HQ 555562: Applicability of partial duty exemptions under HTSUS subheadings 9802.00.50 or 9802.00.60 to oil well drill slips created by sanding and facing the flutes and grooves of the cast wedges and heat treating, phosphate plating and painting.Dolliff;completed articles;C.S.D. 84-49;036081; 038193;555536;555103;T.D. 56166

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 555562

                        November 26, 1990

CLA-2 CO:R:C:V 555562 GRV

CATEGORY:      CLASSIFICATION

TARIFF NO.:    9802.00.50; 9802.00.60

Mr. John W. Cain
Cain Customs Brokers, Inc.
421 Texano
P.O. Box 150
Hidalgo, Texas  78557

RE:  Applicability of partial duty exemptions under HTSUS
     subheadings 9802.00.50 or 9802.00.60 to oil well drill slips
     created by sanding and facing the flutes and grooves of the
     cast wedges and heat treating, phosphate plating and
     painting.Dolliff;completed articles;C.S.D. 84-49;036081;
     038193;555536;555103;T.D. 56166

Dear Mr. Cain:

     This is in response to your letters of January 6, and 11,
and October 30, 1990, on behalf of 3D Border Industries,
requesting a ruling on the applicability of subheading 9802.00.50
or 9802.00.60, Harmonized Tariff Schedule of the United States
(HTSUS), to drill slips for oil well casing equipment to be
imported from Mexico.  Photographs and samples of the merchandise
were submitted for examination.

FACTS:

     U.S.-cast steel wedges with flutes and grooves shaped to
specification will be shipped to Mexico for processing into drill
bit assemblies--those parts of oil well casing equipment used to
hold packers and other extraction equipment inside a casing to
keep it from moving.  In Mexico, the steel wedges first will be
sanded on a belt sander to smooth rough edges, after which the
grooves, flutes and inner curved surface of the wedge will be
faced to specification by cutting tools on a lathe.  The wedges
are then returned to the U.S. where they are heat treated,
phosphate plated and painted.

ISSUE:

     Whether the U.S.-cast steel wedges will qualify for the
partial duty exemption under either HTSUS subheading 9802.00.50
or 9802.00.60 when returned to the U.S.
LAW AND ANALYSIS:

     HTSUS subheading 9802.00.50 provides a partial duty
exemption for articles returned to the U.S. after having been
exported to be advanced in value or improved in condition by
means of repairs or alterations.  Articles entitled to this
partial duty exemption are dutiable only upon the value of the
foreign repairs or alterations, upon compliance with the
documentary requirements of section 10.8, Customs Regulations (19
CFR 10.8).  However, entitlement to this tariff treatment is
precluded where the exported articles are incomplete for their
intended use prior to the foreign processing, Guardian Industries
Corp. v. United States, 3 CIT 9 (1982), as "repairs and
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 the manufacture of
finished articles."  Dolliff & Company, Inc., v. United States,
C.D. 4755, 81 Cust.Ct. 1, 455 F.Supp. 618 (1978), aff'd, C.A.D.
1225, 66 CCPA 77, 599 F.2d 1015 (1979) (Court's emphasis).  As
the steel wedges in this case are not completed articles when
exported, but require intermediate processing to render them
finished articles, they are not entitled to the duty exemption
under this tariff provision.

     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 characteris-
     tics 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.

     We have previously ruled that the operations of machining
(metal cutting), plating and significant heat treating operations
each constitute "further processing" operations for purposes of
HTSUS subheading 9802.00.60, as the first operation changes the
shape of the metal and the latter two operations impart new and
different characteristics to the metal which did not exist in
the metal before processing.  (Regarding machining, see,
Headquarters Ruling Letters (HRLs) 036081 dated December 26, 1974
and 038193 dated January 23, 1975; regarding heat treating, see,
HRLs 555536 dated October 29, 1990, and 555103 dated February 2,
1989, and; regarding plating, see, T.D. 56166, 99 Treas.Dec. 233
(1964)).

     In this case, the steel wedges are eligible articles of
metal for purposes of HTSUS subheading 9802.00.60.  The
operations of sanding and facing performed abroad, taken as a
whole, impact upon the metal itself and, following our previous
rulings, are deemed to constitute "further processing" within the
ambit of the statute.  Further, an examination of the samples
submitted shows that these operations impact the metal itself.
The heat treating and plating operations to be performed on the
drill slips when they are returned to the U.S. similarly
constitute "further processing" for purposes of this tariff
provision, as each operation will impart new and different
characteristics to the metal which did not exist in the metal
before processing.  As the manufacturing operations performed
abroad and on return to the U.S. are sufficient to satisfy the
dual further processing requirements the statute imposes on the
U.S. articles of metal, the drill slips will be eligible for the
partial duty exemption under HTSUS subheading 9802.00.60 when
returned to the U.S.

HOLDING:

     On the basis of the information and samples submitted, the
drill slips to be imported are eligible for the partial duty
exemption under HTSUS subheading 9802.00.60, provided the
documentary requirements of 19 CFR 10.9 are met, as the
operations performed abroad and in the U.S. constitute "further
processing" within the ambit of the statute.

                              Sincerely,



                              John Durant, Director
                              Commercial Rulings Division