CLA-2-84:OT:RR:NC:N1:105
Douglas N. Jacobson
Jacobson Burton Kelley PLLC
1725 I Street, NW Suite 300
Washington, DC 20006
RE: The applicability of subheading 9802.00.50 to coated ceramic substrate from Mexico
Dear Mr. Jacobson:
In your letter dated August 19, 2019, you requested a ruling on behalf of your client, Johnson Matthey Inc., on a coated ceramic substrate.
The product incorporates two main components that are shipped from the United States to Mexico for conversion into a coated ceramic substrate used in catalytic converters. The bare ceramic substrate is a round ceramic base with a honeycomb-shaped body structure. The platinum group metals (PGM) are sprayed onto the bare ceramic substrate in a washcoat process. The final product is the coated ceramic substrate utilized to reduce toxic gases and pollutants in automobile exhaust gas into less-toxic pollutants.
You inquire as to whether the re-imported coated ceramic substrate is eligible for special treatment under subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), which 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. As it applies to merchandise returning from Mexico under subheading 9802.00.50, Title 19, Code of Federal Regulations, Section 181.64(a) (19 CFR 181.64(a)) states, in pertinent part: ‘Repairs or alterations’ means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential character of, or create a new and commercially different good from, the good exported from the United States. Classification under subheading 9802.00.50, HTSUS, is precluded where: (1) the exported articles are not complete 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. See Guardian Indus. Corp. v. United States, 3 Ct. Int’l Trade 9 (1982), and Dolliff & Co., Inc., v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff’d, 66 C.C.P.A. 77, C.A.D. 1225, 599 F.2d 1015 (1979). In considering all of the factors, it is the opinion of this office that the manufacturing process completed in Mexico substantially changes the products exported to Mexico and a new product is created. The coated ceramic substrate fails both of the tests listed above. When exported to Mexico, the ceramic substrate does not have the qualities necessary to act as a catalytic converter. Namely, the product does not have the ability to reduce the toxic gases and pollutants in exhaust gas. As stated in the request, the bare ceramic substrates would be classified in Chapter 69 while the finished good, which has the ability to reduce the toxic gases and pollutants in exhaust gas, is classified in Chapter 84. Although the products when placed side by side look very similar, they are substantially different products capable of two very different tasks. The bare ceramic substrate only has the limited ability to filter out large particles. Even with this capability the bare ceramic substrate would not be utilized in its current condition for the stated purpose. The finished product’s main purpose is to not only filter out large particles (a minor aspect of the device), but more importantly, to convert harmful gases into non-harmful gases. Thus, we find that the operations performed in Mexico do not constitute alterations within the meaning of subheading 9802.00.50, HTSUS.
The applicable subheading for the coated ceramic substrate will be 8421.39.4000, HTSUS, which provides for “Centrifuges including centrifugal dryers; filtering or purifying machinery and apparatus, for liquids or gases; parts thereof: Filtering or purifying machinery and apparatus for gases: Other: Catalytic converters.” The rate of duty will be free.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the World Wide Web at https://hts.usitc.gov/current.
This ruling is being issued under the provisions of Part 177 of the Customs Regulations (19 C.F.R. 177).
A copy of the ruling or the control number indicated above should be provided with the entry documents filed at the time this merchandise is imported. If you have any questions regarding the ruling, contact National Import Specialist Jason Christie at [email protected].
Sincerely,
Steven A. Mack
Director
National Commodity Specialist Division