HQ 555817

April 17, 1991

CLA-2 CO:R:C:S 555817 KCC

CATEGORY: Classification

TARIFF NO.: 9801.00.10

Mr. Octavio Saavedra

Corrigan Dispatch Company

Box 3610

1350 Cheers Boulevard

Brownsville, Texas 78523-3610

RE: Foreign and domestic scrap metal subjected to a shredding

process in the U.S. and then shipped to Mexico for

sorting.19 CFR 10.12(e); substantial transformation

Dear Mr. Saavedra:

This is in response to your letter dated November 14, 1990,

to the District Director, Laredo, Texas, on behalf of Newell

International Inc., requesting a ruling concerning the

applicability of subheading 9801.00.10, Harmonized Tariff

Schedule of the United States (HTSUS), to scrap metal imported

from Mexico. Your request was forwarded to this office for the

preparation of a response.

FACTS:

Newell International Inc. intends to purchase old crushed

scrap cars and other miscellaneous metal items from junk and

salvage yards in the U.S. In the U.S., these metal items of

domestic- and foreign-origin are put in a high power shredding

machine to reduce the size of the pieces. The mixed shredded

scrap metal is then shipped to Mexico where it will be separated

into different piles by type of metal, such as copper, aluminum,

zinc, etc. Once a full trailer load of one type of metal is

accumulated, it will be imported into the U.S.

ISSUE:

Whether the scrap metal will qualify for the duty exemption

available under subheading 9801.00.10, HTSUS, when imported into

the U.S.

LAW AND ANALYSIS:

Subheading 9801.00.10, HTSUS, provides for duty-free entry

of U.S. products that are exported and returned without having

been advanced in value or improved in condition by any process of

manufacture or other means while abroad. Articles satisfying the

above conditions of the statute will be afforded duty-free

treatment, provided the documentary requirements of section 10.1,

Customs Regulations (19 CFR 10.1), are met.

According to section 10.12(e), Customs Regulations (19 CFR

10.12(e)), a \"product of the United States\" is an article

manufactured within the customs territory of the U.S. and may

consist wholly of U.S. components or materials, of U.S. and

foreign components or materials, or wholly of foreign components

or materials. If the article consists wholly or partially of

foreign components or materials, the U.S. manufacturing process

must be such that the foreign components or materials are

substantially transformed into a new and different article, or

are merged into a new and different article.

A substantial transformation occurs when, as a result of

manufacturing processes, a new and different article emerges,

having a distinctive name, character, or use, which is different

from that originally possessed by the article or material before

being subjected to the manufacturing process. See, Anheuser-

Busch Association v. United States, 207 U.S. 556 (1908), and

section 10.14(b), Customs Regulations (19 CFR 10.14(b)).

We have held that foreign-origin scrap subjected to

processes such as dismantling, shredding, and crushing, whether

or not accompanied by sorting, grading, or other similar

activities to promote the stability or utility of the scrap, was

not subjected to a process of manufacture in the U.S. so as to

make it an eligible article of metal for purposes of subheading

9802.00.60, HTSUS. See, Headquarters Ruling Letter (HRL) 554750

dated September 23, 1988, and HRL 555557 dated April 15, 1991.

We are of the opinion that shredding the scrap metal does

not result in a substantial transformation of the foreign-

origin metal into a \"product of the U.S.\" The metal does not

undergo a name change during the shredding operation. Scrap

metal exists before and after the shredding operation.

Additionally, the character and use of the metal has not changed.

The shredding operation merely reduces the scrap metal from large

pieces into smaller pieces. Therefore, as the exported shredded

scrap consists of both U.S.- and foreign- origin metal, the

sorted scrap metal will not be entitled to duty-free treatment

under subheading 9801.00.10, HTSUS, when imported into the U.S.

HOLDING:

The foreign scrap metal is not substantially transformed

into a \"product of the U.S.\" by the U.S. shredding process. As

the mixed foreign and domestic shredded scrap metal is not

totally a U.S. product, it is not eligible for duty-free

treatment under subheading 9801.00.10, HTSUS.

Sincerely,

John Durant, Director

Commercial Rulings Division