HQ H297439
CON 9-04
OT: RR: CTF: ER
H297439 SMS
Cecelia Rothrock
Crane Worldwide Logistics LLC
1500 Rankin Road
Houston, TX 77073
Re: Ruling request; eligibility for duty-free treatment as temporary importations under bond
Dear Ms. Rothrock:
This is in response to your letter of May 21, 2018. In your letter, on behalf of your client, Thermal Engineering Int’l. (“TEI”), you request a binding ruling regarding whether six individual parts or components may be eligible for duty free entry per subheading 9813.00.0520, of the Harmonized Tariff Schedule of the United States (“HTSUS”) as temporary importations under bond (“TIB”). We also take into consideration your correspondences of December 13 and 19, 2018. Our decision follows.
FACTS:
TEI wishes to import six individual parts: the main vane, chevron vane spacer, end vane element, double bend vane element, leading single bend vane element, and trailing single bend vane element. These parts will be subjected to a welding operation resulting in a “Chevron Vane Assembly,” (“CVA”) a finished product which will be exported. CVAs are used in nuclear power plants utilizing the Rankine cycle, the fundamental operating cycle of power plants wherein an operating fluid is continuously evaporated and condensed. Specifically, the CVAs are packed together in vane banks and structurally mounted into a moisture separator system so that they may be utilized for wet steam moisture removal by reducing the heating steam demand. The aforementioned parts are fit into a proprietary jig fixture and subjected to a welding process using “automated electronic resistance spot welding.” This creates “pocket depths” that allow segregation of the liquid and gas phases of wet steam. As explained by TEI, prior to welding, the components are loose parts, and they cannot be installed into a moisture separator system or used to separate moisture and segregate the liquid and gas phases of wet steam. Only when assembled per TEI’s proprietary design and welded together are these CVAs useful in nuclear power plants.
You also indicated that it is not anticipated that there will be any waste or scrap from the preparations which the imported components undergo. However, in the event that any waste or scrap is generated as a result of the welding, TEI will consult with its customs broker, for an appropriate resolution with U.S. Customs and Border Protection (“CBP”). Your submission also included a statement of the use to be made of the articles, and a declaration that the articles are not to be put to any other use and that they are not imported for sale or sale on approval. Lastly, TEI asserts that the finished assemblies will be exported within the TIB required timeframe. In sum, TEI seeks a binding ruling confirming that the aforementioned operations qualify as a “processing” such that the parts are eligible for entry under TIB.
ISSUE:
Whether the six components are eligible for duty-free treatment under subheading 9813.00.0520, HTSUS?
LAW AND ANALYSIS:
General Note 1, HTSUS, mandates that all merchandise imported into the United States is subject to duty unless specifically exempted therefrom. Pursuant to U.S. Notes 1(a) and (c) of Subchapter XIII of Chapter 98 of the HTSUS, which contains subheading 9813.00.0520, HTSUS, articles to be processed into articles manufactured or produced in the United States may enter into the United States temporarily free of duty under a TIB, for exportation within one year from the date of importation. This one year period may be extended for one or more additional periods, which when added to the initial period may not exceed three years. See 19 C.F.R. § 10.37. The imported merchandise may not be imported for the purpose of a sale or sale on approval. Subchapter XIII of Chapter 98 of the HTSUS, U.S. Note 1 (a). (“Ch. 98, Sub. XIII, U.S. Note 1(a), HTSUS”); see Louise & Co. v. United States, 8 Ct. Cust. App. 430, T.D. 37669 (1918) (concluding that when sales occur in the United States, to effect the exportation of merchandise, such sales are permissible and the merchandise can still be entered under a TIB).
In addition, there are two prerequisites that must be met for merchandise to be admitted under subheading 9813.00.05, HTSUS. First, merchandise admitted under subheading 9813.00.05, HTSUS may not be processed into “alcohol, distilled spirits, wine, beer or any dilution or mixture of any or all of the foregoing; a perfume or other commodity containing ethyl alcohol . . . ; or a product of wheat. See Ch. 98, Sub. XIII, U.S. Note 2(a), HTSUS. Second, if the processing results in an article other than that described above in U.S. Note 2(a):
A complete accounting will be made to the Customs Service for all articles, wastes and irrecoverable losses resulting from such processing; and
All articles and valuable wastes resulting from such processing will be exported or destroyed under customs supervision within the bonded period; except that in lieu of the exportation or destruction of valuable wastes, duties may be tendered on such wastes at rates of duties in effect for such wastes at the time of importation.
Ch. 98, Sub. XIII, U.S. Note 2(b), HTSUS.
Subheading 9813.00.0520, HTSUS does not define the term “processed.” Through its rulings however, CBP has defined and explained the term, for purposes of TIB. In Headquarters Ruling (“HQ”) 224661, dated January 11, 1994, we explained that “[t]he processing can be a relatively minor procedure or extensive enough to be considered a manufacture or production.” See also CBP Drawback Regulations found at 19 C.F.R. § 190.2 (“Manufacture or production means a process, including, but not limited to, an assembly, by which merchandise is either made into a new and different article having a distinctive name, character or use; or is made fit for a particular use even though it is not made into a new and different article.) (emphasis added). CBP has also “liberally interpreted this provision [heading 9813.00.05 HTSUS] to include processes which would not otherwise qualify as a manufacture or production for drawback under 19 U.S.C. 1313(a) or (b).” HQ 226589 (Mar. 1, 1996); see also HQ 957424 (May 12, 1995) (determining that slitting steel is an allowable operation under subheading 9813.00.05 even though it did not rise to the level of a manufacture.)
