Aluminum Steel Sheet in Coil; Eligibility for subheading 9802.00.50, HTSUS; repairs or alterations

HQ H278563 November 23, 2016 OT:RR:CTF:VS H278563 CMR CATEGORY: Classification TARIFF NO.: 9802.00.50 Diana J. Fournier Kloeckner Metals Corporation 9804 Norwalk Boulevard Suite A Santa Fe Springs, CA 90670 RE: Aluminum Steel Sheet in Coil; Eligibility for subheading 9802.00.50, HTSUS; repairs or alterations Dear Ms. Fournier: Your request of March 7, 2016 requesting a ruling on the eligibility of certain aluminum steel sheet in coil form (hereinafter, coil) imported into the United States and then exported to Canada for painting was referred to this office for a decision. You inquired as to whether you would only need to pay duty on the value of the painting performed in Canada when the aluminum coil is reimported into the U.S. FACTS: You indicate that your company purchases the coil from a third party who imported it into the U.S. from Indonesia. You informed our New York office that the coil may also be imported from Brazil and further explained the processing in Canada. The coil is imported into the U.S. as unpainted coil. After purchasing it, your company exports it to Canada where it will undergo a paint coating process. While in Canada, the coil will be subject to the following processing: uncoiling, chemical cleaning, heated pretreatment sealing, drying, coating or painting with an applicator roll, a second paint application with an engraved coating or print roll for the wood grain print pattern, curing, water and air cooling, drying and recoiling. The final use of the painted aluminum coil is as decorative ceiling panels. After re-importation into the U.S. from Canada, the coil must be further processed by cutting to size and flattening to create the ceiling panels. You inquire as to whether the coil returning to the U.S. from Canada after undergoing the described painting process will qualify for a partial duty exemption so that your company need only pay duty on the value of the painting process. Subheading 9802.00.50, Harmonized Tariff Schedule of the United States, provides for articles returned to the United States after having been exported for repairs or alterations not covered under a warranty. As the duty rate would be based on the North American Free Trade Agreement (NAFTA) rate for the finished good from Canada, and that rate is Free, if the coil qualifies for classification in subheading 9802.00.50, HTSUS, it would enter from Canada duty free. ISSUE: Whether the coil exported to Canada for the described painting process will qualify for the duty exemption under subheading 9802.00.50, HTSUS. LAW AND ANALYSIS: Subheading 9802.00.50, HTSUS, provides a full or partial duty exemption for articles returned to the United States after having been exported to be advanced in value or improved in condition by means of repairs or alterations, not pursuant to a warranty. Articles returned to the United States after having been repaired or altered in Canada, may be eligible for a duty exemption under this provision, i.e., the articles are subject to duty upon the value of the repairs or alterations using the applicable rate under the NAFTA. In order to receive this preferential duty treatment, the importer must ensure that the documentary requirements of section 181.64, CBP Regulations, (19 C.F.R. § 181.64), are satisfied. Section 181.64(a) states, in pertinent part: . . . “repairs or alterations” means restoration, addition, renovation, redyeing, cleaning, resterilizing, or other treatment which does not destroy the essential character of, or create a new and commercially different good from, the good exported from the United States. Classification under subheading 9802.00.50, HTSUS, is precluded where: (1) the exported articles are not complete for their intended use and the foreign processing operation is a necessary step in the preparation or manufacture of finished articles; or (2) the operations performed abroad destroy the identity of the exported articles or create new or commercially different articles through a process of manufacture. See Guardian Indus. Corp. v. United States, 3 Ct. Int’l Trade 9 (1982), and Dolliff & Co., Inc., v. United States, 81 Cust. Ct. 1, C.D. 4755, 455 F. Supp. 618 (1978), aff’d, 66 C.C.P.A. 77, C.A.D. 1225, 599 F.2d 1015 (1979), wherein the court found that the processing of U.S.-origin greige fabric in Canada by heat setting, chemical scouring, dyeing and treating with chemicals, produced finished fabric and could not be considered as alterations. The court stated that: . . . repairs or alterations are made to completed articles and do not include intermediate processing operations, which are performed as a matter of course in the preparation or manufacture of finished articles. In this case, the processing in Canada, that is, the painting of the coil, is a step in the production process of the coil which is completed after the coil is reimported. As the processing in Canada is not processing of a finished article, but a necessary step in the production of a finished good, the coils exported to Canada for processing do not qualify for subheading 9802.00.50, HTSUS, treatment. HOLDING: The aluminum steel sheet in coil form which is processed in Canada and reimported into the U.S. does not qualify for subheading 9802.00.50, HTSUS, treatment. Upon importation into the U.S. from Canada, the coil is dutiable based upon the full value of the coil. A copy of this ruling letter should be attached to the entry documents filed at the time the goods are entered. If the documents have been filed without a copy, this ruling should be brought to the attention of the Customs officer handling the transaction. Sincerely, Monika R. Brenner, Chief Valuation and Special Programs Branch