Dutiable status of certain exit door devices returned to the U.S. from Canada; drilling; further processing; C.S.D. 84-49; 555432

HQ 555938 May 20, 1991 CLA-2 CO:R:C:S 555983 SER CATEGORY: Classification TARIFF NO.: 9802.00.60 Mr. Ian D. Rodrigues Rapid Customs Consultants Inc. Law Chambers Suite #1900 P.O. Box 40 T.D. Centre, Royal Trust Tower Toronto, Ontario Canada M5K 1B7 RE: Dutiable status of certain exit door devices returned to the U.S. from Canada; drilling; further processing; C.S.D. 84-49; 555432 Dear Mr. Rodrigues: This is in response to your letter of February 5, 1991, on behalf of Von Duprin, concerning the dutiable status of certain exit door devices to be returned to the U.S. from Canada following drilling operations. FACTS: The goods at issue are referred to as "lever arms" and "55 rim center/end cases" and are parts of emergency exit doors. These items, presumably of U.S. origin, will be sent to Canada to be drilled to provide points of access for further assembly in the U.S. of a variety of components to the exit door devices. When the items are returned to the U.S., you ask whether duty will be assessed on the full value of the merchandise or only on the Canadian "value added." ISSUE: Whether the exit door devices will be dutiable on their full value or will be entitled to partial duty exemption under subchapter II, Chapter 98, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), when returned to the U.S. -2- LAW AND ANALYSIS: U.S. Note 2(a), subchapter II, Chapter 98, HTSUSA, provides in pertinent part that "... any product of the United States which is returned after having been advanced in value or improved in condition abroad by any process of manufacture ..., if subject to a duty which is wholly or partly ad valorem, shall be dutiable, except as otherwise prescribed in this part, on its full value ...." Subchapter II, Chapter 98, HTSUSA, sets forth certain tariff provisions which permit a partial duty exemption for articles that are returned after having been advanced in value or improved in condition while abroad. One such provision is subheading 9802.00.60, HTSUSA, which 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 subject 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 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 of the U.S., provided there is compliance with the documentary requirements of 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 [precursor to 9802.00.60 HTSUSA], 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. -3- The operations in Canada are clearly encompassed by C.S.D. 84-49, which states that drilling constitutes further processing. However, according to your submission, upon return to the U.S., the metal devices will only undergo certain assembly operations to complete the articles. We have ruled in Headquarters Ruling Letter 555432 dated July 26, 1990, that assembly operations do not satisfy the domestic further processing requirement of subheading 9802.00.60, HTSUSA. Therefore, as the assembly operations performed with the metal exit door devices do not fulfill the domestic further processing requirement under this subheading, the devices are not entitled to the partial duty exemption. We are unaware of any other tariff provision which would permit a complete or partial duty exemption for the returned exit door devices. HOLDING: On the basis of the information submitted, it is our opinion that the assembly operations performed in the U.S. do not satisfy the requisite domestic further processing required by subheading 9802.00.60, HTSUSA. Therefore, the metal exit door devices will not be entitled to classification under this tariff provision, and will be dutiable on their full value when returned to the U.S. Sincerely, John Durant, Director Commercial Rulings Division