An article is “processed” when the “result is a change in the character and use” of the merchandise to meet certain customer specifications. HQ 229962 (Aug. 1, 2003). In HQ 229962, we found that blending and grading wheat is a “process” for TIB purposes, because the character and use of the wheat was changed; specifically, the “character is changed in the grade, protein level, moisture content or falling number, and the use is changed to meet certain customer specifications.” Id. In HQ 230286, dated April 12, 2004, we found that “creating welded tube from the titanium strip by rolling, welding and cutting is a process within the meaning of subheading 9813.00.05, HTSUS, and the titanium strip may be entered into the U.S. under subheading 9813.00.05, HTSUS.” (emphasis added). We also determined that the “welded tubing is an article manufactured or produced in the U.S., because, when compared with the imported titanium strip, the welded tubing is a new and different article having a distinctive name, character and use.” Id. (citing Anheuser-Busch v. United States, 207 U.S. 556 (1908)).
The welding method used by TEI to produce CVAs from the six imported parts constitutes a “process” within the meaning of subheading 9813.00.0520, HTSUS based upon our ruling in HQ 230286 (Apr. 12, 2004). Welding the components here is similar to the welding that occurred in HQ 230286 in that both operations result in a new and different article having a distinctive, name character and use. See id. The combined components (the main vane, chevron vane spacer, end vane element, double bend vane element, leading single bend vane element, and trailing single bend vane element) take on a distinct name “Chevron Vane Assembly” after undergoing the welding process, as they become a new and different article. See id. The character and use of the components change to become a CVA which can be used in nuclear power plants that utilize the Rankine cycle, which is not possible when the materials are in their original state. See HQ 229962 (Aug. 1, 2003) (finding that the blending and grading of wheat was a process as the character and use of the wheat was changed). As such, the welded components can now function in moisture separator systems so that they may be utilized for wet steam moisture removal by reducing the heating steam demand. See id. Moreover, there is a change in both the character and use of the parts, because, as indicated above, prior to welding, the components are just loose parts, as they cannot be installed into a moisture separator system or be used to separate moisture and segregate the liquid and gas phases of wet steam. See id. Only when assembled and welded per TEI’s proprietary design are these CVAs useful in nuclear power plants. See id. Accordingly, similar to HQ 229962, we find that the welding method is a “process.”
The first prerequisite for admittance under heading 9813.00.05, HTSUS has been met, because the CVAs will not be processed into alcohol, distilled spirits, wine, beer or any dilution or mixture of any or all the aforementioned; a perfume or other commodity containing ethyl alcohol; or a product of wheat. See Ch. 98, Sub XIII, U.S. Note 2(a), HTSUS. However, with respect to the second prerequisite, if the processing described here results in anything other than CVAs, TEI must provide CBP with a complete accounting for all articles, wastes and irrecoverable losses resulting from the aforementioned processing. Additionally, all articles and valuable wastes resulting from the processing must be exported or destroyed under CBP supervision within the bonded period, except that in lieu of exportation or destruction of valuable wastes, duties may be tendered on such wastes at rates of duties in effect for such wastes at the time of importation. Ch. 98, Sub. XIII, U.S. Note 2(b), HTSUS.
Accordingly, the parts subjected to the welding process are eligible for duty-free TIB treatment under subheading 9813.00.05.20, HTSUS, as articles to be processed into articles manufactured or produced in the United States so long as all regulatory requirements are met. Specifically, irrespective of the fact that you submitted a statement of the use to be made of the articles, and a declaration that the articles are not to be put to any other use and that they are not imported for sale or sale on approval, you must resubmit this declaration and statement with each TIB entry summary, in addition to the data usually shown on a regular consumption entry summary. See 19 C.F.R. § 10.31(a)(3). Additionally, in order to satisfy the requirements for the TIB, the imported article must be timely exported. An “exportation” is defined as “a severance of goods from the mass of things belonging to this country with an intention of uniting them to the mass of things belonging to some foreign country.” Swan & Finch Co. v. United States, 190 U.S. 143, 145 (1903); see also 19 C.F.R. § 101.1. Moreover, CBP’s regulation, 19 C.F.R. § 10.38, requires that an application for exportation be made on CBP Form 3495. Finally, the parts will be eligible for TIB entry only if the CVAs are not sold within the United States for domestic use or consumption. See HQ 227704 (Feb. 22, 2000) (citing T.D. 54624(25)(1958)). However, the CVAs may be sold in the United States for export to a foreign purchaser, as this is not considered imported for sale or sale on approval within the meaning of the TIB regulations. See, HQ 225700 (Jun. 16, 1995) (citing C.S.D. 79-96, T.D. 54640 (25)). Please note that if the CVAs are exported to Mexico or Canada, then duty-deferral restrictions under the North American Free Trade Agreement or the United States-Mexico-Canada Agreement may be applicable.
HOLDING:
Based upon the foregoing, TEI’s welding operation constitutes a “process” such that the components described are eligible for duty free TIB treatment under subheading 9813.00.05, HTSUS, so long as all regulatory conditions are met.
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 Customs Service 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.” If the terms of the import or export contracts vary from the facts stipulated to herein, this decision shall not be binding on CBP as provided for in 19 C.F.R. § 177(b)(1), (2) and (4), and § 177.9(b)(1) and (2).
Sincerely,
Gail G. Kan, Chief
Entry Process and Duty Refunds Branch