Applicability of subheadings 9802.00.50 and 9802.00.60

HQ H304566 October 3, 2019 OT:RR:CTF:VS H304566 JMV CATEGORY: Classification Carole Mehl General Manager Umicore Specialty Material Recycling 28960 Lakeland Blvd. Wickliffe, OH 44092 RE: Applicability of subheadings 9802.00.50 and 9802.00.60 Dear Ms. Mehl, This is in response to your ruling request dated June 14, 2019, asking us to address whether Ammonium Perrhenate (“APR”) is eligible for subheading 9802.00.50 or 9802.00.60, Harmonized Tariff Schedule of the United States (“HTSUS”), treatment. FACTS: Umicore Specialty Material Recycling (“USMR”) is a super alloy recycler. USMR purchases products for recycling that contain rhenium. USMR shreds these products so that they may undergo a leaching process. The products contain the following percentages of various metals: 60% Ni, 8% Co, 4% Ta, 4% W, 2% Re. USMR will be exporting U.S.-made APR, water-soluble salt classified under 2841.20, HTSUS, to France pursuant to a tolling agreement. Umicore Specialty Powders France (“USPF”) will conduct the tolling process by converting the APR into rhenium metal pellets, which USMR will then reimport into the United States under 8112.92.50, HTSUS. In France, USPF will conduct a process called reduction, where USPF will place the APR into a high temperature furnace, with hydrogen and nitrogen injections. This will result in a change of the chemical composition of the APR. You stated in an email with this office that rhenium pellets, by their chemical composition, are a different article from APR and have a different use. You stated that APR is used by the catalyst industry while rhenium pellets are used by the aerospace industry. ISSUE: Whether the U.S.-made APR is eligible for tariff treatment under subheading 9802.00.50, or 9802.00.60, HTSUS. LAW & ANALYSIS: Subheading 9802.00.50, HTSUS Subheading 9802.00.50, HTSUS, provides a full or partial duty exemption for articles returned to the United States after having been exported to be advanced in value or improved in condition by means of repairs or alterations, provided the documentary requirements of section 10.8, Customs Regulations (19 CFR 10.8), are satisfied. Court cases considering the applicability of subheading 9802.00.50, HTSUS, and its precursor provisions (item 806.20, Tariff Schedules of the United States (“TSUS”), and, before that, paragraph 1615(g), Tariff Act of 1930), have held that this tariff provision is inapplicable where: (1) the exported articles are incomplete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles; or (2) the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. In Guardian Industries v. United States, 3 CIT 9 (1982), the Court of International Trade stated that, in construing “the tariff provision for repairs and alterations performed abroad, the focus is upon whether the exported article is ‘incomplete’ or ‘unsuitable for its intended use’ prior to the foreign processing.” At issue in Guardian Industries was the question of whether subjecting U.S.-produced annealed glass to a tempering process in Canada to create glass for sliding glass patio doors qualified as an “alteration” under item 806.20, TSUS. The court noted that glass must be tempered (i.e., strengthened) for practical safety use reasons and to conform to U.S. federal regulations before it may be marketed for use in sliding glass patio doors. In concluding that the tempering process was not an “alteration,” the court stated that “the exported articles of raw annealed glass were not ‘completed articles’ since they were entirely unsuitable for their intended use” as sliding glass patio doors and required a manufacturing process to make them complete. The court further concluded that, because the tempering of the annealed glass transformed the glass in name, use, performance characteristics and tariff classification, the operation created a new and different commercial article. See also Dolliff & Company, Inc. v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F.Supp. 618 (1978), aff’d, 66 CCPA 77, C.A.D. 1225, 599 F.2d 1015 (1979) (finding that U.S.