HQ 555915

June 17, 1991

CLA-2 CO:R:C:S 555915 DSN

CATEGORY: Classification

TARIFF NO.: 9802.00.60

Mr. Jeffrey J. Kost

Project Manager-Substations

R Jennings Manufacturing Company, Inc.

8 Glens Falls Technical Park

Glens Falls, New York 12801

RE: HTSUS subheading 9802.00.60; eligible article; further

processing; galvanizing; C.S.D. 84-89; 19 CFR 10.9; 555530;

553869; 086289; 555432; Intelex

Dear Mr. Kost:

This is in response to your letter of January 11, 1991,

requesting a ruling on the applicability of subheading

9802.00.60, Harmonized Tariff Schedule of the United States

(HTSUS), to certain steel structural components imported from

Canada.

FACTS:

According to your submission, U.S.-origin material

consisting of angles, channels, wide flanges, pipes, plates, and

fasterners are sent to Canada for a hot dip galvanizing

operation. The steel structural components are then returned to

the U.S. for what you describe as the \"final stages of

fabrication.\"

You state that the operations performed on the components

when returned to the U.S. \"might include grinding, drilling,

punching, threading, forming, etc.\" We understand from

information you provided by telephone to our New York office that

the threading operation is performed in the U.S. after

galvanization because, if performed prior to galvanizing, the

zinc will eradicate any pre-existing threads. With respect to

grinding, in some instances, it may be necessary to remove any

zinc icicles which may have formed during the galvanization

process. The process described as \"forming\" consists of

straightening the components by using large clamping devices or

vices to correct any warping that may have occurred due to the

steel being subjected to extremely high temperatures in the

galvanizing tank. The \"punching\" process involves reaming out

pre-existing holes which may have become filled with zinc during

the Canadian galvanizing operation, while new holes may have to

be drilled at the customers\' request. Subsequent to the

performance of any of the above-described operations, the

structural components are partially assembled and then shipped to

U.S. buyers.

ISSUE:

Whether the steel structural components will be entitled to

the partial duty exemption under HTSUS subheading 9802.00.60

when returned to the U.S.

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 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 the U.S., provided there is compliance with the

documentary requirements of section 10.9, Customs Regulations

(19 CFR 10.9).

In C.S.D. 84-89, 18 Cust.Bull. 957 (1983) we stated that:

\[f\]or purposes of item 806.30, TSUS, 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 precursor provision to HTSUS subheading 9802.00.60 was item

806.30, Tariff Schedules of the United States (TSUS).)

In this case, the steel structural components are eligible

articles of metal for purposes of HTSUS subheading 9802.00.60.

The galvanization process performed in Canada is considered a

\"further processing\" operation, as it imparts new and different

characteristics which become an integral part of the steel.

See, Headquarters Ruling Letters (HRL) 555530 of February 7, 1990

and HRL 553869 of November 4, 1985, which held that

electroplating with nickel, brass, or chrome is an operation

sufficient to comply with the \"further processing\" requirement of

TSUS, item 806.30.

With respect to the operations performed in the U.S. upon

return of the components, we find that the threading and drilling

processes satisfy the domestic \"further processing\" requirement

of HTSUS subheading 9802.00.60, as they clearly impact upon the

metal and impart new and different characteristics which become

an integral part of the steel. See C.S.D. 84-89 and HRL 554965

dated September 6, 1989.

However, we are not satisfied from the information presented

that the remaining operations to which the structural components

may be subjected in the U.S. are sufficient to satisfy the

domestic \"further processing\" requirement. In Intelex Systems

Inc. v. United States, 59 CCPA 138, C.A.D. 1055, 460 F.2d 1083

(1972), the court discussed the type of processing that would

qualify as \"further processing\". In that case, copper wire and

insulating paper were processed abroad into lead-covered

telephone cable and imported into the U.S. on cable rolls. The

cable was then merely strung on poles after wire stripping and

splicing operations. The issue presented was whether the

imported telephone cable was \"returned to the U.S. for further

processing,\" within the meaning of paragraph 1615(g)(2)(B),

Tariff Act of 1930, as amended (a precursor provision of HTSUS

subheading 9802.00.60). The court considered the words \"process\"

and \"processing\" and stated that:

\...its meaning \[processing\] must be controlled by the

particular context in which it is used here and the

legislative intent. (Citation omitted). When we look to

the context of \[paragraph\] 1615(g)(2), we do not think that

Congress had in mind that any and all kinds of \'processing\'

would suffice to bring the article within the purview of

\'processing\' related to the kind of processing to which the

article had been subjected before\--namely, \'a process of

manufacture,\' as expressed in \[paragraph\] 1615(g)(2)(A). We

continue of the view that Congress used the expression

\'subjected to a process of manufacture\' as synonymous with

\'processing\' (citation omitted), and that the \'further

processing\' referred to in {paragraph} 1615(g)(2) is a

further manufacturing process.

The court stated that it did \"\...not think that processes to

which an already completed article were subjected, incident to

using it for the purpose intended, were necessarily part and

parcel of manufacturing processes performed on that article.\"

(Court\'s emphasis). Therefore, finding no evidence that the

operations performed in the U.S. on the imported telephone cable

constituted a process of manufacture in any common or commercial

sense, the court determined that the partial duty exemption was

inapplicable to the imported cable.

In the instant case, we find that the operations of removing

by grinding any zinc icicles which may have formed during the

foreign galvanizing process, and removing by punching any zinc

which may have filled pre-existing holes, are minor finishing

operations performed on essentially completed articles. These

operations clearly do not impart new and different

characteristics which become an integral part of the steel. See,

HRL 555432 of July 26, 1990 (smoothing out the weld surface on

the inside of a flange and pipe by grinding appears to be a minor

finishing operation which is incidental to the assembly of the

flange and pipe), and HRL 086289 dated March 13, 1990 (minor

grinding of bracket edges is not \"further processing.\"

Similarly, straightening the components to correct any

warping that may have occurred during the heating and galvanizing

operation in Canada serves merely to restore the structural

components\' original shape and does not, in our opinion, impart

new and different characteristics which become an integral part

of the metal. We do not view this operation as a process of

manufacture in any common or commercial sense.

The subsequent partial assembly operations performed in the

U.S. prior to the shipment of the components to U.S. buyers is

also not considered \"further processing\" under this tariff

provision. See C.S.D. 84-89 and HRL 555432 dated July 26, 1990.

HOLDING:

On the basis of the information submitted, it is our opinion

that the galvanizing process performed in Canada to the steel

structural components satisfy the foreign \"further processing\"

requirement under HTSUS subheading 9802.00.60. However, of the

operations to which the returned components may be subjected in

the U.S., only the threading and drilling operations satisfy the

domestic \"further processing\" requirement. Therefore, only those

structural components which are threaded and/or drilled upon

return to the U.S. will be entitled to the partial duty

exemption available under this tariff provision, assuming

compliance with the documentary requirements of 19 CFR 10.9.

Sincerely,

John Durant, Director

Commercial Rulings Division

cc: Assistant Area Director,

NIS (859640)