(abstracted as C.S.D. 89-128)
CLA-2 CO:R:C:V 554965 GRV
Mr. Fernando Goiricelaya
Alloy & Stainless, Inc.
370 Franklin Turnpike
P.O. Box 604
Mahwah, New Jersey 07430-2224
RE: Applicability of partial duty exemption under HTSUS subhead-
ing 9802.00.60 to certain stainless steel pipe and sheet
processed in Europe.C.S.D. 84-49;554245;553950;063601;
037347;warehousing;VRA
Dear Mr. Goiricelaya:
This is in response to your letter of March 4, 1988, to the
U.S. Customs Service office in New York, requesting a ruling on
the applicability of subheading 9802.00.60, Harmonized Tariff
Schedule of the United States (HTSUS) (formerly item 806.30, Tar-
iff Schedules of the United States (TSUS), to certain stainless
steel pipe and sheet to be processed in Europe. Your letter has
been referred to this office for a response.
FACTS:
You state that stainless steel skelp (flat-rolled steel
strip from which pipe or tubing is made) of U.S. origin will be
exported to Spain and other European countries where it will be
formed into pipe. The pipe will then be returned to the U.S. for
further processing, either by beveling or threading the ends or
by cutting to length in addition to beveling or threading.
You also state that you plan to export stainless steel sheet
of U.S. origin in coil form, presumably to the same foreign
manufacturers, to be slit and cut. The steel sheet will then be
returned to the U.S. and warehoused, for up to four months, until
customers' orders are received, at which time it will be further
processed by cutting the sheets to specific sizes, according to
customers' requirements, polishing the sheets and smoothing or
rounding the corners.
ISSUE:
Whether the stainless steel pipe and sheet will be eligible
for the partial duty exemption provided for under HTSUS
subheading 9802.00.80 (formerly item 806.30, Tariff Schedules of
the United States (TSUS)) when returned to the U.S.
LAW AND ANALYSIS:
Effective January 1, 1989, the Harmonized Tariff Schedule of
the United States (HTSUS) superseded and replaced the Tariff
Schedules of the United States (TSUS). TSUS item 806.30 was
carried over into the HTSUS without change as subheading
9802.00.60. This tariff provision 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
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.
HTSUS subheading 9802.00.60 imposes a dual "further processing"
requirement on metal articles--one must be accomplished in the
foreign country to which the metal is exported and one must be
accomplished in the U.S. when the metal is returned. Metal
articles satisfying these statutory requirements may be
classified under HTSUS subheading 9802.00.60 with duty only on
the value of such processing done outside the U.S., upon
compliance with section 10.9, Customs Regulations (19 CFR 10.9,
copy enclosed).
In C.S.D. 84-49, 18 Cust. Bull. 957 (1983) we held 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.
In Headquarters Ruling Letter (HRL) 554245 (September 30,
1986) flat rolled steel was exported to be formed into stainless
steel pipe and tubing, and was further processed on return to the
U.S. by cutting, threading, bending to shape, and coating with
resins or fibers. We stated that the foreign process of
fabricating steel strip into pipe and tubing was sufficient to
meet the foreign processing requirement of TSUS 806.30 (now
HTSUS subheading 9802.00.60). Further, we stated that cutting,
threading, bending and forming the pipe to specific shape in the
U.S. constituted sufficient treatment of the metal to comply with
the domestic processing aspect of the provision. Accordingly, we
held that the metal articles would be eligible for TSUS item
806.30 treatment when returned to the U.S.
We have also held that slitting operations constitute
further processing for purposes of TSUS item 806.30. See HRLs
553950 (December 23, 1985) and 063601 (April 18, 1980).
In the present case, the forming of pipe from stainless
steel skelp and the slitting and cutting of stainless steel sheet
abroad are manufacturing processes sufficient to change the shape
of the metal and qualify the exported metal under the foreign
processing aspect of the provision. Similarly, the beveling or
threading of pipe and the further cutting of steel sheet to size
constitute manufacturing processes sufficient to change the shape
of the metal and qualify the imported metal under the domestic
processing aspect of the provision. Accordingly, provided the
documentary requirements of 19 CFR 10.9 are met, the metal
articles will be eligible for HTSUS subheading 9802.00.60
treatment when returned to the U.S.
As regards the warehousing of the returned stainless steel
sheet for periods of up to four months before it is further
processed to meet customers' requirements, in HRL 037347 (July
14, 1975) we stated that returned articles may be held in stock
for a reasonable time before being subjected to further domestic
processing operations, provided a realistic expectation of
customer demand for the final product exists. We further stated
that the importer should satisfy the district director of the
actual performance of further processing within the time frame
specified before the applicable entry may be liquidated under
TSUS item 806.30. Under the circumstances of the instant case,
it is our opinion that the warehousing of the stainless steel
sheet for up to four months before it is further processed in the
U.S. would constitute a reasonable period of time and would not
preclude HTSUS subheading 9802.00.60 treatment for the returned
sheet.
Regarding export certificates for the metal products
returned to the U.S., although the products may be subject to
voluntary restraint agreements (VRAs) the U.S. has with Spain and
other European countries, the articles may be entered under HTSUS
subheading 9802.00.60 without an export certificate, provided all
requirements for entry under that subheading are met.
HOLDING:
On the basis of the described manufacturing processes, the
stainless steel pipe and sheet will be eligible for the partial
duty exemption under HTSUS subheading 9802.00.60 when returned to
the U.S., provided the documentary requirements of 19 CFR 10.9
are met and the domestic processing of the returned stainless
steel sheet occurs within a reasonable time following its place-
ment in a domestic warehouse.
Sincerely,
John Durant, Director
Commercial Rulings Division
Enclosure