Applicability of subheading 9802.00.60, HTSUS, toU.S.-manufactured steel exported to Italy for processing and returned to the U.S. for further processing

HQ W557188 July 8, 1993   CLA-2 CO:R:C:S W557188 RAH CATEGORY: Classification TARIFF NO.: 9802.00.60 Mr. Richard Terlep Exito International P.O. Box 10115 Towson, Maryland 21285   RE: Applicability of subheading 9802.00.60, HTSUS, to U.S.-manufactured steel exported to Italy for processing and returned to the U.S. for further processing Dear Mr. Terlep: This is in response to your letter of February 26, 1993, requesting a ruling on the eligibility of certain steel products for a partial duty exemption under subheading 9802.00.60, Harmonized Tariff Schedule of the United States (HTSUS). FACTS: The articles exported to Italy are stainless steel billets in random lengths with outside dimensions of 229.3 mm in three types: 314H (65,000 lbs.), 304L (65,000 lbs.), and 347H (65,000 lbs.). The stainless steel billets were manufactured in the U.S. by Armco Stainless and Alloy Products. The manufacturing process in the U.S. involved melting and refining raw material, forming stainless steel into billets and cutting to length. The items are exported to Italy where they undergo processing at two different companies. At one of the facilities the processing involves: removal of oxide layer on the outside of the billets by turning on lathe, and reducing the outside dimensions of the billets to 220 mm.  At the other facility, the processing includes: Cutting the billets into 800-1000 mm lengths; Drilling the pilot hole and radius nose of the billets; Heating and expanding the pilot hole; Reheating and extruding to outside dimensions from 2.375 inches to 7 inches; and Trimming the ends and straightening. After processing in Italy the items will be returned to the U.S. for processing which includes annealing, extruding, pickling, acid cleaning, cutting and finishing into stainless steel pipe. The finished product is stainless steel pipe that is used in heat exchangers and a wide variety of industrial processes. ISSUE: Whether the above described processing operations performed in Italy and the U.S. when returned constitute "further processing" for purposes of subheading 9802.00.60, HTSUS. 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. In the instant case, we find that the operations performed in Italy, which include cutting, drilling, heating, extruding and trimming, clearly satisfy the foreign portion of the dual "further processing" requirement. Likewise, we find that the domestic "further processing" which involves annealing, extruding, pickling, acid cleaning and cutting to create stainless steel pipe satisfy the requirements of subheading 9802.00.60, H SUS. Accordingly, the steel will be eligible for the partial duty exemption under subheading 9802.00.60,HTSUS, when returned to the U.S. HOLDING: The operations performed in I aly to the stainless steel billets (cutting, drilling, heating, extruding and trimming) and the operations performed in the U.S. when the steel is returned from Italy (annealing, extruding, pickling, acid cleaning and cutting) 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 U.S., upon compliance with the documentation requirements of 19 CFR 10.9. Sincerely, John Durant, Director Commercial Rulings Division