Applicability of partial duty exemption under HTSUS sub- heading 9802.00.60 to, and country of origin of, stainless steel bar, wire rod in coil, and angle imported from Korea. U.S. billets;C.S.D. 84-49;555356;T.D. 66-181(1);country of origin;substantial transformation;Torrington (1985);555103

HQ 555568 November 26, 1990 CLA-2 CO:R:C:V 555568 GRV CATEGORY: CLASSIFICATION TARIFF NO.: 9802.00.60 Mr. Jason Lee Sales Manager Sammi (America) Corp. 13942 Orange Avenue Paramount, California 90723 RE: Applicability of partial duty exemption under HTSUS sub- heading 9802.00.60 to, and country of origin of, stainless steel bar, wire rod in coil, and angle imported from Korea. U.S. billets;C.S.D. 84-49;555356;T.D. 66-181(1);country of origin;substantial transformation;Torrington (1985);555103 Dear Mr. Lee: This is in response to your letter of December 20, 1989, requesting a ruling on the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), to, and the country of origin of, stainless steel bar, wire rod in coil, and angle produced in Korea from U.S. billets and returned to the U.S. for further processing. We regret the delay in responding to your request. FACTS: Stainless steel billets of U.S. origin will be exported to Korea for processing into stainless steel bar, wire rod in coil, and angle. The processing in Korea entails hot-rolling, heat treating, turning or cold drawing, and pickling the billets into the various articles of metal. Upon return to the U.S., the stainless steel bar, wire rod, and angle will be further processed by cutting the bar and angle to length and further machining these products to make machine, automobile and industrial parts. The stainless steel wire rod will be cold drawn into bar or wire. ISSUES: I. Whether the stainless steel articles will qualify for the partial duty exemption under subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), when imported into the U.S. II. Whether the stainless steel articles will be considered products of the U.S. or Korea when imported into the U.S. LAW AND ANALYSIS: I. Applicability of HTSUS subheading 9802.00.60 HTSUS subheading 9802.00.60 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. This tariff provision imposes a dual "further processing" requirement on eligible articles of domestic metal--one foreign, and when returned, one domestic. Metal articles satisfying these statutory requirements may be classified under this tariff provision with duty only on the value of such processing performed outside the U.S., upon compliance with section 10.9, Customs Regulations (19 CFR 10.9). In C.S.D. 84-49, 18 Cust.Bull. 957 (1983) we stated 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 character- istics 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. We have previously ruled that converting primary forms of metal, e.g., ingots, into semi-finished or finished articles of metal by hot or cold rolling operations constitutes "further processing" for purposes of HTSUS subheading 9802.00.60, as such operations clearly change the shape of the metal. See, Headquarters Ruling Letters (HRLs) 555356 (December 26, 1989, abstracted as C.S.D. 90-32(6), 24 Cust.Bull. ___ (1990)), 037347 (July 14, 1975), 063601 (April 18, 1980), 553252 (September 26, 1984) and 845453 (October 17, 1989). Therefore, the imported stainless steel articles will satisfy the foreign "further processing" requirement. Moreover, we find that the processing performed in the U.S. on the wire rod and angle, consisting of cutting to appropriate lengths and manufacturing into various machine, automobile and industrial parts, satisfies the domestic "further processing" requirement. See, HRL 555356 (pre-sensitized offset printing press plates specially cut to length on a guillotine shearing machine--a technical process--found to constitute a "further processing" under the statute) and T.D. 66-181(1), 101 Treas.Dec. 518 (1966) (cutting metal electron tube parts to length for incorporation into the tubes constitutes "further processing"). Cold drawing the stainless steel wire rod into bar or wire in the U.S. clearly changes the shape of the metal and, therefore, also constitutes "further processing" under the statute. In this case, the stainless steel article is an eligible article of metal for purposes of HTSUS subheading 9802.00.60, as it is a base metal as provided for at additional U.S. note 1 to section XV, HTSUS. The foreign and domestic operations identified are sufficient to meet the dual "further processing" requirements of the statute applicable in this case. Accordingly, the proposed transaction will qualify for the partial duty exemption under HTSUS subheading 9802.00.60. II. Country of origin The country of origin of merchandise is the country where the merchandise is manufactured, produced, or grown. However, where manufacturing operations are performed on the merchandise in another country, resulting in the substantial transformation of the article, the second country will be considered the country of origin of the merchandise for Customs' purposes. See, for example, 19 CFR 134.1(b). A substantial transformation occurs when an article emerges from a manufacturing process with a name, character or use which differs from those of the original material subjected to the process. See, The Torrington Co. v. United States, 3 Fed.Cir. 158, 764 F.2d 1563 (1985). We have previously ruled that the hot rolling of billets into bar stock and wire rod in coil substantially transforms the metal into products of the country where the processing occurs. HRL 555103 (February 2, 1989). Accordingly, the country of origin of the stainless steel bars, wire rod in coil and angles in this case will be Korea. Regarding the applicability of voluntary restraint agreement (VRA) certification requirements, as this program is administered by the U.S. Department of Commerce, we recommend that you contact the Office of Agreements Compliance, International Trade Administration, U.S. Department of Commerce, Washington, D.C. 20230, telephone number (202) 377-3793, for the VRA requirements applicable to these articles of metal. HOLDING: On the basis of the information submitted, the stainless steel bar, wire rod in coil and angle to be imported will be subjected to sufficient processes of manufacture both abroad and on return to the U.S. to meet the "further processing" requirements of HTSUS subheading 9802.00.60, and are eligible for the partial duty exemption under this tariff provision, upon compliance with the documentary requirements of 19 CFR 10.9. The country of origin of the returned metal products will be Korea, as the manufacturing processes performed in that country on the U.S. billets substantially transform the metal articles. Sincerely, John Durant, Director Commercial Rulings Division