Request for Internal Advice 4/92; Applicability of partial duty exemption to galvanized steel sheet under subheading 9802.00.60, HTSUS

HQ 556591 June 4, 1992 CLA-2 CO:R:C:S 556591 RAH CATEGORY: Classification TARIFF NO.: 9802.00.60 District Director U.S. Customs Service U.S. Customhouse 1 East Bay Street Savannah, Georgia 31401 RE: Request for Internal Advice 4/92; Applicability of partial duty exemption to galvanized steel sheet under subheading 9802.00.60, HTSUS Dear Sir: This is in response to your request for internal advice dated November 7, 1991, regarding an inquiry from Nissho Iwai American Corporation (NIAC) on the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), to certain steel products. FACTS: NIAC is negotiating a contract with An Mau Steel, a mill in Taiwan, whereby hot rolled coil will be purchased by An Mau Steel from a U.S. company and shipped to Taiwan. An Mau Steel will process the hot rolled coil into galvanized material and sell it to NIAC. NIAC customers in the United States purchase the steel and then further process it by roll-forming and/or blanking and painting. ISSUE: Whether galvanizing, roll-forming and/or blanking and painting of steel constitute further processing operations under subheading 9802.00.60, HTSUS. - 2 - LAW AND ANALYSIS: 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 U.S. 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 the U.S., provided the documentary requirements of section 10.9, Customs Regulations (19 CFR 10.9), are met. In C.S.D, 84-49, 18 Cust. Bull. 957 (1983) we stated that: [f]or purposes of item 806.30, TSUS [the predecessor tariff provision to HTSUS subheading 9802.00.60], 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. The foreign part of the dual "further processing" requirement is satisfied in Taiwan, where the steel undergoes a galvanization process. Customs has long held that hot-dip galvanizing or electro-galvanizing are operations which satisfy the "further processing" requirement of subheading 9802.00.60, HTSUS. Headquarters Ruling Letter (HRL) 086289 dated March 13, 1990, citing HRL 555001 dated December 16, 1988 and HRL 067675 dated February 12, 1982. Additionally, the steel is returned to the United States for further processing, which includes roll-forming and/or blanking and painting. Although painting is not a further processing operation as delineated in C.S.D. 84-94, supra, in this case it is done in conjunction with operations which constitute further processing. Rolling-forming steel clearly constitutes a manufacturing process which is sufficient to satisfy the - 3 - domestic processing requirement. C.S.D. 90-32(6); HRL 555001 dated December 16, 1988. Moreover, blanking (which is analogous to cutting) constitutes "further processing." C.S.D. 98-27(10); HRL 037347 dated July 14, 1975 (flattening and cutting to either specific or standard warehouse lengths constitute "further processing"). Accordingly, it is our opinion that the procedures in question are sufficient "further processing" operations both abroad and on return to the United States to entitle the imported galvanized sheet to the partial duty exemption available under subheading 9802.00.60, HTSUS, upon compliance with the documentary requirements of 19 CFR 10.9. It should be noted that there is no requirement under subheading 9802.00.60, HTSUS, that the identity of the person who performs the "further processing" in the United States be known at the time the material is exported from the United States, or at the time the returned material enters the United States. There is also no requirement that the same person who exported the material, or the same person who imports the material must perform the "further processing" in the United States. However, the importer should satisfy the district or area director of the actual performance of "further processing" in the United States. See, 19 CFR 10.9, and HRL 556080 dated August 27, 1991. In addition, the domestic "further processing" should be conducted within a reasonable time following importation. See, 19 CFR 10.9, and HRL 556080, supra. In HRL 554965 dated September 6, 1989, Customs found that under the circumstances of that case, four months was a reasonable period of time to warehouse stainless steel sheets in the United States before being further processed. HOLDING: Galvanizing, roll-forming and/or blanking of steel constitute further processing operations under subheading 9802.00.60, HTSUS. Accordingly, the steel in question will be entitled to the partial duty exemption available under that tariff provision when returned to the United States, upon compliance with the documentation requirements of 19 CFR 10.9. Sincerely, John Durant, Director Commercial Rulings Division