Modification of New York Ruling Letter (NY) M87369, Dated November 7, 2006, Concerning the Tariff Classification of Automotive Parts from China.

HQ H263570 July 16, 2015 OT:RR:CTF:VS H263570 RMC CATEGORY: Classification Jason Combs CJ International, Inc. 7220 Bluffton Road Suite A Fort Wayne, IN 46809-2912 Re: Modification of New York Ruling Letter (NY) M87369, Dated November 7, 2006, Concerning the Tariff Classification of Automotive Parts from China. Dear Mr. Combs: This is in reference to New York Ruling Letter (NY) M87369 issued to you on behalf of your client, Connor Corporation, on November 7, 2006. In your ruling request, you asked whether five automotive parts qualified for a partial duty exemption under Harmonized Tariff Schedule of the United States (“HTSUS”) subheadings 9802.00.50 and 9802.00.60. NY M87369 held that the automotive parts in question qualified as “articles returned to the United States after having been exported to be advanced in value or improved in condition by any process of manufacture or other means” under HTSUS subheading 9802.00.50. It has come to our attention that an error was made in NY M87369. For the reasons set forth below the automotive parts are not entitled to a partial duty exemption under either subheading 9802.00.50 or subheading 9802.00.60, HTSUS. FACTS: As described in New York Ruling Letter (NY) M87369, dated November 7, 2006, the following five automotive products are at issue: Item # A-3105W-1167: An outer steel ring that is first stamped in the United States. This ring is then exported to China, where a manufacturer plates it with zinc, applies an adhesive to the inner diameter, and molds rubber to the inside of the ring. Item # 53P22-1: An outer steel ring that is first stamped in the United States. This ring is then exported to China, where a manufacturer plates it with zinc, applies an adhesive to the inner diameter, and molds rubber to the inside of the ring. Item # 53P25-1: An outer steel ring that is first stamped in the United States. This ring is then exported to China, where a manufacturer plates it with zinc, applies an adhesive to the inner diameter, and molds rubber to the inside of the ring. Item 611491-4: Outer and inner steel rings that are stamped in the United States. These rings are then exported to China, where a manufacturer plates them with zinc, applies an adhesive to the inner diameters, and molds rubber to the inside of the rings. The inner ring is then attached to the inside of the rubber. Item # 3556B40H01: A nylon plastic ring that is first molded in the United States. This ring is then exported to China, where a manufacturer applies an adhesive to the inner diameter of the ring and molds rubber to its inside. ISSUES: Whether products (1) through (4), which are all made of metal, qualify for a partial duty exemption under subheading 9802.00.60 of the HTSUS as an “article of metal . . . 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.” Whether products (1) through (5) qualify for a partial duty exemption under subheading 9802.00.50 as “[a]rticles returned to the United States after having been exported to be advanced in value or improved in condition” through repairs or alterations. LAW AND ANALYSIS Eligibility of Metal Goods for a Partial Duty Exemption under HTSUS Subheading 9802.00.60 Subheading 9802.00.60, HTSUS, provides a partial duty exemption for any article of metal (as 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. This tariff provision imposes a dual "further processing" requirement on eligible, U.S. 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 the documentary requirements of section 10.9, Customs Regulations (19 CFR 10.9), are met. In C.S.D. 84-49, 18 Cust.Bull. 957 (1983) we stated that for purposes of item 806.30, TSUS—the predecessor tariff provision to HTSUS subheading 9802.00.60—the term “further processing” refers 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.” Although NY M87369 held that no “further processing” of the metal occurred in China under subheading 9802.00.60, that is incorrect. Here, metal rings that are manufactured in the United States are sent to China where a manufacturer plates them with zinc, applies an adhesive, and molds rubber to the inside of the metal ring. Zinc plating—a process whereby metal is coated in a protective lawyer of zinc—does indeed “impart new and different characteristics which become an integral part of the metal itself and which did not exist in the metal before processing.” We have recognized this in previous rulings. See, e.g., Headquarters Ruling (HQ) H555562, dated Nov. 26, 1990; HQ 556080, dated Aug. 27, 1991; Despite the error on this point, however, NY M87369 correctly found that subheading 9802.00.60 did not apply because no evidence of further processing in the United States was presented. Subheading 9802.00.60 requires that the imported goods be “returned to the United States for further processing.” Therefore, we continue to hold that the products are ineligible for a partial duty exemption under subheading 9802.00.60, HTSUS. Eligibility of All Goods for a Partial Duty Exemption under HTSUS Subheading 9802.00.50 Subheading 9802.00.50 creates a partial duty exemption for articles returned to the United States after having been exported to be advanced in value or improved in condition through repairs or alterations. The Court of Customs and Patent Appeals has held that “repairs or alterations” can be done only to articles that are complete when exported. Subheading 9802.00.50 therefore does not apply to “intermediate operations which are performed in the manufacture of finished articles.” Dolliff and Co., Inc. v. United States, 599 F.2d 1010 (C.C.P.A. 1979). NY M87369 holding that all five articles at issue are eligible for a partial duty exemption under subheading 9802.00.50 is incorrect because the rings are not complete when exported. As noted above, the metal rings are exported to China for further processing and returned to the United States as finished goods, and the same is true of the nylon rings. The Chinese processing is therefore an “intermediate operation” performed in the manufacture of a finished good, which makes the products ineligible for a partial duty exemption under subheading 9802.00.50. HOLDING: We find that the automotive parts do not qualify for a partial duty exemption under either subheading 9802.00.60 or subheading 9802.00.50. EFFECT ON OTHER RULINGS: NY M87369, dated Nov. 7, 2006, is hereby modified. Sincerely, Myles B. Harmon, Director Commercial & Trade Facilitation Division