 CO:R:C:S 556319 SER CATEGORY: Classification TARIFF NO.: 9802.00.60 Roger L. Hiatt, Esq. Miller & Steuart 2320 Commerce Tower 911 Main Street Kansas City, Missouri 64105 RE: Applicability of partial duty exemption to structural steel tube products from Canada; further processing; C.S.D. 84-49, 89-49; HRL 556080 Dear Mr. Hiatt: This is in reference to your letter of October 14, 1991, on behalf of Bull Moose Tube Company, requesting a ruling on the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), to certain steel tube products imported from Canada. FACTS: According to your submission, steel master coils of U.S. origin are sent to Ontario, Canada. In Canada, the coils are slit by a process of cutting the coil along its length and rewinding the narrower coils into widths approximately the circumference of the tubing to be produced. These "slit coils" are processed on one of three "tube mills" which uncoil the slit coil, form it into a round tube shape and continuously weld the edges, resulting in a permanent tubular shape. The "tube mills" are then used to reshape the tubing into a square or rectangular tube, depending upon the needs of the purchasers. The long tube is then cut into "mill run lengths" before being packaged into tubing bundles for return to the U.S. The length of the tubing at this stage is 20 to 40 feet. Upon return to the U.S., the steel tubing is sold to various customers in the U.S. Some of the imported steel tubing is sold directly to fabricators who will further manufacture the steel tubing into various articles, such as exercise equipment, boat trailers, lawn and garden furniture, bicycle frames, etc. The remainder of the imported steel tubing is sold to service centers, who, in turn, sell the tubing to various manufacturers. -2- ISSUE: Whether the steel tubing will be eligible for the partial duty exemption available under subheading 9802.00.60, HTSUSA, when imported into the U.S. LAW AND ANALYSIS: Subheading 9802.00.60, HTSUSA, 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 of 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. 84-49, 18 Cust.Bull. 957 (1983) we stated that: [f]or purposes of item 806.30, TSUS [precursor to 9802.00.60 HTSUSA], 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. In this case, the steel tubing is an eligible article of metal for purposes of subheading 9802.00.60, HTSUSA. In addition, the processing of the steel in Canada would constitute "further processing" under this tariff provision. In C.S.D. 89- 49(14), Headquarters Ruling Letter (HRL) 554976 dated February 21, 1989, Customs held that cutting, slitting and cold forming of coil steel into C-channel purlins constituted "further -3- processing" for purposes of this program. In that ruling, as in this case, the processing operations clearly impart new and different characteristics which become an integral part of the metal itself and which did not exist in the metal before processing. It next must be determined whether the domestic "further processing" requirement has been met. In this case, the domestic operations are to be conducted by firms who purchase the steel tubing products imported from Canada either directly from the Bull Moose Company or from distributors. These firms will conduct various operations on the steel tubing in the manufacture of products such as exercise equipment, boat trailers, lawn and garden furniture, bicycle frames, etc. You state that, typically, in order to manufacture these products, the steel tubing will undergo a variety of processes including, for example, cutting to length, bending, crushing, drilling or punching holes in the tubing. There is no requirement under subheading 9802.00.60, HTSUSA, that the identity of the person who performs the "further processing" in the U.S. be known at the time the material is exported from the U.S, or at the time the returned material enters the U.S. There is also no requirement that the same person who exported the material, or the same person who imports the material must perform the "further processing" in the U.S. However, the importer should satisfy the district or area director of the actual performance of "further processing" in the U.S. See, 19 CFR 10.9, and Headquarters Ruling Letter (HRL) 556080 dated August 27, 1991. In addition, the domestic "further processing" should be conducted within a reasonable time following importation. See, 19 CFR 10.9, and HRL 556080 dated August 27, 1991. In HRL 554965 dated September 6, 1989, Customs found that under the circumstances of that case, four months was a reasonable period of time to warehouse stainless steel sheets in the U.S. before being further processed. Based on your description of the products which will be made from the steel tubing imported from Canada and the processing that typically is performed to create those products, it would appear that the domestic "further processing" requirement would be satisfied. The manufacture of the articles listed above clearly would impart new and different characteristics which become an integral part of the metal itself. However, as previously stated, the district or area director must be satisfied of the actual performance of "further processing" in the U.S. -4- HOLDING: On the basis of the information submitted, it is our opinion that the processes performed abroad on the exported steel master coils constitute "further processing" as that term is used in subheading 9802.00.60, HTSUSA. In addition, it would appear that the operations to be performed in the U.S. on the imported steel tubing also would constitute "further processing". However, as only a general description of the operations that may be performed in the U.S. was provided, the district or area director must be satisfied of the actual performance of "further processing" in the U.S. Contingent on the satisfaction of the district or area director in this regard, the imported steel coils will be entitled to entry under subheading 9802.00.60, HTSUSA, with duty only on the cost or value of such processing performed outside the U.S., upon compliance with the documentary requirements of 19 CFR 10.9. Sincerely, John Durant, Director Commercial Rulings Division