Application for further Review of Protest No. 3004-7-000140, contesting the denial of item 806.20, TSUS, treatment to steel piling galvanized in Canada

HQ 555384 November 24, 1989 CLA-2-CO:R:C 555384 RA CATEGORY: Classification TARIFF NO.: 806.20, TSUS (now 9802.00.50, HTSUS) District Director of Customs 909 First Avenue Room 2039 Seattle, Washington 98174 RE: Application for further Review of Protest No. 3004-7-000140, contesting the denial of item 806.20, TSUS, treatment to steel piling galvanized in Canada Dear Sir: This is in reference to your memorandum of March 15, 1988, forwarding the above-referenced protest, filed August 18, 1987, at the port of Blaine, Washington. The protest was filed against the decisions in the liquidation on August 14, 1987, of entry Nos. 110 0026965, 66, 67 and 68. FACTS: Steel sheet piling made in the U.S. was exported to Canada where it was galvanized and returned to the U.S. The galvanized piling will be used in a salt water application and the protestant claims it did not lose its identity as a result of the foreign processing, thereby enabling the operation to be treated as an alteration. Protestant states that steel sheet piling usually is not galvanized before use. ISSUE: Will the provision in subheading 9802.00.50, Harmonized Tariff Schedule of the United States (HTSUS), which authorizes a partial duty exemption for articles altered abroad, apply to sheet steel piling subjected to a galvanizing process in Canada? LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides for an allowance in duty for articles returned to the U.S. after having been exported for alterations while abroad. The articles must be finished products when they leave the U.S. and not undergo any intermediate processing to complete them in the foreign country. Also, its application is precluded where the foreign operations result in commerically different articles or where they finish the manufacturing began in the U.S. in order to meet pre- established specifications. Dolliff & Company, Inc. v. U.S., 66 CCPA 77, C.A.D. 1225, 599 F. 2nd 1015 (1979). The galvanizing process in Canada was the final step in the manufacture of steel piling which was coated with zinc in order to render it resistant to salt water corrosion. In Ferrostall Metals Corporation v. U.S., 11 CIT , 664 F. Supp. 535 (1987), the Court of International Trade held that hot-dip galvanizing of sheet steel resulted in a substantial transformation and a different product. The processing caused a change in character by significantly altering the mechanical and chemical composition of the steel and providing protection against corrosion. In the case of Guardian Industries Corporation v. U.S., 3 CIT 9 (1982), the court decided that when a foreign processing creates a new article of commerce, the operation cannot be considered to be an alteration. We held in a ruling dated February 12, 1982 (067675), that a foreign galvanizing process makes the steel articles into finished products with new and enhanced characteristics ready for their intended use as corrosion resistant materials and this process exceeds an alteration. HOLDING: The galvanizing of steel piling in Canada constitutes a substantial processing which goes beyond an alteration and precludes any exemption from duty under the provisions of subheading 9802.00.50, HTSUS. Accordingly, the protest should be denied in full. Sincerely, John Durant, Director Commercial Rulings Division