-origin fabrics which were exported to Canada as griege goods for heat-setting, chemical-scouring, dyeing, and treating with chemicals, were ineligible for 806.20, TSUS, as the processing in Canada resulted in a finished fabric suitable for manufacture into curtains). Conversely, in Amity Fabrics, Inc. v. United States, 43 Cust. Ct. 64, C.D. 2104 (1959), “pumpkin” colored fabrics were exported to Italy to be redyed black since the pumpkin color had gone out of fashion and black was a consistently good seller. The court held that the identity of the goods was not lost or destroyed by the dyeing process, that no new article was created since there was no change in the character, quality, texture, or use of the merchandise; it was merely changed in color. The court found that such change constituted an alteration for purposes of paragraph 1615(g) of the Tariff Act of 1930. See also Royal Bead Novelty Co. v. United States, 68 Cust. Ct. 154, C.D. 4353, 342 F. Supp. 1394 (1972) (finding that uncoated glass beads exported and coated was entitled to preferential tariff treatment under 806.20, TSUS as the identity of the beads was not lost or destroyed in the coating process and no new article was created). In Headquarter’s Ruling (“HQ”) 560325, dated January 27, 1998, CBP considered the eligibility for subheading 9802.00.50, HTSUS, treatment of U.S.-origin glass stemware which was decorated by a silkscreening process with a pictorial winter scene abroad and returned. The stemware was offered for sale both in its decorated and undecorated state. In holding that the decorating process constituted an alteration, Customs stated that: . . . the processing abroad results only in a change to the appearance of the stemware, and does not alter the function, character or identity of the exported articles. The merchandise sent is finished white wine stemware, marketable in the condition exported, and what is returned is the same merchandise, available to the same class of customers, albeit enhanced in appearance by a decorative winter scene. Emphasis added. See also HQ 557659 (finding that curtains that were exported for airbrushing and hot-wire cutting were entitled to 9802.00.50, HTSUS because the curtains in their exported condition were marketed for the same use after the air brushing and hot-wire cutting operations, demonstrating that the fabric before the processing is suitable for its intended use). Here, you state that rhenium pellets are a different article from APR and have different uses by different users. The APR exported from the United States is not marketable in the same industry as the imported rhenium pellets. Additionally, the APR is not in a condition suitable for the intended use of the rhenium pellets. Therefore, consistent with the rulings above, the rhenium pellets are not eligible for 9802.00.50, HTSUS. Subheading 9802.00.60, HTSUS Subheading 9802.00.60, HTSUS, provides a partial duty exemption for: [a]ny article of metal . . . 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 for the United States for further processing. Subheading 9802.00.60, HTSUS, therefore imposes four requirements: (1) the merchandise must be an article of metal; (2) the metal must either be manufactured in the United States or subject to a process of manufacture in the United States; (3) the metal must be exported for further processing; and (4) the metal must be returned to the United States for further processing. For purposes of subheading 9802.00.60, HTSUS, “metal” includes “base metals enumerated in note 3 to section VX,” which in turn includes rhenium. See U.S. Note 3(e) to Chapter 98, HTSUS. While the imported rhenium is a metal, the exported APR is not; it is a salt. Therefore, the imported rhenium does not meet the first requirement and is not entitled to a partial duty exemption under subheading 9802.00.60, HTSUS. HOLDING: Based on the information presented, the rhenium will not be eligible for a partial duty exemption under either subheading 9802.00.50, HTSUS, or 9802.00.60, HTSUS, when imported into the United States. Please note that 19 C.F.R. § 177.9(b)(1) provides that “[e]ach ruling letter is issued on the assumption that all of the information furnished in connection with the ruling request and incorporated in the ruling letter, either directly, by reference, or by implication, is accurate and complete in every material respect. The application of a ruling letter by a CBP field office to the transaction to which it is purported to relate is subject to the verification of the facts incorporated in the ruling letter, a comparison of the transaction described therein to the actual transaction, and the satisfaction of any conditions on which the ruling was based.” A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy of this ruling, it should be brought to the attention of the CBP officer handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation & Special Classification Branch