Applicability of HTSUS subheading 9802.00.60 to stainless steel coil from Germany; metal; scrap; melting; punching; bending; stamping

HQ 557690 April 7, 1994 CLA-2 CO:R:C:S 557690 MLR CATEGORY: Classification TARIFF NO.: 9802.00.60 Mr. Howard Atkinson SB International Inc. P.O. Box 190628 Dallas, Texas 75219 RE: Applicability of HTSUS subheading 9802.00.60 to stainless steel coil from Germany; metal; scrap; melting; punching; bending; stamping Dear Mr. Atkinson: This is in reference to your letters of November 10, 1993, and April 5, 1994, concerning the applicability of subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS), to stainless steel coil from Germany. FACTS: SB International Inc. ("SB") purchases U.S.-origin stainless steel scrap metal from U.S. suppliers and sells it to a customer in Germany who utilizes the material in the manufacture of new stainless steel. In Germany, the processing basically involves melting the raw scrap metal and reforming it into steel sheets. SB purchases these sheets and imports them into the U.S., mainly in coil form, banded to wooden pallets. The coils are then sold to U.S. manufacturers of appliances and machinery. In the U.S., the processing includes, but is not limited to, punching, stamping and bending as required in the manufacturing process of the finished products. You enclose for our consideration certificates from your main U.S. metal supplier, the German importer/processor and a major consumer of the finished stainless steel who attest to the materials' origin and processing. ISSUE: Whether the stainless steel coil will be eligible for the partial duty exemption available under subheading 9802.00.60, HTSUS, when imported into the U.S. LAW AND ANALYSIS: Subheading 9802.00.60, HTSUS, 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). We have consistently ruled that "obsolete" and "industrial" scrap metal is eligible under subheading 9802.00.60, HTSUS, only if it is shown that all of the metal articles from which the scrap was obtained were manufactured in the U.S. or subjected to a final process of manufacture in the U.S. See Headquarters Ruling Letter (HRL) 555557 dated April 15, 1991; HRL 554750 dated March 14, 1988, and HRL 555691 dated May 10, 1991. It appears that this requirement is satisfied based upon the certification from your main U.S. supplier which indicates that the 18/8 stainless steel scrap metal sold to you is of U.S. origin. In C.S.D. 84-49, 18 Cust. Bull. 957 (1983) we stated that: [f]or purposes of item 806.30, Tariff Schedules of the United States (TSUS) (precursor to 9802.00.60, HTSUS), 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. In HRL 555037 dated June 24, 1988, scrap steel was purchased from a U.S. supplier and shipped abroad where it was manufactured into hot rolled, cold rolled, galvanized and stainless coils or sheets, bars and wires. The steel was then returned to the U.S. where manufacturers performed operations consisting of roll forming, machine punching, stamping, drawing, spot or arc welding, peeling, polishing or a combination of these operations. It was held that the manufacture of steel into hot rolled, cold rolled, galvanized and stainless coils changed the shape of the metal and imparted a new and different characteristic which became an integral part of the metal itself that did not exist prior to the processing, thereby complying with the "further processing" requirement of the foreign segment of item 806.30, TSUS. The U.S. operations were also sufficient to comply with the requirements of item 806.30, TSUS. In this case, the melting and reforming of the scrap metal in Germany clearly changes the shape of the metal and imparts significant new characteristics which satisfy the foreign "further processing" requirement. Furthermore, to the extent that all of the returned metal coils will be subjected to punching, stamping and bending operations, we find that the domestic "further processing" requirement of subheading 9802.00.60, HTSUS, is satisfied pursuant to C.S.D. 84-49 and HRL 555037. HOLDING: On the basis of the information submitted, we find that the processes performed in Germany on the exported U.S.-origin scrap satisfies the foreign "further processing" requirement of subheading 9802.00.60, HTSUS. Furthermore, the punching, stamping and bending operations conducted in the U.S. on the imported stainless steel coils also constitute "further processing." Consequently, provided that the metal articles from which the scrap was obtained were manufactured or subjected to a process of manufacture in the U.S., the imported stainless steel coils will be entitled to entry under subheading 9802.00.60, HTSUS, provided the documentary requirements of 19 CFR 10.9 are satisfied. Sincerely, John Durant, Director