Applicability of partial duty exemption under subheading 9802.00.50 for silver nitrate solution; alteration

HQ 561757 October 19, 2000 CLA-2 RR:CR:SM 561757 KSG CATEGORY: Classification TARIFF NO.: 9802.00.50 Mark Neville KPMG 345 park Avenue New York, NY 10154 RE: Applicability of partial duty exemption under subheading 9802.00.50 for silver nitrate solution; alteration Dear Mr. Neville: This is in response to a letter of May 22, 2000, from KPMG requesting a binding ruling on behalf of Agfa-Gevaert N.V. regarding the eligibility of imported silver nitrate solution used to produce film, for a partial duty exemption under subheading 9802.00.50 of the Harmonized Tariff Schedule of the United States (“HTSUS”). FACTS: Your client, Agfa-Gevaert N.V., intends to export pure silver ingots or granules of U.S. origin to Belgium for processing. In Belgium, the silver is placed into a solution of nitric acid and treated to form silver nitrate in aqueous solution. Impurities, such as copper or lead are removed by heat and crystallization. The silver nitrate solution will be imported into the U.S. to be used to produce photographic film. ISSUE: Whether the silver nitrate solution is eligible for a partial duty exemption under subheading 9802.00.50, HTSUS, when imported into the U.S. LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a partial duty exemption for articles that are returned after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided that the documentary requirements of 19 CFR 10.8 are met. For qualifying articles, duty is assessed only on the cost or value of the foreign processing. In circumstances where the operations abroad destroy the identity of the exported article or create a new or commercially different article, entitlement to subheading 9802.00.50, HTSUS, is precluded. See A.F. Burstrom v. United States, 44 CCPA 27, C.A.D. 631 (1956), aff’d C.D. 1752, 36 Cust. Ct. 46 (1956); Guardian Industries Corporation v. United States; 3 CIT 9 (1982). Additionally, entitlement to this tariff treatment is not available where the exported articles are incomplete for their intended purposes prior to their foreign processing and the foreign processing is a necessary step in the preparation or manufacture of the finished articles. Dolliff & Company, Inc. v. United States, 455 F. Supp. 618 (CIT 1978), aff’d, 599 F.2d 1015 (Fed. Cir. 1979). In Burstrom, U.S.-origin steel ingots were processed abroad into steel slabs which were imported into the U.S. The court held that the imported slabs were a commercially different product than the U.S. origin ingots, and that the foreign processing therefore was not an alteration. In Guardian Industries, U.S. glass sheets in annealed form were sent to Canada for a heat treatment known as tempering and then imported into the U.S. The court held that the tempered glass is a separate and different commercial article from the annealed glass from which it was processed, noting that the tempered glass has different characteristics, different uses and a different trade nomenclature. The court concluded that the tempering process is not an alteration. In Headquarters Ruling Letter (“HRL”) 555772, dated January 14, 1991, Customs determined that plastic appliance parts manufactured in Mexico from phenol molding compound in powder form were not eligible for a duty exemption under subheading 9802.00.50 because the plastic appliance parts were new and commercially different articles. In HRL 555461, dated March 15, 1990, Customs held that molybdenum ore roasted abroad to remove sulfur impurities was not eligible for subheading 9802.00.50 treatment because roasting was required to complete the product for its intended purpose. This case is similar to the above cases in that the silver nitrate solution is a new and commercially different article (when compared to the exported silver ingots or granules) and the foreign processing is necessary to complete the product for its intended purpose in making photographic film. Accordingly, the processing in Belgium exceeds an alteration and the silver nitrate solution is not eligible for subheading 9802.00.50, HTSUS, treatment upon importation into the U.S. HOLDING: Based on the information provided, we find that the imported silver nitrate solution is not eligible for a partial duty exemption under subheading 9802.00.50, HTSUS, when imported into the U.S. A copy of this ruling letter should be attached to the entry documents filed at the time this merchandise is entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction. Sincerely, John Durant Director Commercial Rulings Division